"What kills you doesn't look like you."
VeraSage Institute founder Ron Baker likes to share that saying when he's asked about upcoming changes in the accounting profession. Historically, innovation in the field has indeed often been driven by outside factors, from tax legislation and reporting mandates like the Securities and Exchange Commission's proposed
However, change can also come from those who know the profession best and see it from the inside. It sometimes takes revisiting ideas that have been percolating for a while to tackle inflexible conventions and ineffective systems that hold the profession back.
With that in mind, here are a handful of major ideas whose time, say industry experts and thought leaders, may well be coming soon. (See even
Idea No. 1: Narrow your scope
ConvergenceCoaching has declared October 21 "National Fire Some Clients Day." The group, which consults with accounting firms, believes that having fewer clients will allow accountants to build a deeper relationship with their clients and reduce their workload while improving productivity.
To understand which clients to pull away from, the firm recommends identifying clients who no longer fit, informing them of the firm's new direction and pointing them toward other providers who can better serve them. Additionally, ConvergenceCoaching partner Tamera Loerzel says that firms should also consider letting go of clients whose poor organization causes delays, disrespect the firm's staff, or fail to pay in a timely manner.
"We have too many client commitments, too many engagements, too many hours of work inside our firms for the number of human beings that could possibly get that work done with quality, work-life balance, joy and inspiration, and with deep client relationships," said the firm's co-founder Jennifer Wilson. "We've got to make some room by firing clients and saying no to some engagements and no to some clients."
Experts have been recommending that accounting firms identify and fire underperforming clients for years, but the idea has been slow to gain traction. It was only in the last year that a significant portion of the Top 100 Firms reported seriously looking at more carefully managing their client rosters, and for many smaller firms, the idea remains unthinkable.
According to VeraSage Institute fellow Ed Kless, too many professionals believe that every revenue dollar is a good dollar and therefore, every customer is worth keeping. However, Kless thinks firms shouldn't welcome customers only because they can, but because they can learn from them and apply that new knowledge to other cases. He argues that revenue doesn't come from marketing, but the creation of value external to the organization, along with a higher bar for customer selection.
Closer relations with a hand-picked group of clients is one hallmark of tomorrow's successful practices, according to AICPA vice president of firm services Lisa Simpson: "The firm of the future is an entity that spent a lot of time thinking about its strategy, who it wants to serve, which services it will provide and who its employees are going to be," she explained.
Simpson also warned that firms need to take clients' leadership into account when adopting a business plan. For example, when a client company transfers power from one generation to another, firms should adapt to the new leadership's expectations and communication style to ensure a smooth transition — a hard enough task when you are working with clients you like.
As for Loerzel, she explains that many firms are reluctant to adopt a newer model because they believe it would result in a loss of revenue, since most partner compensation models rely on the number of clients. Many accountants wish to make a difference and are uncomfortable with turning people away, but Loerzel believes that having fewer clients actually increases service quality. She argues that firms shouldn't be afraid to introduce their clients to new processes and that there is a lot of money to be made with client reduction. As an example, she cites client firm Andrea & Orendorff, which sold its 800-client tax practice last December.
"I wasn't very passionate about for-profit and when you work day-to-day on this topic, it can be very exhausting," said Andrea & Orendorff partner Ryan Goerres. "We had so many clients that we couldn't focus on our staff or culture."
The 40-year-old firm went through a major succession planning effort after tax partner Terry Smicht retired in 2021, following by partner Katherine Andrea announcing her retirement in 2023. Wondering how the tax practice would remain profitable without these two key partners, the firm organized a day-long strategic planning three years ago to discuss their client base with Loerzel and other team members. Several months later, Andrea & Orendorff sold the tax practice and decided to follow a path that better fits the firm's vision, with a focus on government and nonprofit entities.
Since then, the firm has completely made up for the loss of the tax department and even increased its revenues because they have more time to focus on its biggest clients, who are in audit. According to Goerres, the firm didn't even rely on paid marketing to promote the change, as its new mission naturally attracted younger generations wanting to give back to their community. Instead, the firm used organic marketing to explain how its new direction could serve its clients' needs.
"Kathy and I always say that's the best decision we've ever made, and we have more time for nonprofit and government practices," said Goerres. "Now our time is much more focused on things that truly matter for our firm, and when you work on things you're passionate about, you have much more energy to do what needs to be done."
"When you open up a business, the entrepreneurial spirit tells you to attract as many clients as possible, rather than being strategic and focused, because you have bills to pay," said Loerzel. "However, if you never ask yourself who you truly want to serve, it causes a lot of problems very early on. Conversely, having fewer clients in those peak periods would allow you to manage them better because you have time to do follow-up work, rather than having tons of small clients who are all due at the same time."
