You’re probably familiar with Uber by now, unless you live under a rock, or live in the 25% of the country not yet covered by it.
Just in case, here’s what Uber is and what it is not. Uber is an app on your phone. You use it to summon a complete stranger to drive you wherever you want to go in their personal vehicle. In fancy terms, Uber is a “transportation network company," which is just another way of saying that it connects passengers with drivers.
What Uber is not is an employer for most of its workers. Uber drivers are contractors and use their own non-commercial vehicles. Uber takes a 20-30% cut of all fares. Pretty good deal for Uber, right?
It may be too good. The company is fighting litigation for classifying drivers as contractors. Last week, Uber reached a settlement with drivers in California and Massachusetts in which drivers will remain classified as contractors and receive up to $100 million in compensation. However, the judge in the case still has to approve the settlement, and Uber is still at risk of additional lawsuits or that state labor boards may get involved.
Despite these risks, at the end of last year Uber was valued at something like $68 billion dollars, which is more than the market cap of GM a lot of other public companies.
Naturally, dozens of new startups have rushed to copy the Uber model and “Uberize” other industries seemingly ripe for disruption. This includes an Uber for Dog Walking, Uber for Laundry, Uber for Grocery Shopping, Uber for Tutoring, Uber for Wine, a bunch of Ubers for Food, and no fewer than three Ubers for Marijuana. You can check out the full list on Quora.
There’s also been some talk about the possibility of an Uber for Accounting, and what that could mean for our profession.
I went to two accounting technology conferences last year, and by the end of the second, I was ready to start playing a drinking game involving one rule and the word “Uber." It seemed as if in every session at least one speaker or panelist would bring up the threat of the inevitable “Uberization” of our profession.
What "Uber for Accounting" looks like
Accounting services become on-demand and commoditized. Traditional firms go out of business because they can’t attract clients via traditional means. The firms that survive are forced to join online marketplace platforms where increased competition drives down prices. Clients have no reason to be loyal any more because they can hire a new accountant with just the tap of an iPhone. Good, stable jobs become harder and harder to find for accountants. Chaos ensues.
Why "Uber for Accounting" doesn't work
The problem with this doomsday scenario is that it relies on the assumption that any service can be Uberized. But that’s simply not true. There are many things about Uber that make it special and difficult to copy. Farhad Manjoo writes about this in The New York Times:
Uber’s success was in many ways unique. For one thing, it was attacking a vulnerable market. In many cities, the taxi business was a customer-unfriendly protectionist racket that artificially inflated prices and cared little about customer service. The opportunity for Uber to become a regular part of people’s lives was huge. Many people take cars every day, so hook them once and you have repeat customers. Finally, cars are the second-most-expensive things people buy, and the most frequent thing we do with them is park. That monumental inefficiency left Uber ample room to extract a profit even after undercutting what we now pay for cars.
The failure of a number of Uber-like startups over the last couple of years shows how difficult it can be to adapt a service to an app-based, on-demand model. And of all the services that could potentially be Uberized, accounting is one of the least likely to succeed. That’s because the accounting profession is almost the complete opposite of the taxi industry.
Here's a table:
Point A to Point B
Most of the time, the client has no idea where they need to go.
Driver is always looking for additional fares.
CPAs don’t need to spend a lot of time looking for new clients once they build a book of business.
Passengers and drivers use a five-star rating system to establish trust among strangers.
Trust is often established via personal referrals or published testimonials and case studies. Most clients would be unable to rate the quality of an accountant's technical work because they lack the expertise.
The car, owned by the driver. The app, owned by the company.
Multiple complex and integrated accounting applications which may be owned and/or hosted by either the accountant or the client.
Uber, in essence, is a better version of a taxi service. It’s about getting from Point A to Point B with as little hassle and human interaction as possible. It’s on-demand, short-term, and highly impersonal. (As soon as Uber can get rid of the drivers, it will.)
Most accounting engagements, at least the good ones, are the complete opposite. Client and accountant relationships are typically long-term and may last for decades. Often these relationships are highly personal and the accountant is considered one of the client’s confidants. When a client calls up a CPA, he or she is often looking for advice on where to go or how to get there, not just for someone to get them from Point A to Point B.
Is H&R Block "Uber for Taxes"?
That’s not to say there aren’t accounting services built on getting clients from Point A to Point B and that’s it. They exist. They’re all those 1040 tax prep shops or those new online bookkeeping services that categorize transactions quickly to churn out cash-basis income statements.
These are the low-end services that could potentially be Uberized, but it isn’t even worth trying. Automation and artificial intelligence are already removing the human component from the business model. Every year, TurboTax and its ilk eat away at the revenue of retail tax practices. And improved automation workflows in online accounting software such as Xero and QuickBooks Online are making it possible for tech-savvy accountants to do the work of a traditional bookkeeper in a fraction of the time.
Accounting won't be Uberized
The Uber model is a terrible fit for the accounting industry. The rise of the on-demand economy is disrupting some service industries, but that doesn’t mean it will disrupt them all.
That’s not to say that there won’t be disruption — there will be plenty of it. But the threat to traditional firms will not come from an app on your phone. It will come from elsewhere. And that will have to be the subject of a future article.