In the corporate world, businesses grow either organically or via mergers and acquisitions (M&A)—or a combination of both. But in the accountancy sector, another route to growth is on offer: membership of a network, association, or alliance. Small- and medium-sized practices (SMPs) who are keen to grow while retaining some or all their independence—especially those in emerging markets including those in the Global South—can join an international network, association, or alliance. The International Accounting Bulletin reports that global networks and associations are growing fast. And this looks set to continue as the advantages of membership grow.

Many ‘unattached’ SMPs express interest in joining, but many have not. At least not yet. Reasons vary, but the main ones are a lack of knowledge that suitable networks, associations or alliances are still available for membership, other than those that have already entered their markets, what are the real advantages of such measure, and the guidance as to how to go about it. This article looks at the advantages (and disadvantages) of membership of an international network, association, or alliance, provides some guidance on how to go about choosing one, and ends with some useful resources to help.

What are Networks, Associations, and Alliances?

Professional services networks are business networks of independent firms who come together and collaborate to provide professional services to clients through an organized framework. They are notably found in law and accounting. Associations and alliances typically have a less organized, less stringent framework than networks and offer fewer membership perks and are less expensive to join.

In the international marketplace for accounting, assurance, and advisory services, the large international firms, most notably the Big Four, have dominated. (Remember, all of them were SMPs some time ago!). Traditionally, SMPs were often not considered when a company expanded and its needs changed. But over the past few decades things have changed. International accounting associations and alliances have emerged to create a “global firm” for SMPs, enabling them to be competitive with international firms and serve their clients when they transition from local to regional or global.

Advantages of Membership

The advantages of membership include:

  • Support growing clients – IFAC’s Practice Transformation Action Plan – A Roadmap to the Future says that SMPs can use networks, associations, and alliances to satisfy the needs of growing clients. Membership gives SMPs the scale and scope, product and service range, and geography of large international firms. Previously, when a company expanded overseas and needed a broader range of support it would typically part company with their local SMP and select an international firm to satisfy their needs. But now those local SMPs can join an international network, association, or alliance to meet those needs.
  • Exchange of knowledge and expertise – Members can share knowledge and expertise on country-specific accounting, tax, auditing, and regulatory matters, as well as introduce new services in their countries with the support of more experienced members.
  • Learn about managing the practice – Members can learn best practices for firm management in hiring and training staff, succession planning, and other practice management issues, in a variety of settings including online and in-person events.
  • Methodology and quality management – Members can access best practice methodologies, technology, and quality management—for example, for audit and ISQM implementation.
  • Referral services – Members may be able to refer clients to other non-competing firms that offer specific niche services without the fear of losing their client to a large firm.
  • Personalized attention, locally and internationally – Clients are typically referred to a member firm’s partner who ensures the client gets personalized attention.
  • Marketing and branding - Member firms can benefit from marketing and branding. Member firms’ clients may spread the word to other entrepreneurs that they use a firm with a global presence and word-of-mouth referrals can translate to new clients.
  • Multi-firm engagements – Members can work with multiple firms across the world to serve clients that operate in many jurisdictions and in so doing are able to provide the full suite of services they need spanning all their operations.
  • Ability to bid on international assignments – Member firms can bid on work they were not previously able to because they did not have the support of other firms from other countries.
  • Community and support – Meetings and conferences give members the opportunity to meet and establish relationships with other member firms prior to doing business together. This helps a firm trust that they are referring their client to another firm that will take good care of the client. Member firms can also contact peers in other countries with questions.
  • Meeting global requirements – Clients that have international operations—or else aspire to have them—will often not hire a firm unless it belongs to an international network, association or alliance.
  • Exclusivity – Some networks, associations, and alliances offer exclusivity of membership with only one firm in a specific geographic area. That member firm has control of the specific marketplace and only with their approval will another firm in the same area be accepted.
  • Online service – Thanks to technologies like teleconferencing and the cloud, accounting firms can provide a range of high-quality professional services in real time remotely without face-to-face meetings. Membership of a network, association, or alliance can expedite this.

