The Profession and Change

I read a lot. I generally don’t have the time to read whole books, but I read magazine and newspaper articles all the time on a diverse set of subjects from science & technology to philosophy & politics with the usual general business reading thrown in for good measure. As I was scanning the Wall Street Journal this morning, I read a brief editorial about how Apple, Inc. has been caught by two macro trends of business which are “the Cheap Revolution” (drastic price reductions of computer processing power as a result of “Moore’s Law”) and “global capitalism”. I believe the author of the article is most likely correct, as these apply to Apple and I believe that these two things are affecting the accounting industry in general and my current firm specifically.

When I started in public accounting, the firm I was with did almost everything manually. They prepared all business tax returns by hand and all audit work was done with pencil, paper, and a ten-key calculator. They worked 12 hour days, 5 days a week, 45 weeks a year. Keep in mind that this was not that long ago and that most local firms worked in a similar fashion. It was low value manual labor for the most part. (I think my time was billed out between $30 and $40 an hour.) There wasn’t time for high value projects. Those were left to the national and international firms. They could afford the overhead and the time.

My goodness, times have certainly changed. The decrease in cost of computing power (There are wrist watches today that have more computing power than PCs of that era.) has revolutionized what we can get done. Communications technology has shrunk the world to the point were some small firms routinely outsource data entry to foreign countries. Soon the concept of data entry will, itself, be foreign. In this environment, what will happen to an organization that is still in the “manual mindset”? I can’t say in all cases what will happen, but I know that the firm I first worked with doesn’t exist any more and the one partner still around is at another firm and is not a partner.

“Change is the law of life. And those who look only to the past or present are certain to miss the future”. — John F. Kennedy

Some years ago (1998?) the AICPA presented its vision project to the accounting community. The purpose of the project was to help provide a rough road map to the future of the accounting profession. The project was met with a pronounced yawn from the practitioners of the time, who seemed to feel as though the predictions made by the project weren’t going to have an impact on their careers. Those practitioners may have been correct in the near term. In the years since the project was presented, very little has changed in the way the average professional does his/her job. However in the long term, the practitioners who have ignored what the vision project highlighted will be disastrously wrong for their firms and the profession. Radical changes in what is expected of us are coming and they are coming soon.

Most of the changes that have come in the 10 or so years since the presentation of the project have been fairly subtle. The internet was utilized to some degree then. Email was available to most professionals and used in some way shape or form then. Tax software had already migrated from DOS to Windows. Spreadsheets had long since replaced “green bar” paper. These were the same tools that we had always used; we just use them a little differently now. The nature of what we did, converting disorganized client information into some proscribed form, hadn’t changed in decades and didn’t seem as if it would.

Following is the vision statement produced by the project –

CPAs are the trusted professionals who enable people and organizations to shape their future. Combining insight with integrity, CPAs deliver value by …

Communicating the total picture with clarity and objectivity,
Translating complex information into critical knowledge,
Anticipating and creating opportunities, and
Designing pathways that transform vision into reality.

Recognize that the typical small firm practitioner, 10 years ago, didn’t perform any detailed analysis of the data that ran through their office. Sure the occasional projection of income may have occurred for purposes of tax planning and there may have been the infrequent preparation of pro-forma financial information, but this rarely if ever involved detailed analysis. It was simplistic, used canned responses and no brain cells. Can you imagine what the response to the above vision was from professionals who were 75% of the way through their career? When they saw or heard this they just as well have been Charlie Brown listening to any adult, wa-wa.

Let me pause for a moment…I recognize that, while I believe all of the above to be true for the typical accounting firm/practitioner, this may not be the case for the large national and international accounting firms. I believe the pressures that these firms have been under for sometime forced them to be more forward looking. This is clearly evidenced by the fact that all of the “Big 4” have some form of consulting practice and that these practices have been and continue to be a very significant source of revenue. These large firms are the exception in the accounting world. They are not the norm.

In the not so distant future, data will be more organized than we can hardly imagine. We are already seeing the consistent use of programs like QuickBooks, Quicken, and Peachtree by the small business community and its entrepreneurs. These programs are taking the “shoe box” of receipts and paper that we used to receive and organizing it in a manner that is more useable by everybody. These programs already integrate with some tax and planning software and in the future that integration will be even greater. We have a habit of turning our nose up at such things, but we have to come to the realization that these types of programs (and their availability) have changed and will continue to change what we do. The programs I mentioned above are constantly improving and encroaching on territory that used to be the exclusive realm of small public accounting firms. Traditional write-up services are a thing of the past. Getting accurate and timely financial information from clients is a thing of the (oh so) near future. How will we adapt when our clients are providing us complete and accurate information, no adjustment necessary, to use in preparing their tax returns, financial statements, etc.? Are they going to come to us for such services, when they have them available at the push of a button or click of a mouse?

How are they going to do these things themselves? What we deal with is so complicated and every time congress gets in session it becomes more complex there is no way that our clients will be able to do these things on their own.

I hear you. Keep in mind, before the “simple” programs I mentioned were around, many small businesses had to have a full time accountants to manage the transactions that any normal business has. Some relatively small businesses needed full accounting departments in order to maintain their records, create invoices, and make payments. These programs have eliminated much of this for the smaller businesses that are the majority of our clients. If the positions haven’t been eliminated altogether, their staffing requirements have been greatly diminished. These positions required the detailed knowledge of accounting principles and they have been replaced by “simple” software. As these “simple” pieces of software become more and more capable, what else will they replace?

There will be a necessity for an accounting profession, always, but in order for any individual or firm to maintain its viability in the market place they will have to adapt to the changing realities. We will not be the data entry profession of the past. Circumstances will not allow it. We will have to be the analysts of the future. We will communicate. We will educate. We will connect. We will actively guide our clients toward their future.

I don’t argue that the accounting profession is going away. To the contrary, I argue that we can and will be a vibrant profession. I just believe that the nature of what we do and how we do it will be radically different tomorrow than it is today. I believe that the vision as projected by the AICPA 10 years ago will come to pass. They set a date for the vision to be realized of 2011. That may be just about right.