During the course of the day, expert speakers shared their thoughts on a range of topics, including cybersecurity, talent development and the state of business in the UK. Participants had the opportunity to take part in interactive sessions and pick the brains of our expert speakers.
Issues impacting professional services
Managing cybersecurity risks
Ben Densham, chief technology officer at Nettitude, led the first session on the evolving nature of cyber threats and how to manage them. With barely a week passing without news of a major corporation being hacked, Ben served the room a realistic truth:
If someone really wants to hack into your organisation it will be possible. You need to protect your assets that the hack is going after. Ben Densham, chief technology officer, Nettitude
Attention shifts to how would you respond. You must think about the threats. Who are they? What do they want? How might they get it?
As a professional services firm, you do not need to base your response on what a Lloyds Bank or Facebook might do. Ben’s advice: tailor your plan to your specific circumstances, but DO have a plan. Make sure cybersecurity sits on your risk register and have an appropriate person responsible for it within your organisation.
While your solution might require significant budget, this may not be necessary. There are many basic things you can do cheaply to reduce the risks, and the National Cyber Security Centre has useful guidance in their 10 Steps to Cybersecurity.
Finding and keeping the future of your firm: your most important revenue enhancement strategy
After lunch, during which there were roundtable discussions about what it means to be a trusted adviser today, our next speaker Frank Tirelli took to the floor. Frank is vice chairman of professional services at our US parent company alliantgroup. He has amassed decades of experience during which he led Deloitte’s Italian business and was vice chairman at Deloitte US. He has also had roles at the highest level in industry.
Frank covered three fascinating topics:
- The state of the professional services market today
- “The best and the brightest”
- Talent development
The state of the professional services market in 2018
In 1978, when he started out, Frank reflected that 80% of a professional services firm’s operations were accounting and auditing. This translated into 90% of the profit and 90% of the risk.
Today, accounting and auditing is just 20% of operations and 15% of the profits. But still 90% of the risk!
Business consultancy has taken over and represents 50% of operations and 60% of the profit.
The business consultancy people recognise this value. Come the next financial crisis, Frank’s prediction is that they will split away from accountancy, audit and tax.
“Best and brightest”
Frank began this part of his talk with a conundrum:
“Everyone says they hire the best and brightest. To me this means one of three things: Either everyone qualifies as the best and brightest, or people have different definitions of the best and brightest, or somebody is lying.”
He confessed that he did not know what the best and brightest really meant, but asserted that 80% of people with a degree have the requisite level of intellect and requisite level of talent to be successful in professional services.
What you do with someone after you hire them is much more important than what they did before they joined you. Frank Tirelli, Vice Chairman of Professional Services at alliantgroup
This brought us on to Frank’s insight into talent development. He started with five characteristics which he thinks are essential to be successful:
Five attributes to be successful
- You’ve got to be passionate.
- You need a plan to be successful.
- You’ve got to be 100% focused on your activity.
- You need to be disciplined.
- You must have resilience.
This applies to everyone at a firm.
With these principles established, Frank turned to strategy:
“The best talent development retention and acquisition strategy is a revenue enhancement strategy. Because your staff are going to need to enhance revenue to develop.”
Frank told us about how he achieved this. The first thing he did when he managed a practice was to identify every client that he had. He assigned a team to every client.
He then identified every target company that he wanted to work with, stressing that he called these “future clients” to show how committed he was to working with them. He would assign a team to each future client. His teams included people from the very top of the hierarchy to the very bottom – every single person in the firm should be involved in revenue enhancement, bringing value.
How do you bring value? Frank’s approach is a simple matrix. On the left-hand side, all your clients and future clients. On the top, are all the areas in which your firm can bring value. And you match up all the areas that your firm can bring value to each of the clients and future clients.
Your teams should then meet monthly and talk about their strategy on how they are going to bring value to those clients and future clients. Then hold meetings of accountability. Because this doesn’t work without accountability.
