Hong Kong accounting firms are quicker to adopt automation tools in daily practice
59.5% of locally-based firms are already using data automation apps compared to 25.8% in Singapore
HONG KONG, 29 JANUARY 2019 – Xero, the global small business platform, released its annual Accounting Industry Report for 2019. The report sheds light on the best practices of pacesetting firms 1 to serve as benchmark for other firms to maximise their success in 2019 and beyond. Based on the findings, Hong Kong accounting firms are quick to adopt technology when compared to their counterparts in Singapore.
Furthermore, the report found that a larger number of accounting practices in Hong Kong (59.5%) are using data automation apps compared to their counterparts in Singapore (25.8%).
The adoption of such apps is especially popular with pacesetting companies who make up the top 15% of the market, boasting high growth and revenue rates, with 81% of such firms in Hong Kong declaring that they use automation apps when compared to just 34.5% in Singapore.
Xero surveyed 97 accounting and bookkeeping companies in Hong Kong and 157 in Singapore, asking their views across a range of different areas including opportunities for practices in technologies relating to compliance, simple advisory and complex advisory . The feedback also 2 3 4 included views on the performance of apps used by pacesetting practices leading the market in terms of growth, and the priorities of said pacesetting firms in comparison to other firms.
The findings of the report also reveal that financial performance results in Hong Kong are higher than in Singapore with Hong Kong-based companies averaging HKD 2,739,000, compared to Singapore at HKD 1,384,268 (SGD 242,600) in total advisory revenue.
This shows that a higher adoption rate of automation tools in accounting firms positively impacts their ability to devote more time to higher-valued advisory services. Presently, the biggest users of automation tools are practices that provide complex advisory services (42.9%), followed by simple advisory services (33.3%) and basic compliance services (24%). The report also reveals a higher retention rate for high-value clients, with only 6.8% of client departures in the last 12 months. The figure in Singapore is lower with only 3.1% departures.
Accountancy firms that have been proactive in embracing new technology to aid the operational and profit-making functions of their business make around 20% more revenue than the industry average, doubling in total advisory revenue, whilst the cost to serve a single business client is around 80 hours less. However, Singapore-based companies are expected to quickly catch up in 2019 with 52.4% indicating they are considering implementing data automation tools in comparison to just 32.1% of Hong Kong-based firms.
1 Pacesetting firms are defined as the top 15 percent of firms with high growth and higher revenue relative to firms of the same business age. 2 Compliance services include accounting, bookkeeping, payroll, tax preparation and accounts receivable management. 3 Simple advisory services include cash flow forecasting, budgeting and planning at reasonable prices, requiring both automation, high quality bookkeeping and accounting data. 4 Complex advisory services include audit services, HR advisory, succession planning, business performance benchmarking, capital raising, and business app/software selection, setup, training and maintenance.
The report outlines how the Hong Kong market has a bigger appetite for advisory services when compared to Singapore, which is estimated to have generated a revenue of over HKD 1.9 billion in 2018. Demand for simple and complex advisory services (50.2% of total revenue) is on par with compliance services (49.8% of total revenue), for example: compared to Singapore, revenue from compliance services (70.4%) is significantly higher than simple advisory (14.6%) and complex advisory (15%) services, indicating that routine year-on-year compliance work is still an intricate part of Singaporean accounting practice.
Accounting firms that would move into providing advisory practices look to prioritise the implementation of timesaving methods to reduce the time they spend chasing clients for documents and information (68.5%), documenting processes and creating workflows (66.7%). Another key area outlined in the report is that building advisory services can serve up to 50% - 70% more of their clients (38.9%) in a shorter space of time given that SMEs are increasingly looking for further support from their accounting advisors on forecasting, budgeting, cash flow and business planning, as well as startup mentoring and assistance with business development.
Kevin Fitzgerald, Regional Director for Asia, Xero, said, “With the increase in technology penetration giving rise to increased adoption of automation tools, we are seeing routine tasks giving way to more strategic, analytical work. The accounting industry is no exception as we see automation tools being an integral part of the workflow of accounting firms in Hong Kong and Singapore, and we expect this trend to continue in the next 24 months. By automating administrative jobs, accounting firms are getting into position to extend their capabilities beyond basic compliance services, to providing advisory services which is currently growing in demand. As accountants evolve into business advisors for their small business clients, we see our role here at Xero as an enabler and supporter for our accounting partners, helping them achieve success by leveraging market-leading applications, and banking and fintech partners in our ecosystem.”