• The Accounting Profession’s Murky Future

    By | June 25, 2015

    The accounting profession is in a weird place. Maybe that’s too polite; the profession is in a demonstrably fucked up place. This is obvious to some people, not so obvious to others.

    I say this as an observer, of course, and not someone who lives in the profession like many of you. But, really, it is weird fucked up. Earlier this month I spent three days at the AICPA Practice Symposium Tech+ Conference (affectionately known as Prac/Tech) in Orlando. The week before Prac-Tech, I spent three days at Xerocon in Denver. The events were in no way alike and it’s indicative of a profession that is being splintered in two different directions.

    Right about now you might expect me to go on about how cool Xerocon was compared to Prac/Tech, but that’s a waste of time. Xero wishes to win the love and business of young accountants, small businesses, 2nd-generation CPA firms, and anyone who’s sick of QuickBooks. Xerocon is basically Ren from Footloose while Prac/Tech is Reverend Moore.

    A lot of people asked if I was going to write about the difference between the “feeling” or “energy” of Xerocon versus the one at Prac-Tech. I guess I could do that — there were food trucks and a live band at Xerocon’s big party, Mickey and Minnie Mouse posed for pictures at Prac-Tech; lots of people wore plaid at Xerocon, there were lots of blue blazers at Prac-Tech — but that seems kinda cheap.

    My working hypothesis is this — both groups judge each other far too harshly and it’s actively driving people apart when the profession desperately needs some visionary leadership. On the one side, the Xero-inspired accountants think that if you’re not with them, then you’re stuck in the Stone Age. That if you don’t get them, then there’s no hope for you. It doesn’t really matter to them what you do because they’re in it to win it and they don't care who rides along.

    The Prac-Tech crowd looks at the Xero fanboys and fangirls and think they’re too flashy, too noisy, too KIWI, too everything. That their “beautiful accounting software” condescends to those who aren’t fanning themselves over accounting in the cloud. To them, making decisions about the future are more complicated than jumping on the Xero bandwagon. 
       
    This isn’t a newsflash but Xero doesn’t have a monopoly on disruptive thinking. In Ari Gold’s interview with inDinero CEO Jessica Mah, she said this:

    Being able to provide unlimited, flat-fee accounting services as a software is what’s going to make us a household name over the next 10-20 years.  We’d argue that our accounting services as a software will make CPAs, as we know them today, obsolete in the next 5-10 years.  If accountants aren’t innovating away busy work like inDinero does and instead providing far more strategy rather than paper pushing; they’ll go the way of the Dodo bird and become extinct.

    I haven’t heard anyone at Xero make a prediction quite like that but Xero CEO Rod Drury said the next 5 years will be “really exciting” a lot at Xerocon. I don't really know what he meant, but maybe it has something to do with the fact that now companies like inDinero — Bench and Backops are two others — that have developed platforms, but hire accountants too, to provide bookkeeping and advisory work. And because these companies can scale, they pose a legitimate threat to larger, legacy firms who are stuck in neutral trying to figure out who their future partners are.

    Whether it’s at a big event like Xerocon or in a Q&A here, you’ll have to excuse those people who believe that Xero and other companies developing new accounting technology is the best shit since sliced bread because they have been waiting a LONG TIME for this.

    But I think the people who talk about the transformation of the accounting profession hinging on technology are wrong. That is, technology — Xero, Apple, inDinero, analytics, #CLOUD #CLOUD #CLOUD — won't be the sole thing to turn your Ford Taurus accounting firm into a Tesla accounting firm.

    Accounting firms still need people to transform their businesses through vision, strategy and culture. Technology like Xero is just one of the tools out there that can help execute those things. If you agree with the premise that the accounting profession is going through massive change, is it written anywhere that you have to use Xero to help navigate that change?

    Xero wants people to believe that accounting can be much better than it is. That it doesn’t have to be mocked for its reactive, historical-focused past. That it can become a forward-looking profession that serves as a consigliere more than box checker. 

    All the people attending Prac-Tech want the same thing. They want the accounting profession to enjoy a reputation for enriching clients’ businesses by making them more effective and profitable. 

    So why all the conflict? I personally don’t get it. The problem is, a lot of the “incumbents,” as the Xero people like to call them, don’t get it either. They’re enjoying lucrative profits and it’s baffling to them why someone wouldn’t want to use their tried and true methods for succeeding in the accounting profession. That goes for both firms and vendors that market to them. They demand to be taken seriously, but it's kind of hard when "trusted advisors" rely on old cliches and practices in an environment that's light years ahead of those advisors.

    The largest firms will be fine. They have scale and reputation that will allow them to keep going as long as litigation doesn't bleed them out. Smaller firms will have to adjust. A few young partners will play the game long enough to steer the firm’s business model in a new direction, but it might be painful. New firms will be started, many of them by you, because transforming a firm from the inside out will happen at a glacial pace, and you and your fellow start-up firm partners will want a new kind of business on your own terms.

    New accounting startups like inDinero, Bench and Backops will emerge and because they have the ability to scale, they may challenge not only small firms (they’re already nervous), but medium and large firms as well. And, finally, many firms will just die. They’ll hem and haw and wring their hands and one day they'll turn around and their clients will have given their business to a new firm. Firms don't need Xero to live on, but they'd be damn foolish to ignore what their movement represents — wholesale change in a profession that's been asleep at the wheel for decades.

