HMRC seeks AAT members’ views over MTD for ITSA threshold

Posted by & filed under Making Tax Digital, Members, Policy.

Members meet with HMRC to chart the way forward for businesses below the £30,000 threshold.

Making Tax Digital for Income Tax and Self Assessment (MTD for ITSA) may be delayed from 2024 to 2026, but that doesn’t mean little will happen for two years. Far from it: important decisions are being shaped now, and our members have been playing a role in this alongside our public affairs team as we seek to bring the ideas and insights of the whole AAT community to bear.

A recent example was HMRC reaching out to AAT about how best to deal with businesses with a turnover of under £30,000. They were keen to meet members who have small business and landlord clients falling within this band.

We know our licensed members are particularly concerned about this, and it’s one of the most important areas for refinement and improvement within MTD for ITSA. We were delighted by the strong response to HMRC’s invitation, resulting in a significant number of members who were willing to attend the meeting, or feed in experiences and ideas.

Members raise communication concerns

Members raised several topics with HMRC, including the lack of direct communication with businesses about coming changes.

As 2022 drew to a close, there was growing unease that the Government was relying too much on accountants and vendors to deliver the message that small businesses would soon face substantial changes in tax compliance.

Lucy Cohen of licensed firm Mazuma Accounting, and a member of AAT Council, was happy for her comments during the meeting to be reported. Here’s what she told me:

“When they asked what they could do to make the introduction smoother, I told them they needed to develop a strategic and substantial marketing campaign for taxpayers to let them know this is coming.

“We need their support so everyone can get the outcome they want. HMRC has to get the messaging right, because the audience that needs to understand MTD [sole traders and the self-employed] won’t be reading letters from HMRC,” Lucy says.

A joined-up approach is needed

There’s no doubt resources are already stretched within Government departments. But the next stage of MTD represents such a significant change it requires a budget allocation for communication. This is no ‘nice to have’, but a fundamental requirement to allow for proper consultation, awareness-building and support.

MTD for ITSA could and should be an opportunity. If it’s designed and implemented well, it has the potential to be a step change towards a modern and efficient tax system. Lucy confirms, “I was encouraged by the general consensus on the call that we could see its benefits over the longer term, whether that be in areas like service to taxpayers or clients, or record keeping.”

Take the opportunity

Accountants will play a critical role in shaping MTD’s future so I would encourage all members to continue their engagement with the process.

“Speak to your clients about it now,” says Lucy. “Worst case scenario is that you do all the prep and the transition onto new systems so your client is better served; and if it doesn’t go ahead, it still won’t do you any harm – you’ve developed your practice and made it better. So don’t look at this as something HMRC are making you do – look at it as something you should be doing as your practice and business development efforts.”

Have your say

HMRC is open to further ideas about how best to work with small businesses. It wants to consider other ideas for rolling out MTD for ITSA to this community, such as streamlining reporting requirements, changing the threshold or excluding them altogether.

I urge members to get involved by speaking to us at AAT, too. Our public affairs team meets regularly with HMRC and we are dedicated to ensuring members’ voices are heard by HMRC and Government on this important policy. If you want to share your thoughts about how this policy will affect your business and clients, please contact Jack Withrington so we can include them in our discussions with policymakers.

Accountancy firms lead the way in female representation

Posted by & filed under Members, Women in finance.

Discover how businesses are increasing the proportion of women in senior positions.

Gender diversity in the finance sector has shown some improvement over the last year, with official statistics revealing a 35 per cent increase in the number of women in senior level roles.

The Women in Finance Charter – first launched in the UK in 2016 – was set up in response to a 2015 governmental review which found that just 14 per cent of senior-level roles in the sector belonged to women.

The Charter works to improve gender diversity across the sector. It pledges to:

  • Encourage firms to support progression of women into senior roles in financial services sector through focus on executive pipeline and mid-tier levels.
  • Encourage firms to set their own target based on their unique situation.
  • Encourage firms to publicly report on progress to deliver these targets.

By signing up to the Charter, firms pledge to:

  • Promote gender diversity by having one member of the senior team who is responsible for promoting gender diversity and inclusion.
  • Setting internal targets.
  • Ensure senior executive pay is linked to delivery against these targets.

Over 400 firms have now signed up to the Charter. This year’s edition revealed that, on average, female representation in senior roles increased to 35% in 2022. The proportion of female senior management was maintained or increased by 77% of signatories in the same reporting period. Additionally, for the first time the top quarter of signatories had at least 40% female representation in senior management.

And a report by EY showed that UK financial services firms are leading the way in female representation: 58% of UK financial services board appointments were female (compared to 50% across Europe).

But more needs to be done, particularly at business level. It’s crucial that accountancy firms are taking steps to address gender imbalances, not just at entry-level but around career development opportunities and flexible working practices.

We spoke to AAT members to find out what steps they’re taking to improve female representation in their firms.

We have an incredible benefits package and flexible working practices

Rachel Harris MAAT, Founder of @accountant_she and StriveX Accountants

My experience has always been that there’s a clear issue with female representation in senior leadership roles in accountancy.

