The accounting profession needs to take advantage of current conditions to take critically important steps to ensure its future, according to American Institute of CPAs president and CEO Barry Melancon.
“We have an opportunity due to our relative strength to do things that will be critical in the next 10 years,” Melancon said in his opening keynote address at the Digital CPA Conference, held here this week. Citing an old adage, he noted, “The best time to plant a tree is 20 years ago. The second best time is today.”
“We must be committed to helping the profession evolve into something else to be successful,” he said, but added, “We don’t have to throw away everything that’s made the profession successful in the past – in fact, we shouldn’t – but we do need to change.”
He listed a host of major trends that are determining the future shape and function of the profession: the increase in international business, technology, economics, the war for talent, specialization, increasing regulation, changes in learning models, and growing competition.
In response, the profession will need develop its expertise in serving worldwide businesses; find new ways to measure its competence in learning; work to become more attractive to the younger generations; and address new competitive challenges from both inside and outside accounting.
“If you think your competition is the CPA firm down the street, you’re missing the real threats,” Melancon said. “It’s not even other professions. Competition is no longer defined by the traditional ground rules.”
That will mean seeking out non-traditional sources of growth; Melancon pointed out that non-traditional services provide far greater rates of growth than traditional services. “About a quarter of the new employees of the Top 100 Firms are not accountants and aren’t expected to do accounting work,” he said.
Potential new services include cyber-security attestation, integrated reporting, validating private company financial reports and others, many of which leverage CPAs’ skills in assurance work. “The public is looking for someone to trust – and in every survey we come out extremely positively; in each data point we have that trust,” he said. “We are known as a profession that delivers quality – and we need to renew that.”
The state of the economy
Bolstering Melancon’s argument that now is a good time for the profession to embark on a course of change was a report on the economy by Wells Fargo senior economist Anika Khan, who told conference attendees in a separate keynote, “We are moving in the right direction.”
While Khan acknowledged that some are concerned because we have had six years of growth since the economic downturn, and the average business cycle is five years, economists are noting growth in consumer spending and a gradual increase in wages and salaries.
“Consumer spending is growing at a healthy pace, which is a great sign,” she said. “We had seen higher income people make the most of the recovery, but now we’re seeing momentum shift to middle-income and lower-income households.”
In addition, long-delayed household formation by Millennials is causing the housing and rental markets to pick up, as they move out of their parents’ homes.
However, capital expenditures have been pretty low. “This is important because that’s where we get innovation. We’re lacking in innovation,” Khan warned. That lack has led Wells Fargo to predict that U.S. economic growth will stay steady, but low, at 2.4 percent for 2015, 2016 and 2017.
“Many recent technology improvements have been about quality, not breakthrough changes,” and that has kept labor productivity low, she said. “Small businesses are at the heart of innovation, and they were hardest hit by downturn.”
Nonetheless, “The mood of small business is on the upturn,” said Khan, and she expects that by 2016 unemployment will be likely be below 5 percent, which economists generally consider “full employment.”
“Overall,” she summed up, “U.S. economic growth is sustainable, and it’s moving forward.”
