Members of the accounting profession, operating alone or in small- and medium-sized practices (SMPs), have a generally optimistic outlook for 2016. According to the most recent global survey by the International Federation of Accountants® (IFAC®), the majority of them are expecting revenues to stay the same or increase. However, their confidence does not reach the previous year's level; growth expectations for 2016 are lower than they were for 2015.
Additionally, the severity of each challenge presented was rated overall as less acute than last year, however, the top challenges remain the same: the primary challenges are: "attracting new clients" (a high or very high challenge for 47% worldwide, 56% in Germany), "keeping up with new regulations and standards" (44% worldwide, 53% in Germany), as well as "differentiating from the competition" (43% worldwide, 49% in Germany) and "pressure to lower fees" (41% worldwide, 54% in Germany). Finally, 53% of respondents in Germany rated "recruiting and retaining employees" as a high or very high challenge, compared to 31% worldwide.
This year's survey was conducted by IFAC in 22 languages in October–November 2015 (the report on the German results was developed with the help of the Institut der Wirtschaftsprüfer—the German Institute of Public Accountants). The survey had the greatest number of responses ever with 6,725 responses from 169 countries (Germany: 103 responses).
Revenue expectations for accounting practices in Germany can be broken down as follows. No change or moderately increasing revenues are expected by a majority of respondents in each of four areas: accounting, compilation, and other non-assurance/related services (53% no change, 30% moderate increase); tax (51% no change, 32% moderate increase); advisory and consulting (43% no change, 36% moderate increase); and, to a lesser degree, audit and assurance (38% no change, 20% moderate increase, whereas 24% expect a moderate decrease).
Consulting services are also important for SMPs: the majority of respondents offer some form of business advisory and consulting services. The most commonly provided services were tax planning (52% worldwide, 82% in Germany), corporate advisory (i.e., mergers, legal advice, valuation, due diligence, financing) (45% worldwide, 78% in Germany) and management accounting (i.e., planning, performance and risk management) (41% worldwide, 57% in Germany). In Germany, newer consulting fields are also represented: 18% of repondents provide advice regarding business intelligence (i.e., transformation of data for business analysis purposes), 8% provide information technology advice, and 6% provide enhanced corporate reporting advice (i.e., integrated reporting, sustainability reporting, corporate social responsibility reporting).
These practices' clients, small- and medium-sized entities (SMEs), also face some challenges: in 2015, the greatest challenge from a worldwide point of view was “economic uncertainty” (a high or very high challenge for 61% of worldwide respondents, 25% in Germany), followed by “rising costs” (58% worldwide, 50% in Germany). The top challenges in Germany, on the other hand, were “competition” and the “recruitment and retention of employees” (both rated by 59% as a high or very high challenge). Compliance with regulations (51%) was also a notable challenge in Germany.
For practictioners, the regulatory environment, competition, and technology developments remain dominant factors in the medium term. These topped the list of factors expected to affect SMPs in the next five years. The "regulatory environment" was predicted to have a high or very high impact by 52% of respondents worldwide (69% in Germany), followed by competition (from other practices or other professional groups) with 46% worldwide (57% in Germany), and technology developments with 6% worldwide (54% in Germany), rating the factor as high or very high. The "perceived trust/credibility of the profession" is generally seen as less important: in Germany, only 34% rated this factor as likely to have a high or very high impact, while 61% indicated that it would have a moderate or low impact.
This article was originallypublished in German in the IDW’s periodical Die Wirtschaftsprüfung No 9/2016, pages 478 + 479 on 1 May 2016.
