Dutch accountants and administrative offices lead the way internationally when it comes to the use of ICT for the benefit of their customers. But in terms of their own automation, it is a different story. This is evident from the SMB Cloud Barometer 2015, a survey Pb7 has carried out for the third consecutive year for Exact and KPN. As we also studied Belgium, France, Germany, Britain and the United States this year, an interesting picture of how Dutch accountants “are doing it” in comparison to their foreign peers has developed. It is clear that even more than in other countries, the Dutch industry has had some tough years. The future is also far from certain. Where accountants recognize that the use of new technology offers great opportunities to improve service to customers, the same technology is putting revenues of their organizations under pressure. More and more accountants offer solutions from the cloud in which the customer usually enters his own data and immediately has access to the financial situation with automated reports. Thus eliminating tasks in the area of accounting and reporting. Many accountants are trying to take advantage of this shift by providing more added value. “Coaching” is now considered to be the magic word. But while many SMBs indicate that more advice and support is desirable, most do not want to pay heavily for it. Indeed, a considerable group finds it pleasing that they are less dependent on their accountant. The rapid technological change has at this moment more of a dampening effect on revenues and employment in the average office. For organizations to stay financially healthy, it is important for the back-office to adapt to the changes on the front of the organization. That means to connect the processes to the changing customer demand. In order to better serve the customer, it is necessary that an advisor at all times has a 360 degree view of the customers’ status. Starting with when the customer contacts the firm, but also having the advisor be able to give proactive advice based on hard data. Think of general customer data from address to personal interests, current financial status, contact history, but also benchmark data. This data is to a large extent usually available within the systems of accountants, but is not always equally well coupled to each other. Actually it is no longer of our time that you need to open three or more software applications to gain insight into the status of a customer and to get to the core of the problem. That takes too much time and allows too much room for incomplete or even wrong advice. Yet, this is often precisely the problem at Dutch accountant and administrative offices. The back office is often limited or not developed in accordance with the changes in the front: 29% of Dutch accountants indicate that the internal administration is a combination of separate software applications and spreadsheets, and 44% indicate that the administration is distributed across multiple software applications. The Netherlands is especially out of tune with the latter of the two. Outside the Netherlands the use of integrated software packages is much more common, although it is usually spread across two systems: one for the commercial side of the organization and one for the back office. Dutch accountants that want to benefit from the rapid technological changes in their industry, will have to take a long and hard look at the current internal application environment. Only when you, as an accountant, also run ahead in the back, are you ready for the future. Peter Vermeulen, Director Pb7 Research About the SME Cloud Barometer 2015 The SME Cloud Barometer 2015 is an international study into the role of cloud computing in SMEs. It is the successor of the MKB Cloud Barometer and was this year for the first time rolled out worldwide. The research was conducted by Pb7 on behalf of Exact and KPN. In the first months of 2015, a survey was conducted among decision makers, mainly owners, in 2975 businesses with up to 50 employees in the Netherlands, Belgium, Germany, France, Britain and the United States. The interviews were in each country evenly distributed across the manufacturing, wholesale, professional services, accountancy and ‘other’ industry. Afterwards a weighting was applied to ensure the representativeness of the sample.
A successful, young entrepreneur speaks
Danny Mekić (1987) is a born entrepreneur. He started his first internet company at the age of 15. After winning a number of awards in 2009, he started appearing in the media more and more often. This caused him to end up in the phone books of the ‘éminence grise’, who invited him to all sorts of inspirational and strategic meets. His personal passion is about two types of companies. Firstly, there are the large oil tankers. They need to keep going ahead, because everyone expects them to. But they can have trouble with that, because it’s difficult for them to alter their course in times when the waves are very changeable. His other passion is in encouraging entrepreneurship. Hence, his second company is an investment company that focuses on startups. He’s looking for ‘disturbing innovations’, ideas that could challenge the establishment and that show that things could be done entirely differently and much better. They often don’t have enough money to be interesting to a bank. By now he’s ready for his third company, NewTeam. It’s a consultancy firm staffed by teenagers and people in their twenties. At the moment they’re employed by 40 of the 100 largest organisations in the Netherlands. Their goal is to change organisations from inside, to challenge them and improve them in the areas of technology, media, communication, entrepreneurship and law. The idea of the company is to first look for good people, instead of pushing your proposition on your clients. The difference between them and other firms is that their advice doesn’t automatically come with a proposal to take care of it themselves. And that’s exactly what makes them trustworthy. What are Danny Mekić’s thoughts on notions like trust, transparency