The Year Ahead
New year, new president, new changes, new challenges and new opportunities: 2017 promises to be an interesting 12 months. To help you start getting a handle on what it might mean for your practice, your firm and the accounting profession as a whole, we’ve turned to two different groups: a panel of experts in the field, and a large group of accountants themselves.
You can see some of the results of our survey of more than 800 accountants, CPAs and tax pros to see what they expect the next year to look like (see the “2017 in numbers” slideshow), and you can read the predictions, warnings and advice of our experts below.
This year’s experts are: Joanne Barry, executive director and CEO of the New York State Society of CPAs; Crosley+Co. founder Gale Crosley; California Society of CPAs CEO Loretta Doon; CPA.com strategic advisor Greg LaFollette; Illinois CPA Society president and CEO Todd Shapiro; Boomer Consulting president Sandra Wiley; and ConvergenceCoaching co-founder Jennifer Wilson.
What are the one or two trends that accountants should most keep an eye out for in 2016?
Crosley: First, the development of technologies in audit. On the attest side, data analytics and continuous audit will be the biggest game changers our profession has seen in years. Although we don’t know exactly how these trends will unfold, they represent a sea-change at the very core of the profession. Our future auditors will be very different from today’s. Just Google “future trends in audit,” read some of the white papers, and you’ll see what I mean.
And second, the development of technologies in tax. Tax compliance is also going through a major transformation. As we move toward total electronic sharing of information between investors, clients, tax preparers and the IRS, the very need for a tax preparer (as we know it today) is being questioned. Be thinking about a future where tax consulting represents the lion’s share of your tax revenues.
Wilson: The Big Four are actively using their audit data analytics/testing technologies (Halo and other custom solutions) and these are going to change the game in the expectations for audit efficiency and insights available to clients. Midsized firms should be shopping solutions like Validis and devising strategies to remain competitive in the delivery of the increasingly commoditized audit services.
In an effort to add more value around their compliance solutions, firms will be seeking more advisory opportunities and increasing their focus on the delivery of consulting services, especially specialty tax solutions like SALT, international, sales tax and more. This was already a focus for 2016, but the resources being allocated to consulting by all size firms will continue to increase.
Barry: We will be seeing more vigilance by regulatory agencies, especially the SEC Enforcement Division and the Public Company Accounting Oversight Board. This year we have seen that they are increasingly dissatisfied with audit quality and will pay more attention to the acquisition and growth of consulting services. Their strategy might be to increase pressure with more public criticism of firm deficiencies and failures. This might also lead to smaller or understaffed firms exiting the public audit market, especially in audits of broker/dealers where there is an 80 percent audit deficiency rate. Peer review changes will also have an impact on firms as the profession works to enhance quality in this area.
Shapiro: One major trend will be the changing workplace. In an effort to keep staff, more and more employers are implementing policies for a more employee-focused workplace. Some large firms have implemented “dress for the day” or “work where you are,” and unlimited PTO. To compete for new staff and retain current staff, firms of all sizes will look toward implementing policies that were once thought unprofessional. Ultimately, this requires greater trust in our employees to “do the right thing.”
Second would be the continued aging of the profession. On the public accounting side, a high level of merger activity will continue as more and more small firms run by aging Baby Boomers will look to an exit strategy. Midsized firms will continue to expand into this space. On the corporate side of the accounting world, this aging population will provide more opportunities for advancement, long sought after by Gen Xers.
LaFollette: More and more firms will be offering boutique-style, value-priced “packages” to clients. Example: Silver, Gold and Platinum Tax Service, where Silver is basic preparation with a 15-minute consultation after preparation; Gold adds a one-hour tax and overall financial planning consultation; and Platinum adds unlimited, year-round phone/e-mail access and representation before the IRS for any issues concerning this return. The “packages” might be priced at $600, $950 and $2,500. These examples are not suggested prices but rather illustrative of what a firm might deploy.
