Accounting firms should transform their current service offerings and explore new, more profitable ones now, before changes in the economy and the marketplace force them to, according to two leaders of the profession.
Speaking during a joint presentation at the American Institute of CPAs’ Engage 2019 conference in Las Vegas this week, CPA.com CEO Erik Asgeirsson and AICPA executive vice president of member relations Mark Koziel made the case for why accountants need to consider this transformation — and detailed many of the service areas they should consider first.
“You’re going to hear, ‘Disrupt, disrupt, disrupt,’” Koziel warned. “I hate that word. How many people want to be disrupted? How many people want a root canal? But the whole marketplace is being disrupted — it’s not just us.”
Forty percent of the companies that were in the S&P 500 in 2000 no longer exist in the same form, he pointed out — a wave of change that is mirrored in the accounting profession, where 39 percent of the firms that were in the Top 100 in 2000 no longer exist.
Many of the same factors that have propelled those changes since 2000 have moved the profession into a position where its traditional services deliver less perceived value — but where it has tremendous opportunities to add more value than ever before.
“It’s no longer about data processing and general compliance — those are just table stakes. All that we used to do in the transactional will be automated,” Koziel explained. “If we’re just filling in boxes on a 1040, our business is at risk. If our focus in dealing with the client is talking about their individual needs, now we have a business.”
Asgeirsson stressed the important role of technology in transforming accounting firm services.
“I’m really excited, because it feels like we’ve moved into a new era of investment in technology — it’s happening at firms of all sizes,” he said. “With new technology, the question is how you’re leveraging them to drive your business forward.”
But while he thought the profession’s embrace of technology over the past 10 years — its ongoing embrace of mobile and the cloud, for instance — have set it up well for thriving in the next five years, he also explained that the tech alone is not enough.
“It’s not just about the technology — you have to think about your strategy, too,” he said. “The CAS firms that are successful have a strong strategy.”
New worlds to conquer
In fact, the modern form of client accounting services — where firms use cloud-based software to offer sophisticated outsourced CFO services to more and more clients — was one of the prime service areas Asgeirsson and Koziel recommended firms get into.
“Our smaller firms are crushing it in CAS, moving up the value chain and adding more value,” Koziel said.
“There’s never been a better time to get into client accounting services — and there’s never been a better time to get into prep, comps and reviews,” Asgeirsson added, citing a number of developments that are transforming assurance services.
From the release of the OnPoint PCR tool to enable more efficient and effective preps, comps and reviews, to the rise of AI and the AICPA’s initiative to build a 21st century audit tool and methodology with its Dynamic Audit Solution program, and the institute’s efforts to improve audit quality, this core service area of the profession is on the verge of its own transformation.
“Today there’s roughly $35 billion in assurance revenue,” Asgeirsson said. “We think the modern auditor will bring in much greater value.”
“Without the audit, the rest of the things we have permission to do are at risk,” Koziel said. “Whether or not you and your firm do them individually, as a profession we need to maintain that level of trust.”
That trust is, in part, what will enable accountants to expand into some of the other service areas the two mentioned as ripe with value-adding opportunities, such as cybersecurity services, a wide range of blockchain consulting, advisory and assurance services, and wealth management.
The last, Koziel noted, is an area where accountants have long left value on the table. He recalled going through a long process to help a client sell their business, at the end of which the client received a $10 million check and then asked Koziel what to do with the money. “I had a friend at Merrill Lynch, so I introduced them, and my friend got a big new client,” he said. “And what did I get? I got a cookie basket from my client.”
Threats all around
While the opportunities in new services are tremendous, Koziel and Asgeirsson did not downplay the competitive threats.
Brokers and credit rating agencies are offering to do tax returns for free, Koziel noted. “When clients go to their brokers and say, ‘My CPA says you’re the problem because my 10-K is late,’ the broker is going to say, ‘Get rid of your CPA; we’ll do your tax return as a loss leader, since we know all the information.’ That’s where the market is now.”
And looking down the road, the threats only get more serious, he said: “If Google looks at the historical reports we create and says, ‘We can give you forward-looking information on a real-time basis,’ we’re in trouble. We need to transform ourselves.”
This kind of change in service offerings is not new to the profession, however. “A hundred years ago, we were doing CAS, but in a different way — we were the Bob Cratchits of the world, keeping the boss’ books,” he said. “And then in 1912 we took over tax, and then in 1934, the CPAs were there again to take on the audits.”
“Thirty years ago, the small firm was the general practitioner — now the small practitioner is focused on a single niche and they go deep,” he continued. “Our new sole practitioners are being created based on today’s technology, not the technology of 20 years ago, and these are the really progressive firms.”