To some degree, every Australian business has a vested interest in the performance and outlook of the country’s accounting firms. The sector is carefully watched as a bellwether for broader economic cycles and a proxy for business confidence.

Commonwealth Bank’s latest Accounting Market Pulse report shows confidence among accounting firms has reached its highest point since the series began in 2015. It also marks a spectacular turnaround that saw sentiment fall into negative territory for the first time in 2020.

It’s not just sentiment that’s improving. Firms also have the profit growth to show for it, with a 4.4% uplift reported in the last financial year and a moderate uplift to 4.9% predicted for the financial year ending 30 June 2022. Firms also expect favourable conditions to last for at least the next two years, with confidence pacing higher.

“Accountants forged strong bonds with clients while guiding them through financial uncertainty and rapid regulatory change during the pandemic,” says Julienne Price, Executive Manager of Professional Services at CommBank.

“As the economic recovery gains momentum and many businesses hunt growth opportunities, a new phase of client demand has followed. More corporate, transactional and compliance activity, and business transformation needs, continue to keep accounting firms at full capacity. The only intensifying challenge is accessing the talent to meet demand,” Julienne says.

The firms leading digital transformation

Like many other businesses, the pandemic forced many accounting firms to fast-track technology adoption to keep pace with the growing digital economy. However, not all firms are equally advanced in their digital maturity, and that has a bearing on their performance and outlook.

So, what sets digital leaders apart? First, the report identified digital leadership through five core criteria. That included whether firms found hybrid and remote work manageable or easy; the same for digital service delivery; that their staff’s digital skills were average or above; realised at least a moderate return on investment in technology ;and finally, planned to adopt emerging technology over the next three years.

Just one in three accounting firms satisfied all five criteria. Comparing these firms to the followers reveals further insights into why and how they invest and their strategic priorities.

1 in 3 accounting firms met the standard for digital leadership and are targeting growth opportunities that others may not.

The pacesetters of growth

On closer inspection, digital leaders exhibit a range of traits that differ from their peers. They are investing in a broader range of technologies and digital capabilities and for different reasons and see client demand in areas others may not. They recognise the potential to make service delivery better, faster, and cheaper and enable a gold standard in client experience.

The focus on the client experience was neatly summed up by David Larocca, Regional Managing Partner and CEO of EY, Oceania, who said, “every client conversation is now grounded in technology. Clients want insights at speed, and technology is the engine behind that”.

Here are just some of the ways in which digital leaders in accounting stand out:

  • Capturing emerging demand: Digital leaders are far more likely to anticipate client requirements in emerging areas such as IT and digital transformation, big data and analytics and ESG consulting.
  • A culture of innovation: New product and service development is driving the technology agenda for 67%, which falls to 17% among followers. Digital leaders are also twice as likely to be prioritising new models of service delivery in the year ahead.
  • Mobilising digital skills: The majority of firms are targeting core digital competencies around compliance, data, social media and cybersecurity. Leaders are also far more likely to be targeting capabilities in robotic process automation, using ERP software and coding and programming.
  • Ramping up growth: While the top investment and growth strategies across the sector relate to marketing and up-selling or cross-selling services, this is far more prominent among digital leaders. They also see opportunities to raise fees for their market-leading, technology-enabled services.
  • A brighter profit outlook: Digital leaders forecast a 5.5% profit uplift in the current financial year compared to 4.7% among followers.

New product and service development is driving the agenda for 67% of accounting’s digital leaders, the same for just 17% of followers.

While digital leadership may have a narrow definition, it’s apparent that there are correlations with how firms are developing their cultures, capabilities, and outlook. With the financial strength to continue investing in technology, it seems that digital leaders are well positioned to pull even further ahead.

Read the full report here.

You’ll find more information about the economy, technology and sustainability, and how those insights can improve your business at CommBank Foresight, insights for future-facing businesses.