1. Introduction
A Chartered Accountant reaches a major crossroad of his life when he is qualifies and has to decide between practice and service. Unfortunately, in recent times, from a majority of the persons qualifying opt for service in industry or the Big 4 as their first choice and very rarely choose practice as a career. The Institute of Chartered Accountants (ICAI) statistics reflect the number for associate members who are in full time practice at 46,308 out of total 171,357 CA’s i.e. 27%.
2. Probable reasons for choosing employment over practice
This trend is also evident from my personal experience:
(a) Out of 25 odd aspiring CA’s in my CA group of 1999, it is sad to note that I am the only one who has opted for independent practice. There are of course some who are with the profession as Big 4 employees, but a majority is with the corporate sector.
(b) Only a couple of trainees have opted for practice out of approx. 50 odd trainees trained by our firm in the last 14 years.
(c) On the personal front as well my Chartered Accountant sibling has opted to make a career in the Big 4 and has never shown interest in practice.
On the other hand, the global trends as reflected in June 2015 by the International Federation of Accountants (IFAC) pegs the number of accountants in public practice at 45.1%. This brings me to the moot point on why are the statistics of qualified CA’s opting for practice in India so low as compared to global norms? The reasons for not opting for practice, as a career choice may be attributable to the challenges faced by a CA practitioner: –
(a) Lower earnings in the initial struggle period of practice as against an assured fixed pay package from day one of employment
(b) No readymade post-retirement benefits in individual practice for the practitioners as against those in employment where the employer provides for post -retirement employee benefit plans.
(c) Need to operate from home until one can afford to buy/lease an office as against in employment where you can work with the best infrastructure and state- of -the-art facilities.
(d) No structured career path vs. a structured career path with a fast track plan in place.
(e) Little travel opportunity vs. attractive global business trips at the employer’s cost.
(f) Networking for developing good contacts, identifying mentors etc. is currently on limited and on a trial and error basis since it is random, unstructured and luck also plays a dominant role since it is not always possible to be at the right place at the right time. (I am not referring to networking as envisaged by the ICAI which does not seem to have taken off).
(g) Difficulty in retaining good staff who trains with the firm but leave for greener pastures elsewhere.
(h) In recent years, it is becoming increasingly difficult for the smaller firms to get the reasonably priced trainees, which has resulted in their costing being thrown off gear due to the need to opt for more expensive semi qualified staff.
(i) The clients in India are also extremely price sensitive and generally resist increase in payments by CA practitioners. This results in many of the smaller CA firms continuing to accept lower fees from their clients out of insecurity and fear of losing clients.
(j) The general public perception is that a good CA is one who is good in “managing” client’s issues with the various government authorities. They feel that generally all CA’s earn substantial portion of their income from such malpractices. This though only a perception unnecessarily taints the entire profession, which can otherwise play an important role in the country’s economic growth
by partnering and supporting business by leveraging their expertise/ knowledge in the right and ethical manner.
(k) There is also the challenge of losing work due to technological development. For instance, many corporate players have created websites providing online assistance for filing Income tax returns, Company formation etc., at a fraction of a cost charged by CA firms. There is a strong possibility that CA practitioners will lose their staple practice if they do not carve a niche for themselves.
(l) It is widely known that almost 70% of the practitioners are sole proprietors and there is a general aversion to partnering with others possibly due to lack of formal forums / guidance to network, distrust for peers and non-willingness to trade off size with independence. The proliferation of smaller sole proprietary set ups may be the reason why there is a mad scramble to get work at any cost, resulting in undercutting of prices. If the proprietary firms join hands to form bigger set ups, then the fee structure would definitely be more competitive and fair for CA’s.
(m) Since I have joined practice, there has been a major overhaul of laws, starting with replacement of FERA with FEMA, introduction of Service tax, introduction of new corporate laws, the recently introduced RERA and Benami Prohibition Act, the proposed introduction of GST etc. It has become increasingly necessary for the practitioners to quickly unlearn the old and learn the new in order to stay updated and relevant.
