The Accounting Profession’s Murky Future

By | 2 years ago

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.

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