The reason I created @accountant_she was because there were no female partners in the top 75 practice that I trained in and I believe that we can only be what we can see. I wanted to create content, open doors, create bursaries and let people into the real life of what being a female leader in accounting looks like.

As a firm, we have a 75% female workforce with a 50% split evenly on female leadership positions. I believe that seeing women in leadership positions creates great role models, encouraging future women to take leadership roles.

We have an incredible benefits package and a very strong culture which attracts fantastic talent. It’s my job as a leader to make sure that the benefits package serves everyone in the same way, regardless of their gender and outside of work commitments, like families, kids and pets!

Every member of our team has flexible, remote and work from anywhere working opportunities, as well as employee assistance programmes, sick pay and personal development opportunities. I’ve always had the dream that not one of our employees should ever miss a child’s sports day or parents evening. Flexible working opportunities and an outcome-based working environment mean that they are trusted and respected to manage their own time and keep that work life rhythm ticking along.

Verdict: Seeing women in leadership positions creates future female leaders. Our flexible working opportunities and outcome-based environment also enable staff to keep a work-life balance.

Providing staff flexibility to work around home lives is key

Rosie Berridge FMAAT, Director, Accountability Edinburgh, Chair of Edinburgh AAT

When I set up Accountability Edinburgh as a mother of three 11 years ago, it was with the express vision that this would provide flexible working arrangements for all staff. I had left a job which I loved but which paid me less than I was paying in childcare.

All the team have flexible working arrangements – they can work part time and flexible hours. We have 12 members of staff, 10 of which are women, with women working at every level. I am the female director, and the head of virtual finance and payroll managers are both women.

All our staff have the same development opportunities. We have a published progression pathway – which applies equally to men and women. The main focus for us is about allowing staff flexibility to work around their home lives and this applies equally to all staff.

Verdict: We provide staff flexibility to work around their home lives and have women working at every level.

Mentoring and networking programmes have improved female representation

Lily Montgomery, Partner and Human Resources at HW Fisher

Although there is no conscious bias around recruiting women at HW Fisher, the number of women applying for roles has definitely increased thanks to better female representation at the firm. Being able to see the promotion and growth of women in senior positions for all levels of staff encourages others to reach their goals, in what has historically been a male-dominated industry.

HW Fisher follow a hybrid working policy allowing more flexibility for our staff. This has helped to promote more work-life balance. We also have a number of wellness offerings, including enhanced maternity leave.

The efforts and achievements of women at HW Fisher in particular are celebrated and therefore reflected with promotions. There are also mentoring programmes in place to help encourage development within the business.

Networks, such as WealthiHer, of which HW Fisher is a Partner, has really helped in improving female representation, too. Many of our female staff members have attended networking events which inspire women to advance their futures providing empowerment for women to reach their goals.

Verdict: Mentoring and networking programmes has helped improve female representation at HW Fisher.

Our workplace culture is tailored around employees’ personal and professional needs

Ria-Jaine Lincoln, FMAAT, Founder, The Beauty Accountant

I think things are improving, very slowly, when it comes to female representation in the sector. Firms are starting to think more about their offerings mostly due to the changes since lockdown.

At my firm, we offer flexible working and the ability to work from home. Plus there’s additional leave for those with caring responsibilities, including childcare, eldercare and caring for adult family members with additional needs. We also stagger start and finish times around school drop-offs.

We provide support where we are made aware of domestic abuse impacting a staff member, accommodating support sessions and recovery. This has helped us review triggers within the working environment which is something I am passionate about, being a survivor myself. We have zero tolerance for abuse/passive aggressive communication from clients or anything that makes the team feel unsafe.

In terms of staff development we provide:

  • Additional training opportunities and exposure to all areas of the business for professional and personal development.
  • Support for additional projects that our staff are taking part in, as some have second jobs and/or passion projects.
  • Full transparency across the entire business so staff know how the business is doing and how they fit in, allowing them to make suggestions or raise concerns.
  • Regular reviews of the service matrix to see where staff are competent and ready to step into the next level of responsibility.
  • Regular pay reviews.
  • Attendance of industry events and exposure to other opportunities that I am very fortunate to have access too as my role as judge or panellist on industry webinars.
  • Regular training opportunities via AAT or similar.

We have also started to train in financial abuse issues. Working with a predominantly female client base, it’s important for us as advisors to help signpost or provide material to inform our community.

Verdict: Our workforce is predominantly female, and our workplace policy and support is entirely geared around the personal and professional needs of our workforce.

Study in chunks with AAT’s study timetable

Posted by & filed under Students, Study tips.

Whether you’ll be classroom-based, attending live-streamed lectures, or using a blend of study methods, we’ve got advice from the experts on how to make the absolute most of it.

Study methods and skills series

If you haven’t been in formal education for a few years you may be expecting things to go a certain way. Maybe the teacher explains a topic, you make notes and, at some point, you answer questions.

To really get the most out of your classroom learning though, there are a few key things you can do to take things to the next level.

