Re­anda of­fers hope in ac­count­ing jun­gle

China Daily European Weekly - - Business -

Com­pany is show­ing the smaller out­fits how to sur­vive and flour­ish in the face of some very pow­er­ful and in­flu­en­tial world­wide com­pe­ti­tion

Re­anda’s soured mar­riage to BDO high­lights a typ­i­cal prob­lem in the ac­count­ing world, where smaller play­ers give up their in­de­pen­dent de­ci­sion-mak­ing pow­ers to ad­here to big ac­count­ing net­works’ rules and, in re­turn, en­joy the ben­e­fits of the net­works’ brand names and rep­u­ta­tion.

Un­known to many, the “big four” ac­count­ing com­pa­nies — KPMG, PwC, Deloitte and EY — are not sin­gle en­ti­ties, but net­works of many ac­count­ing com­pa­nies that col­lec­tively use the same name. Clients would not know the dif­fer­ence, since the ser­vice they re­ceive has con­sis­tent stan­dards.

The likes of KPMG, PwC, Deloitte and EY in­vest a large amount of money to man­age their net­work com­pa­nies and en­sure con­sis­tent ser­vice stan­dards. This in­vest­ment is re­couped when mem­ber com­pa­nies pay the net­work a li­cens­ing fee for the use of its name.

Re­anda, a Chi­nese ac­count­ing com­pany founded in Bei­jing in 1993, made a de­ci­sion to in­ter­na­tion­al­ize by join­ing one such net­work in 2002. It chose BDO, which ranks just be­hind the big four in the “sec­ond tier” ac­count­ing net­work cat­e­gory, along­side the likes of RSM and Grant Thorn­ton.

But when Huang’s team re­al­ized that Re­anda and BDO had dif­fer­ent val­ues and ap­proaches, they went sep­a­rate ways.

“After we left BDO, we found our­selves at a cru­cial junc­tion. We had to make a de­ci­sion about our fu­ture,” he says.

“One op­tion was to join an­other in­ter­na­tional net­work, but sim­i­lar prob­lems might oc­cur. We could also have sold our com­pany to an in­ter­na­tional ac­count­ing firm, which would re­turn a lump sum pay­ment to our part­ners in re­turn for our years of hard work, but we felt Re­anda had so much po­ten­tial and we didn’t want that to be the end of the brand.”

In the end, Re­anda made the de­ci­sion to start its own ac­count­ing net­work, the first Chi­nese ac­count­ing com­pany to do so.

“Start­ing and man­ag­ing our own net­work means we make the rules,” says Huang.

The Re­anda In­ter­na­tional Net­work, started in 2009, has since grown to in­clude 31 mem­ber ac­count­ing com­pa­nies in China and over­seas.

The net­work’s mem­ber com­pa­nies gen­er­ated more than 1.2 bil­lion yuan ($190 mil­lion) of rev­enue in 2017, mak­ing it the 20th-largest ac­count­ing net­work by rev­enue glob­ally. Re­anda In­ter­na­tional Net­work’s mem­ber com­pa­nies em­ploy al­most 4,000 peo­ple.

Re­anda In­ter­na­tional’s mem­ber com­pa­nies are in markets in­clud­ing the UK, Italy, Por­tu­gal, Cyprus, Ger­many, Aus­tralia, In­dia, Kaza­khstan and Mada­gas­car. The net­work hopes to ex­pand to in­clude 40 mem­ber com­pa­nies by 2019.

Al­though Re­anda Cer­ti­fied Pub­lic Ac­coun­tants is still based in Bei­jing, the Re­anda In­ter­na­tional Net­work’s head­quar­ters are in Hong Kong. The net­work, which op­er­ates as the par­ent com­pany for all in­ter­na­tional mem­ber com­pa­nies, col­lects li­cens­ing fees from over­seas mem­bers, as well as re­fer­ral fees when mem­ber com­pa­nies in dif­fer­ent ju­ris­dic­tions re­fer work to each other.

It has had a pres­ence in the UK since 2016, when the Bri­tish ac­count­ing com­pany Grun­berg & Co, which was founded in 1990, joined its net­work and adopted the name Re­anda UK.

Re­anda UK em­ploys about 70 peo­ple and pro­vides ac­count­ing, au­dit­ing, tax and con­sul­tancy ser­vices.

“Join­ing the Re­anda In­ter­na­tional net­work helped us to be­come more in­ter­na­tional, and cap­i­tal­ize on op­por­tu­ni­ties pro­vided by Chi­nese com­pa­nies ex­pand­ing into the UK,” says Robert Bean, man­ag­ing part­ner of Re­anda UK.