and authenticity? We went to his office in Amsterdam to ask. Trust In the past, there were small banks, small insurance companies, small bakeries, small stores. In the past few decades, companies have grown tremendously. You can see that to accommodate for this larger scale, large organisations have started ignoring individuality. People believed that at a larger scale, it would be necessary to have one central point of contact for all the customers. And that only works if you nullify individual freedom. For example, if you call the help desk of your phone provider and ask a perfectly sensible question, you’ll be told that it’s impossible. If you then ask why it’s impossible, they’ll tell you it’s impossible because it doesn’t fit into the system. In recent years we’ve seen that, due to the crisis (which it would honestly be better to call a turning point), large organisations have been trying to save money on service and customer relations. After all, all the other large organisations are doing it too. Aside from that, due to digitalisation, companies are challenged by a new type of startup that takes an entirely different approach. These startups are able to revive the values of the small town bakery. Moreover, a sort of trap has been created by consumers finding each other on social media and comparison sites. With individuals collecting small bits of information and being connected to one another via the internet, you’ll get a reliable idea of how an organisation works in practice. Consumers are finding out that their trust in organisations is less well-deserved than they thought. That leads to decreasing trust. This is made worse still by the aftershocks of several industries where all sorts of scandals have come to light. Think for example of politics, financial institutions or the retail sector. Organisations will therefore need to change in order to be able to regain people’s trust. That starts with being honest to yourself. What do we really do? Do we really treat our customers well? Can we satisfy them? If that’s not feasible, you should do something else. Investments are retroactively being made in customer satisfaction, but companies rarely ask themselves whether they as an organisation really deserve to be trusted. What’s striking is that in the people in the various board rooms often say the same things as their competitors. If you ask them why customers choose them, the answer is almost always: ‘we provide good service.’ And ‘good service’ is then defined as ‘slightly less awful than the competitor’s’. So when it comes to trust, organisations convince themselves that it’s all not so bad. When the employees at the help desk are only allowed to say ‘no’, then there may be a service channel, but customer satisfaction is still zero (as is the motivation of the help desk workers). Trust is therefore something organisations need to build up again. It’s not just about a trustworthy demeanour; people need to feel it. Trust exists in relation to the other person. Transparency Transparency used to be something a company could grant. Nowadays, it’s something that happens to them. They are less and less in control of it themselves. The consumer’s consciousness and knowledge has grown enormously in recent years, as a result of the rise of the internet. In order to be able to retain the consumer’s trust, organisations should not resist this transparency. If your organisation doesn’t offer transparency itself, someone else will do it for you. And that almost always has negative consequences. For example, the Dutch government is not known for having the most innovative approach. We often read news reports about failed IT projects. However, that’s not how things really are. There’s a great amount of innovation within the Dutch government. But they’re not transparent about it. The media fill in the blanks left by that vagueness. The government would therefore do better to make those innovations publicly known and let people discuss them. This can lead to good suggestions for improvement. That’s why for organisations, the question comes back to: how well are we really doing? If you claim for example that you offer the best vacations, with the best air travel, the best hotels, the best service and also the lowest price, you’ll have to
Making the shift towards renewable energy in the Netherlands using wind
The unique Energy Agreement in the Netherlands makes for a clear and sustainable direction of the Dutch energy supply. The agreement, with a strong focus on wind energy, was made between more than forty organizations in 2013. It ensures that the Netherlands can meet the European target, that 14 percent of all energy supply must be of renewable origin by 2020. According to the agreement this should subsequently grow to 16 percent in 2023. A substantial part of this renewable energy must be generated by wind. At the moment it is planned to generate 4450 megawatts (MW) of wind energy offshore, and 6000 MW on land. As of now the installed capacity in the Netherlands amounts to 3357 MW. In total, only around five percent of the Dutch energy supply is renewable right now. Compared to other European countries this is an incredibly low percentage, only Luxembourg and Malta perform worse in this respect. So the Netherlands still needs to make some big steps. Wind energy offshore When it comes to offshore wind energy, the Netherlands started out pretty well at first. It was one of the first countries in the world that constructed an offshore wind park. The first two of these, Egmond aan Zee (installed in 2006) and Prinses Amaliawindpark (completed in 2008), have an installed capacity of 228 MW. But after that off shore wind energy came to a halt in the Netherlands. It took until September 2015 before the wind capacity was on the rise again in the Netherlands, with the completion of the park Luchterduinen. This park consists of 43 turbines with an aggregated power of 129 MW. Gemini, 85 kilometers north of the Wadden Sea islands, will become operational in 2017 with a capacity of 600 MW, which is of course a real