Change is coming to public accounting, and firms that fail to adapt will be hard-pressed to keep up with the competition.
That's the view expressed by executives from five prolific producers of accounting software. The executives, responding by email to questions from the JofA, articulated remarkably similar visions for how technological, demographic, and market forces will reshape the landscape for accounting firms. Across the board, in separately submitted answers, executives from Wolters Kluwer, Intuit, Sage, Thomson Reuters, and Xero agreed on the following:
- Competitors from outside the CPA profession—and outside the United States—will emerge to test CPA firms in the coming years.
- Younger entrepreneurs and other CPA firm clients, especially those from the Millennial generation, will expect high-touch, high-tech relationships with their accountants. Firms that offer only compliance services will be left at a competitive disadvantage.
- Value pricing will emerge as a key component of accounting firm business models, because hourly billing discourages the frequent communication and collaboration that will characterize the new firm-client dynamic.
The software executives' vision of the future aligns with the findings of a study conducted for AICPA subsidiary CPA.com by futurist James Canton and the Institute for Global Futures. That study found that 80% of CPAs believe their role will change significantly by 2025, with consulting, risk management, and advisory services playing a larger role in their businesses.
Why should CPA firms care what software vendors think? The JofA approached the software executives because a significant part of their job is to anticipate the direction that the market and their customers' businesses will take. Vendors that fail to meet accounting firm needs in product development will lose business in that space. The JofA was curious to see how the vendors' visions of the future compare to one another's and to those of others in the profession and beyond.
COMPETITION AND THREATS
The software executives see accounting firms being tested by a number of outside competitors in the next few years.
Automation and do-it-yourself technologies could convince some business owners that they can substitute software for an accountant and be self-sufficient, said Jennifer Warawa, vice president and general manager of Sage Accountant Solutions for Sage North America. "They may come to an incorrect conclusion that they don't need an accountant," she said.
Jim McGinnis, vice president and leader of Intuit's Accountant and Advisor Group, foresees clients' engaging non-CPA consultants and advisers to deploy strategic planning, succession planning, mergers and acquisitions, and business/wealth advisory and family office roles.
In addition, more financial and wealth management advisers are testing the waters with tax compliance, either by establishing referral relationships with practitioners or cultivating a new service offering for their clients, said Scott Fleszar, vice president, product management and emerging businesses, Thomson Reuters Tax & Accounting. For firms looking to combat this trend, one option is to partner with other businesses in referral networks to meet other client needs, such as legal advice.
Jamie Sutherland, general manager of U.S. products and solutions for Xero, sees accounting firms from outside the United States entering the U.S. market and challenging for clients. "Small businesses in these smaller countries are used to looking for new markets across borders. Accountants in these countries are no exception."
In addition, Sutherland already is seeing savvy, entrepreneurial bookkeepers—who don't have the legal restrictions that CPAs have in providing financial advice—attempting to become strategic advisers for clients.
Clients will be looking for help interpreting data and developing strategies for success—a view echoed in the most recent report by The Sleeter Group on what small and midsize businesses want from their CPAs, which found that the top reason clients leave their accounting firm is that it did not provide proactive advice. A recent poll of 393 small business leaders by hardware and software provider Wasp Barcode similarly showed that more than 4 in 10 complained that their accountants are more reactive than proactive.
Accounting professionals who can provide proactive business advice based on real-time client data will be desired, especially for organizations led by Millennial clients, who will want their accountant to interpret data and answer questions such as "Can we hire an employee, buy more inventory, set up a new office?" Sutherland said. He sees accounting professionals becoming like medical care specialists focused on preventive health care. Instead of seeing clients for a once-a-year physical (such as an annual tax return meeting), the accountant helps keep the client healthy with regular checkups.
BRING VALUE WITH PRICING APPROACH
Accountants will enhance client communication and collaboration through the use of technologies such as web conferencing, online collaboration tools, and mobile apps, Fleszar said. Leveraging these tools, accountants will be able to provide more timely advice and insights via automated processes that help elevate client service while reducing costs.
Technology won't be the only key to fostering more frequent communication and maximizing the accountant-client relationship. A shift from hourly billing to value pricing also will play a role.
"A client is much more likely to pick up the phone and reach out to a firm if it does not result in incremental fees," Fleszar said. "A smart approach is to build the value of this communication into the client's fee structure to help position the firm as a trusted adviser to the client and in the role of wanting to help with key decisions."
Value pricing brings other benefits, according to the executives. It boosts client loyalty because the firm provides only those services clients consider valuable, according to McGinnis. "It also provides the ability for accounting firms to charge more for services because they are high-value services and firms can also spread bundled service pricing across the year to smooth cash flow," he said.
In the end, a combination of factors puts accounting firms in good position to compete for business in the future. CPAs bring to the market a combination of financial expertise and business acumen no other profession can match. In addition, the anytime, anywhere access to client data provided by mobile devices and cloud computing breaks down geographic and technology barriers, giving accounting firms of all sizes access to markets and data analysis tools previously available only to large enterprises. For firms willing to evolve to meet clients' needs, the business opportunities may stretch to the sky.
"Client expectations are transforming the accounting profession, and the cloud is simply an enabler to help professionals meet and exceed the expectations of today's clients," said Heffy Provost, vice president of software product operations for CCH Software at Wolters Kluwer. "Client service in the future is a matter of embracing high-tech and high-touch, as the speed of technology and the importance of client relationships continues to intersect."
About the author
Jeff Drew is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact him at firstname.lastname@example.org or 919-402-4056.
- "Accounting Firms Moving Slowly Toward Cloud," March 2015, page 44
- "How to Open New Doors by Closing Your Office," July 2013, page 24
- "From 'Write-Up' to Right Profitable," April 2013, page 24.
Private Companies Practice Section and Succession Planning Resource Center
The Private Companies Practice Section (PCPS) is a voluntary firm membership section for CPAs that provides member firms with targeted practice management tools and resources, including the Succession Planning Resource Center, as well as a strong, collective voice within the CPA profession. Visit the PCPS Firm Practice Center at aicpa.org/PCPS.
Information Management and Technology Assurance (IMTA) Section and CITP credential
The Information Management and Technology Assurance (IMTA) division serves members of the IMTA Membership Section, CPAs who hold the Certified Information Technology Professional (CITP) credential, other AICPA members, and accounting professionals who want to maximize information technology to provide information management and/or technology assurance services to meet their clients' or organization's operational, compliance, and assurance needs. To learn about the IMTA division, visit aicpa.org/IMTA. Information about the CITP credential is available at aicpa.org/CITP.