A host of issues — including everything from staffing shortages and the rise of artificial intelligence to succession problems, the influx of private equity, and growing competition — are putting pressure on how accounting firms organize themselves and do business, and those that hope to survive will need to change, according to experts at a recent conference.
"When you put together all these challenges and add regulatory challenges like the [One Big Beautiful Bill Act], it's absolutely impossible for accounting firms to survive with the old operating model," explained Sagar Ahuja, CEO of QX Accounting Services, in his keynote opening the company's QXcelerate 2025 conference, held in Chicago earlier this month.
"The traditional pyramid model is out," he warned, with problems with the pipeline of new entrants to accounting weakening the broad base of new talent that firms had previously relied upon. "Progressive firms aren't working with the pyramid model anymore; they're working with the diamond model."
In the diamond model, major portions of the work previously done by entry-level accountants would be automated with technology — which more and more will mean artificial intelligence — and outsourcing.
Both will be crucial solutions for U.S. firms, as AI grows ever-more-capable, and the country struggles to produce enough accountants — a problem not found in many other parts of the world.
"One million people are pursuing accounting in India every year, and there are 200,000 accountants in the Philippines," Ahuja explained. "The human capital in accounting is sitting in India and the Philippines."
Tapping that enormous reserve of talent will be crucial for firms looking to transition to the diamond model. "Outsourcing is really getting integrated into the operating practices of accounting firms," said Ahuja.
Time for an accounting reset?
Managing a new staffing model is only one of many recent challenges forcing change on the profession.
"Flash back five years: There was no COVID; no firms had taken private equity investment; AI was on the agenda, but not prominent, and we still haven't begun to see the impact really," said Bob Lewis, president of The Visionary Group, in a session at the conference called "The Great Accounting Reset."
The growing need to invest in technologies like AI presents a particular problem for smaller firms, who have far less to invest.
"We have a resource imbalance," Lewis explained. An $8 million firm with a 30% margin that decides to invest all of it has only $2.6 million to spend, he noted; a similar approach by a $600 million firm would yield a far larger warchest. "Your $2.6 million is barely a rounding error."
Technology isn't the only thing firms need to invest in, of course; they're also interested in acquisitions, and making sure their partners can retire and realize the value of their stake in the firm.
Those capital needs are forcing accountants to confront difficult decisions.
"Firms are struggling with how and if to remain independent. We have this conversation every day," Lewis said, adding that a lack of information is only exacerbating the problem. "Firms don't know what the options are for them in this marketplace. They react to whoever reaches out to them."
What's worse, too many firms and too many baby boomer and Gen X partners are hoping to put off difficult decisions in a whole host of areas until after they have retired.
"People want to sit in the rowboat in the middle of the lake, dead calm, no one throwing any rocks in the boat, and then five years from now, the boat just slowly heads to the shore and they get out," Lewis said. "But you can't afford to be passive nowadays. That's not going to work."
"Doing nothing is a really dangerous move to make in this market," he concluded.