Be open to constructive feedback

If you’ve chosen tutor-based learning, then the most important resource you’ve got is the tutor. And one of the big drivers in quality education is feedback. 

If you currently study AAT via distance learning, skip to part 3 of this series here.

It’s not surprising that if the tutor gives constructive feedback, you perform better in the long run. Feedback should include how to improve, not just what you did wrong, and should be followed up with additional support via supplementary questions and discussion.

It’s important therefore that you’re receptive to getting feedback in the first place. 

Evidence shows that if you sit an assessment and are given a score alongside a constructive comment, you’re most likely to ignore the comment and focus on the score. Even worse, you may go on to compare scores to the rest of your group, to justify where you sit in the spectrum of responses. 

The study skill you need here is to focus on the feedback and follow instructions to improve. Don’t get complacent if you got the question mainly right, or don’t have the lowest score in the group.

Feedback with blended learning

When following blended learning programmes, which combine online learning and face-to-face interaction, it’s often the case that the process is flipped. You follow the online programme and, when you have a classroom session, the tutor is not teaching a new topic, but is reinforcing learning and focussing on weaknesses or difficult errors. 

Again, they should give you personal feedback on where you’re doing well and where you’ve struggled. Focus on the feedback that enables you to improve, as well as soaking up any praise.

Train your attention span

When the tutor is imparting knowledge, perhaps through a short talk or through group feedback, are you listening, or checking your phone?

Often when a student asks a question, the rest of the class switches off. But the tutor wants to feed back to the whole group, so it’s important that you continue to listen, and make notes. After all, they may cover something that you were confused by too.

This is particularly essential when you’re attending an online lecture as you’re more likely to be distracted. However, one of the advantages of online sessions is that you can usually listen to it all over again the next day (if you want to!).

Engage and ask questions

Whichever way you’re accessing contact with the tutor, do ask questions. 

Some students are more comfortable asking questions online, from the safety of their home desk, than in a classroom, but the main advantage of having a tutor present (in whatever form) is that you can actively ask questions and gain personalised answers.

You may want to have two notebooks to keep track of everything:

  • one for writing down explanations from tutors, learning points and theory, copying examples from the board or from the screen. This way, you start to compile your own textbook. 
  • and one notebook for practice examples and active working out.

Working it out yourself

One of the required skills for accountants is to be able to sort information out and use that which is relevant.

As part of your lesson, you’ll have to complete questions and tasks. 

It’s essential therefore that you don’t expect the tutor to spoon-feed you the numbers you need for the calculation, but that you take the time to puzzle out the problem yourself.

Actively engaging with the work like this will also help you to focus in class.

Studying with others

Another study skill is working with others, or collaboration, which is important in a classroom and more importantly, the workplace. 

This is potentially challenging when online, depending on how the session is managed, and the flexibility of the software. But strive to log some time working with others, even if it’s over Skype or Zoom, to get into the habit.

Some software does allow students to talk directly to each other, away from the ‘main room’. So, if available, puzzle out the problems in pairs or groups over Zoom – but don’t fall into the trap of passively allowing the clever student to tell you what to do! If you’re the clever student, ask the others questions to actively draw them out.

Developing your writing skills

Written questions are always the bane of the accountancy student’s life. 

The reality is, when you’re working you’ll have to communicate with clients and managers in writing quite a lot. Develop your self-discipline and get practising your writing skills – because practise here is just as important and effective as practising numerical calculations.

If you’re learning via live-streamed lectures, find out how the tutor is going to give individual feedback, and make sure to seek it out. Guidance on honing your writing skills will serve you well in the long-run.

Your AAT study timetable

We’ve reviewed some key tips to make the most of your classroom or tutor based learning above. But one key tool to help you really tackle your studies is the AAT study timetable.

Schedule out your days to factor in when you’ll be in classes or self-studying, but also when you’ll be at other commitments like work. Your tutor’s plan of study will tell you what you need to study each week, but you are in charge of when.

A well-planned schedule is one of the keys to successful study. It’ll enable you to space out the required number of study hours per unit, factoring in ‘down time’ for your brain to relax and unwind.

Download the AAT study timetable now

Read the next article in this series now to download your free AAT unit and overall revision plans, which work well with the AAT study timetable to help you take charge of your overall studies.

In summary

In the first article in this series, Choose the best study method for success, we advised you to combine classroom-based learning with self-study or homework in order to get your full learning hours in.

The next article will focus on study skills for home study which all students need to engage in, but is particularly important for those who choose non-tutor based programmes of study. You’ll be able to download the AAT unit and overall revision plans in our final article, which bring everything together.

Read more on study methods that work:

Browse the full range of AAT study support resources here

Meet AAT’s youngest student: 15-year-old Mahi Shah

Posted by & filed under Career.

At just 15 years of age, Mahi Shah has already completed both the Level 2 Certificate in Accounting and the AAT Level 4 Diploma in Professional Accounting.

And all that before even taking her GCSE exams.