Goerres understands how professionals may hesitate to make such a big change, especially when a business has been going well. He recognizes it's not a decision to take lightly, as many employees' livelihoods are on the line, and agrees that firms shouldn't sell a practice unless they're absolutely sure. Before making a move, Goerres recommends addressing everyone's concerns and investing in data analysis to find out if selling a practice makes financial and logistical sense.
In the case of Andrea & Orendorff, it has sometimes been financially difficult to pass some costs to nonprofits and governments because of their limited resources, especially in the current inflationary environment. However, while selling a practice means losing one market and its opportunities, Goerres says it also creates new chances within one's niche. Since selling the practice, the firm has observed improved outsourcing efforts, planning and strategizing, along with better client relationships.
"We've been able to create more of a team approach and our clients now have many more points of connection, because there is always someone who can answer their questions," said Goerres. "We've had a much happier staff and more satisfied clients, but I think some people still disagreed with that decision, which is common for every big change. That's why you need to talk to your shareholders and your staff, which is the reason we hired a marketing firm to know how to explain this decision."
Idea No. 2: From 'clients' to 'customers'
The word client comes from the Latin word "cluere," which means "hear" or "obey." First used to describe patronage in Ancient Rome, the word is now deemed problematic by VeraSage's Kless, who thinks it implies that clients need to be propped up by their providers.
He prefers the word "customer," which was first used during the 14th century for people who regularly bought goods from the same guild. Kleiss believes that regular conversations between customers and advisors should become a habit, not because there is an issue to solve, but because both benefit from the conversation.
"All change is linguistic, and the way culture shifts is by changing the language that we use to talk about things, and I think it would be far better for professionals to think in those terms," said Kless. "I believe changing our language would have the biggest long-term impact on innovation and creativity."
VeraSage's Baker, who's also Kless' cohost on the influential podcast "The Soul of Enterprise," says that firms tend to define themselves by the customers they don't have or the services they can't provide. As a counter-example, he notes that Apple doesn't concern itself with its low computer market share because it focuses its efforts on smartphones, where it's one of the main leaders. Baker says that firms too often chase growth, instead of profitable growth, thus putting revenue before capacity.
"Firms think what they're selling is time and that's monstrously false," said Baker. "There's a lot of apathy on both sides, and I don't think it will ever disappear because that's the only way employees know how to work. People prefer to buy mortgages rather than variable rates because they want certainty, and it works for accounting too."
Like culling clients, the idea of shifting from a strictly transactional model to more of a relationship model has been circulating in the profession for some time, but as firms struggle with staffing issues and high rates of burnout during the COVID pandemic, it's getting more attention.
Kless believes the major cause of burnout is the billable hour, which he considers the "cancer" of the profession. He says it encourages knowledge hoarding because when accountants have targets to meet, they won't rely on their colleagues and will keep their cases to themselves for profit. This lack of collaboration is further supported by a continuous lip service within firms, which Kless accuses of designing systems that only reward short-term success.
He thinks cooperation can never truly happen in the workplace because most firms implement individual key performance indicators, rather than inspiring employees to work as a team. Kless says that the accounting leadership model is broken because it is too prescriptive on transactional issues, and not enough time is spent on addressing the underlying causes of dysfunction. The real problem is not the transactional anxiety of situations, but an "underlying chronic anxiety" that is not just limited to accountants.
"Overwork culture is a chronic defect in our profession, but also in many other businesses," said Baker. "Many don't see the difference between efficiency, which measures output by input, and effectiveness, which is a judgment. You can't be efficient with people, there's no 'efficient marriage' because it's a relationship. It requires work and commitment. It's not scalable, because there are only so many deep relationships that you can have. Innovation and creativity are the antitheses of efficiency."
Rather than insisting on a certain number of hours and a budget to get the job done, Baker thinks firms should challenge their staff on how well they can assist their clients, and which technologies they can use to be as efficient and effective as possible. The
"I think you can create a culture where innovation is allowed to occur more frequently by encouraging it and seeing failure as a learning tool, but innovation will always take you by surprise," said Kless. "Socialism would work if you could plan innovation, but places like North Korea or the old Soviet Union show us that it never works when there is no freedom of creation. And ultimately, society would eat itself from within."
Since you can't put a date on change, Kless recommends taking risks. When he meets leaders who struggle with time management, Kless suggests doubling their price because it's unlikely to push customers away, especially if they've been continuously satisfied for a number of years. Even in cases where, say, 25% of customers leave when presented with higher prices, Kless argues it would still mean making twice as much while working less.
Idea No. 3: A sharper focus on auditor independence
When the modern public company audit was being created in the 1930s, one suggestion would have had the government assign independent auditors to listed businesses, or even conduct the audits itself. The system that was adopted, however, allows companies to choose and pay the outside firms that sign off on their financial statements. This model has been in place for so long that it is hardly ever questioned.