stunner. Furthermore, in the IJselmeer a park called Westermeerwind will be installed which will generate 100 MW. To reach the goals set out in the Energy Aagreement, all parties involved agreed to increase the total output of the offshore wind energy parks by a total of 3500 MW by taking five steps of 700 MW each. The parks are divided over a couple of parcels that are being licensed in duos through a tendering process. As a matter of fact, a bidder can opt to install a higher output (up to 380 MW), in order to generate more electricity and thus more revenues. To transport the electricity from the wind parks towards the shore, some sort of power sockets will be used on sea which are connected to the wind turbines. These will be connected to the mainland, so no cables will run directly from the turbines towards the shore. This is a unique Dutch solution which brings down the costs. The upcoming wind parks will be tendered through five biddings, and each winning party receives both the license and, simultaneously, the needed government subsidies. The winner is determined based on price, or in other words the consortium that needs the lowest amount of government subsidies in order to realize the project. This consortium receives the subsidy spread out over 15 years, and after that it needs to make do with the revenues from selling generated electricity. Since the Dutch government imposes a reduction in costs of 40 percent for the new wind parks, there is a maximum bidding price which effectively means a maximum in government subsidy for each unit of electricity. This, combined with fluctuating energy prices over time, makes that a bidder has to cope with considerable uncertainty in this business. A total amount of 18 billion euros of subsidies has been reserved for the offshore power grid, for the upcoming 20 to 30 years. Three to four billion is needed for the so-called power sockets and cables. TenneT, a Dutch power grid operator, has been chosen to administer this. The remainder of this money will be utilized as subsidy for wind energy parks. At present, wind energy without forms of subsidy is not profitable yet, but the new system which yields cost savings of 40 percent will certainly help make it profitable in the future. It is expected that a number of large consortia will start bidding on the tenders, which will not only attract energy suppliers but also financial institutions and construction companies. The biddings are allowed to be financed with debt, but a strict requirement is that at least 20 percent must be (owner’s) equity. Wind energy on land The agreed on target for wind energy on land (onshore) amounts to 6000 MW and will be divided among each province in the Netherlands. Each Dutch province must generate some proportion of this 6000 MW, taking into account the expected ‘wind energy yield’ for each province. For example, the target for the Limburg province (which lies in the South) is relatively low (only 95.5 MW) because there is less wind compared to the coastal provinces. Differences do exist in the policy of each province regarding how wind energy is stimulated. For instance, a number of provinces require that for each newly installed turbine, two old (and smaller) turbines must be replaced. Unfortunately this leads to undesirable situations in which a market for old turbines emerges, which drives up the price of wind energy. Of note, the subsidies for the turbines on land are financed from another subsidy fund than the one for offshore wind energy. This fund is a more general one for renewable energy, which also finances for instance solar techniques. A criterion for this fund is that the most productive technique will receive a subsidy more quickly.
Will you make a difference?
The audit profession is going through enormous change. Therefore, the profession needs people that are able and willing to be part of that change. More than that, we need people that drive it. And those people are you, today’s students. But how will you make a difference? One of the nice things about the audit profession is that there is a constant inflow of young, ambitious people. Some of them may have the idea of being an auditor for life, others may like the profession because it enables them to develop as a finance professional and may, after having gained experience as an auditor, want to become a controller, internal auditor or CFO. A substantial portion of the staff in an audit firm consists of people with less than 5 years of experience who have completed their education relatively recently. Those people bring new ideas, new skills and a new culture. Audit firms have not always benefited as much from this as they could have. A common approach in the past has been to hire people with similar skills and educate and train them in a standardized way. This may work well when compliance with a detailed set of relatively stable auditing standards is the objective. Audit teams that consist of team members who have all been trained in the same way and are familiar with the same standards can achieve their objectives effectively and efficiently. This approach does however not work well in a changing profession that needs new and more diverse skills. Furthermore, also in a non-changing environment uniformity within a team does not always result in the best decision making. In the sector report, In the public interest, the organization of contradiction within the organization and challenge of existing habits is mentioned as an important way to achieve quality. One of the ways to achieve it has been developed into a sector measure. The implementation of a supervisory board with external members is proposed to achieve challenge from outside the organization in a top-down way. But the challenge should also come from the inside, from you. By bringing your ideas into the organization and challenge existing habits. Audit firms recognize your contribution and added value and a number of audit firms organize this challenge by giving young professionals a platform and structure to provide their input. But input via such formalized