The four trends driving accounting today
Four seismic shifts are going on in the accounting landscape right now, a panel of experts recently told a conference of CPA firm partners and leaders, from how firms generate their revenue and how they staff their engagements, to how they service their clients and how they will build the firms of the future.
While Rainmaker Cos. president Angie Grissom, who moderated the panel at Rainmaker’s 2017 SuperConference: Breaking the Barriers, noted that there are actually more than two dozen significant issues facing the profession, the panel chose its four trends based on their overarching significance – and the number of sub-trends that each covered.
Trend 1: Generating Tomorrow’s Revenue
The panel agreed that the way firms made money in the past isn’t how they’ll be successful in the future – and that more and more of the profession will move away from compliance work toward advisory services.
“Imagine you’re a compliance-oriented firm,” said panelist and Rainmaker CEO Dan Brooks. “It’s got to be a little bit scary to hear this trend.”
However, non-traditional services that aren’t based on billable hours can be tremendous opportunities, he pointed out, citing wealth management as an example.
Panelist Carl Peterson, the vice president of small firms at the American Institute of CPAs, added that advisory services are experiencing double-digit growth, while growth for traditional compliance services is in the single digits. He particularly highlighted cybersecurity offerings.
And firms that make the regular investments in resources, particularly technology, will not only reap the benefits in profits, but in greater retention among younger staff, he added.
Setting aside those resources, though, can be challenge, as can getting broad-based buy-in, Peterson warned: “You have partners who don’t like change, and partners who are very progressive. You also have partners who are very different places in their careers.”
Trend 2: Staffing Tomorrow’s Accounting Firms
Looking beyond the current staffing shortages, Grissom suggested that firms may need to start worrying less about the quantity of people they hire, and more about the type and quality.
“If we’re going to be offering different kinds of services, we may need to hire different kinds of people,” she warned. “We may be killing off these advisory type people because we’re measuring them incorrectly.”
Even as firms scramble to fill current positions, the type of graduates they need to hire is going to change. “Are accounting students getting the education they need?” worried Brooks. “The accounting schools are teaching them to be good compliance accountants. You need to train them more on advisory services at an early age.”
“The barrier here is us,” said Peterson. “The partners who’ve been in the business for a long time, and think the best way to learn is data entry.” He stressed the importance of giving younger employees more exposure to clients and to interesting work – and to find ways to use technology to minimize the grunt work that filled the formative years of too many accountants.
Trend 3: Satisfying Tomorrow’s Clients – The Business Model Is Changing
Old metrics like the billable hour are on their way out, the panel believes, to be replaced by newer measurements and approaches that reflect the new emphasis on higher-value-added services.
“You’re not going to get the same utilization on advisory services,” warned Brooks. “It doesn’t make sense to use an annuity model on something that’s not an annuity.”
Peterson agreed: “The barrier is, ‘We’ve always done it this way, we’ve always measured these things.’ You’re not just an H&R Block person where you do the tax return and say, ‘See you later.’”
Rather, firms need to find new ways to get paid for advisory services – many of which they’re already offering for free or at almost no cost alongside their compliance work. “For some firms, they’re not even charging for the most important work they’re doing,” Grissom marveled.
Perhaps the most important thing to realize, the panel agreed, is that there is both a clear opportunity for accountants to make the move, and that their clients want them to do so.
“There’s an empty chair in your client’s office that you should be sitting in,” Brooks said, occupying that (metaphorical) space to dispense high-level business advice.
What’s more, Peterson believes clients will immediately realize the new value they’re being offered: “These services sell themselves,” he said. “It sells itself when you are engaged with the client and identifying their exposures.”
Recalling the challenges firms will have with younger employees, Grissom recommended killing two birds with one stone: “Teach your entry-level staff to look at your clients as businesses, considering their holistic needs.”
Tech 4: Building Tomorrow’s Professional Service Firm
For their final trend, the panel looked beyond the immediate changes, discussing various technological and economic shifts to limn a picture of a firm of the future that employs many more remote and “gig” employees, and that has embraced the opportunities of developments that many currently fear for their power to disintermediate accountants.
Peterson was particularly positive about blockchain. “Blockchain will allow us to elevate the level of work we’re doing,” he said, improving audits and removing grunt work. In general, “Technology enhances what we do, and raises the level of our services and our clients.”
What’s more, the “Uberization” of whole industries and the rise of the gig economy – with as much as 40 percent of the workforce expected to be in freelance or other independent contractor work by 2020, according to an Intuit survey the panelists cited – represent opportunities for accountants to serve those sectors.
In the end, the primary barrier to successfully negotiating these four trends lies within accountants – specifically the profession’s appetite for and ability to process major shifts in how they do business.
“Most CPAs, when you talk about change, they don’t raise their hand and say ‘Give me more,’” Brooks noted.