Is there still a place for it?
The cornerstones of financial information are:
- Relevance – Does the information give insight into the CURRENT position of a business?
- Reliability – how accurate is the information? Can it be trusted?
Traditionally the accounting profession (and other professional service industries) has based its billing / selling price on the time spent to complete the activity.
But considering that one of the cornerstones of financial information is Relevance, this is counter-intuitive.
Would you be willing to pay twice the price for the same set of financial statements just because Accountant A took twice as long to prepare them as Accountant B?
In fact, the set of financial statements that are completed quicker and presented to the business owner sooner add more value. The same applies when assessing employees in an accounting firm: A staff member who can complete 8 VAT returns in a normal working day is more valuable than an employee who needs 12 hours to complete the same work. Why? When the firm is under pressure, the more efficient employee will be able to keep pace.
Thanks to digitisation, the value of financial information that is as close to "real time" as possible has increased monumentally.
It is critical that professional services companies whose value proposition to their customers is affected by this ensure that their pricing models evolve as well, and that they correctly price the elements that their clients see as the value-add.