The hard trends that matter more than ever now

A hard trend can be defined as a predictable, future fact. While it’s tough to predict the price of oil or the direction of the stock market daily or weekly, finance professionals can focus on hard trends to have a better understanding of where business is heading. Tom Hood, CPA/CITP, CGMA, the CEO of the Maryland Association of CPAs and the Business Learning Institute, shares insight into three hard trends and why they matter for accountants now.

What you’ll learn from this episode:

• How an awareness of the changing world can make finance professionals more anticipatory.
• The definition of the term “hard trend.”
• Why regulation is considered a hard trend by futurist Daniel Burrus.
• Specific examples of how firms and companies can apply knowledge of hard trends.

Play the episode below or read the edited transcript:

To comment on this podcast or to suggest an idea for another podcast, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:

Neil Amato: Joined on the podcast by Tom Hood, where today we’re talking about hard trends and how finance professionals and organizations can better anticipate those trends. Tom is CEO of the Maryland Association of CPAs and the Business Learning Institute. Thank you, Tom, for being here today.

Tom Hood: It’s great to be here, Neil. Thank you.

Amato: The MACPA has linked up often with futurist Daniel Burrus, who talks about a lot of very enlightened things. One concept that I believe I heard first from him is this concept of hard trends. First, what is the definition of hard trend and what are the hard trends out there, especially the ones that finance professionals should be paying attention to?

Hood: It’s interesting because this is actually our fifth year of partnering with Dan Burrus. It’s been five years and we use what he teaches, and we’ve done it for our association. Hard trend is the coolest thing because we find that CPAs can apply them easily and it can give them a tool to think about the future. Here’s the basic framework. A hard trend is a predictable, future fact that you actually can rely on.

What Dan would say is there’s a whole lot of things we can’t predict, like what’s the stock market going to do today or the price of oil, which we’ve been living through really a lot in these days, or vacancies in real estate. You name it, those trends. But there are some trends that are actually predictable and once you know what they are, the theory is — Dan would say — focus on the things you can be certain about — the hard trends — before you worry about the things that you can’t predict.

Interesting enough, I actually asked him. I thought I could catch him on the coronavirus. I was like, “Dan, you couldn’t have predicted the coronavirus.” Of course, Dan would say he probably could predict anything. He ended up saying — he never said I couldn’t predict. What he said is you can predict because it’s a cycle and it has a beginning and an end, so the coronavirus will end. I said, “But you didn’t predict the time it was going to happen.” He was like, “You’re right about that.”

But this cycle will get over, so one of the things we should all be looking at is the certainty that the coronavirus will end, some way and some time. Once it does, we will be in the next phase. The other part though, three hard trends — regulatory and legislation, which is right up the CPA alley. Two is technology. Three is demographics.

How many people are on the planet? Every year, we’re a year older. We know how many of that’s Baby Boomers and Millennials and Gen X. Then you can predict what’s that going to do. Are you going to have a shortage of people or excess? How are you going to deal with that, whether it’s you’re selling something or you’re managing a workforce? The technology happens to be the one that’s exponential. It’s doubling in bandwidth, storage, and processing power every year.

When you start looking at 5G, for instance, 5G is 1,000 times faster than 4G. It’s predictable that — do you think things are going to get more video and more mobile in the next couple years with that kind of capacity coming online? Oh, yeah. That’s predictable. So if you’re advising a business client who hasn’t gone mobile yet and you can add in all the other demographic trends around that — younger generation, everything is on a cellphone.

Then you start to say, “OK, what should I be watching for? Well I need to watch for as that bandwidth comes online, more people want more mobile.” Now with this coronavirus, it’s accelerating that trend even faster. So, all the stores and restaurants that now can’t do much with the people coming in, they need mobile ordering to help them transact better, make sure people can get the right expectations, all those kind of things.

So you see how that plays out? You can predict what problems or opportunities you should be looking at based on the trends that you know are going to happen. You can bet on that because it’s just going to get better. It’s not going to get slower, right? The hard trend of regulations and law — oh, my God, this environment couldn’t emphasize it more.

I sit there and go — and this is why we’re excited and working hard because everything that’s happening right now around this COVID thing — the new act that’s getting ready to come out — every one of these things is being enacted with laws and regulations that happen to go implemented through accounting, tax, and payroll systems, which is right in the sweet spot of every CPA.

If I were a CPA practicing today, I would be saying, “What can I be anticipating with these laws and bills and things that are coming through so I can put myself in the best position to advise my clients how to leverage on this stuff?” And we’re seeing firms doing that kind of thing. That’s the major kind of background on this hard trend.

Amato: That’s a very good summary. You touched on it a little bit with restaurants that are able to pivot a little faster to online ordering. Can you see a difference maybe in the other examples in kind of the reactive organizations versus the proactive ones in how response to coronavirus has gone?