structure is only a fraction of what is needed. The most useful and fun discussions that I have in daily practice are those when the people that I have the discussion with have done their research in advance and the discussion starts with a well-supported position. When people are able to have a real two-way discussion about the topic, are able to look at the issue from multiple directions and challenge others and their own first views. The people that I have those discussions with make much more impact than the people that just ask for the answer. They are the people that improve quality and realize the change that we want to realize. I challenge you to have such discussions every day. Of course your studies should provide you with a strong basis to start in the auditing practice. After your studies you know about the basics of auditing, accounting, internal control and various other relevant areas. But it is just the basics and quality improvement requires continuous investment in your knowledge and skills. The sector report therefore devotes a chapter to “A culture in which quality improvement is the norm” and proposes a number of measures to achieve this. Now, let me challenge you. Is it currently part of your mindset? In your studies, do you strive for a 6 or do you set the bar higher for yourself? Do you regularly read Accountant.nl to understand what is happening in the sector? Did you read the sector report? Did you read IFRS 15, the new revenue standard, last year? Will you read the new lease standard this month? Is it expected from you? Does it actually matter whether someone else expects it from you? Do you want to invest in making a difference, that’s the question. And be confident about your strengths. The sector is becoming more and more technology driven. Effective use of this technology is crucial in the audit of today and certainly in the audit of the (near) future. You have been raised with technology and using it is for you more a second nature than an adapted style which it is for many experienced people in the profession. You can make a difference by embracing the existing technology in the audit, helping team members to use it effectively and developing it to the next level. If you really want, you can take the profession in tow to the next, bright, decade. Can the profession count on you?
Master abroad?!
In August 2014, I moved to Stockholm to start studying for my master’s degree at the Stockholm School of Economics. It has been a great year, and I am more than happy to share my story with you. Rather than focusing on how amazing Sweden is (believe it or not – it is!), I will write about my decision to start my Master’s degree abroad rather than staying in the Netherlands. I am not trying to convince you to do the same, but I am hoping to inspire you with my story such that you consider a Master’s degree abroad when deciding where to continue your studies. Let me start with a short introduction of myself. My name is Sander Verberne, and after finishing the BSc. Business Economics at Tilburg University and a great time at Asset | Accounting & Finance, I am currently studying a double degree in MSc International Business and CEMS MIM at the Stockholm School of Economics. During my Bachelor’s, I did an exchange semester at Universidad Pontificia Comillas ICADE in Madrid in fall 2011 which was the best semester. Upon return in the Netherlands, I had 1.5 years of my Bachelor’s degree ahead of me which allowed me to start thinking of the next steps. As part of this process I turned to a family friend with vast experience in HR. His advice was threefold: 1) choose your studies based on what you like, studying topics that you are interested in increases motivation; 2) distinguish yourself from your peers by means of for instance, extracurricular activities, internships or your studies; and 3) make sure you get international exposure as globalization plays a major part in business nowadays. During my year in the board of Asset | Accounting & Finance, I continued my search for a Master’s degree. Since I considered going abroad, I knew that I had to start preparing my applications early as deadlines are generally up to one year in advance. Hence, I visited some fairs and met with agencies that helped students to start their studies abroad. Eventually, I found out about my current program when a student at the Economic Business weeks Tilburg told me about CEMS. In short, CEMS is a Master’s degree that is jointly offered by 29 business schools worldwide and is to be taken on top of a regular MSc program. The program is focused on international experience and practical skills. Visiting a Master Information Session at the Rotterdam School of Management and contact with current CEMS students confirmed my interest in the program. It turned out that finding out which program to apply for was the easiest part. In order to be eligible to apply, numerous criteria must be met and tests needed to be taken that tests English proficiency and cognitive ability. Specifically for the CEMS program a third language on level B1 was required along with recommendation letters from several professor at Tilburg University. After meeting the criteria and a half-day interview in Stockholm, I got admitted to the program in April 2014. So I have been living and studying in Stockholm for over year already and my time in Stockholm is coming to and end since I will spend the last semester of my studies in spring 2016 at the University of Sydney. Looking back, I have had an extremely rewarding time. Pursuing a Master’s degree abroad is a completely different experience than going on exchange. Where an exchange is usually more focused on travelling and partying, staying abroad for a longer period allows you to live a “normal” life abroad. It has brought me a lot in terms of cultural understanding, theoretical knowledge and a tight international network. Therefore, I can definitely recommend everyone to look further than the Netherlands when choosing your Master’s degree and consider going abroad – you get an awful lot in return.
