With COVID-19 upon us, small- and medium-sized practices (SMPs) face problems in meeting reporting deadlines because of issues in employee mobility and lockdowns, which makes it difficult to gather audit evidence and complete audit assignments. Furthermore, SMPs face additional audit and advisory risks as a result of technical issues relating to uncertainties in the valuation of inventories and receivables, assessing the going concern assumption, and relevant disclosures.

While COVID-19 has generated many challenges, it is also a catalyst for businesses, as well as SMPs, to transform. It has pushed many SMPs out of their comfort zones to embrace digital and consider new business models to create business value for their clients.

Nevertheless, the pain points remain. SMPs often are troubled by how exactly to resolve them, given the lack of resources, talent, expertise and the uncertainties in forging ahead into a new service line when they do not already have a critical number of clients who will use their service.

This underscores two important considerations when digitalizing and/or diversifying into a new service: the need to ensure that not only does it result in revenue growth, but that it is accompanied by a rise in productivity.

Here are a few pointers, distilled from the recently launched Association of Chartered Certified Accountants and Singapore Accountancy Commission report and quick guide, that professional accountancy organizations (PAOs) can encourage SMPs in your market to consider.

Pointer #1: Digitalize first, before diversification, to lead to higher productivity.

Using Singapore data as a case study, it can be seen that there are clear pathways to higher productivity. According to industry data, SMPs that embark on diversification (before digitalization) tend to have lower productivity. Those that digitalize first then diversify have higher productivity. 

Pointer #2: Diversify services beyond regulatory compliance to stay relevant in the future economy.

According to Market Demand for Professional Business and Advisory Services (2018) of the top five service lines demanded by corporates, projected from 2018 to 2021 across ASEAN and China, three were non-regulated service lines.

1. Statutory audit (regulated)
2. IT solution business (non-regulated)
3. Tax Compliance (regulated)
4. Risk Advisory (non-regulated)
5. Tax Advisory (non-regulated).

Non-regulated service lines are those that are not required by law or by regulation and regulated service lines are the converse. One of the findings from the report is that there is a significant rise in non-regulated services. SMPs should be motivated to place less reliance on compliance-based services and more reliance on advisory-based services to grow their practices.

Pointer #3: Understand and anticipate where the demand for professional services is coming from to ensure a more sustainable practice.

To do this, SMPs should review and scan the latest industry data on the most demanded professional service lines. The ACCA-SAC Market Demand report is a good source for this information. It tracks demand for professional services in the Asia-Pacific region. When embarking on new services, it is equally important to ensure that it also leads to higher productivity.

Pointer #4: Evaluate and harness internal skills and competencies to ensure efficient use of resources and lower transformation costs.

In order for SMPs to assess their competencies, they will need to reflect on where their firm is currently with respect to digitalization and diversification. The services developmental matrix below can help your SMPs in identifying your firm’s ‘’persona’’ for this purpose.

(Image and data from SAC-ACCA Quick Guide)

Pointer #5: Start from your strengths.

SMPs should not overlook the fact that their current expertise may provide the runway to develop expertise to provide new and innovative services in the future. So, encourage SMPs in your market to start from their current strengths. For example, we are accustomed to think of a service line like statutory audit as a single (monolithic) service. However, by examining a little closer, it is easy to note that it can be broken up into component services: risk assessments, internal control evaluation, valuation, reporting and other services.

See below for an example of how Statutory Audit can be ‘’unpacked’’ into its components and the new services that could grow out of and extended from each service.

SMPs should review their current services and break it down to “component services,” which will provide them with the “embryos” to spawn new services.

Pointer #6: Move incrementally toward greater diversification.

To minimize pain points, SMPs should work out and use specific progression pathways toward best practice and higher productivity. SMPs can use the illustrative progression pathways in the SAC-ACCA Quick Guide to review their current service and see how it could help them to reach their target service through incremental steps. See examples below—the red boxes represent the current and target service, the grey boxes show the relevant skillsets required to be developed incrementally in order to reach the target service.

Red box: Professional service
Grey box: Skill sets required to be developed

The SAC-ACCA Quick Guide and the pointers in this article require the SMP business owner to assess his/her environment, as well as his/her strengths and weaknesses, while keeping an eye on the ever-changing demand for various professional services. It also requires the owner to be selective about his or her progression and not to succumb to popular trends but clinically evaluate options by considering profitability and productivity.

It is hoped that the above pointers will help SMPs in your market to feel more confident about embarking on new services to transform your business.

For more information and guidance, download the Quick Guide on Digitalisation and Diversification for SMPs, a collaboration between ACCA and the Singapore Accountancy Commission. The guide aims to provide practical tools to develop practices, along two dimensions, digitalization and diversification, while following 2 gradients: higher productivity and higher revenue growth. The Singapore guide can help SMPs, from a case study perspective, on how they can pivot seamlessly from their current services to more innovative services through “personas” identification and recommended progression pathways. The guide is accompanied by a Report on Professional Services Progression Pathways for SMPs.