Accountancy as yet underdeveloped in Vietnam with post pandemic opportunities

The adoption of IFRS will bring the industry in line with international standards and give a yard stick for quality, allowing firms to compete on something other than price. The accounting industry in Vietnam still remains under-developed, according to Phạm Thị Huong from Vietnam Auditing and Valuation Company Limited, an MGI Worldwide member firm. “Currently, Vietnam has more than 700,000 enterprises, but the accounting industry in Vietnam has not yet developed,” she says. “This is because Vietnamese enterprises mainly recruit staff to work as accountants at the accounting department of the company. Only a few small-sized companies use outsourced accounting services. The number of firms providing accounting services is still negligible, currently there are about 150 companies providing accounting services in Vietnam.”

There is also an issue with the quality of service being offered – according to Huong, the current team of accountants in Vietnam is still lacking in both quantity and quality compared to international standards. With huge pressure on fees, that is only getting worse, firms do not have the resources to upskill. “To work in firms providing accounting services, staff must have in-depth knowledge, professional and effective working methods,” says Huong. “However, due to low service fees and an underdeveloped market, recruiting and retaining employees at accounting service firms is very difficult. The accounting profession is always one of the most competitive industries.

While many countries are experiencing a bounce back after the pandemic, Vietnamese accountancy firms are discovering that while client demands might be increasing, their budgets are not. “On the recovery momentum after the covid pandemic, the top priority of businesses is to cut costs, the cost of financial and accounting services is also among them,” says Nhu Tien Nguyen, partner at PKF Vietnam. “For existing customers, they tend to use the reason that the service company is familiar with the accounting system and their transactions, the service provider does not have to take as long as the initial approach contract. In addition, the collection of many quotes from many suppliers, also creates a downward trend in the overall market.“

This kind of fee pressure is affecting even the biggest companies. According to Lam Vu, partner at Crowe Vietnam, even the Big 4 firms try to reduce fee levels to get more clients from mid-tier firms.

Staff recruitment and retention is also a headache. “It is more challenging to recruit staff because the younger generation is much less interested in the accounting field and they have more demands,” he says. “Staff retention is very challenging because of the fierce competition from Big 4 firms and commercial companies; they are willing to offer a competitive salary and benefits.”

“The demand for human resources in the accounting industry is always high due to the broad nature of this industry,” says Nguyen. “This leads to a lot of job-hopping. For staff, they are always looking for jobs with companies that pay well but also have highly competitive welfare policies. You cannot attract people on salary alone – an employee’s decision to accept a job offer depends on many issues such as training and development opportunities, support from superiors and colleagues, rewards and recognition of achievements. To cut the rates of job hopping and develop a long-term relationship between enterprises and personnel, both sides need to improve their adaptability.”

While the Vietnamese accountancy industry may look as if it is locked in a race to the bottom, the adoption of the International Financial Reporting Standards (IFRS), could be a way out of the spiral, allowing firms to compete on quality and not price. The IFRS will replace the current Vietnamese accounting standards (VAS). The IFRS implementation is divided into three stages towards 2025, when IFRS will be compulsory for consolidated financial statements of all state-owned enterprises, listed companies and large-scale unlisted public companies.

“Currently the SMEs sector of the accounting industry still competes on price,” says Nguyen Quang Ty, partner at Viet & Co, a Morrison Global member firm. “This creates huge pressure on SMEs due to lack of competitive advantages such as limited resources and narrow networking. With the improvement of the awareness of the financial statement users in the economy and the adoption of IFRS, the accounting industry will focus more on professional ethics and compete on quality.”

While IFRS will help with quality, there is a long-term issue of firms having the capacity to meet client demand.

“Mostly, Vietnamese enterprises are currently small and medium enterprises with limited economic potential,” says Pham Nhu Dong, managing partner at Tri Thuc Viet Company, an Allinial Global member firm. “The number of companies that supply accounting services increases rapidly, but only a few companies have the capacity in terms of size, scope, and quality. Companies provide accounting services focusing on operation in some of the big markets such as Ha Noi, Ho Chi Minh City, Binh Duong, Hai Phong, Da Nang, Can Tho, among other localities. Although there are branches, they are not evenly distributed.”