Another major trend is that clients will increasingly shop and screen professionals based solely on that professional’s digital presence, making your “digital brand” and “digital footprint” more and more important. This has been happening for years, but the rate of adaptation hasn’t kept pace. The train has now left the station, and those not on will find it very, very difficult to catch up.
Wiley: Firms of all sizes will need to spend time working on their business in the key areas of management, talent development, technology, process improvement and growth. While all are important, a couple of key trends bubble to the top when looking ahead to 2017:
- Succession reality: Our clients and next-gen leaders deserve a laser focus on the area of transition. It has been on the radar for many years, but this is the year that true movement will occur. The youngest Baby Boomers are in their late 50s and they have been thinking about the possibilities of retirement with little true action, but now it is time to share their plans and transfer their relationships and wisdom.
- Security: The increase in security challenges will only grow in 2017. The No. 1 way to protect client data and firm integrity is education and a heightened awareness of how to “stop the bad guys” for everyone on the team.
Doon: Technology and the hyper-rapid move toward the singularity — that point in time where the invention of artificial intelligence will abruptly trigger runaway technological growth, resulting in changes to human civilization. I believe that not only is the singularity near, but in many cases it is already here.
The impact on accounting and the auditing process will be significant as more and more processes are automated. However, the value and essence of human professional judgement cannot be dismissed. The accounting profession can and must retain and enhance its values of integrity, objectivity and professional skepticism culminating in trust to clients and to the public.
What do you think will be the most surprising thing for accountants in the coming year?
Barry: The Ben Affleck film “The Accountant” wins Best Picture of the Year! Also,
the Tax Simplification Act of 2017 will be even more complex and difficult to understand than any previous reform in recent memory.
LaFollette: Firms will be amazed at the speed at which some technologies become mainstream. By this time next year we’ll be seeing artificial intelligence embedded in accounting software and it will be accessed by voice. A user might ask, “What’s my bank balance?”, “How much does Customer A owe me?” or “How many yellow widgets do we have in stock?” and have an almost instantaneous answer. The major accounting software vendors have already prototyped this “chatbot” technology and have been demonstrating it to the thought leader community.
Wiley: Given the war for talent that is raging, the push and the reward to hire professionals from outside the accounting realm will be a pleasant surprise. Individuals with expertise in specific niches, marketing, business development, technology, finance and economics are just a few new professional acumens that we will see in firms in the coming year.
Doon: The continuing increase in demand for business needs beyond the financial statements and audit. For the smaller accounting firms and practitioners, there was a need to fill the client demand for financial statements and tax returns. Then, there was a need for specific expertise in niche areas such as valuation, wealth management and financial planning. Now I think the trend will move towards firms having a broader knowledge base or having the ability to attain this knowledge base in some way to service the needs of clients in a more comprehensive way. Are you ready to provide comprehensive services?
Shapiro: The increased focus from clients (public accounting) and C-suite executives (corporate accounting) on cybersecurity. Based on the assertion that there are two types of people in the world — those that have been hacked and those that don’t know they’ve been hacked — there will be increased expectations on accounting/finance to understand, control and implement solutions to mitigate risk.
Wilson: I think there will be more mid-level management and young partner moves out of firms that don’t empower their best and brightest to change their firms to begin to look and feel like firms they want to own. These frustrated next-gen leaders will find the courage to leave their firms for better opportunities with firms that “get it.”
Do you expect anything to get radically worse for accountants, or radically better?
Shapiro: The search for staff and escalating pay for those you do hire will get radically worse. At what point will salaries start to choke firms and companies? Smaller organizations will find it harder and harder to hire staff.
On the other hand, the need to find and retain staff will drive a more employee-centric workplace. The focus on work/life balance, “dress for the day,” “work where you are” and unlimited PTO will present the accounting profession in a positive light.
Wiley: I fear that the rising cost of health insurance will continue to adversely affect businesses over the next year. Change will come, but not in 2017. While this is not an “accountants only” concern, it is one that affects our profession, and every client we have.
