Mario Draghi’s recent report on The Future of European Competitiveness highlights the urgent need for reforms across Europe. Without prompt measures, Europe risks losing its competitive edge globally, which could undermine future growth. The takeaway is clear: reform is essential for Europe to maintain its position as a key player in the global economy.

What then does this mean for Europe’s small- and medium-sized accountancy practices (SMPs)? What role do they stand to play in raising the competitiveness of the European economy, specifically in supporting the growth of small and medium-sized enterprises (SMEs) and start-ups? And how might they themselves adapt to properly fulfil this role? This article looks at how SMPs themselves can transform to be more effective in their support for SMEs. Essentially, it’s a manifesto for making Europe’s SMPs more competitive! And the same manifesto is good for SMPs elsewhere.

Role of Europe’s SMPs in Making Europe Competitive

The European Federation of Accountants and Auditors for SMEs (EFAA for SMEs) believes that SMEs are central to the sustainable transition and competitiveness of the European economy. We also believe that SMPs are instrumental to SMEs being able to contribute to the timely transition and competitiveness of the European economy. In other words, SMPs are key enablers - enabling SMEs. Our European Parliamentary Election 2024 Manifesto, which set out our top 5 priorities for SMPs if they are to be key enablers of SMEs, states that SMPs are vital partners of SMEs in the journey of transition, helping SMEs navigate financial resilience, technological advancements, and sustainable practices.

SMPs are experiencing the same technological and digital transition, as well as the need to stay competitive, as their clients. This experience provides them with unique insights to share with their SME clients. SMPs provide professional services to businesses ranging in size and complexity from simple micro enterprises through to complex medium enterprises. These services, including advice, are tailored to meet the specific needs of SMEs as well as being informed by learnings from across multiple clients. Moreover, SMPs are themselves SMEs, operating in the accountancy sector, and as such they are a good fit for SMEs and can advise SMEs in a language they readily understand.

What must SMPs do to fulfil this role?

In effect what’s needed is practice transformation. Back in 2020, the early days of the global pandemic, IFAC published Practice Transformation Action Plan – A Roadmap to the Future. In 2021, IFAC and EFAA co-hosted the event Future of SMPs: Lessons from the Crisis and Practice Transformation to promote the Action Plan. We believed that SMPs needed to ‘reboot’ if they were to survive and thrive during the pandemic. IFAC and EFAA have continued to advocate for practice transformation. But today, here in Europe, there is a great urgency to this transformation. SMPs themselves need to transform if they are to help SMEs and startups be the engine room of renewed European competitiveness. And to realize this transformation a vital pre-requisite is that regulators and standard setters recognize that SMEs are the foundation of strong economies and accordingly fully embrace the “think small first” approach to the setting of regulation and standards.

What does this transformation entail?

We believe it entails the following, the four Ps of practice transformation:

Posture – Embrace Change

By posture we mean of the attitude, mindset, and cultural kind. The world is changing, fundamentally and fast. SMPs need to accept that the only constant is constant change so it’s best to embrace it. SMPs, specifically their leadership, must be prepared to adapt and reposition as regulation, market needs, the economic environment, and technology change.  

People - Attract, Retain and Nurture Talent

The most important asset of any knowledge-based business are its people. This is especially true of accountancy. The accountancy profession and SMPs, especially those in Europe and North America, are engaged in a war for talent, competing with other professions and industries, some with current cache such as tech, to attract talent. It’s not just about attracting more people. It’s about attracting the right type of people, and reskilling existing people, to cope with the changing way of working and the services offered. SMPs increasingly need people with technical skills and expertise in sustainability and emerging technologies like artificial intelligence as well as ‘soft’ skills such as teamwork and leadership.

In May 2024, EFAA published ‘Building a Strong Brand Identity for Small- and Medium-Sized Accountancy Practices’ which highlights the attractiveness of a career in a SMP and the need to build a strong brand identity. SMPs need to proactively promote why their practice is a rewarding place to work both financially and professionally.