(n) Due to the superior technology adopted by various government departments and more integration between databases of different government departments, the defaults made by tax filers are detected more briskly and penalty orders issued immediately. It has become most important for CA’s to regularly educate and guide their clients to be compliant in all respects so that they are safeguarded from such penalties.
(o) Recently, there have been news of the database of some CA firms being hacked resulting in them losing access to their own database. This has made it extremely important for the firm/partners to take professional help in ensuring the firm network and databases are secured and regularly backed up.
Therefore, practice is not for the weak-hearted especially in larger cities where the competition is cut throat and one has to be constantly alert to opportunity and reinvent the wheel to survive.
3. Meeting the challenge and the way forward- my personal experience
In my initial years of practice, there was no conscious thought given to actively developing the practice. With a ready-made practice, which I became partner in, I had thought that I just need to stick around and learn the tricks of the trade. I spent the maximum time and energy in execution mode i.e. in interacting with clients, execution of jobs on hand and updating my knowledge and skill sets. Our firm never had any growth plan or strategy and we generally trudged along doing our daily jobs, like a rudderless ship. I remember not knowing how much would be our firm’s turnover and profitability at the end of the year. The big Surprise would be revealed only after all accounts were updated at the time of tax return deadline in September. Our outstanding fees were also averaging at 8 months since most clients would pay before the next audit/ tax filing due to lack of regular follow up on our part. We would randomly provide annual increments to staff including performance incentives, even before our financial position was known to us. This coupled with the lack of special efforts to add to our top line, slowly resulted in the shrinkage of our bottom line. We soon realised such an approach was not sustainable since although we were successful in keeping our staff happy, it was at the expense of the firm’s long-term prospects.
Ever since, we have started focusing our energies on steadily developing the practice and have changed tracks to introduce the following professional initiatives, which has definitely helped set the firm into “growth mode”. These are the steps we have taken :
(a) It is very important to do an honest SWOT analysis of your firm, and align your firm’s growth plan to its strengths. It is also important for the firm partners to take into consideration their areas of interest so as to have a well-defined firm strategy. We have thus identified newer areas of practice, identified industries or service lines to focus upon etc., and have devised a growth strategy for the firm covering 3 years, wherein the aim is for the newer areas of practice to contribute more than the traditional areas of practice, to the topline.
(b) We have also introduced an annual process of budgeting firm performance in March every year, taking into consideration the previous year’s performance. We regularly monitor firm performance against targets set at a monthly frequency such that the firm’s performance is known to us before we head into the 4th quarter.
(c) We also conduct Monthly Outstanding reviews, to ensure the receivables do not become sticky thereby adversely impact our cash flows. We have also introduced a system of sending follow up emails for the slow moving debts and a stop service policy in case the dues go beyond 6 months, so that the clients do not take us for granted.
(d) We have introduced the policy to periodically review rates charged to clients per service line and to formally communicate any increase vide formal communication so that the client understands that it would be the norm rather than an exception. We have also fixed minimum thresholds for our fees, below which we would not accept/continue the work. This has helped in weeding out clients who do not appreciate your services and unnecessarily object to fee increase.
(e ) We have also introduced the practice of issuing an engagement letter for the new jobs. This has ensured that the terms and conditions on which we undertake the assignment are well spelt out at the start and accepted in writing by the client. There is also a policy to collect the mandate fee of 50% of the fee for walk- in clients, who have not been referred by our contacts.
(f ) For the purpose of continuously engaging with the clients, we have started the practice of meeting key clients identified by the firm at the start of the year, at regular intervals. We also send regular mailers to all clients containing interesting articles, recent key changes in law etc.
(g) Managing the IT systems to ensure data is kept secure and is regularly backed up, software bought are updated regularly, business continuity planning etc. is especially important in the current world, where the technology drives most business. We have outsourced the IT systems to a professional to manage the IT risks.