Since join­ing the Re­anda In­ter­na­tional net­work, Bean’s team has started ad­vis­ing more Chi­nese clients, thanks to grow­ing UK-China trade and in­vest­ment re­la­tions. Rev­enue growth has led to new hir­ing, and this year Re­anda UK moved into two new of­fices, in North London’s Colin­dale and in Cen­tral London’s Moor­gate.

De­spite the strong growth, Huang ac­knowl­edges that Re­anda In­ter­na­tional’s over­seas ex­pan­sion still faces chal­lenges. Com­pared with the big four, Re­anda In­ter­na­tional has a smaller bud­get for staff salaries, which makes it harder to at­tract top tal­ent. Its shorter his­tory re­sults in a less-known in­ter­na­tional rep­u­ta­tion, which also makes se­cur­ing big client deals more dif­fi­cult.

Re­anda In­ter­na­tional’s rev­enue of $190 mil­lion also pales when com­pared with the big four. Deloitte’s 2016-17 fi­nan­cial year rev­enue, for ex­am­ple, was $38.8 bil­lion, and PwC’s was $37.7 bil­lion.

The less fa­mous brand name of Re­anda In­ter­na­tional is also demon­strated by Grun­berg & Co’s hes­i­ta­tion to com­pletely give up its own name, which was al­ready fa­mil­iar to old clients. Grun­berg & Co’s logo is still seen on its build­ing and the com­pany’s mar­ket­ing ma­te­rial.

Re­anda In­ter­na­tional has given Grun­berg & Co four years to phase in a more con­sis­tent Re­anda- only brand­ing strat­egy, al­though de­tails are open to dis­cus­sion. Re­anda In­ter­na­tional’s other in­ter­na­tional mem­ber com­pa­nies are also in a sim­i­lar sit­u­a­tion.

“We un­der­stand their con­cerns,” says Huang. “Giv­ing up an es­tab­lished brand to adopt our brand is a leap of faith in our fu­ture de­vel­op­ment. Hope­fully, one day, when Grun­berg & Co gen­er­ates more rev­enue from new Chi­nese clients than its ex­ist­ing clients, the brand­ing tran­si­tion will come will­ingly and nat­u­rally.”

The big four ac­count­ing net­works nor­mally en­joy brand con­sis­tency be­cause smaller com­pa­nies de­rive far more ben­e­fit from adopt­ing the new name. But this lux­ury is not so much en­joyed by even the “sec­ond tier” of ac­count­ing net­works. For in­stance, Re­anda it­self was branded as Re­anda BDO be­tween 2002 and 2007 when it was a part of the BDO net­work.

Re­anda In­ter­na­tional cur­rently be­longs more in the ranks of the “third tier” of ac­count­ing com­pa­nies, in Huang’s view. How­ever, it does en­joy some unique ad­van­tages and op­por­tu­ni­ties. One is its un­der­stand­ing of the mind­set of Chi­nese com­pa­nies, which is par­tic­u­larly use­ful when ad­vis­ing these com­pa­nies’ over­seas ex­pan­sion.

“We en­joy the unique ad­van­tage of hav­ing both a deep un­der­stand­ing of Chi­nese busi­ness cul­ture and also lo­cal ex­per­tise in each in­ter­na­tional mar­ket we are present in,” Huang says.

Strate­gi­cally, Re­anda is fo­cus­ing on es­tab­lish­ing more mem­ber ac­count­ing com­pa­nies in coun­tries along the re­gions cov­ered by the China-led Belt and Road Ini­tia­tive, which aims to grow con­nec­tiv­ity be­tween Europe, Asia and Africa through in­fra­struc­ture in­vest­ment. Chi­nese com­pa­nies have been ac­tively trad­ing and in­vest­ing in these coun­tries.

“Since many Chi­nese com­pa­nies are still in the early stages of their over­seas ex­pan­sion, we feel that as a Chi­nese ac­count­ing net­work, there is a sense of re­spon­si­bil­ity to sup­port their in­ter­na­tional ac­tiv­i­ties in the best pos­si­ble way,” Huang says.

“In re­turn, we will look to es­tab­lish a solid rep­u­ta­tion in­ter­na­tion­ally. Suc­cess­ful ex­por­ta­tion of high-qual­ity Chi­nese ac­count­ing ser­vices makes us proud, and changes peo­ple’s per­cep­tion of the his­tor­i­cally cheap, low-qual­ity ‘made in China’ image,” he says.

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