It’s a path she has chosen in order to give herself a head start on a career in finance, which she hopes will one day culminate with a position as CFO of a multi-national company. “I know I want to work in finance,” says Mahi, who lives in North-West London with her family.

“So while I was solely focusing on my GCSEs until year 9, when my Dad, who works as a chartered accountant, suggested I study for the AAT qualifications at the same time, I thought: ‘Why not?’.”

Mahi’s AAT journey

Keen mathematician Mahi’s AAT journey began when she was just 13 years old. “I started AAT about two years ago with the Level 2 Certificate in Accounting, in which I got a distinction, and I received my Level 4 Diploma certificate in November 2022,” she says. It’s an impressive track record, especially given that Mahi studied for the qualifications at home in her free time.

“Studying for the Level 4 qualification really solidified my understanding of financial concepts, giving me a great base on which to build my career,” Mahi says. “I really enjoyed studying IFRS and IAS and the subject MDCL.

“In fact, the hardest thing for me was time management as I had to study the AAT subjects alongside my schoolwork, and I couldn’t let my grades drop.” Doing AAT studies while still at school has benefits, though.

“Doing the AAT courses has helped me with my schoolwork as I learnt many new skills, including how to better manage my time and how to prepare for exams, which will be useful when I come to do my GCSEs next year,” Mahi adds.

“It’s also given me exemptions for future courses I plan to do, which is why I recently advised a friend with similar career goals to look into doing AAT himself.” And Mahi’s AAT journey is not over yet. Once she finishes school, she intends to become a professional AAT member too.

Mahi’s plans for the future

An undoubtedly gifted student, Mahi is currently taking 12 GCSE subjects, including maths, additional maths, French, and computer science.

“I’ve always enjoyed maths,” she says. “It’s so fun! When I was younger, I was also interested in neurobiology, but finance is the area in which I can imagine myself working, and I would love to get to the very top.

“That’s why, after my GCSEs, I’m planning to do the Association of Chartered Certified Accountants (ACCA) qualifications, ideally as part of an apprenticeship with one of the big four firms.

“I’d then like to go to university to do an MBA, probably in business and administration; I just want to do everything I can to have the best possible career in finance.” It’s not all work and no play for Mahi, though. She also finds time to have fun with her friends.

“I play the piano, and I like going to the movies and going swimming with my friends,” she adds. “But I’m very driven and motivated when it comes to my studies and my career. I want to go as big as I can.”

With that sort of attitude, there’s no doubt Mahi Shah is a name to look out for in the future. We’d like to thank her for her time and wish her the best of luck with her GCSEs and her longer-term career plans.

How to study for AAT qualifications at home

Online or distance learning is a great option for people of any age who want to do AAT qualifications but need to fit them in around other commitments such as school, college, or work.

It’s also a handy alternative for those who don’t live near a college or study centre where they can take an AAT course.

The AAT qualifications you can do this way range from the Level 1 Award in Bookkeeping to the Level 4 Diploma in Professional Accounting.

You can sign up with an approved online training provider or, if you’re confident you can cope without the support of an AAT tutor, simply buy the AAT textbooks for the qualification you want to take and get started.

Even if you choose the self-studying option, however, you’ll still need to register with AAT to be able to sit the assessment – and to get access to the AAT Lifelong Learning Portal, which is a great source of information and study support materials.

You’ll also generally need to find an approved assessment venue at which to take the test you need to pass to attain the qualification you’ve chosen to do.

Further reading

How to make ChatGPT work for you

Posted by & filed under Artificial intelligence, Future of accounting, Members.

Artificial intelligence is improving, and thought is turning to its potential applications.

ChatGPT is essentially a turbo-charged chatbot that can provide answers to questions no matter how big or small. It can write essays, poems and even cover letters for job applications (not that you should) with a confident and fluent writing style. It does this by drawing on the vast amount of human knowledge used in building it, with careful guidance from human experts, who helped train and refine its responses. 

That’s where the significant step forward has been made. The initial language model was fine-tuned by feeding the chatbot an enormous number of questions and answers provided by human AI trainers. Then, the programme was asked to produce several different responses to a wide variety of questions, which human experts ranked from best to worst. This human-guided fine-tuning means ChatGPT is often extremely adept at interpreting questions, finding the information sought and framing the answer in a natural manner. 

“I’ve seen this movie before. If you replace 1995 business web with 2023 AI, many of the same questions are being asked.”

– Gary Turner, Co-Founder and former Managing Director of Xero 

Make the most of ChatGPT

If you’re going to use generative AI, you need to learn how to write specific prompts for accurate results.

Find out more

AI and accounting 

As with many professions, accountants have been exploring how AI and chatbots, including ChatGPT, can be used. 

When ChatGPT emerged, one accountant, Stuart Cobbe, decided to put it to the test, running it through an ICAEW first-stage sample paper.  

“You can breathe easy – ChatGPT still fails a first-stage ACA exam,” Cobbe posted on LinkedIn. “And yes, I did spend an hour pasting in questions from an accounting exam paper into ChatGPT.” 

