As a profession whose primary stock in trade is knowledge, accounting has not traditionally called for the sort of major capital expenditures that characterize, say, car manufacturing or energy production or making semiconductors. According to the conventional wisdom, a firm’s major assets go home every day in the heads of its partners and employees; there isn’t much call for splashing out massive amounts of cash on chip foundries or sprawling refineries, or even on expensive intellectual property.
At most, accounting firms might have wanted capital to acquire another practice, or even to fund a broader acquisition strategy; occasionally, the owners might decide to buy the office building they work in, as an investment. But otherwise, “investment” in the sense of spending money in advance on the assets and tools needed to support the establishment or growth of a business has not been much needed in accounting.
That’s going to change.
Technology will drive much of that change, as it upends all kinds of businesses and creates powerful new capabilities that accountants will want and need to adopt — or to create themselves. Indeed, we already have a good example of one type of that last kind of technology investment in the Dynamic Audit Solution, where the American Institute of CPAs, CPA.com and the largest firms in the profession are investing millions to build an audit platform for the next generation. Not everything will be quite as much of a moonshot as the DAS, but going forward the profession will find itself investing much more in a number of areas:
- Investing in and around technology. The first wave of technology in the accounting profession digitized what firms already did on paper; there was, therefore, something of a limit to the technologies they could be expected to take on board. The next wave, which is already beginning, will see an endless stream of innovations that firms will need to adopt, understand, and often be able to build themselves, both for their own work and their clients. Now it’s robotic process automation, artificial intelligence and blockchain that firms need to invest in; in five years, it will be some completely different list of game-changers.
- Investing in people. It’s not uncommon for accounting firms to talk about how they invest in their staff, and it’s true that this is one area where the profession has made major strides. But it’s going to need to significantly increase its investments as the variety of skills that staff and future partners need expands — and as that variety continually changes and requires updating. Firms may also find that they need to start investing in a range of expensive non-accounting specialists, such as data analysts, coders, business development professionals and subject-matter experts of all kinds; these will not be entry-level hires, and firms will need to support their higher salaries until they begin to pay off.
- Investing in new services. Compliance work is rapidly being commoditized, and the profession will need to develop higher-value-added consulting and advisory services to compensate. Advisory work will eventually be much more lucrative than compliance work, but that may take some time — and firms will need to make investments in the transition. For instance, the partners who lead the charge in these new areas will need to devote themselves to them full-time, which may mean they can’t maintain a regular book of business; the firm will need to support them until the new offerings get off the ground. Acquiring an already-established practice can be a shortcut to profitability, but is in itself a major investment.
All that is a long way of saying that going forward, the accounting profession is going to need to invest in its own future much more than it has in the past. Fortunately, the returns will be greater than they’ve ever been.