Hood: Yeah, actually, you could see it in the CPA firm environment. One of the fastest growing service lines in CPAs is client accounting services, which if done right is all cloud-based. Take the newest cloud stuff — Xero, QuickBooks, Intacct, and Sage — and build out a tech stack and then serve your small business clients so that you can give them state-of-the-art accounting no matter where they are.

If you had done that, your clients are pretty happy right now because they’re able to stay up with you. You can see all of the things going on in their transactions. You can pull their payroll report, those kind of things.

Now the reactive small business, which there were many — some CPAs kept saying, “My small business clients just aren’t ready to move to the cloud.” Now what’s happening is they’re running to the CPA going, “I need to get on the cloud. Can you put me on there tomorrow?”

It’s shifting what used to be. The ones that don’t react at all to that and the ones that don’t move, they aren’t going to be around much longer. You can’t compete with Amazon and all the online things, knowing where your orders are, all the Order Up, Grubhub, all those things that are connecting to restaurant and even small business platforms.

If you’re not in that game, you’re not going to survive for the next 12 months while we’re in this starting, slow-rolling, opening-back-up process. That’s true for the CPAs that serve them. If that CPA is not conversant in the cloud and hasn’t moved clients to it and isn’t ready to start doing that, they’re going to fall behind faster. It’s like trying to coast uphill.

Amato: Of the hard trends you mentioned, obviously people can see tech changes, they understand the demographic changes, and they know there’s very little we can do to stop those. Regulation seems a little bit different — to me, at least. Tell me why it truly is as important as tech and demographics.

Hood: It’s funny because I was convinced that Dan was wrong on that one. Obviously, we spend a lot of time in Annapolis on behalf of our profession working on the state legislative environment. I was tracking state laws introduced over a five-year period since we’ve been working with Dan and I thought, “I’m going to get him on this because it can’t be true that every —” because we have a governor who is anti-regulation. I’m going, “No, the regulations are going to be going down, not up.”

Year over year in Annapolis, there’s an increase about 20% of new legislation every year. This year, it was almost 40%. Now, every year. That’s with an anti-regulatory administration. So what’s the difference? The difference is no matter what happens — here’s the best example.

A couple years ago, the big, hot holiday season toy was drones. Overnight, people were abusing the drones. They were flying around people’s bedrooms. They were running around in parks attacking people. All of a sudden, now they’re walking out with shotguns shooting the drones and that’s not exactly a safe practice. Suddenly, regulations and laws popped up all over the United States dealing with drones.

So, the example is there’s going to always be innovations, and they’re accelerating a lot because of the other hard trend of technology. Every time that happens, someone is going to have to figure out how to deal with it, whether it’s privacy and security on Facebook — all those things. In accounting it’s no different. Look at the number of standards that get released every year. We just keep layering on new stuff because there’s more complexity in business and the world.

The beauty is — CPAs, you’re in a spot where you’re an expert in a whole lot of those regulations and laws — tax, accounting. You should be thinking, looking at that like, “Not another tax act,” but, “How can I use this tax act to really get my clients ahead?” Or my company if I’m a CFO. Does that make sense?

Amato: Oh, absolutely. Absolutely. I’ll ask: Would you say that the Paycheck Protection Program loans, would that count as being anticipatory on the regulatory front?

Hood: Absolutely. Right, now go a step further. The business goes, “I’m reading about PPP, let’s do it.” If their CPA was really proactive, they would have said, “Are you sure you want to do the PPP because they’re talking a lot about people that are getting these. What if we looked at other options like the Employee Retention Tax Credit, the ERTC, because that one’s not being reported.”

If you’re a proactive CPA, you’d be going, “I want to look at all the options for you, not just the one you’re telling me to look at.”

Amato: How can organizations as a whole, or maybe CFOs — how can they be more anticipatory on the regulation front?

Hood: I think for us, it starts with learning the language. You have to have the right mindset. Your mindset has to be you actually can see the future coming to some degree. It’s not making you a global futurist, but it does make you [looking] ahead. Then you have to say, “What can I expect?”

I’ll give you our own example. When this coronavirus thing started hitting and we started seeing Congress getting together to solve it. And the state. We saw the same at the state of Maryland level. We said, “We better get ahead of this because it’s going to impact our members, both those who are in companies that are going to deal with it and our practitioners who are going to have to advise people about it.”

We started to double down on who are the players. We started looking at what’s going on. We’ve got Congress and the Maryland Legislature, governor, President Trump, Secretary Mnuchin. Those are the players. “Oh, look. Now they’re bringing in the SBA, so we better connect back with the bankers in Maryland to make sure we know what they’re thinking because that’s where it’s going to come flowing through.”

We anticipated. We didn’t know what it was going to do, Neil, but we knew that these were the players, and we needed to make sure we knew the most recent connections and what we had there. Then when stuff started to happen, we started to rely on those networks and connections, also the AICPA relationship. You guys have been incredible. State CPA societies to see what’s going in other states so I can anticipate what happens in Maryland. That’s how we began to look at it.

