Contractors are a constantly evolving group of business consumers who are becoming much more demanding of their service providers. The result, in the contractor accountancy space, is increasing segmentation of services to meet contractors’ needs.
This stratification has been highlighted by ClearSky’s recent move to introduce its ‘price match guarantee’. The firm’s managing director Derek Kelly outlined the contractor accountant’s strategy as being ‘people centric’.
He also explained that, although contractors have a common set of characteristics that set them apart from other small to medium sized enterprises (SMEs), the contracting market is far from being homogeneous. Which is why many contractor accountants now offer several tiers of service.
The evidence of how contractor accountancy providers have segmented suggests that contractor needs in turn are principally segmented according to:
- How much bookkeeping, accountancy and tax they want to take on themselves
- How they want to interact with their accountant
- How much they are prepared to pay.
These factors first led to the contractor accountancy market moving from an all inclusive to a menu-driven model. To use a car analogy, buying contractor accountancy services used to be like buying a Honda or Lexus. You paid your fixed price and you got the core service and all the extras.
But contractors are more mature buyers, and frankly a lot savvier at procurement, so they don’t want to pay for services they don’t use. To continue our car-buying analogy, that’s like the Ford or Audi model: you pay a base price and everything else is an option. The result is multiple tiers of services that range from bargain basement tax and company accounts service only to bespoke accountancy, and everything in between.
The other major trend is how contractors interact with their accountants. This has resulted in the evolution of the online accountancy model and the refinement of the existing ‘people centric’ model.
The online accountancy providers have predominantly, although by no means exclusively, focused on systems and process efficiency. The huge uptake in services from those contractor accountants offering them is evidence that many contractors prefer to engage with their accountants online.
The ‘people centric’ model provides contractors with ongoing telephone and sometimes even face-to-face contact with their accountants. There is usually an online portal providing support, but rarely to the extent provided by the genuine online-only contractor accountants. ClearSky’s reported rapid growth, with the firm saying it has taken on over 1,500 new clients in 2012, is just one piece of evidence that the people centric model is also what a segment of the contractor market wants.
You then have the ‘high-end’ accountants that focus on personal services, rarely bothering with all the automation, ensuring that their contractors always get direct access to the accountant.
A positive factor for contractors is that the process efficiencies created by online contractor accountants also mean such firms can afford to invest more in face-to-face service delivery. So, actually, many providers do pretty much the same, but market and price it differently.
As contractors are becoming more demanding, the market is clearly segmenting based on users’ needs. The more you earn, the more there is to talk about, so you need a tax advisor. Those contractors who are more IT proficient are often happy to do the book keeping themselves through an online portal. Others prefer a solution where they hand over all their receipts and their accountant does it.
And what’s most exciting, if accountancy services can be called exciting, is that the high street/corporate accountant model for contractors is largely long gone. Service providers are genuinely responding to their customers’ needs and contractors can only continue to benefit – no matter what level of support they prefer.