Cobbe entered questions from a sample exam into the chatbot, then extrapolated its answers back into the online test. ChatGPT got 42% on the exam in the end, short of the 55% pass mark set by ICAEW. 

The development of ChatGPT and other similar AI is reminiscent of the early days of the internet, says Gary Turner, Co-Founder and former Managing Director of Xero. 

“Lots of people knew in the mid-1990s that the web was big and important, but people hadn’t worked out the use cases for it yet, other than having a website,” Turner says. “That pattern is recognisable.”

Use cases

Thus far, AI has been primarily used in accounting to spot patterns. Last year, KPMG invested in AI by partnering with Blue J, which “predicts tax scenario outcomes with 90%+ accuracy”. The programme will “dramatically reduce the time spent searching for and analysing tax legislation and case law”, the Big Four firm said. 

For accountants, Turner suggests that, rather than clients interacting directly with super-smart chatbots, it could well be accountants doing so on their behalf. Finance teams within organisations could use chatbots in the same way. 

“Imagine on a phone or a video call, the client is describing their query to you in real time, and you have a chatbot listening to what the client is asking. This is enabling you as the practitioner to advise them appropriately, almost as a co-pilot,” Turner says. 

“It feels like we’re on the cusp of something huge,” he adds. “The things we eventually use chatbots for in 15 to 20 years will be three or four levels beyond what we’re currently considering.”   

Straight from the horse’s keyboard

Here’s what ChatGPT had to say when we asked it about accounting and tax matters.

AAT: Hi ChatGPT. Are you able to give tax advice? 

ChatGPT: “As a language model, I can provide general information and answer questions about tax laws and regulations, but I am not a licensed tax professional and cannot provide specific advice on how to file taxes or handle specific tax-related situations. It’s always a good idea to consult with a licensed tax professional or accountant when it comes to taxes and financial matters.”  

AAT: If AI gave incorrect tax advice, who is responsible? 

ChatGPT: “As AI technology continues to advance, the question of legal responsibility for AI-generated advice and actions is becoming an increasingly important one. In general, the legal responsibility for the consequences of AI-generated advice would depend on the specific circumstances of the case and the laws in question. 

“In general, the legal responsibility for the consequences of AI-generated advice would likely fall on the entity that created or deployed the AI system. If a company creates an AI system that provides tax advice to users, and the advice turns out to be incorrect, the company would likely be held responsible for any negative consequences that result from the use of that advice.” 

AAT: If AI is able to provide tax advice in the future, will there still be a role for humans? 

ChatGPT:  “Even if AI becomes capable of providing accurate and comprehensive tax advice in the future, there will likely still be a role for human professionals in the field of accounting and tax. 

“AI systems can be used to automate repetitive tasks, such as data entry and analysis, but human professionals will still be needed to interpret and apply the results of those tasks. This includes providing context-specific advice and making judgement calls based on the unique circumstances of each case. Humans will also be needed to oversee the development, deployment and maintenance of AI systems to ensure they are operating as intended. 

“Additionally, AI can be a powerful tool to help human professionals to work more efficiently and effectively, but it is not able to replace the human touch and emotional intelligence that is needed in some aspects of the job. 

“It’s also worth noting that laws and regulations around taxes and financial matters are constantly changing, and AI systems would need to be continuously updated to keep up with those changes. Human professionals will be needed to stay current on the latest laws and regulations and ensure the AI is providing accurate and up-to-date advice.” 

Make the most of ChatGPT

If you’re going to use generative AI, you need to learn how to write specific prompts for accurate results.

Find out more

Clients trust their accountants more than their partners

Posted by & filed under Accountable, Members.

Our survey for Accountable found that almost half of our survey respondents trust their accountant over their partner.

Research carried out for AAT this March found that 46% of people who employ an accountant or tax adviser trust that professional more than their own partner. Maybe that’s not so surprising given that 35% of respondents would not trust their partner with their bank information.

Broken trust

That’s a lot of responsibility to bear, and not all finance professionals are appropriate for the challenge they’re given. When choosing an accountant, cost was the most important factor (selected by 41% of respondents), over specialist knowledge (24%).

That may be a false economy given more than two-fifths (42%) of respondents reported losing money due to poor accounting. Separately, more than half (51%) had to hire another accountant to correct their previous adviser’s work. Amongst those who claimed to have suffered financial losses due to poor accounting, our research showed that self-employed individuals (39%) and those with a ‘side hustle’ (49%) are the most affected.

Regulation matters, too. Data from HMRC shows that one in three unregulated accountants (not members of a professional accountancy or taxation body) cause two-thirds of the complaints they receive about tax agents.

Members of professional bodies are both guided and held to account for their actions. For example, AAT imposed monetary fines amounting to £84,000 against 65 licensed members for anti-money laundering breaches in 2022. Of respondents, 35% checked their accountant’s qualifications before appointing them, suggesting some awareness of how important accountability is.

Building it back

These business risks are why we’re campaigning for accountable accountants. AAT is working with others across the profession to press the Government to take much-needed action, that will deliver greater confidence in those who employ financial advisers.

