Tendai White explains how medium-sized firms can make an impact internationally by joining associations or networks
With the dominance of the larger firms, and the unstable economy, it can be difficult for South Africa’s medium-sized accountancy firms to thrive and make their presence felt. These medium-sized firms, which fit somewhere in the middle of small partnerships (1–5 partners) and the big firms, need to adapt to the changing market in order to keep their heads above water. In order to compete successfully, medium-sized firms need to look outside of South Africa for longer-term growth opportunities.
With the changes to the Companies Act that occurred in 2011, the reporting and regulatory environment for smaller businesses has changed significantly. While certainly not the only factor, some medium-sized firms’ revenue streams have been affected as a result. However, the continuing presence of medium-sized firms in the market indicates that they are finding ways to keep clients happy and stay profitable. And the growth of international accounting networks and associations in South Africa and worldwide is one manifestation of the changing market and the need for smaller firms to think about the bigger, global picture when it comes to their clients.
Such organisations work to connect smaller, independent, owner-managed accountancy practices to other medium-sized firms that face similar challenges at the national and international levels.
However, for firms looking at membership of one of these organisations, the list of options can be daunting. There are more than 50 active global groups to choose from. And, since the Companies Act, these organisations have had to specify their standing as either a “network” (such as RSM International) or an “association” (for instance INPACT International) as defined by IFAC’s (International Federation of Accountants) code of ethics. This distinction is significant and ensures greater transparency in the marketplace so that clients can understand better the nature of a member firm’s affiliation and therefore the standards and quality control procedures the global organisation has in place.
NETWORKS VS ASSOCIATIONS
In a nutshell, a network is a more formal, cohesive, tightly integrated, and highly branded organisation that tends to comprise of larger firms that serve clients requiring cross-border audits and related work. An association is a less formal “referral group” and appeals to smaller firms in the mid tier, where audits are a less significant share of their practice and where real pockets of specialist domestic and international tax and related expertise may exist.
Whichever route is taken, many of the core benefits are the same. The firm is able to “go global” instantly and become part of a ready-made alliance of firms while cultivating regular sources of fee income over the long term by exporting their own services. However, success is dependent on the organisation’s recruitment policy and business model, and of course whether or not the member fee earners participate personally in group initiatives.
One important factor in whether member firms derive maximum benefits appears to be geographical exclusivity. Most groups offer some form of territorial exclusivity, ensuring members have their own “patch”, do not compete against each other, and can refer their clients without the worry that another member firm may poach their client.
Additionally, medium-sized firms who join an association will receive:
• Access to international specialists who can lend a hand with non-core practice areas
• The ability to refer their clients to similarly priced, specialist firms that offer the same level of service
• The opportunity to receive referrals from firms in other countries
• Permission to use the association’s branding to increase overall credibility
Each association and network will have variants of these benefits, so it is important that an interested firm look through the mission statements of the organisation and the current members. Most networks and associations will gladly hand out information about their services and member benefits.
MEETING THE ORGANISATION’S REQUIREMENTS
It goes without saying that many networks and associations have stringent criteria that a firm must meet before it can become a member, with these related to size, culture, or practice and sector focus. With the benefits that come from being a member of one of these organisations, the groups have to be selective. This selectivity also ensures that the firms who are currently members will serve as valuable assets to each other.
The requirements for joining networks and associations will vary from one to another, so, if a firm does not fit the qualifications for one organisation, it will still have choices available. It also should be noted that membership typically requires a one-off, yearly, or monthly fee from the firms involved.
While the process of gaining membership to these organisations might seem difficult, medium-sized firms need to be thinking innovatively about how they can best export their accountancy and tax services to a larger audience. And once a firm gains membership to a global accountancy organisation, it has tangible resources at its disposal that will allow it to protect its client base, project a larger presence locally, and of course, give it a platform for promoting Brand South Africa to overseas firms and clients. ❐
Author: Tendai White is the Executive Director of INPACT International