It is a known fact among leaders at professional services firms that the industry is undergoing a wide range of changes due to a dynamic economic landscape. The effects of those changes are especially challenging to small and medium-sized professional firms that are trying to remain relevant in an increasingly competitive environment.
Here we will take a look at an article by Lucy Mair of The Gateway to outline five of the biggest issues facing professional services today and how document management systems like eFileCabinet can help give professional service providers a leg up in facing some of these challenges.
- The Big Four Monopoly
You do not have to be an individual in the professional services industry to know the “Big Four.” The Big Four refers to the four largest companies that dominate the professional services industry currently, they are: Earnest and Young, PwC, Deloitte, and KPMG. These multinational companies audit all but one of the FTSE 100 index of leading UK-listed companies. Combined, they consist of tens of thousands of employees and have thousands of offices worldwide.
This monopoly has unfortunately stifled competition from smaller companies such as Grant Thornton and BDO. This has inadvertently resulted in increased pricing of services and a reduction of quality. To mitigate the negative effects of this dominance, the Competition Commission, at the recommendation of the House of Lords inquiry, began investigating the Big Four and is in the process of publishing its findings. As an interim measure, the EU has presented proposals that make it mandatory for large corporations (the Big Four) to perform joint audits with their smaller rivals.
- Audit And Non-Audit Services
The combination of audit and non-audit services has also proved to be an issue for companies in the professional services sector. The services offered by professional services firms include audits, tax, corporate advisory, and management consulting. However, players in the industry have been debating about whether audit services should be kept separate and independent from the non-audit services.
The reason for this is simple. An audit provides an assessment and scrutinizes a company’s financial records and procedures. The main objective of the audit is to determine if a company’s records gives an accurate view of its current standing. We can therefore see that if a company that performs an audit also provides consulting services, a conflict of interest could arise, leading to potentially biased audits.
In an attempt to assure the independence of external auditors, the Auditing Practices Board of the UK has begun prohibiting professional services firms from providing consulting and advisory services to their audit clients. There have already been reforms proposed by the European Commission that will separate audit and non-audit services that could potentially impact the business models of existing firms, requiring them to restructure their services.
- The Financial Crisis
In the great financial crises of 2008, the Big Four professional services were heavily criticized for not being sufficiently rigorous in their assessments of banks and other financial institutions. As a result, they came under fire from the House of Lords Economics Affair Committee for failure to report the risks in the banking sector.
Coming out of this, the EU regulators have proposed a rotational system whereby an auditor’s tenure with a client would be limited to a maximum of 25 years, which is a significant decrease from the current average relationship of 48 years.
- Tax Avoidance
The topic of tax avoidance comes up in the news fairly often. It is defined as the legal usage of the tax regime in a single territory to one’s own advantage to reduce the amount of tax that is payable by means that are within the law (Wikipedia). Tax audit and management services are some of the biggest business areas for professional services firms. However, tax advisors typically assist their clients in legally reducing the amount of taxes they pay on earnings and other business transactions. The impact on professional services firms becomes increasingly apparent as the ethics of tax avoidance is questioned.
- Administrations
Professional services firms may also provide reformation services to businesses in financial distress. When a company’s assets aren’t sufficient to repay debts, administrators would usually take on a managerial role in running the company in the interest of creditors. Economic conditions are unlikely to improve in the near future, most likely meaning that reformation services will continue to be an important service offered by professional services firms.
How can eFileCabinet help Professional Services Firms?
Document management systems (DMSs) such as eFileCabinet are an essential tool for improving the quality of audits by making them faster and more efficient thereby giving professional services a leg up on the competition.
eFileCabinet DMS can help professional services firms remain organized by providing the ability to quickly locate documents with the click of a button. eFileCabinet has a powerful search function that allows users to search for file by with the file name or by keywords present in the document.
In addition to being organized, companies no longer have to worry about meeting the standards of regulatory bodies. eFileCabinet comes with built in HIPAA and FINRA compliance with features and functions that help companies foster document management best practices such as: robust security measures to ensure document privacy and confidentiality, various control systems to detect and prevent unauthorized creation, editing, and deletion of records, and multiple backup methods to retrieve files that are lost due to unforeseen circumstances.
Best of all, professional services firms will be delighted to know that with eFileCabinet’s Enterprise Access Tool, audits can be done entirely remotely by allowing access to auditee files 24/7 from anywhere with an internet connection. This has serious potential to minimize cost, time, effort and interruptions during the auditing process.
To find out more about how professional services can leverage the power of eFileCabinet to improve the quality of services and keep ahead of the challenges plaguing the industry, fill out the form provided for a free 15-minute demo.