Bringing value to the marketplace is how you differentiate yourself, especially to future clients. For future clients you need a hook, a speciality service that differentiates you. R&D tax credits are a great place to start for middle-market future clients. That first conversation, a one-off, “this is the first time we are getting to know each other, this is the value I believe we can bring to you”.
If you organise your entire human resource strategy as having your most junior professional to the most senior determining ways to bring value to clients, that is the most valuable human resource strategy you can have. Because word is going to get out into the marketplace:
“If you come and work with my firm, I am going to train you in how to be successful in this business.”
On generations, Frank observed that millennials want the same thing as baby-boomers like him wanted: to be successful. It is just the language around it has changed.
Inside HMRC: Behind the data
ForrestBrown director Jenny Tragner was our next expert speaker. She gave her insights on the latest HMRC data on R&D tax credits for 2016-17.
The number of R&D tax credit claims being submitted by SMEs is rising fast. HMRC had also revised the data for the two previous years, and a huge jump in the number of claims made between 2013-14 (15,585) and 2016-17 (34,060) has occurred. So dramatic was this rise, that earlier this year HMRC’s ability to process these claims was impacted.
The value of the claims being made are not rising so quickly and may even be dropping. In this we can conclude that a lot of businesses are making low value claims. Part of this can be naturally explained by the large volumes of new claimants who won’t initially have the thorough record-keeping required to legitimately support larger claims.
But here at ForrestBrown we are also reviewing plenty of claims which have been prepared in-house or by other advisers where there are obvious gaps. So, if your client is a growing business and their R&D tax credit claim has remained around the same value, it’s definitely worth a second opinion in case something has been missed.
The second part of Jenny’s talk saw her sharing some of her experiences of HMRC’s R&D Consultative Committee on which she sits. She covered four areas:
- Resource constraints – Owing to the surge in claims, HMRC had fallen behind on their own delivery targets of 28 days, but have now caught up.
- New software guidance – HMRC felt they were not being presented with the right information on digital claims. So they are in the process of finalising new advice on how to prepare a digital claim.
- Feedback on claims – There is no legislative requirement to provide an R&D activity report, but it helps to support a robust claim. HMRC have said that there is not enough of a technology focus in many of the claims – that they are too woolly. You can read more about what goes in our technical narrative in our KnowledgeBank.
- HMRC awareness drive – HMRC have been out there, on the road, working with growth hubs and trade associations to drive awareness of R&D tax credits. They have not done this for a long time, so it is a great sign that they want to give more money away. What this awareness drive does not do is help companies maximise claims. There is the difference between making a claim, and making a really robust claim.
R&D tax credits in depth – at Dartington Crystal
Our Think Tank concluded with a live interview with Alan Ramsay, the finance director at Dartington Crystal. This is a fantastic example of how an established industry like glass-blowing is still full of innovation despite being centuries, even millennia old. A useful reminder that professional services advisers should be aware that R&D takes place in every single sector – from construction to cheese-making.
Alan spoke in depth about how he had come across R&D tax credits at Dartington Crystal, the initial positive impact on the business and how they had come to transform the mindset of the company.
Initially, Dartington Crystal used the cash generated by the credit to pay down debt. But once this was done, they have ploughed it back into innovation with dramatic results. R&D tax credits have helped them fund new apprentice places and training courses to balance an aging workforce, take more risk to deliver better results to clients and proceed with more bespoke work which comes with better margins.
Alan stressed the subtlety of their work which leads to qualifying R&D activity: a change of ingredient or a new process. He urged those advisers in the room – who may have clients in similarly established industries which may be doing unrecognised qualifying activity in their own day-to-day operations – to be proactive in helping them get R&D tax credits that could transform their businesses.
Reflections on ForrestBrown’s think tank
Thank you to all of the professional services firms who took the time to attend this event. Our goal in hosting the Think Tank was to provide thought leadership to our most valued partners and the businesses they serve. By providing them with insights to stay ahead of emerging trends, we hope to help ensure their continued success.