Wilson: Turnover will continue to hurt. Finding experienced talent will be even tougher — if that’s possible. Succession and retirements will also drain the firms of resources. Provided the political climate doesn’t destabilize our economy, firms will find opportunities to sell services — especially value-added services and staff augmentation services like outsourced accounting — even better than in 2016.
Barry: The talent shortage will get worse. Firms are seeing adverse feedback about the grinder mentality of many large firms, and they’re seeing high attrition rates by the third year. Auditing’s unfriendly hours don’t help young professionals meet their needs for true work-life balance, and we’ll continue to see the impact of that. Client services and rainmaking skills need to become part of new CPA training right out of the gate. By holding on to the old model, the worst-case scenario will be that the best and brightest, as they choose taxation, finance and advisory services over auditing, will forego the CPA track altogether.
LaFollette: Clients will demand more and more value-added services, and price resistance to old-style compliance-type services will continue to grow.
Doon: Neither. The accounting profession has a certain resiliency in the business community. In good or bad economic times, the objective and meaningful accounting for assets will always be there. However, what the profession needs to keep in mind is how to make it better by making products and services more relevant and useful.
Crosley: The market conditions are excellent for growth due to several factors. These include shifting directions in standards and regulations, and the discussion about the relevance of today’s financial statements; international opportunities as a result of Brexit; technology evolution reshaping our core services; the dearth of talent causing a re-think of offshoring; and the impact that client accounting services is having on our thinking about our core services (examples: para-professionals, value pricing).
What advice would you give firms going into next year?
Doon: Take good care of your resources — especially your personnel. You are not only going to need capital but also a highly skilled and motivated team in order to morph to the next level of relevancy and value to clients.
Barry: The next generation of partners is now taking over firms in greater degrees. They need to make sure that they build firms of the future and do not build on the old models. They will need the skills and mentoring, perhaps from outside the firm, to re-invent the model and to bring change to the firm. This is directly tied to recruitment and retention.
Help your new CPAs pay off their student debt. It’s one of the greatest benefits you can offer in today’s marketplace — and you might build loyalty to your firm along the way.
Wiley: I would look at current leaders in the firm and tell them that the most important thing they can do is to find ways to pass their wisdom and knowledge on to the next-gen leaders in your firm. The process can take years, and can be exhilarating. It is all in their mindset, and if they can adjust their focus from the day-to-day client work, and focus on mentoring, teaching, protecting and future-firm focus, our profession will thrive. If they choose not to move on this, they are doing a disservice to the future of our profession.
Wilson: Make the changes needed to be a next-gen firm and retain your future leaders. Wonder what those changes are? Ask them! Put together a next-gen advisory board and have them prioritize the changes they most want to see — then work with them to implement these changes. They are bright enough to generate solutions and implement them. Empower them and get out of the way!
Crosley: I recommend a consistent process throughout the firm to retain and grow your largest, most strategic clients. My IBM days taught me that not all clients are equal. Our firms know this, but are coming up short on ways to protect against large client defection. As your firm’s partners retire, and mergers continue, more substantial competitors can impress your clients with their cutting-edge capabilities, presenting a real threat to the firm.
Shapiro: Focus on the future.
Automation of compliance-related activities, whether in public accounting (audit and tax) or in corporate accounting, will drive the future landscape of our profession. Integrated systems and new technology within companies will allow for expanded automation. A global financial institution said that while 2,000 employees around the globe are involved in the monthly close process today, it will be fully automated by the year 2020. A Big Four firm noted that it will be hiring half as many new staff by the year 2020 as a result of technology and artificial intelligence. Maybe this won’t all happen by 2020, but it will happen and will happen fast.
We are on the verge of a technology revolution. Firms need to start focusing on and preparing for the future now. 2020 is just over three years away. The winners in the world of accounting will be those that embrace and plan for a changing profession.
LaFollette: Remember that you make your own future. The profession is changing — rapidly. You can change with it and prosper or you can choose to ignore the inevitable. Remember the famous quote from the great American engineer, statistician, professor, author, lecturer and management consultant W. Edwards Deming: “It is not necessary to change. Survival is not mandatory.”