This year’s Practice of Now report is built on a survey of 3,000 accountants worldwide and identifies a cultural shift in accounting.
Put simply, things are changing in a way that we haven’t experienced for perhaps 40 years since breakthroughs like the desktop PC, or deregulation of the financial markets.
There’s a whole host of reasons behind this cultural shift, which we’ll explore below, but ultimately the Practice of Now reported that it’s occurring in response to changes that are going to come to light across the next decade now that the 21st century is fully underway.
Ask yourself: Do you really think your practice will be the same as it is now in 2030, given all the societal and technological changes that are occurring? What are you going to do to prepare?
An evolving profession
A stunning 90% of accountants worldwide agree that there’s been a cultural shift in accounting. Only 10% disagree.
So, what’s going on? The survey data suggests that the cultural shift is partly driven by clients and the marketplace, which are together demanding much more than the traditional number crunching and compliance work that’s historically driven accounting.
Let’s take a look at the data:
Let’s dig into the implications for your practice of some of these.
Giving the market what it demands
Arguably the least specific of the reasons quoted here, market demands refers to just about anything that an existing or new client asks of a practice. This could be taking care of year-end taxes, of course, but increasingly it’s taking the shape of consultative and partner-oriented services that are advisory in nature (and note how increasing client demands is considered important enough to receive its own response and segment in our graph above).
Your practice was undoubtedly founded once upon a time to cater to market demands. After all, it wouldn’t have got very far if it didn’t.
But how suited is it to contemporary market demands?
Well, there’s an easy way to find out, and that’s to compare your practice to any new accounting firm that might’ve opened up recently in your area. This might be as simple as discovering what services they’re offering via their marketing materials. What’s their focus? Do they specialize? If so, why do you think they do?
But you also need to be aware of their approach to business, which is to say, their culture. For example, more and more new businesses nowadays operate almost mostly via social networking channels. Additionally, some even lack physical premises for the staff, who work remotely. This sounds radical to some yet is simply normal for others. But it lets the new practice save money, and thereby slash costs for clients – who themselves appreciate such a forward-thinking approach because they could be in the same position themselves.
Or you might simply ask yourself what an accounting practice would look like if it started-up today. It’s unthinkable that technology wouldn’t be central to every part of it. And in these days of tax and payroll digitization, you might think twice about setting up processes with clients that revolve around paper-based processes and boxes of receipts delivered to your door. Would you anticipate a 100% digital client list?
This is all very radical, of course, and retrofitting it to an existing practice is unlikely to be sensible or desirable. But what nuggets of wisdom can you turn into practical changes in your practice? If nothing else, you might aim to start a discussion within your staff about the direction of travel over the coming years.
Responding to regulatory burdens
Most accountants are aware of a familiar chain of events: Governments create new legislation, which places new strains on businesses, which then turn to their accountant to at least help them understand it, and often to take care of it.
Is the regulatory situation getting worse? Recent decades have seen countless financial scandals, which have forced worldwide legislatures to respond. Yet, and perhaps ironically, many of the same legislatures in the larger western economies have simultaneously been attempting to reduce so-called “red tape.” The net result has perhaps been a reshaping of the regulatory landscape, rather than a reduction or indeed increase.
Nonetheless, increasing or just differing regulations remain a core driver of business for accountants—and increasingly it’s a driver of innovation too, as the different types of regulation challenge accountants to stay on top of the situation. As demonstrated in this year’s Practice of Now report, accountants worldwide agree that it’s one part of the cultural change.
Your practice undoubtedly has specializations in regulatory necessities but is it keeping up with the changes your clients require? Is the training available for you and/or your staff to learn what they need to know? These are questions that the Practice of Now’s findings suggest should not only be asked on a regular basis, but investigated with the intention that changes are immediately made.
Making the most of ongoing digitization
Technology and accounting have been tied together for nearly half a century now, with the electronic calculator bringing the industry into the modern era, and cloud computing, AI and bots being the latest technologies to fundamentally change the way accountants work.
Yet technology adoption isn’t moving fast enough—or so the accountants we surveyed in the Practice of Now report. Eight-five percent of accountants believe the profession in their country needs to pick up the pace of technology adoption to remain competitive internationally.
When asked why firms are lagging, reasons stated include a lack of time and money to invest in digital transformation (13% and 38% of survey respondents, respectively), although 25% of firms state a lack of expertise is holding them back.
Yet if there’s one thing accountants can be sure about, it’s that technology is a game changer. Generations of accountants have experienced this. To offer-up excuses rather than adopt new technology is a backwards move.
Once again the solution is to simply keep digitization in mind at all times. It shouldn’t be something that’s done once and then forgotten about, because technology is evolving at such a pace right now that new and useful products come to market on a regular basis.
For example, what do you know about blockchain and the switch to decentralized ledgers? What do you know about how machine learning is fundamentally changing the low-level admin jobs within the profession? If all of this sounds like gobbledygook then you have a major problem—and it’s something that will only get worse as time goes on.
Read-up on technologies and try to envision how they will affect your existing processes and tools. Look for how the technologies are starting to be implemented within businesses for examples. You might even make some cautious investments in training and technologies, but be sure to take your clients on the journey with you because ultimately it’s they who will benefit.
Adapting to generational changes
Much has been said about the millennial generation. Born between 1983 and 2000, the US Census Bureau reports that this is the largest living generation in the US by age. The year 2018 marked the first year that those born in the 21st century came of age.
Millennials were born into a world of technology, so instinctively turn to it without thinking for all their life activities. Not only that but, according to a report by Sage (Walking the Walk), millennials have a unique set of values unlike previous generations. For example, 62% of millennial entrepreneurs say they have sacrificed profit to stay true to their personal values, while 66% say they prioritize life over work. Two thirds of millennial entrepreneurs believe they’ll start more than one business in their lifetime.
The fact they’re now out there creating businesses is why they’re impacting the profession of accounting and helping create the cultural shift. They need accounting services, but they know enough to take care of the day-to-day stuff by themselves. They value accountants more as service-oriented business partners to guide them through the processes and pitfalls of business life. Can your practice provide that? If not, how can you make the necessary changes so you can do so—and therefore remain relevant?
But it’s not just a change in the type of clients. Increasingly millennials are entering the accounting profession too. Yet here there are again substantial benefits. What better way to encourage millennial-run businesses to become your clients than to have your own millennial employees who they can identify with and who share their values? Ensure you make use of millennials because research shows that they have high expectations for career progression—and little tolerance for low-level work.
There’s a perfect storm of challenges occurring at the moment that’s profoundly affecting the world of accounting, in a way that we haven’t see for decades. Indeed, it might be that we’ve simply never seen anything like this before.
The pressure is on all accounting firms to adapt and evolve. This might involve making radical changes. It will almost certainly involve a root-and-branch evaluation of your processes and attitudes. But as our research shows, there’s simply no choice if you want your practice to be ready for the next decade.