There also needs to be a significant investment in education. Dong pointed out that while Vietnam has abundant and cheap labour source, filling companies with bodies is not enough. “According to feedback we have had from companies when recruiting people for the accounting department, 80%-90% of the recruited students are not able to do the work.”

In order to remain competitive and achieve some real growth, small-sized companies need to consolidate or merge to improve their competitiveness, while investing heavily in training, according to Dong.

The lack of skills is a problem facing every sector and Vietnam will need a skilled workforce to transform itself into an upper-middle-income economy by 2035, according to a recent report from the World Bank. In its bi-annual report, the lender said: “Vietnam needs a workforce with 21st century skills to grow. As the economy moves from being driven by low skill and low wage jobs in manufacturing and services towards a more innovation driven growth model built on higher value-added industries and services, Vietnam’s workforce will need to attain higher level and more relevant skills.”

The Vietnamese Government’s Socio-economic Development Strategy for 2021-2030 says as much, aiming to use scientific, technological, innovative, and digitally transformative knowledge and build quality human resources as key drivers of higher productivity and future economic growth. To achieve these goals, Vietnam needs to reform its education system to improve quality and access. Transforming the higher education system is the key to boosting the country’s productivity and achieving its development goals. The report said that the impact of the pandemic is still present with businesses reporting broad-based labour shortages as of March 2022, which were felt more acutely in services and manufacturing, and in the Ho Chi Minh City area. This, in addition to growth slowdown or stagflation in main export markets, further commodity price shocks, continued disruption of global supply chains, or the emergence of new COVID-19 variants, are hindering Vietnam’s full recovery.

But if accountancy firms can pull themselves out of free-falling fees and under-trained staff, there are opportunities in post-Covid Vietnam. According to Huong, e-commerce activities have increased by 16%; internet services have increased by 14,6%; financial, banking and insurance services increased by 9.5%; accommodation and food services (increased by 11.19%; while warehousing services increased by 8.13%. In her opinion there are five mains groups of development including: opening the door to ensure safety and improving the capacity of the health system; ensuring social security and employment; supporting enterprises, cooperatives and production and business establishments; developing infrastructure, unleashing social resources for development investment; institutional reform, administrative reform, and improvement of the business and investment environment. This will require a strong push, affecting most of the fields that need support on both the supply and demand sides, which will promote economic growth.

Specifically within the accounting industry, Hillary Vu, international liaison partner with BDO Vietnam, has seen outsourcing, transfer pricing, advisory services grow over the last 12 months. “Non-audit services are expected to grow especially business outsourcing, advisory services,” she says. “But I don’t think there will be any significant development until Vietnam adopts IFRS in 2025.”

Nguyen thinks that firms should be getting to grips with the new generation of technology. “The new development trend of the accounting field is to use increasingly intelligent and sophisticated technology (such as smart software with cloud computing and big data), to replace the traditional processing systems,” he says. “The specific trends that I think the accounting industry needs to pay attention to are the support of artificial Intelligence technology, automating accounting processes, gradually replacing traditional IT systems with cloud systems and investigating blockchain for future applications.”

While the IMF predicted that Vietnam’s GDP would grow by 7 % this year, higher than the previously predicted 6 %, the economy is still very vulnerable. The IMF pointed out that the bad debt ratio of the entire banking system is at a high level, while risks exist in the credit structure, especially retail credit and investments in corporate bonds, which have been increasing rapidly. The openness of Vietnam’s economy is at a high level and, with an import and export turnover of over 200 percent of GDP, it is vulnerable to external upheavals. The foreign invested sector is controlling the openness of the economy. Meanwhile, the domestic economic sector is inclined to look inward and poorly connects with the foreign invested sector in particular and global supply chains in general. The quality of FDI (foreign direct investment) in Vietnam is not high and Vietnam still cannot attract high technologies and implement technology transfer as expected. The country often accepts small-scale FDI projects (most of the projects are registered by Chinese investors) which do not bring effectiveness to the national economy, according to the IMF.

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