Product - Expand Service Offerings

The professional service offerings of SMPs are changing. There has been strong growth in advisory services over the past several years. We see continued growth in this service line as more SMEs seek advice on how to be more competitive through improvements to their strategy and operations. SMPs, being SMEs themselves and able to draw on the experience and insights from across their client portfolio, are ideally placed to offer this advice.

And then there is the exponential growth in sustainability services – advisory, reporting, and assurance that EFAA documented in its ‘Call to Action: SMPs Supporting Creation of the Sustainable Economy’. There is enormous opportunity for SMPs to expand through offering sustainability services to SMEs. But this opportunity comes with inevitable, but s­­urmountable, challenges. The foremost challenge is that of building the necessary capacity and capability but as EFAA’s research ‘The Role of Small- and Medium-Sized Practices in the Sustainable Transition of SMEs’ reveals SMPs are ready to take on this emerging role. 

Processes – Modify Way of Working

SMPs need to consider how their processes can be modified to improve their overall efficiency, effectiveness, and economy. First, SMPs need to be constantly alert to developments in new technology and leverage them. Many SMPs have already embraced technological transformation. Leveraging technology has enabled SMPs not only to increase the efficiency of their traditional compliance-oriented accounting tasks, but also to become strategic advisors to SMEs. Right now, the focus is on artificial intelligence (AI). In June 2024, EFAA held a webinar ‘How Accountants Can Appropriately Rely on AI' that offered guidance on how SMPs can use AI.

SMPs also stand to gain from being sustainable themselves. As well as making their practices a more attractive place to work for those seeking a purpose-led place of work, ‘walking the talk’ provides them with the experience that can be shared with SME clients as well as the authenticity and legitimacy that comes from practicing what you preach.

EFAA for SMEs, together with our member PAOs and with the support of IFAC, is the voice of SMPs, and in turn their SME clients, in Europe. We will continue to work in lockstep to help SMPs transform.

For further guidance on how SMPs can boost their competitiveness through practice transformation refer to the resources below.    

Resources

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Salvador Marín

President, EFAA

Salvador Marin’s professional background spans academia, business and practice. As a practicing economist and adviser he has gained considerable experience in financial economics, financial  information and non-financial reporting and extensive national and international experience in strategic consulting, economics, internationalisation, financial and non-financial reporting and management of SMEs and financial institutions. Presently he is the managing partner of a boutique practice of national and international advisers, member of the Board of Directors of a Spanish company with responsibility for international affairs, senior advisor in a venture capital Company, and General Coordinator for International Professional Regulation at the General Council of Economists of Spain (CGE). Marin boasts substantial international experience gained through his tenure as CEO of COFIDES, the Spanish Development Finance Institution and member of the Boards of Directors of EDFI, Marin has held positions in the field of Public Management having served as a minister in regional government in Spain. Author of over a one hundred books, articles, papers on financial information and non-financial reporting, Marin has experience as a lecturer at university and several national and international business schools. He has a specific recognition of quality as a researcher and knowledge transfer. Marin holds a Doctorate in Economics and Business Administration, specialising in Financial Information and gaining a distinction. Marin is Certified Accounting Expert by the Spanish Register of Accounting Experts.

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Paul Thompson

Technical Director, European Federation of Accountants and Auditors for SMEs

Paul Thompson is the Technical Director at EFAA for SMEs and a World Bank consultant dedicated to thought leadership and building capacity of the global accountancy profession.

From 2004 to 2016 Mr. Thompson worked for IFAC latterly as Director, Global Accountancy Profession Support, a role that extended to overseeing the IFAC Global Knowledge Gateway, research and innovation, and activities in support of small- and medium-sized practices (SMP) and professional accountants in business (PAIB).

As a World Bank consultant he works on various initiatives to improve corporate reporting and the capacity of the accountancy profession in the South Caucasus. He also advises developing professional accountancy organisations in Asia.

Previously Mr. Thompson worked for Touche Ross & Co., London before going on to lecture on corporate reporting and analysis at universities in the UK, Singapore, and Malaysia.

He has a number of publications in academic journals and the professional press in the areas of ethical finance, corporate sustainability reporting, corporate governance, integrated reporting, practice management and the future of the profession.