Are You Prepared for Tomorrow's Public Accounting Industry?
March 30, 2021 •Oak Street Funding
For decades, the public accounting industry had a reasonably consistent pace. Between bookkeeping and tax preparation, most firms could count on consistent business and predictable cycles. It was relatively easy to keep up with the industry’s slow evolution.
Not anymore. Profound changes in the business world are reshaping clients' needs and expectations and forcing the accounting industry to reengineer the roles it plays and the services it offers. Let’s examine several of the changes that are impacting small and medium-sized public accounting firms.
Technology: a double-edged sword
Changing technology has been a constant, but there are two trends that may influence your business most. Today's key differences are first, the acceleration of that change and second, what the changes are allowing your clients to do. The most prominent example is the growth of the do-it-yourself approach to bookkeeping, tax preparation, and other vital accounting elements. Products such as QuickBooks® and TurboTax® have put tremendous power in the hands of clients. That's particularly true for smaller businesses, whose accounting needs have always been more straightforward.
Convinced you offer something a software package can never duplicate: your professional insight? Don’t be so sure. As machine learning and artificial intelligence improve, systems may be able to mine data effectively enough to replicate professionals' comprehension and guidance.
New competition from big names
As larger accounting firms have become more sophisticated and clients expect greater value for lower fees, these firms look to acquire smaller companies as a huge potential revenue source. If you want to keep your clients in the coming years, you can't settle for being better than the CPA firm down the street; you need to be prepared to compete against your state or region’s biggest names.
Clients expect more
Clients are increasingly aware of what’s available in the marketplace. They want more services customized to their specific needs, and to pay only for what they need. How you choose to adapt will have an impact on your business. You can resist offering customized options or embrace the opportunity to become precisely what each client wants you to be.
New roles for CPAs
Firms that focus on general bookkeeping and tax work can expect to see more of those activities move to the client-side. So what's left for accountants? Something many CPAs have long wished for: becoming an integral, strategic business partner. Keeping client relationships healthy is more critical than ever. Changing accounting firms once created tremendous stressors for companies because of all the physical records that were involved. Now, a company that uses cloud-based services can switch from one firm to another almost as quickly as you can pay a credit card bill online.
Capabilities are less important to clients than personalized service. If your service keeps your clients happy, chances are they will stick around. But if you’re not as responsive as they expect you to be, it won’t be hard for them to move to a competitor.
Who will do the work?
While the pace of change accelerates, the public accounting industry as a whole is aging. Who will take the place of those aging and retiring partners? That’s an excellent question. While the number of students enrolled in accounting classes appears to be growing, fewer accounting grads are opting to sit for the CPA exam.
Employee expectations have changed, too. Accountants nearing retirement age remember spending the early part of their careers “paying their dues” with long hours in audits and tax preparation, hoping for a spot on the partner track. Recent college graduates are more interested in work/life balance and have less patience for corporate ladders.
Company leaders must acknowledge that they won't always be able to keep up and need to develop a plan for the perpetuation of their business. Understand the differences between generational values can help identify new leadership and ensure a smooth transition process.
Future-ready accounting firms
Firms that fail to adapt or prepare for the changes are less likely to survive. Partners need to perform strategic planning to become what their clients want them to be. Making more effective and client-centered use of technology is one example.
In an environment in which they must entice new hires, firms should establish formal mentoring and leadership development programs to ensure that younger employees gain the skills, knowledge, and judgment needed to assume partnerships in the future. To help overcome the hesitancy to sit for the CPA exam, firms can provide incentives such as extra time to study for the test and covering the cost.
Finally, one effect of the aging population of partners in the accounting industry and the lack of formal succession planning is that many firms will become acquisition candidates. Firms that are poised to capitalize upon the evolution in the industry may add clients and employees by taking advantage of those acquisition opportunities. Additionally, firms may also look to merge with similar-sized firms to gain economies of scale and become more competitive with regional and national firms.
Often businesses require an infusion of cash to take the next step to stay competitive. If you are thinking strategically about growing your firm by acquiring another company, adding staff, ramping up your marketing, or upgrading technology and don’t know exactly where to begin, please feel free to contact us. At Oak Street Funding, we have experts in lending who have helped hundreds of clients make their business goals a reality.
Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.