External audits are often seen by many businesses as a mandatory legislative requirement rather than a value-added service. However, leading audit firms recognise the audit process can offer more than just an independent review of financial statements and accounting records.
Despite this understanding, the challenge of fee pressure looms large, particularly when audits are perceived as commoditised services. What strategies can audit firms can adopt to manage fee pressure while continuing to deliver substantial value through their audits?
Shifting the Perception of Audits: From Necessity to Value
Progressive audit firms understand the importance of transforming their clients’ perception of audits. While many view audits as a box-ticking exercise, these firms strive to educate clients about the broader benefits audits can bring to their operations. A well-executed audit can serve as a powerful tool for enhancing financial processes, managing risks, and even facilitating strategic decision-making. Yet, in the face of fee pressure, it’s essential to showcase these value-added aspects to clients.
Clear Scope Definition
One of the primary ways to navigate fee pressure is to have a clearly defined scope for the audit engagement. By outlining exactly what’s included and what could potentially be included in the audit, firms can ensure that clients are making direct comparisons between service offerings. This prevents confusion and helps clients appreciate the differences between a comprehensive and inclusive proposal compared to a basic limited scope proposal from a competitor.
Beyond Price: Emphasising Value
A key mistake many audit firms make when dealing with fee pressure is focusing predominantly on price during proposal discussions. To counter this, firms can shift the narrative towards the value they provide. By highlighting their expertise in financial processes, risk management, and strategic review, firms can demonstrate how their audit services contribute to clients’ overall success.
Avoid Price-Only Competition
In the face of client negotiations on fees, it’s crucial not to hastily agree to price reductions without considering changes in the scope of service. If price is under discussion, audit firms should be prepared to outline the value they offer. Discounting fees without a proportional reduction in service can lead to commoditisation, devaluing the expertise and insights that audits bring and impacting on the firm’s ability to maintain its service quality standards.
Leverage Technology for Efficiency
The modern landscape of audit practices is heavily influenced by technology. Data analytics, automated testing procedures, artificial intelligence, and machine learning are revolutionising how audits are conducted. By adopting these tools, audit firms can automate routine tasks, allowing them to focus on more complex analysis, improving reporting accuracy, efficiency, and depth. Offering a higher quality service at a reasonable fee can really set firms apart from the competition and elevate the firm above industry benchmarks.
Annual Re-engagement Process
Building a lasting client relationship is a critical step in managing fee pressure. Instead of treating annual reviews as mere opportunities to announce price hikes, audit firms can use them as platforms for reaffirming the scope of work and exploring avenues to deliver additional value. These discussions allow firms to understand their clients’ evolving needs and align their services accordingly.
It’s important to shift the narrative
Fee pressure is an enduring challenge for audit firms, however it need not lead to a compromise in the quality of service provided. By shifting the narrative surrounding audits, emphasising the value they bring, and leveraging technological advancements, audit firms can position themselves as partners rather than just service providers. The key lies in demonstrating that an audit is not merely a legislative requirement, it isa strategic opportunity for organisations to enhance their financial processes, risk management strategies, and overall decision-making.
Key Steps for Audit Firms to Manage Fee Pressure with Audits
- Clearly Define the Audit Scope: Articulate what’s included and potential additions in the audit, ensuring clients make accurate comparisons.
- Emphasise Value over Price: Highlight the broader benefits of audits in financial processes, risk management, and strategic review.
- Avoid Price-Only Negotiations: Consider price changes only alongside scope adjustments, emphasising the value provided.
- Leverage Technological Efficiency: Utilise tools like data analytics and artificial intelligence to streamline audits and focus on valuable analysis.
- Annual Re-engagement Process: Use annual reviews to reaffirm the scope, explore added value opportunities, and engage with clients meaningfully.
In essence, managing fee pressure requires a strategic mindset which demonstrates the worth of audits beyond their regulatory obligations. By implementing these key steps, audit firms can establish themselves as partners in their clients’ success while maintaining a fair and sustainable fee structure.
National Audits Group is a reputable Authorised Audit Company that can leverage extensive experience in audit, assurance and financial reporting to provide real value to clients.
Our team takes pride in the quality of our services and the results we deliver for our clients. Our goal is to assist clients by providing cost efficient solutions which meet financial reporting, regulatory and operational needs. We use leading edge technologies to assist with the secure collection and processing of data and ongoing engagement with our clients. This ensures collaboration and communication is strong at every stage.
To discuss how National Audits Group can help your business, contact our team at Ph 1300 734 707.
Managing Director National Audits Group | www.audits.com.au