We're witnessing the evolution of the "new firm."
First, these aren't audit firms. They are their own unique beast and don't fit into this new firm model. They are firms:
- Where professional services and technology have merged together with a significant investment from venture capital or other outside capital.
- That are merging up into a firm with private equity. They will eventually become public companies when PE won't be able to get their money out, forcing an IPO.
What do these new firms have in common? They focus on those services that don't really need a CPA credential. Things like general accounting and tax, controller services, CAS, etc., can be done by anyone; a CPA is only needed to conduct a public company audit.
Sound scary? Not really — if we as CPAs are willing to own that space in the marketplace. The CPA brand is significant and something worth having. But what happens when this influx of capital is commonplace and things change? How do we focus on protecting the profession and not the firm? This is key to our future!
The CPA in this evolving industry
Yep, I said it. Industry. Not profession. As certified professionals, CPAs work in a profession. But the new firm is focused on the industry where work is done by a broader group of people who work for a company and not a professionally licensed firm.
I recently conducted a poll on LinkedIn where I asked if CPA firms will still exist in 2030. With 400 responses, 24% of respondents said they will not. So, if public accounting is evolving into a new business model, then how do we protect the profession within that business model?
Today, just as the American Institute of CPAs advocates for the CPAs working in professional services firms, they also advocate for those CPAs in industry, working to protect the CPA brand for CFOs, controllers, etc. This could evolve into another group of CPAs.
Let's say someone works as a CPA for a technology company, selling services or professional services attached to that technology. They don't report to the CFO or CEO, right? So, that's not really an internal CPA. They are public-serving, but not part of a firm either. What do you call this group of CPAs? And how do you make sure the people in this role meet the rigorous standards of their credentials?
These are the questions we need to be asking. We should be thinking about what that looks like in the future, too. The question then becomes what training or education is needed for these professionals, and what are the requirements that protect the CPA within this new industry.
The real-time disruption
I'm dating myself here, but when I grew up in firms after graduating in the early 1990s, automation was just starting with computerized tax returns. It wasn't that much later when I was starting my firm that QuickBooks came onto the scene. When you think about how work was done then compared to how work is done today, you see the real-time aspect the cloud has had on our work — disrupting the way we get things done.
And that's the biggest reason why firms haven't changed. They don't think about the real-time disruption of cloud accounting. The focus is too often on how a CPA is trained in a firm, where one person does the work and someone else reviews it. It's all after the fact, right?
Most firms still have a hard time with the idea of real-time, but if it's truly a disruptor, then how do you quantify and qualify it? How do you educate around it? How do you maintain professional standards? That's ultimately the problem to solve to protect the profession.
Asking the right questions
This might not make a difference if you're working in a firm or in a company that sells accounting and tax services, but as private equity came into the profession, so did a new firm model and structure. It's here and we need to adapt.
We've struggled with real-time for the past 20 years, but in today's day and age, CPAs and accounting professionals are working on things as they happen. When you're working in real-time, especially with technology and bots, you have to make sure that your output is at a certain standard. What that looks like is something we need to determine. The focus should be on the human element and serving customers, too, as bots can't deliver either.
I don't have all the answers, and I never claim to, but we're asking the wrong questions. We need to think about protecting the profession and not necessarily the firm. What questions should we be asking?