However, some advocates such as Ed Ketz, an accounting professor at Penn State University and a former
"A lack of independence causes auditors to not demonstrate due care, depth, and professional skepticism, which is critical to catch these problems," said Ketz. "When you serve someone who's paying you, there is always a chance you may consciously or unconsciously be biased toward the person giving you the money."
While Paul Munter, the acting chief accountant at the SEC,
First, he believes transgressors should face bigger consequences for their actions, and argues that the fines sanctioned by the SEC are not nearly big enough to be effective. KPMG received the biggest fine ever in 2014, with an
"They probably want to relax independence rules because they realize there are significant issues and they feel like it's too hard to regulate," said Ketz. "They are relying on other institutions to fix those problems but I think there are many ways to find indicators that might suggest a lack of independence. Audit independence would be less of a problem if attorneys actually held audit firms accountable for their violations."
Ketz has several ideas on how to improve audit quality, and the first one would be for a regulatory agency such as the Federal Communications Commission to assign auditors and decide whether to leave auditors in place depending on their performance. Research
Another solution would be to separate consulting and auditing practices to give auditors more freedom to perform their duties. Comparing the two fields to a husband and wife supervising one another, Ketz said auditors can be reluctant to find errors on a project their firm's consulting section has put a lot of work into, and that it's the company's responsibility to prevent overlap. It's in this mindset that EY
"We operate in a very competitive environment that demands consistently increasing targeted investments in our people and capabilities," said Bill Strait, EY Americas Assurance deputy vice chair. "We believe that two distinct entities with different strategies could be well positioned to make those investments more nimbly in ways that open up new opportunities. Ultimately, transforming into two multidisciplinary, purpose-led organizations would help each of the entities really continue to lead in the respective markets that we serve."
Earlier this year, EY undertook a strategic review on a global level for several different aspects and developments of its business, including looking at growth across service lines. Valued at $20 billion, the assurance firm would focus on auditing with the EY name and structure while continuing to serve as an advisor to CFOs, C-suite executives and boards. Additionally, its $25 billion consultancy will become a new entity and the multidisciplinary global corporation, will operate fully independently of the assurance firm as a publicly traded consultancy under a new brand – positioned to support clients' growth, risk and transformation agendas.
It's not the first high-level auditing shakeup for the Big Four, of course. In the aftermath of the Enron scandal and the passage of the Sarbanes-Oxley Act in 2002, EY, KPMG and PwC sold or spun off their consulting practices to Capgemini, Bearing Point and IBM between 2000 and 2002. Similarly, EY Americas Assurance talent leader Becky Burke said that the firm's current proposed split represents a commitment to audit quality and independence on a multinational level.
The Big Four has long taken back their share of the global consulting market since Euron, with
"Whether or not the transaction happens, the process itself has been really important and informative," said Burke. "I think we have a once-in-a-lifetime opportunity to really redefine our industry and we want to be the ones to lead that vision on how we can build an organization that changes the profession, but also new and exciting opportunities for our people."
The firm currently focuses on its IT audit team in the U.S. while applying continuous improvement principles across technology risk, forensics, valuation and actuarial modeling. EY also plans to direct its assurance business earnings back into its core business to strengthen its audit, tax, and advisory capabilities, which it will use to drive audit quality, look at new digital audit resources, and expand assurance over non-financial disclosures such as ESG. Burke says that EY now wants to focus on regulatory and reporting trends while deepening its expertise for its clients.
Burke says the split proposal aims to anticipate future evolutions within the profession and that it will give EY a chance to serve clients with a more robust and end-to-end service environment, as well as various other priorities.
"I think that our plans make strategic sense for us as well as for our stakeholders, and that's who we are focused on," said Burke. "I think the constantly evolving business environment really does require organizations to strategically review their businesses, and that's something that we should be doing all the time to make sure that we're creating value for our people, clients, and stakeholders."
Idea No. 4: Reimagine the employee experience
While firms are preparing themselves for the future, it seems like fewer and fewer employees will be taking part in the transition. According to
Zicari says the profession has been changing so rapidly that firms now need to tackle several challenges at once, using a great variety of resources from management teams and staff for something that used to be handled by one person. To avoid overworking employees in the face of the talent shortage, he recommends relying on efficiency to supplement professionals who can take care of administrative tasks. This strategy to face seems to be paying off for Bonadio, since the New York-based Top 100 Firm received a
A new focus on the employee experience will be at the center of the industry's future, according to Zicari. In this mindset, the Bonadio Group has been promoting a feedback culture with established insight teams who questioned over 100 different leaders throughout the firm as a "stay interview." The goal was to ask them what is important, where the firm could improve and what was currently working. Zicari says it made employees feel valued, and the firm received feedback on areas that needed improvement, along with a list of recommended solutions.