The thing is, if you see a tax act coming or think back in the days of Sarbanes-Oxley when the Enron and Tyco things happened. A good anticipatory CPA would be going, “There’s going to be a law coming out of this. If it has to do with anything to do with accounting or tax, I’m going to be involved in that because I want to see what’s coming.” Then you start paying attention. What’s the House or the Senate version look like? What are they starting to talk about? Oh, we’re going to use the SBA programs. I better start brushing up on that.

We had a connection to our Maryland SBA folks. It’s like all of a sudden, you start — it’s like a crime map on one of those [TV shows], right? You start going, “OK, here’s the SBA. Here’s Treasury. Here’s Congress. What’s happening at the state level?” And you begin to fill in what you know and then start looking for the things you don’t know so you can get ahead of it and provide answers to your clients or, in our case, members.

Amato: Maybe this is a hard trend. Maybe it isn’t. What about the notion of a somewhat overused phrase, change being a constant, as a hard trend? Would you say that’s true? Is that a Dan Burrus trend?

Hood: I think the way we would get to it’s true — first of all, he would argue it’s transformation now way more than change. He would argue it’s because of the acceleration of the hard trends and the combinatorial part of hard trends. So, if you take technology — so there’s artificial intelligence. There’s machine learning. There’s cloud computing. Now there’s internet of things. If you look at the whole COVID situation, it’s being solved with a lot of technology.

Every time they’re adding on new devices, whether it’s temperature sensors — they’re trying to plot where people are and have sentinels, they’re going to be using all that technology to get to a footprint where they can say how much risk is there. If people start reporting sick — I hope we don’t get down to that point. It will be a privacy issue, I think. The point is, they can solve those problems. The point is, yes, it is accelerating. That means change, transformation. All of that is going to continue to run at the same pace as the lead hard trends driven primarily by technology.

Amato: Maybe a little bit of a tangent but still important to this conversation. On a talent front, what opportunities are out there for organizations to get in front of these hard trends?

Hood: I think there’s at least two key pieces to that. First of all, talent is a hard trend by virtue of the demographic. I know, Neil, you’ve had it on your show before, but all the stuff about Millennials and the fight with Boomers and the Gen Xers, that’s all driven by demographic differences and ways they view work. What’s happening now because of — this is where COVID could be a good thing in one weird way.

Because it’s accelerating flexibility, work from home, and different cultures, the answer is it is impacting talent in a positive way. If you were to let your talent help you solve the problem, you could accelerate even faster. Let me tell you what I mean by that.

I was doing some work with a firm and we were talking about all of these trends and they’re like, “I hear all those demographic trends, but I just don’t know what to do about it. I don’t know what they want. I give them off on Friday and they still complain.” I’m like, “No. That’s not what we’re talking about.” I said to them, “What would happen if you got them in a room and said, ‘We want you to have the best environment in the world that you can create — all the flexibility, anything you want — provided that you serve our clients in the best way you possibly can.’”

So killer client service, any way you want. And they were like, “That’s going to be crazy. They’re just going to say they want off all the time.” I’m like, “I don’t think so, not if you add the criteria that they have to serve the clients in a really important, impactful way.” So they were like, “All right. We’re going to try it,” so they actually went and did it.

They got the young people in a room and they said — I said, “You have to put the ‘and’ in there. You can’t just say, ‘What kind of culture would you like to create?’” because that’s just a license to steal. “I just want to hang out and play pool when I’m in the office,” those kinds of things. But, “I want to be the best firm I can be serving our clients the best way we can and give you the most flexible, killer culture you can think of.” Solve for that.

They did, and it made a huge impact. They had all kinds of legitimate suggestions that quite frankly amazed the partners because they weren’t like, “They just want more days off and they just want to kind of goof off all the time.” They got to some really meaningful stuff, and that firm is thriving through this period that we’re in right now.

Amato: That’s a really good example. On the hard trends topic, anything kind of to say to sum it up?

Hood: I think the coolest thing that we’ve found working with firms in this whole anticipatory learning program is that CPAs come out of it instantly being able to talk about the future with clients, which is something they would never touch before that. In other words, hard trends are logical. They’re facts. They’re future facts. Once you know them, you get it. You could even sit there and go, “Yeah. I could see where these are hard trends.”

Once they get comfortable with facts, which is what we like to do as CPAs, now I could go say to my agriculture farmer, “Hey, I’ve been reading about drones helping to manage your crop water levels and stuff by taking readings. Have you ever thought about that?” “Well, no. I actually haven’t thought about that.” Now you could be in a position of offering up thought-provoking insights and then the client could be coming back going, “You know, I’ve never heard a CPA talk to me about the future before like that.”

So, understand the trends relative to a client and being confident that as long as you stay inside the hard-trend framework, you’re in a safe basically future fact zone that allows you to do what everybody is trying to do, just how do I be more consultative and value added to a client. It’s about paying attention to the hard trends that are impacting them. Not you, them. That’s what you would do with it. 

Amato: Tom Hood, thank you very much.  

Hood: Thank you, Neil. This is awesome.