Industry Analysis
The Big Squeeze
The Accounting Industry is Experiencing the Big Squeeze
Executive Summary
It is now becoming abundantly clear that the market for conventional services of accounting firms is shrinking. However, this does not mean that mid-size firms cannot flourish as the industry rapidly changes. In fact, the opportunities are endless if these firms are prepared to expand their service offering and take advantage of new technology.
In this new era, firms will require:
- A bold vision that embraces new service lines and expanded consulting services
- Demonstrated commitment to diversity in the way they recruit, develop, reward and promote their staff
- The adoption of next generation technology platforms that promise to fundamentally change the way accounting firms operate, expand and scale their services offering
Trends
A Generational Shift in Attitudes: The Need for Work/Life Balance
The most significant challenges facing CPA firms right now are people related. As you consider your firm 5 years out, keep in mind that the nature of the workforce is also changing. The desire to log 50 plus hours per week in order to get ahead is no longer a driving force. Everyone is, and should be, looking for balance in their lives. According to the Grow Group, six in ten accountants would like to make a career change and transition to industry or a different practice.
The Talent Shortage: Competition Will Require More Focus on Recruiting & Retention
There is a serious shortage of talent and this is only going to get worse as the baby boomers move on. This generation is retiring at a rate of 400,000 per year in Canada and similarly in the USA (4 million) and Europe; this trend is expected to continue for the near future. Consequently a great deal of valuable corporate knowledge is going to leave the workplace. The "talent exodus" is also happening at a time where suitable graduates are in high demand. Firms that are going to survive must be strategic in order to obtain their share of the emerging talent pool.
Work from Anywhere: Higher Employee Expectations and Less Loyalty
Through the lens of the pandemic, we have learned quite a bit about what the future of work will look like; it has underscored the importance of getting the remote worker equation right. As key staff members spend less and less time in the office, their relationship with the firm is bound to change. This will present opportunities for other firms to poach top performers. We now have an unprecedented situation where we have new staff who have never worked in their employer's physical environment.
An Impending Economic Downturn: Putting Downward Pressure on Fees
A drop in the trained workforce across the country will likely result in an economic downturn, or at the very least, marginal gains. The impact will lead to fee pressures and a negative impact on growth, coming at a time when people are less and less interested in spending money on compliance-type engagements. Our clients have higher expectations - they want smart advice and comprehensive plans that will assist them in building their businesses.
Maintaining Growth: Requirement of Firms to Expand their Service Offerings
The firm of the future will need to expand beyond the classic CPA services. They will need to go well beyond standard compliance services to provide clients with comprehensive advice in the key areas that affect their client's success. What new areas can firms focus on that are complementary to their current offering? How do you expand on this and become the "Advisory" firm of the future?
A Cultural Shift: The Need for Firms to Embrace Specialists from Outside the Profession
Accounting firms have traditionally operated as a network of experts operating under one roof for the benefit of our clients. However, the gurus continue to tell us that we must creatively focus on developing niche practice areas for expansion. Therefore, a cultural shift will be required as firms welcome and nurture individuals from different disciplines.
Making the Shift — Opportunities
Offshore Resources
This can be part of the solution for firms but really concentrates on the cost side rather than the income side. Report after report indicates that the strongest organizations are those with an eye on growth. While many firms are and will continue to consider the outsourcing of compliance type work offshore, cost cutting does result in short term income gains but it is not growth oriented.
Risk Mitigation
As auditors, we are analyzing risk as it relates to our client's ability to remain a going concern. A strong practice can clearly be developed in this area.
Cyber Security
We also need to develop a clear understanding of the risks presented to our clients by cyber threats. When we develop our "Opinion" on their results from operations and their abilities to continue to do so into the future we had better have a good understanding of the strength of their IT infrastructure.
Strategic Planning
In-depth knowledge of our clients' affairs make us the ideal candidate to assist in their strategic planning process. We can provide leadership and direction in this regard. Firms can start by developing an internal template/process package to guide staff through the process.
Data Mining/Analytics
There is a need to enhance our abilities to extract relevant information from our clients' data banks to assist in the planning and decision making process. By scouring this data, we are in a position to gain great insight and competitive advantages.
Technology
It is no secret that big data, bots and AI will be transformational going forward. This is especially true in our profession. Bots are making routine repetitive tasks far more efficient and accurate while AI is transforming the way in which we detect fraud and ultimately perform our audit functions.
The "Firm of the Future"
The Evolution Hub will continue to paint a picture of "The Firm of the Future" by outlining the strategies and technologies that will drive these initiatives as well as introducing creative solutions to the many issues facing the small to mid-size firm.
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