"We're going to switch from a team-based environment to an industry-focused environment, meaning everybody will specialize in two or three industry niches," said Zicari. "It will allow them to be experts in those areas with really specialized areas and compete in these sectors. This new structure will be highly useful to remain competitive and efficient while allowing people to pursue what they like."
One key element of sharpening a firm's focus on its employee experience is investing in new skill sets that may not be in the usual payscale, and Carla McCall, managing partner of New England-based AAFCPAs, says that concepts such as mental health and belonging have become extremely important for employees. People now expect predictability and varied experiences to support their career development.
Idea No. 5: It's past time to fully embrace technology
When it comes to testing apps, Bonadio uses a 100-employee focus group to get their input on the user experience, meeting frequently with the team to make sure each app is ready for the rollout. After implementation, the firm then asks for feedback on feature enhancements and other fields before sending a survey to employees. How did the focus group represent your team? How supported did they feel by the IT team? All those questions, along with a study of bounce rates and other metrics, give the company enough information to measure the application's success before sending back the results to users in all transparency.
That's a fairly advanced process, but accounting professionals aren't always that eager to embrace new technologies. In 2017, a FreeAgent report found that 96% of accountants believed that all or some accounting jobs would be fully automated by 2022, but the profession is still far from being fully computerized.
According to Bonadio CIO John Roman, these new tools are here to support accountants, not replace them, and he argues that they could even create new positions in the future. In 2020,
"Everyone can brag about having technology, but do they actually use it for the benefit of their clients?" said Roman. "Are we using correctly and putting data to good use? The expertise our professionals are building around these technologies and how they'll use this data to support their clients is going to be the difference."
To give the best customer service, AAFCPAs managing partner Carla McCall recommends having a data team ready to assist clients with creating a dashboard so they can have a better insight into their critical information. McCall says that automating workflow with bot technology allows accountants to achieve these goals more efficiently, and the Massachusetts firm itself organizes monthly meetings with its innovative technology committee to explore how it can leverage people's time.
According to Wave vice-president David Axler, it's all about making accounting more accessible and increasing the financial literacy of users. While the automation and simplification of repetitive or time-consuming tasks gives software a natural advantage over traditional processes, it can't really go into deeper fields such as forensic accounting. Axler argues that's where firms have the opportunity to pivot and use these new technologies to create a new niche or explore other practices.
"More firms are providing client accounting advisory services than ever before because people realized there was a lot of revenue to make," said BotKeeper CEO Enrico Palmerino. "Delivering financial services by the 15th of the month used to be considered master class speed, but tech has now allowed firms to embrace weekly processing and reporting instead of monthly, and even daily for bigger collectives."
Valued at
"As an entrepreneur, I always wanted to get my numbers faster but we were always slowed down by the person doing the bookkeeping, and vacations always happened at the worst time of the season," said Palmerino. "There also were way too many apps for only one accountant, with the average firm using between eight and 12 applications."
While software such as a bank-statement-fetching application is supposed to save you time, Palmerino explains that it quickly gets complicated when you need to switch systems. One may even need to switch a dozen times a day just for bookkeeping, with data kept in silos that often are incompatible with one another. The massive amount of information forces professionals to rely on Google Slides or Excel to keep track of passwords and other information, and Palmerino estimates that a firm loses between $200-300 per client just in application fees.
However, Palmerino says consumerism has made people strive for instant gratification and many now push for immediate processing, which he says will probably remain out of reach for a few more years. Another noteworthy change is that firms now offer more advanced financial reporting and added fields such as forecasting, budgeting or payroll planning to their services. Customers now expect business spending and trend analyses from their advisors.
"When that transition happens, those who didn't take the tech path will suddenly see clients turn at an alarming rate because they'll be charging $1,000 for monthly accounting services when other firms will give daily reports for five times less," adds Palmerino. "It will likely happen in the next three years because it generally happens faster than you expect, and the accounting revolution will catch a lot of firms by surprise."
While accountants won't lose their jobs to robots anytime soon, Palmerino believes that AI-using professionals will drive their old-fashioned peers out of business very quickly. With the average accountant now entering their
To prepare for this disruption, he advises people against labor arbitrage because of high turnover rates and increasing wages. As mobile services gain a bigger role as people go remote, Palmerino said that relying too much on low-cost labor means losing to firms that provide high-tech services, at a faster rate and lower cost. According to him, not curbing one's headcount and keeping up with market pricing expectations is essential to avoid a surprise decline in the future. It's a long-term investment that may not seem immediately profitable, but that will allow businesses to remain a step ahead of competitors in the course of time.
"Smaller firms definitely need to invest in these new technologies if they want to remain competitive and relevant," said Bonadio's Roman. "It could start with a hundred-page roadmap or a PowerPoint, it doesn't matter, because anything can lead to a digital transformation plan. For example, a simple step would be to update software for the entire office and pick the one field that will have the maximum impact for the biggest number of people."