    But in the end, it’s not really that scary. Everything will be fine. Just different! Sorta like when the dinosaurs went extinct.

    • B4Senior

      I like how the use of “consigliere” (noun: consigliere; an adviser, especially to a crime boss) implies that the clients are all criminals.

    • liEYr

      Well, I believe we will all be replaced by robots so not sure it will really matter how committed any of us accountants are to “the cloud”.

      • Bloviator

        How do you know we haven’t already been replaced by robots?

        • liEYr

          The entire profession has been inside the Matrix for years.

    • SouthernCPA

      When QuickBooks came out, everyone said that was the end of bookkeeping. However, after a few years, it became apparent that while many companies COULD keep their own QuickBooks files, many owners either did not really want to, or, did not know how, and just make things a bigger mess when it came time to file their tax return.

      Xero, et al, bring some cool new features, and the fact that QB Online has gone from a pretty terrible product to something that is approaching useable, is directly related to what Xero et al has done.

      At the end of the day, though, someone still has to make decisions. What Xero et al provides is the ability to automate some accounting functions and the ability to provide better intelligence to help with the decisions. Outsourced accounting is real – and firms that can embrace it will do well.

      HOWEVER we still have the issues of tax and audit. Regulations in both areas are getting tougher and tougher. They both – especially tax – require a whole lot of decision making that can’t really be automated at this point.

      The reality is that most clients can benefit from the new style consulting services powered by Xero et al AND can benefit from and/or require old school compliance help.

      Until the new school realizes that old school services are still necessary, no one will take the new school seriously. And until the old school realizes that perhaps, in some areas, things can be done differently, the old school will become less and less relevant.

      The old cliche “A house divided upon itself will fall” seems to apply here.

      • N.E.R.D.

        “Until the new school realizes that old school services are still necessary, no one will take the new school seriously. And until the old school realizes that perhaps, in some areas, things can be done differently, the old school will become less and less relevant.”

        This will happen over generations. The old school will die off eventually.

        What I think we’re witnessing is the actual technology transformation moving at the speed of business. We haven’t arrived at the “destination.” I think a close mirror of events is how cell phones evolved over the last decade. Accounting and data analytic software will be much more developed/refined and probably mainstream in a decade.

    • N.E.R.D.

      /hailcorporate

    • IndenturedServant

      Nice guerrilla marketing bro.

      Tell us more about how cloud computing is going to make the firms super profitable when we arent even able to use the technology we have now.

    • Chris

      Why is it that I simply don’t give a shit if this whole wretched profession folds up?

      • N.E.R.D.

        ..

      • cpanum31

        Because the behavior of many people in the profession over the years just grates on one’s nerves. After a while, you generalize the behavior of these stinkers to everyone else in the profession, even the good an silent.

        When the robots take over is the time of The Singularity. A concept put forward by John von Neumann. Von Neumann was one of those people who was smarter than all the accountants in the world, and just about everyone else. Personally, being an accountant, and not as smart has him, I still think he over estimated the progress of artificial intelligence.

    • Bloviator

      Has anyone ever audited financial statements that were prepared by services like InDinero, BackOps, or Bench? It’s a comedy of misstatements. These are just bookkeeping businesses that use homegrown cloud software to automate workflow. They still have people behind the scenes who record transactions, make adjusting entries, etc. Trouble is, they have one accounting department serving hundreds of clients of different sizes, industries, and legal forms. There are no internal controls, reviews, or consistent accounting policies. Some of the staff know a little GAAP, and others don’t.

      If this is the future of accounting that’s going to make CPAs obsolete, I’m feeling very secure about my job.

      • Yuckountant

        Well said.

        I truly fail to see how these tech accounting start ups are different than a cpa firm that does bookkeeping for a client. Except that the book keeping is done by people that don’t know gaap which is kinda fine until you need an audit.
        These companies are trying to push cpas out / their goal is to essentially make them obsolete- which really just makes me think that they don’t know what they’re doing and don’t understand the nature of accounting. I’m willing to be that because of tech a 2nd year staff today knows way more than a 2nd year staff 20 years ago- when ticking and tying took up so much time and a lack of regulations had a much lower bar to give an opinion.

        These companies honestly just have the wrong long term goal- instead of trying to magically innovate accounting without really understanding the nature of a cpa, they should be trying to identify where a CPA could get his work streamlined- PLEASE invent something that reads PDFs and converts exactly where I need them to go in excel. Keep innovating ticking and tying tasks and tasks we farm out to India- the firm’s internal software development is slow and never they great- where’s my development around the applications we already use all the time?

        In short- stop trying to give me google spreadsheets and tell me it’s going to be better than excel and just make something they integrated excel with Adobe in a user friendly way.

        In a recent article on going concern, if I remember correctly, was talking with the founder of InDinero or whatever- she worked as a book keeper for a short while and then expects to push cpas out of business?

        small firms will just continue to adapt and embrace new useful technology while ignoring the ridiculous impractical claims of these start ups. I live in bay and have audited start ups. Most of them fail for a reasons. Too much money in VC throwing it at anyone who smells nice.

        • IndenturedServant

          I would kill for a tool that allows me to copy and paste tables from PDF into excel without them getting all fucked up.