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The Current Status of the Accounting Profession: More than Just an Industry

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Categories: Accounting, Business Strategy, fiscal management

Accounting is more than an industry; it is a rapidly changing culture and profession. Accountants, Bookkeepers, Chartered Accountants, and CPAs cannot manufacture and sell goods. Instead, they are packaging their services that will help plan the economic future of their clients.

Accounting is a service, and due to the complexity of regulations and tax laws (that are always changing), it takes highly trained and skilled professionals to provide these services. Generally, these services include tax, audit, and compliance. More frequently we have seen accountants taking on advisory services that are typically focused towards cost control.

To retain one’s accreditation and license, formal continuing education takes place every year that usually has very high standards. Every nation has one or more government departments to establish these standards, and many have associations to support the continued excellence of accountants. 

As we’ve been working with partners globally, we’ve found that there are many differences, but also many similarities in the regulations and support systems in place. In Brazil the government requires that every company has an independent accountant for managing transactional bookkeeping and accounting, since national taxes are paid based on business revenue. In the United Kingdom the Institute of Chartered Accountants of England and Wales (ICAEW) plays a significant role in establishing skills and abilities. The Association of International Certified Public Accountants (AICPA) is the leading organization in the United States and most of the rest of the global free marketplace. One thing similar throughout the world that all national and international organizations recognize, in today’s world, is that technology is having a profound impact on accounting professionals. All acknowledge the unstoppable shifts that are changing the accounting profession forever.

These changes cannot be simply copied and pasted into an accounting firm; it is not a cookie-cutter approach. Rather, they must be adopted, learned, practiced, and mastered by professionals. Though accounting professionals are in a mature service, the changes are happening faster than ever before, leaving few comfortable. However, the accounting ecosystem has developed strong support systems, creating a true community and culture of people in the profession.

Working with partners in Europe, the UK, the USA, Brazil, and Australia has given the ProfitSee Team a first-hand look at what is happening at the ground level. Significant disruptions are at hand, and there are five main factors driving this:

  1. The simplification of tax codes
  2. The commoditization of many traditional account services driving down revenue
  3. The migration of accounting and fiscal management systems in businesses to the Cloud
  4. Software tools that create accounting efficiencies for business clients
  5. Business owners expecting fiscal advice in “real time,” rather than only historical data from traditional financial reports

How serious is it? Barry Melancon, CEO of the AICPA declared at the 2018 CPA.com/AICPA Executive Roundtable that “accounting firms that are not expanding what they do to include CFO level services will be risking a serious shrinking of their practices within five years! 

Accounting professionals need to adapt to these changes, otherwise they’ll be left behind. Firms that survive by embracing new technology and opportunities likely will not recognize their practices five years from now.

These changes, however, do not come without challenges on many levels. Business owners expect their accountants to know what is best in new technology for the company. But this expectation comes without offering any compensation for the knowledge. Learning how to educate business clients on fiscal management and future growth while remaining compliant is another wrinkle. And shifting financial analytics from quarterly, or even, to real time is a completely new frame of reference.

In spite of these obstacles and other barriers, these changes in services are taking place in major accounting firms internationally, including:

  • KPMG
  • Ernst & Young
  • Deloitte
  • PwC
  • Grant Thornton
  • Clifton Larsen Allen
  • And many others…

The fundamental issue is understanding what really are CFO level services and why they are needed. Many companies have individuals titled as a “Chief Financial Officer,” but most function as little more than comptroller, focusing primarily on reducing spending. Despite this the need for a true CFO is driven by some primary needs of all companies. 

What does a true CFO do? They increase revenue, grow profitability, and plan for future growth, while mitigating risk. They understand:

  1. A business that does not have a plan for growth is dying.
  2. Growth is a function of reinvestment in the business; it takes money to make money.
  3. Without functional budgets as performance benchmarks there is no way to measure performance.
  4. Growth requires capital. How does the company transform to find, create, and use working capital?
  5. How a company increases valuation while minimizing risk.

Those things are not commonly understood, and take a specialized individual to accomplish. In fact, they account for many of the reasons large, publicly traded corporations hire high-level analysts to work with their CFOs. 

But this is where there is a major gap between large corporations and small businesses. Small to mid-sized companies lack the resources to hire a CFO and analysts to crunch the numbers. The result? Fiscal management is usually a company’s weakest discipline.

What really is Fiscal Management? It is much more than cost control, in involves the disciplines of a true CFO and includes:

  • Cash flow forecasting
  • Capital formation
  • Planning for future growth
  • Scenario building and strategic business planning
  • Timing on new strategies and tactics
  • Increasing valuation while minimizing risk
  • Mergers & Acquisitions
  • Succession planning
  • Long-term tax strategies
  • And more…

CFO Services are, in most cases, outside the norm for Accounting Professionals. This is why organizations, like the AICPA, are laying the foundations for helping the transformation of accounting professionals.

Last year, I was fortunate enough to be invited to their annual Executive Roundtable event. Each year around 40 high-level executives meet in the AICPA’s New York offices for two days. During this time, many presentations and no-holds-barred discussions occur. They cover the next steps in technology and how they will be affecting accounting professionals.

The businesses in attendance ranged from:

  • Those that train on how to use the cloud
  • Data security
  • File management
  • Value added applications for accountants’ business clients
  • Accounting software companies
  • ProfitSee

 

We were the only technology company with a focus on providing sophisticated financial analytical tools that allow accountants to provide true CFO level services. Our tools are internationally accredited by the ICAEW. Beyond that, we also understand the value and need for comprehensive training on the tools and how they help you provide these services to your clients.

When implementing new technology there is always a learning curve to understanding the full breadth of functionality and figuring out how it fits into your firm. Our goal is to help you become a trusted business advisor, providing true CFO-level services, and we will walk you through every step of the way.

Exciting changes are taking place for accounting professionals. We are excited to be a part of the future of advisory services, and more will be sure to come from the AICPA/CPA.com 2019 Roundtable.

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