Finance and Accountancy Briefing
Succession in the Accountancy Profession
The number of phone calls that we have received with regard to succession has increased considerably over recent months. Given that we have an ageing partner profile, it is inevitable that many are now thinking of how they are going to pass on the baton to the next generation, not only in terms of receiving some value for their lifetimes work, but also in terms of responsibility towards staff and clients. There is also the question of the general and overall responsibility of the practice itself. It really isn’t feasible just to close the front door, turn the key in it, turn the lights off and walk away. Ongoing responsibilities, for example leases, now mean that careful consideration has to be given by many practices as to their future.
This particular problem applies principally to multi partner firms in the country, and not particularly to sole practitioners, although some are affected. As a sole practitioner it is, of course, much easier to make decisions about when, where, and why to deal with matters as opposed to being part of a partnership. Partnerships tend to have partners with different agendas. For example, you may have younger ones who are looking forward to their opportunity to take over the practice and run it. You have older ones who wish to retire and take a cheque. You have those in the middle that seem to have a bit of an eye in both directions. We have been made aware of many combinations. Some practices, of course, don’t value goodwill at all and it is merely a case of passing on the baton. However this is not the case with most practices. Many partners have paid for goodwill and they are looking forward to their cheque when they go. And what about capital accounts as well? Some of those have grown into quite substantial amounts over the years.
The other problem that has now come to the fore is the one surrounding the buyout of the goodwill of a retiring partner. Even before the credit crunch arrived we had been made very much aware that the younger generation coming through were unwilling to arrange substantial loans to buy out retiring partners. This has further been exacerbated by the current economic climate. This has meant that those who could have considered this route are finding it extremely difficult to raise the funds to do so.
To review the paper in-depth, please download it here.
People who read this also read these
More from Goldsmiths Practice Services