Recent issues in the rotation of accountants
“Rotation extravaganza was unnecessary”. “Strict time constraint against EU-rules ”. “Political point-scoring creates wrongful accountancy act”. “Businesses suffer from political madness”. The Financieele Dagblad had quite the headlines in late September. What happened exactly? In 2012, the Dutch Upper and Lower House passed legislation on the mandatory rotation of audit firms for Public-Interest Entities (PIEs; Dutch: Organisaties van Openbaar Belang, OOBs), such as listed companies and financial institutions. This by way of an amendment on the Dutch ‘Wet op het accountantsberoep’ (Wab), effective January 1, 2013. Initially, the Wab intended the formation of a new professional organisation for auditors. However, because of a number of amendments passed by parliament, the effects became much more severe. One of these amendments caused that as of January 1, 2016, the Dutch ‘Wet toezicht accountantsorganisaties’ (Wta) should be extended with a new rotation rule. PIEs would have to change their auditors after eight consecutive years of conducting the statutory audit. This auditor may then only re-engage after a cool-down period of two years. During the relatively short discussion in Dutch parliament, there was a concurrent European debate (already since 2010) on, amongst others, the rotation of accountants on the job. In April 2014, this resulted in an European Regulation, effective June 17, 2016, encompassing accountant rotation rules. This order has a direct approach, which overrules any defying national legislation, albeit that the Regulation has a maximum duration which member states may shorten for national purposes. Europe has a rotation duration of ten consecutive years and a cool-down period of four years. Moreover, as opposed to Dutch law, a step-by-step implementation and transitional arrangement are part of the law: the longer relationship duration between auditor and auditee, the sooner rotation will be mandatory. After pressure from the Upper House, in December, 2012, the Minister of Finance decided that due to feasibility and the proposed European legislation, the transitional period would be lengthened. The new rotation of audit firms would only take effect as of January 1, 2016, as opposed to January 1, 2014. In addition, the Minister agreed to change the Wab in case the law would conflict with the European regulations. Through the ‘Wijzigingswet Financiële Markten 2016’ (WFM 2016) bill, in May 2015, the Minister proposed, in accordance with a carried motion, to increase the allowed audit period to ten years and the cool-down period to four years. Just prior to the vote in parliament, a NautaDutilh analysis was published, stating this bill was contradicting the European Regulation. Allegedly, the Minister incorrectly stated that a transitional period would not be necessary, and that without this Dutch national arrangement, no European imposed transitional period would be in effect. Moreover, stating to not allow the Autoriteit Financiele Markten (AFM, Dutch market regulator) to unilaterally extend the audit period with an additional two years in special cases, would be contradicting the European Regulation even more. The NautaDutilh analysis led to parliamentary questions on September 18, and in his response on September 23, the Minister concluded that the Dutch law of direct effect indeed contradicts the European Regulation. This is why the legal clause in the Wta and the amendments to the WFM 2016 with regard to the rotation of audit firms will not come into effect, just the European Regulation will hold. What are the consequences of this important decision? First of all, the European imposed audit period of ten years with a cool-down period of four years is in effect. An EU member state can extend this period with an additional ten years by means of a public tender, or an additional fourteen years in case of a joint audit. However, because Dutch parliament has decided against this, it is not possible in the Netherlands. The AFM will be allowed to unilaterally extend the audit period with an additional two years in special cases. The most important change is the transition period. Under old bills, Dutch PIEs should have switched their audit firm as of January 1, 2016, if they were audited by them for over ten years. With the new European Regulation, this is mandatory as of June 17, 2020 for PIEs which have had the same audit firm for twenty years or more, as of June 16, 2014. PIEs with an audit firm tenure of eleven to twenty years as of June 16, 2014 should have changed their auditor by June 17, 2023. All other PIEs are set to rotate by June 17, 2024. In short, the Dutch bill would have evaluated audit firm tenures retrospectively whereas the European Regulation sets the audit firm tenure to start at June 16, 2014, with exemption of tenures of over eleven years. Moreover, the cool-down period will only start after the expiration of the tenure. PIEs which have already switched, could potentially return to their former audit firm after just one year without them, and sign a new ten year period with the audit firm. After parliamentary questions, the Minister answered that “The Dutch legislators have moved in an excellently defendable manner, as at that moment in time no European legislation existed.” One can argue whether or not the Dutch legislators should have waited for further developments in the European debate and European legislation, and, when passed, have this regulation analysed more closely for contradictions with Dutch bills. I have argued elsewhere that a phased implantation in accordance with the European regulation would put significantly less stress on the audit firm market. PIEs have had little choice in alternative audit firms because of a sorrowful collision of circumstances: few PIE-certified audit firms with specific expertise, mandatory separation of audit and consulting services, and the fact that many PIEs had to change auditors in the same year. I fiercely hope that in the future, the Dutch legislator will combine decisiveness and care more flowing.