These findings underline the risks and higher costs businesses can face when appointing unqualified and unregulated advisers. Our survey has also shown that small businesses in particular are losing money through accounting errors. This is why AAT has repeatedly said the Government should legally require anyone offering paid-for tax or accountancy services to be a member of a professional body, as happens in other professions. This would provide much needed assurance to business owners that their accountant or tax adviser is suitably qualified and required to maintain their commitment to the highest standards of professionalism and ethical behaviour.

– Adam Harper, Director of Professional Standards & Policy at AAT

Pay off

At the other end of the spectrum, good practice makes a real difference. Of respondents, 70% agreed a qualified professional’s accounting had saved them money, pointing towards the benefits of a regulated industry.

Self-employed clients are struggling

Posted by & filed under Members.

Government support schemes missed sole traders, contractors and the self-employed during Covid, and continue to do so.

Sole traders, contractors and self-employed individuals have faced unprecedented challenges in recent years. While larger businesses and SMEs have been somewhat supported by Government support packages during Covid-19 and recent energy bill highs, many sole traders have fallen between the cracks.

Inflationary pressures have pushed up costs of raw materials, leading to supply chain issues, while the cost-of-living crisis has led to less work for those providing domestic services such as painting and decorating or household construction projects.

Some of the common issues experienced by sole traders, contractors and tradespeople include:

  • cash flow issues – having enough money to pay suppliers and sub-contractors.
  • shrinking customer base due to cost of living
  • tight profit margins
  • rising energy bills
  • cost of materials
  • ongoing supply chain issues
  • labour shortages due to Brexit.

In addition, IR35, which was extended to apply to the private sector in April 2021, has also caused issues. It has reduced net income for those deemed to be ‘inside’ IR35 who are therefore required to pay NICs and income tax but lack the benefits of a regular employee such as holiday pay or sick leave.

How are these micro businesses and sole traders managing in this climate? We spoke to accountants whose clients include hairdressers, actors and window cleaners to find out about the issues they’re experiencing.

Micro businesses, contractors and sole traders are experiencing people issues

Emma Chesson, Associate Director, Business Services and Outsourcing, BDO LLP

With the types of businesses we work with, we are seeing a lot of focus on people. There are difficulties in attracting and retaining talent and dealing with the impact of Brexit on the workforce. There are also challenges from newer ways of working, such as creating a team dynamic in a hybrid world and supporting staff wellbeing in the workplace.

Being a business owner can be a very lonely experience and getting the right support can be a challenge. We are focusing on supporting our clients to help them build a resilient growth strategy.

Verdict: Smaller businesses are experiencing people issues from talent retention and labour shortages to employee engagement.

Clients are being cost-squeezed from all sides  

Steven Leonard, Partner, JL Winder & Co

Government support schemes missed small businesses during Covid, and continue to do so.

Cash flow is the major issue facing most smaller businesses and sole traders. Due to increasing business and personal costs, they’re being squeezed from both sides. They’re struggling particularly with inflationary effects on supplies, overheads and wages.

Minimum wage increase is also having an impact: it’s not just the 10% increase in minimum wages but wages need to be increased for other employees to ensure the wages differentials are maintained for more skilled or experienced staff.

In certain sectors such as hospitality, there’s also a labour shortage and rates have already increased due to demand.

It’s therefore the dilemma whether these businesses can pass on costs to customers who are quite often individuals and therefore more price sensitive. Trying to absorb the costs will see a drop in profits and create a struggle to meet personal costs (mortgages, fuel, general inflationary price rises etc).

Although there is some support available across many sectors, it does seem that small businesses and sole traders are generally overlooked by the Government and policy-makers. It seems that if you don’t have a property or employ several staff, you’re off the radar.

Our job as accountants is to support and guide clients and help them adapt to the current situation. Clients need accurate and up-to-date information to help make informed business decisions. Communication with clients on an individual basis is particularly important.

Small businesses are a major part of the economy and, while they are undoubtedly facing difficulties, experience tells us that good businesses will always survive and then thrive when the pressure eases.

Verdict: Micro businesses are being squeezed from all sides, facing cash flow issues around wages as well as general inflationary costs in business and personal lives.

Virtually no support and various big concerns

Alan Broome, Director, Acumenica Group

There is virtually no support or relief for sole traders, contractors or self-employed businesses. Key concerns for these businesses are around spiralling costs, recruitment difficulties and tepid demand. Increases in business tax rates for 2023/34 are also very concerning.

We are advising our clients to work hard AND smart. Keep an eye on costs from a cash flow perspective, but don’t neglect sales.

Verdict: Micro-businesses have ongoing concerns around spiralling costs, recruitment difficulties and tepid demand.

Self-employed clients have been hardest hit

Neil Parsons, Managing Director, Wolters Kluwer Tax & Accounting UK

Prior to the onset of the pandemic, self-employment in the UK had been steadily increasing. It peaked at five million between October and November 2019 (15.3% of total employment), according to the Office of National Statistics. Since then, numbers have fallen and account for 13% of total employment.