(h) In recent times we have carefully developed a web presence and we ensure that it is regularly reviewed and updated with latest details with respect to firm Partners, offerings etc.
(i) For a small enterprise, where the partners are involved in execution, it is very challenging to spend time on networking. However, it is extremely important to slot time for networking into your calendar since unless you continuously expose yourself further to newer people/corporates, the opportunities would not be so forthcoming. For this reason, we have devised internal targets to ensure each partner meets two new people per week.
(j) We have also introduced the practice of determining key result areas (KRA’s) for the key staff at the start of the year, so that the incentives paid are aligned to firm performance and the individual’s achievement of KRA’s.
(k) We have also focused on creating standardised processes and procedures and regularly training the staff in this regard, which would help the firm in scaling up through creation of efficiencies.
(l) Since the results of the trainees in our firm in recent years have not been good, we have started regular in house trainings for the trainees and also encourage them to attend relevant programs conducted by
the ICAI.
(m) We also have devised a system of weekly trackers for the staff, wherein we allocate works to staff and also regularly monitor the status of the works.
(n) It is possible that to many readers the steps that we have taken seem elementary, but my experience is that despite this knowledge of what is necessary, many of my contemporaries do not put it into action.
4. Expectations from Institutions and peers
Although in recent years, ICAI & BCAS have been very active in the development and marketing of the profession, and have taken noteworthy initiatives, there is yet scope
to do more to alleviate the challenges faced by the current practitioners and help practice become the top career choice:
(a) Although there are myriad seminars for developing knowledge on various laws, there are very limited seminars/courses focusing on developing public speaking, presentation skills and other soft skills that are important for a practitioner. The professional institutes should consider a tie-up with premier Management Institutes for creating specialised communication courses for CA’s, which may help them develop their communication/ presentation skills.
(b) Currently, there are multiple study circles where the focus is generally on knowledge sharing, but there could be groups regularly meeting with a specific focus on practice management to share specific practice experiences, network and encourage tie-ups/ partnerships. The practice experience shared could cover topics relevant to practitioners like draft of a partnership agreement /MOU, recent tools available for CA office management, etc.
(c) Like the ICAI has created separate portals for WOMEN CA, professional development etc. ICAI could create a portal for the Corporates to post their specific requirements for audit/ special assignments etc. The SME practitioners could log in and regularly check for such requirements and send their best quotation. The regulatory framework of the ICAI should, be such that this becomes a possibility.
(d) There is a lot of literature available in the market including self-help books focusing on individual practitioners. Regular columns may be introduced in the publications to recommend and review these books, which may help the practitioners who are avid readers.
e) Senior members in practice in the bigger Indian firms may be encouraged to share their experiences in practice and provide insights into practice development. For instance, M/s ABC wishes to have an office in Goa, but does not know how to go about the same and build a presence. The only way the firm would learn is by speaking to other firms who have successfully done it. I am aware that BCAS has such a program but these type of events need to increase. If there were regular columns/articles in the professional magazines wherein the partners of the larger firms would share their experiences on how they have expanded their reach, others could benefit from it.
(f) Another effort lacking is for formal mentoring programs to be introduced for younger members, so they can gain considerably from the experience of the seniors in the profession. Here again BCAS has such a program but it needs to be publicised much more.
(g) Although there is a portal for registration of articled trainees which firms can use for recruitment of trainees, the same needs to be improved since the information available therein as regards articled trainees is not updated promptly, which unnecessary results in waste of time.
Conclusion
The thought process behind penning this article is for the following stakeholders in the profession: –
(a) For the new practitioners to learn from my experience, to get out of the execution mode, view the big picture and to consciously take steps to grow their firm to its full potential.
(b) For the professional bodies of our erudite profession to further support and empower practitioners so that the newly qualified CA’s seriously consider practice as a “true and fair” choice rather than join the service bandwagon, which is the trend in recent years.
