Lawyers often regard accountants as a necessary evil but according to an exclusive survey commissioned by The Lawyer and Baker Tilly, more law firms have been switching allegiance if they are dissatisfied with the services provided by their accountancy firm.
In last year's survey, over 74 per cent of law practices remained with the same accountancy firm for at least five years prior to 1994. This year the figure has slipped to 67 per cent. The signs are clear – law firms are looking for accountants offering a better all-round service, a wider range of services and a more proactive approach.
One reason for the switches of allegiance may be the increased merger activity of law firms. When two practices merge, one of the incumbent accountancy firms is going to lose out in the long run, and a change in the external accountants will inevitably be forced on one firm.
Of the firms that have switched, some had set high standards for their new accountants. The client of a 'big-six' firm commented: "We have recently changed accountants having outgrown the one we were with for many years. We are still in the honeymoon stage with the [big-six firm] but it is apparent that the information experience and personnel of a large firm is of tangible benefit to us."
Most firms gave more than one reason for changing their accountants. And the issues of fees and poor service have become the major catalysts for change. Many firms also said they needed either more or better advice and an ability to generate ideas proactively, a lack of which they considered as evidence of the poor service provided by their accountants.
The understanding of a law firm's requirements was viewed as the most important aspect of service in the survey results of both 1994 and 1995.
Similarly, value for money remains one of the most important aspects of the service, ranking second in both years.
In 1994, 67 per cent of firms said the fees charged for Solicitors Accounts Rules work were reasonable compared with 68 per cent this year. And while 30.5 per cent felt their fees were high in the 1994 survey, this figure fell to 27 per cent in 1995, an encouraging trend for law firms.
The issue of fees remains an emotive subject for many law firms. There were numerous comments on the subject, including many aimed at the big-six firms, such as a request for "less emphasis on delivering large fee notes and more on delivering a reasonable service".
The results of the 1995 survey largely confirm the findings of the one in conducted 1994. It is clear that other than understanding law firm requirements, accountancy firms are not generally satisfying the needs of law firms, though there are signs of improvement.
The top five aspects of service provided and selected for further analysis in 1994 were:
understanding a law firm's requirements
having a partner in charge of work
having a partner in charge of the office
handling of telephone calls competently
reputation and image
But, whereas in 1994, 68 per cent of firms said their accountants understanding of legal practice aspect was either excellent or good, in 1995 that figure had dropped to 63 per cent. The handling of telephone calls was rated as excellent or good by 60 per cent of firms, and the remaining three aspects – having a partner in charge of work, proximity to office and reputation and image – all rank equally, with 59 per cent of the firms rating them as excellent or good.
A comment from one law firm client about a 'big six' accountancy firm highlights the concerns many feel over proactivity: "I would wish to see a more proactive service being given, covering a wide range of subjects including tax, VAT and presentation of accounts. The larger the firm the less personal contact we have with the partner and his managers."
The two aspects which improved both their position and the percentage of firms giving an excellent or good rating were the ability to solve problems, which moved from twelfth in 1994 to eighth in 1995, and the range of services provided, which moved from eleventh to seventh.
Accountancy firms may, therefore, be able to draw some positive news from this comparison.
Partners in accountancy firms will probably be pleased that they remain high on the list of important aspects of service. But it should be noted that the team doing the work has slipped in importance from sixth place in 1994 to tenth place in 1995.
As for the future, when asked which of the following will be the most important area for the firm over the next five years, top of the list was:
partnership advice – 20 per cent
financial advice – 18 per cent
business planning – 14 per cent
quality of service – 12 per cent
marketing advice – 11 per cent.
Clearly, these findings suggest that the 'management consultancy' services – business planning, quality and marketing advice – have gained value for many lawyers.
However, whether these services will be bought from accountancy firms remains to be seen. As one law firm, the client of a medium-sized accountants, said: "Marketing, business planning and IT advice – these are all unimportant as far as accountancy firms are concerned."
The service which registered the largest anticipated growth in importance was business planning. The 1994 survey highlighted the fact that 53 per cent of firms felt business planning was quite important. This has risen to 62 per cent in 1995. It may reflect an increase in pressure on the profitability in mid-tier firms and their need to focus on key strengths in the face of increasing competition from other firms.
The survey results on accountancy services seem to be that accountancy firms 'could do better'.
As one partner put it, what he wants is "a proactive response towards running the business, critical comment of the business planning cycle, quarterly reviews of progress and a full analysis of what we spend our money on".
For a free copy of the report, contact Stephen Blundell at Baker Tilly on 0171 413 5100.