Self-employed individuals and freelancers were among the hardest hit by the pandemic, not receiving the same level of governmental support. In many cases, their businesses have still not recovered and continue to struggle due to high energy costs and costs of materials. Research from Centre for Economic Performance (CEP) at the London School of Economics and Political Science found that a third of self-employed people cite the cost of energy as their most challenging issue.

We are seeing our clients experience increased demand from their own self-employed clients, with forecasting services in higher demand, among other new services and more frequent advice.

What we saw throughout the pandemic was just how much people relied on their accountants. Accountants were helping their clients proactively navigate government grants, local authority grants and bank loans. They were also helping business owners understand the nuances of individual businesses and giving the best advice to enable their survival.

Verdict: Self-employed clients have been among the hardest hit and have often fallen between the cracks due to lack of governmental support.

Majority of accountants may leave their organisation in the next year

Posted by & filed under Career, Members, Technology.

FloQast’s Controller’s Guidebook survey series finds 63% of those considering a change may leave accounting entirely as teams work to recalibrate work-life balance. 

The latest survey from accounting automation company FloQast highlights the impact of the talent crisis, The Great Resignation and “Quiet Quitting” on the accounting industry, which is disproportionately affected. It also reveals more than half of accountants aren’t confident they’ll stay with their current company in the next year, and a majority of that group may not stay in the industry at all.

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The survey is the third chapter in FloQast’s Controller’s Guidebook survey series and takes a deeper look at what influences accountants to remain in their current accounting role and what prompts them to explore a new one. It also analyses the impact technology has on both decisions.  

Conducted in partnership with the University of Georgia Consumer Analytics Program, the survey includes the perspectives of 203 accounting and finance professionals. FloQast looked for individuals and organizations that varied in title, tenure, company size and IPO status, as well as their fulfillment in their jobs, and the tools and training they had received. 

The survey revealed the accounting industry is in the midst of a “Great Recalibration” — in which accountants (much like other employees) are rethinking how much of their time and energy their work should require of them. Survey findings revealed an alarming talent crisis in the industry. Key insights include: 

Retention is very much in question – About half of accountants (53%) are not entirely sure they will stay with their current company in the next year. Of those, some (63%) aren’t even sure they will stay in the industry at all. 

Accountants aspire to uplevel their roles but don’t have the time – More than 60% of accountants report they struggle with an imbalance between work and life, doubting they can complete the work they’ve been assigned and, yet, still aspire to take on a more strategic role in their organizations. 

A sense of on-the-job fulfillment is critical to retention – When a sense of professional fulfillment is high, accountants are almost five times more likely to stay with their current employer than when fulfillment is average. They’re also more than 12 times more likely to stay compared to someone with low fulfillment.  

The relationship between technology and talent cannot be overstated – More than 60% of accountants say technology is more important in their job satisfaction today than it was two to three years ago, and 43% say they are extremely likely to ask about technology when interviewing for a new role. 

The ball is in employers’ courts – Accountants with a strong belief that their company is capable of understanding and addressing these issues are three times more likely to stay with that company than those that aren’t sure.  Additionally, 76% of accountants who strongly believe in their company say they are likely to stay in their jobs. 

“At FloQast, we recognize that the industry is facing a massive talent crunch and are dedicated to creating powerful solutions that empower accountants and make their lives easier,”  says Mike Whitmire, CEO and co-founder of FloQast, CPA. “Our research demonstrates that as more and more organizations leverage automation technology, the broader accounting industry becomes far better positioned to attract and retain accounting talent.”  

Expanding on this, FloQast’s latest survey results detail clear actions for employers: 

  • Take a proactive approach to assessing the technology accountants use in their work 
  • Seek integrated technology solutions that are purpose-built by accountants, for accountants to protect the sense of fulfillment that accountants gain from their work 
  • Ensure the organization is capable of identifying, procuring and deploying those solutions in ways that reinforce accountants’ belief in its abilities 
  • Be prepared to address questions about technology solutions when recruiting new accountants 
  • By leveraging these solutions, organizations are better positioned to remain competitive and continue attracting and retaining accounting talent. 

For additional findings, an eBook with more detailed survey results as well as an infographic is available on FloQast’s website.  

About FloQast

FloQast delivers workflow automation software enabling organizations to operationalize accounting excellence. Trusted by more than 2,000 accounting teams – including Twilio, Los Angeles Lakers, Zoom and Snowflake – FloQast was built by accountants, for accountants to enhance the way accounting teams work. FloQast enables customers to streamline processes such as automated reconciliations, documentation requests and other workflows that impact the month-end close, financial reporting and payroll, and is consistently rated #1 across all user review sites. Learn more at FloQast.com. 

How AAT’s new strategy works for you

Posted by & filed under AAT news, Members.

AAT’s community is driving the new strategy of producing ‘real world ready’ finance professionals and boosting careers into 2030.

Securing Future Relevance is AAT’s blueprint to create a bold and ambitious future for accounting technicians. It’s folded into our brand refresh, showcasing the message that AAT accountants and finance professionals are ‘real world ready’.

