NUMBER CRUNCHING: The Consis team focuses just on accounting activities so as to avoid conflicts of interest with clients.
KLAIPEDA - Your business plan may seem to be far-reaching, well thought-out and likely promising a big turnover, but all this does not guarantee success if you’ve still got a lousy accountant.
“I consider my accountant to be the second man in my enterprise. All my business counterparts point to the special importance of their accountants. In business circles, there is a good saying about the role of a accountant: a good one can pull one out from bankruptcy, and a lousy one can easily sink a large company into it,” says Viktoras Aleksejunas, owner of a Klaipeda-based auto repair center.
Danute Grazeliuniene, a seasoned accountant and head of a Klaipeda-based accounting company, whose services are mostly outsourced by a wide-range of firms in the Klaipeda region, says the old generation of experienced and sly accountants is being replaced by fledgling youngsters who, most often, do not have a keenness of mind for numbers.
“You cannot expect a young girl who has just graduated from a dubious accounting school to set up a balance sheet for a company with 1,000 employees and a turnover of a few million litas. Experience comes with the daily practice, as in any field. However, when I see new accounting schools pop up, I always doubt their credibility,” Grazeliuniene said to The Baltic Times.
From her experience, most fresh accounting starters work from one balance to the next. When there comes time to set up a balance sheet, they quit, frustrated. “Lucky are those who get a job in a big company with a large accounting department, as the beginners can rely on the help of experienced accountants,” Grazeliuniene says.
“Although most Lithuanian accountants work successfully with them, we often do not have the necessary online accounting software. It is partly due to the often changing laws and sub-law acts regulating financial services; programmers and specialists of informatics are not able to swiftly adapt the existing software to the numberous changes,” she notes.
Among hundreds of accounting companies consisting of single employees, some stand out for their solid teams of personnel and impressive, to Lithuanian standards, annual turnovers. However, the majority of them are branches of international accounting and financial service groups.
Thus, Vilnius-based BDO Auditas ir apskaita (Audit and Accounting) is an affiliate of the BDO International Co., which claims to be the fifth largest accounting company worldwide, with more than 1,000 offices in over 100 countries, Lithuania included.
At present, BDO Auditas ir apskaita runs 3 offices, in Vilnius, Kaunas, Klaipeda, and has 73 employees nationwide. The company’s Lithuanian affiliate’s turnover was believed to be 3.5 million litas (1 million euros) last year.
The runner-up, according to employee numbers, is Mirror Support Services, which was founded in Lithuania in 2005 as a 100 percent owned subsidiary of Mirror Accounting, a Norwegian- and Swedish-capital accounting company, which is owned by the Lindorff Group.
The company’s Vilnius affiliate employs 47 accountants. The employees go through a 5-month extensive Norwegian and Swedish language educational program before starting work in the Vilnius office. The third slot among the largest accounting companies in Lithuania belongs to Leinonen, a Finnish-owned accounting and consultancy company which, besides its offices in Vilnius and Kaunas, also have offices in Finland, Estonia, Latvia, Poland, Bulgaria, Hungary and Russia. In addition, the auditing company, Leinonen Audit, which operates in Riga, belongs to the group.
The fourth on the list is Macrofinance, which employs 34 persons and whose turnover was expected to reach 1 million litas last year. The company is to open its representative offices in Latvia and Estonia soon.
The list of the top five is concluded by Rodl&Partner, a German-based audit, legal and consulting firm. Founded in 1977 in Germany, Rodl&Partner has expanded to 88 offices in 39 countries, including Vilnius.
Among the 10 largest is also Norwegian capital-based Consis Baltic. Its managing director Marius Buivydas says the company, in Lithuania, provides all accounting services. “We are an accounting chain of our mother company Consis, which has very strong positions in Scandinavia. Consis has chosen to be just an accounting company, similarly to some other Scandinavian companies, which are ‘pure’ accounting firms, like, for example, Leinonen. The reason for this choice is avoidance of conflicts of interest,” Buivydas said to The Baltic Times.
He says he is cautious about other accounting companies’ financial performance public data. “Since there are no accounting licenses and only a couple of accounting companies audit their financial results, it’s easy to miss some company and be misled by the official financial performance data,” he notes.
He suggests that Lithuania is characterized by low prices for accounting services. “Given the fact that our average turnover per client is 400 litas and, in Norway, it is 1,200 litas, our price level for accounting services should be 3 times higher. However, we have taken the competiveness and purchasing power into consideration when setting our service prices,” the director says.