These advantages look set to continue to increase over the coming years. Globalization, facilitated by new technologies, is a relentless trend. Small- and medium-sized enterprises (SMEs), right down to the smallest ones, are increasingly transacting and operating cross-border. These SMEs need access to international expertise to support them and often seek the convenience of a one-stop shop, sourcing as many professional services from one accounting firm as possible.

Disadvantages of Membership

There are some disadvantages of membership, including:

  • Cost – Annual membership fees, referral fees, conference attendance fees, etc.; SMPs will need to undertake a thorough cost-benefit analysis to determine whether membership offers value for money.
  • Rules and methodology – Membership often comes with rules and a requirement to use specific methodologies such as for audit and quality control which will likely require some investment.
  • Name – Members may have to adopt a designated name or brand which may not necessarily work well in the local market.
  • Restrictions – Members may be unwilling to refer clients to other member firms.
  • Language – Proficiency in English may be necessary.

Choosing the Right Network, Association, or Alliance

The SMP must first decide whether network, association, or alliance is right for them. Smaller practices will likely find it better to join an alliance first—less costly and less restrictive—and then as they grow consider “graduating” to membership of a network or association.   

There are more than 50 international accounting networks and associations. Many of these are members of IFAC Forum of Firms or EGIAN (European Group of International Accountancy Networks and Associations). The largest ones are ranked annually by the International Accounting Bulletin.

Not all provide the same services and benefits. SMPs must be careful to make sure they find the one that best fits their practice and the needs of their clients. There is a great diversity of networks, associations, and alliances: local, regional and global; large, medium and small. There is something to suit every firm. The better known, stronger brands are usually the most expensive and have the strictest rules.

The advantages and rules of membership outlined above vary from one network, association, and alliance to another. Some are good for sharing capabilities (for example, providing access to tax or legal professionals). Some are good for marketing and image (for example, they have a recognizable brand name). Some offer central methodological or technical or technological support (for example, access to proprietary software programs and tools). Some international networks and associations also have national structures one can join. Some can be innovative enough to follow market trends, including global and regional ones, and offer new services to existing or new clients, simultaneously providing a good knowledge sharing platform for the local member firms.

The right option will depend on the unique circumstances, character, and strategy of the practice. If the practice is not a boutique with a market niche, then size and international perspective will likely be very important for clients and staff. The stricter the membership requirements, the more carefully one must consider the risks and potentials, the advantages and disadvantages. It’s worth considering: what will happen if the firm chose to remain as it is, but its clients and competitors change?

For further guidance, check out the resources below.

Resources

A man smiling at the camera
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.

A man wearing a suit looking at the camera
Yuri Dolidze

Board Member, Service for Accounting, Reporting and Auditing Supervision (SARAS), Georgia

Yuri Dolidze is the Board Member for SARAS, also the EU and World Bank consultant dedicated to accounting and sustainability reforms implementation in Georgia, Ukraine and Armenia. 

Yuri founded and managed two local leading SMPs in Georgia, worked as a local contractor for Deloitte and Ernst & Young, initiated opening of PwC Georgia branch in 2005, acting as its Assurance and Advisory Services Director and Academy Leader for 9 years. Yuri also participated as ICAEW consultant in the ADB’s Audit Quality Assurance Technical Assistance Project in Armenia.

Yuri was significantly involved in developing professional society in his country. He was one of the founders of IFAC member Georgian Federation of Professional Accountants and Auditors (GFPAA), presented in its Board and various committees for 15 years. 

In 2016, the Prime-Minister of Georgian assigned Yuri on the position of the Head of Service for Accounting, Reporting and Auditing Supervision (SARAS) where upon term expiration he represents business societies in its Board. 

As the World Bank and EU consultant, Yuri continues supporting accounting and auditing reform with the regional coverage including Georgia, Ukraine and Armenia. His mandate as consultant recently also included the sustainability reporting and assurance matters.