Australia has a vibrant knowledge economy. Highly skilled lawyers, accountants, engineers, architects, consultants, and business managers contribute not only to our own economy, but to the global one as well.
Firms that invested early in technology were ahead of the game when the pandemic hit. By leveraging tech-enabled solutions and embracing hybrid working models, these knowledge powerhouses adapted – and fast – while ensuring seamless service delivery. Disruption brought agility, efficiency, and in some cases increased staff retention and business growth to professional services.
We’re now seeing improved business confidence, with rising economic activity expected to grow discretionary spending and investment in new projects, driving demand across professional services in coming years. You’ll need the workforce to support this. And with a tightened labour market, and specialised skillsets in high demand, attracting and retaining your workforce is more crucial than ever. This will help you protect your top line, to nurture your bottom line.
Top trends in Professional Services
Issues impacting businesses in Professional Services
Allocation of profits within professional services firms
The ATO published the long-awaited final Practice Compliance Guideline PCG 2021/4 for the allocation of profits by professional firms. With the start date deferred to 1 July 2022, there’s now a two-year transitional period to 1 July 2024 for arrangements that were low risk under the Suspended Guidelines. To be on the front foot, it’s important to consider the impact of the PCG on your business structures, remuneration and compliance obligations. Reach out for support around assessing areas of exposure, implications for existing arrangements, forecast income and more.
Considering M&A to achieve vertical integration
Over the past decade, we’ve observed the continued movement of the Australian economy from a resources-led economy to a knowledge-based service economy. Acquirer appetite has been driven by a focus on innovation, with tech-enabled businesses high in demand – particularly for those looking to become vertically integrated. This means organisations become more attractive supplier choices by diversifying their service portfolio. As acquisition can be a fast way to grow strategically – taking a proactive approach ensures the right acquisition, stronger positioning with sellers, and ultimately, the best outcome for your business.
Working capital optimisation
Organisations usually don’t optimise their working capital until cash becomes tight – however in this scenario, it’s often too little, too late. Professional services firms in particular may have overlooked opportunities to preserve cash because so much of what they do is intangible. Cash freed up can be used to reduce debt, increase return to owners and invest in future growth ambitions. Reach out to understand how you can preserve cash more efficiently.
Technology driving efficiency, yet cyber security issues rise
Spanning across enhancements to client experience (CX), remote accessibility, finding efficiencies in processes and streamlining tasks, many systems have enabled positive change. But with professional services capturing and storing confidential and highly sensitive information, plans, intellectual property and patents, they are a particular target for cyber threats, corporate espionage and fraud. Having a strong cyber security and operational resilience strategy in place to prevent, minimise and rectify customer risk is more crucial than ever.
Prioritising CX to drive loyalty
Although CX may seem like the latest buzzword, it’s crucial to prioritise to build strong, ongoing and loyal relationships with your most important stakeholders – your clients. From delivering impactful services and having the right people to support your clients, to optimising your brand and driving personalisation, CX is essential to define your value proposition and differentiate yourself from the crowd. At the core of CX is your people – the backbone of your organisation. With people reconsidering what they look for in an employer and prioritising jobs aligned to their lifestyle and values, people experience (PX) is a key element of driving good CX. To optimise your PX, key differentiators go beyond compensation, as employees prioritise flexibility, career development and delivering impactful work.
Remuneration alternatives to the stock standard salary
With a global shortage of people, competition for the best talent is intense. Coupled with rising labour costs, employers need to look beyond financial compensation to alternative forms of remuneration. From non-cash remuneration, to how businesses can use employee share schemes (ESS) to manage overall costs – ESS can be a competitive advantage not only for attracting and retaining talent, but also to protect IP. From the outside looking in, ESS might seem complex to set up – but get the mix right, and it can be a tax effective way to incentivise your teams and propel your business forward.
We cut through the complexity of compliance
Australia has a complex regulatory environment, borne of decades resulting in red tape and compliance requirements that can be tricky to navigate. Whether it’s tax, audit or managing risk when considering your commitment to anti-money laundering, fraud and modern slavery – we cut through the compliance and complexity.
Increased focus on ESG transparency
Environmental, social and governance (ESG) and sustainability issues are high on the agenda for professional services firms. Stakeholders, including investors, customers and employees, are demanding contributions towards a more sustainable future, support towards marginalised groups and transparency about organisation’s stand on workplace diversity and inclusion, as well as social and environmental sustainability. Although the regulatory environment around ESG is changing rapidly, early adoption of ESG reporting is currently restricted by little guidance on reporting requirements. With governments considering ESG disclosure rules further to COP27, organisational ESG reporting is heavily reliant on targets, disclosure of business activities and performance against sustainable finance as well as social impact benchmarks.
Does the partnership model work?
It’s essential that your business structure supports growth and stability in the face of an unpredictable market. The partnership model can mean partners take their profits and 'drain the swamp' each year rather than reinvesting in the business. As we’ve seen in 2020, a war chest of retained capital was critical to support businesses to withstand the first wave of the pandemic. Will this mean the end of the partnership model and a move to an incorporated structure for some professional services firms?
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