He also points to the difference in the fee calculation principles in Lithuania and Scandinavia. “The vast majority of Scandinavian accounting firms are billing by hours, i.e. how much time their accountants spend for the accounting activity. In Lithuania, this is rather unusual, because two Lithuanian businesses generally mistrust each other. Therefore, most of the Lithuanian market is either working by fixed price agreements or transaction based pricing, i. e. taking a fee for every document or every employee entered into the accounting system,” Buivydas suggested.
He says it is hard to say which system is more progressive. “We get signals from Scandinavia that some clients are asking to cap their accountants’ hourly fees, or even introduce transaction-based pricing. Maybe, therefore, all Eastern Europe, compared to Western Europe, has a more progressive system, where more business risk lies at the accounting firms. In Western Europe, accounting firms are guaranteed an hourly fee whatever the efficiency is,” the Consis Baltic managing director emphasized.
In the market since 2009, the accounting expert notes that efficiency and computerization of routine tasks are probably the key issues of a modern accounting activity. “This trend of computerization allowing better efficiency will probably continue in 2012. The business risk for accounting firms will increase, driving small players out of the market,” Buivydas predicts.
He admits the crisis has not ill-affected Consis Baltic operations. “Maybe this is because we are actively acquiring new clients, and our price level is very competitive compared to the price levels of local accounting firms. Our strategy, ‘Service with international quality and local pricing,’ has been received very well by our clients. From the beginning of 2010, we are constantly increasing our turnover and we see no reasons for its slowdown,” Buivydas stressed.
If the double-dip crisis hits Europe, he says the company sees it as an opportunity to increase market share, especially among foreign clients in Lithuania. “In a time of crisis, they may become price-conscious and do not tend to overpay for quality,” the director says. He admits, though, “competition is enormous” in the market.
“There are no accounting licenses in Lithuania, and they say that there are close to 1,000 accounting firms in the country. Some small players appear and disappear every day. Fortunately, there are a lot of clients too,” he says.
The good thing of the economic recovery, he says, is the decreasing effect of the black market’s generated “one-man” accounting firms. “Fortunately, these kinds of firms almost disappeared in 2010, when jobless accountants found steady jobs in serious firms. These ‘one-man’ accounting firms have been causing a big headache for serious market players, because the black market’s accountants are usually being paid salaries in cash and, with their underpriced services, for serious accounting firms, it was impossible to compete with them,” Buivydas noted.
Agne Jasinskaite, director general of Financial Services Center (FSC), says that that FSC specializes in finance and accounting services, which basically include general accounting, payroll, tax returns, financial reporting and planning. She describes the Lithuanian accounting environment as “quite demanding.”
“The market is still growing, but not with the same speed as before the crisis,” Jasinskaite noted to The Baltic Times.
Asked about specific characteristics of Lithuanian accounting, she says there are none, as Lithuanian Business Accounting Standards are harmonized with International Business Accounting Standards. “However, from the practical point of view, it should not be forgotten that Lithuania is still a ‘young’ EU member state, and still some time is needed to perceive accounting as an added value creator for a company, to not treat it as a tax calculation service to support local authorities,” Jasinskaite emphasized.
In Western Europe, she says, it is popular to concentrate accounting services in one center (the so-called Shared Service Centers), which provides remote accounting and other related services. “In Eastern Europe, including Lithuania, many companies are used to having a local accountant present, as one of their employees; however, due to the increasing benefits of outsourced services and opportunities to reduce costs – the number of companies, switching from the ‘on-board’ accountant to an outsourced one, is rapidly increasing,” the FSC director stressed.
Since the crisis has shrunk the market of audit and other finance/tax consulting companies significantly, she says many of this kind of company were shutting down their activities, or many of them launched their own accounting departments and started providing accounting services, hereby increasing competition in the market. “Even with the tough business environment, we still think that outsourced accounting services will have potential for the future, especially those services provided by high quality professionals,” Jasinskaite surmised.
Laura Gavenaite, director of TFS, an accounting and legal service company in Vilnius, points to the “unbelievable” range of various accounting companies’ prices. “Speaking of other things, there have been many rumors about mandatory exams for accountants. However, no decision has been adopted in that regard,” the TFS director noted.
She says the crisis has not adversely impacted the company’s activity. “Both our services and revenue have doubled during it. I would say a crisis does not ill-affect our sector. Furthermore, it encourages expansion,” Gavenaite emphasizes.
She says the demand for accounting services will keep rising next year. “Resource-conscious entrepreneurs, especially during the downturn, tended to entrust accounting companies in providing them accounting services. With the economic situation better, I reckon stronger enterprises will want to reinstate the capacity of bookkeeper, as this person is the second man in every company, right after its head,” Gavenaite predicted.
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