“We are looking to broaden our community and the impact they have on a global stage. Outside the UK, the contribution of accounting technicians is not well known, therefore the value they can and do bring to employers and economies isn’t well known either.”

AAT CEO Sarah Beale MAAT

This vision is going to be driven by the AAT community, not pure commercial ambition, or growth for growth’s sake. The community is – and will remain – made up of people like our Impact Award winners.

“We’re so proud of our Impact Award winners – they, and many others in the AAT community, are unsung heroes. They bring to life what our strategic plan is about,” says AAT President Christina Earls. She adds, “Council has agreed AAT’s priorities and strategy to keep accounting technicians relevant. As AAT develops the business plan, we’ll oversee the process to ensure the interests of those winners – indeed, our whole AAT community and the accounting profession – continue to be well served.”

AAT: Securing future relevance

We have a new strategic plan to secure a bold and ambitious future for accounting technicians. Read more in our digital guide.

Read the plan

Themes of future relevance

What do those priorities look like? The strategic plan to 2030 focuses on three key themes:

  • Keeping the profession relevant
  • Driving up professional standards
  • Building responsible business.

Impact on public affairs

To achieve the 2030 plan, AAT will ramp up its activity in shaping political and public opinion. “We’re going to start influencing policy around education and build on the successes we have had to date influencing policy and initiatives impacting the profession. We are going to amplify this activity. As a result, members and the general public will hear much more about the body of people we represent and the changes we have driven on their behalf,” says Beale.  

AAT also wants to reach more employers. Armed with the strapline that AAT produces ‘accountants for the real world’, AAT will be talking more assertively about the role of accounting technicians, alongside other accountants.   

“We want global recognition for technicians so that employers understand they needn’t always have a chartered accountant as the only accountant in the building. [Chartered] is a different skill set serving a very valuable purpose. But on a broad scale and at a practical level, it’s AAT members and AAT’s offer that could fulfil a very productive role for employers.”

Impact for members

Of course, the effect of Securing Future Relevance will be felt internally, not just in the wider world. Members will notice differences, even though we want the organisation to feel the same in many ways.  

‘Change will never be this slow again’ has become a popular saying to reflect the increasingly unpredictable nature of the world. Many things about the profession and the economy could feel different by the end of the decade. AAT’s mission will be to keep members and the profession ahead of the curve. 

“We want to look after the careers of our community from beginning to end, from an invoice clerk at Level 2 to a bookkeeper right up to full MAAT status and even CFO material. Their needs will change throughout their journey. That’s why AAT needs to adapt.”

AAT President Christina Earls

This is where AAT will put the community front and centre. Earls explains “There are two big themes to community. One is about making sure membership offers the greatest value possible – anticipating what the community needs, perhaps before they realise it. The second is providing it in the way they want it, by offering them a chance to influence that decision.”  

That might look like a forum for students, peer-to-peer networking for bookkeepers, and CPD covering emerging skill requirements from analytics to leadership. And all, of course, delivered in modern, accessible ways. New membership pathways and designation positions are under development to deliver better opportunities and create a level playing field, as well as increased public trust and confidence.

An early example is looking at ways to get unregulated accountants into the AAT fold, balancing their desire for experience to be recognised against AAT’s absolute refusal to create a route that would devalue membership.

Digital first, but not exclusively

With an eye on efficiency and sustainability, AAT needs to take advantage of technology and automation. Enter the new ‘digital-first’ policy. Note, the policy will not mean digital only. “We will assume digital first, then test that assumption to see if that is the right choice at that time,” says Beale. “Digital delivery means we don’t have to go around the world building offices investing in expensive and fixed infrastructure. It’s a much more logical and agile way to expand.” 

This of course feeds into the Building Responsible Business pillar. However, this theme is not just about sustainability, nor just about jumping on the green bandwagon.

Responsible business

“Responsible business is about doing the right thing for society. That of course means reducing your carbon footprint, such as travelling and printing less. But we are absolutely entrenched in accessibility. Therefore, Building Responsible Business means opening up careers and opportunities to a cohort of society that would otherwise be lost,” says Beale.  

Building Responsible Business will also involve working hard for better representation for underrepresented groups, including at senior level. AAT has long been passionate about this, but recognises as an organisation it needs to improve too. So, it has chosen to make itself accountable through target setting and voluntary reporting.  

When it comes to sustainability, Beale promises, “We will encourage critical thinking in the green agenda. We want our members to challenge appropriately. Rather than say is this the right process to follow, we want then to ask – is this the right thing to do?”  

She notes wryly that a huge proportion of large businesses have signed up to net zero, even though people are still debating how to define and measure it. Bringing together aims and influence, this is an example of how a forward-looking, future-ready AAT could make a real world impact: “We should have a role in saying, how do we bring this to life in a meaningful way for someone reading that set of accounts and annual report?”

AAT: Securing future relevance

We have a new strategic plan to secure a bold and ambitious future for accounting technicians. Read more in our digital guide.

Read the plan