In the world of accounting and tax, change isn't knocking on the door — it's kicking it down. The stage is set for a transformation unlike anything we've seen before, and it's being driven by a dynamic mix of new players, cutting-edge technologies and a financial surge that's rewriting the rules.
There is a seismic shift coming and now is the time to pay attention to what's happening while we're in the relative calm before the storm. So, who are these new game-changers, and why are they such a big deal?
Think of the market as a sprawling chessboard, buzzing with different types of players making their own strategic moves. At one end, progressive small firms are thriving on innovation, evolving from early adopters into mainstay business models. Their midsized counterparts are catching up, albeit at a slower pace, gradually revamping operations from top to bottom.
Yet, alongside these progressive pioneers, there still stand the legacy small firms, hesitant to fully modernize and trying to shake off some outdated methods. Similarly, the legacy midsized and large firms are grappling with new technologies and staffing pipeline issues. Some are even eyeing new strategies like being acquired by private equity firms to shake things up. They might talk about being remote or using tech, but at their core, they still stick to their traditional roots.
Even so, these traditional firms usually have a loyal client base and strong local reputations. While many are taking steps in the right direction, they might not be quick enough to catch up with their innovative rivals.
Money talks
At the other end of the chessboard is cash flow — capital is shaking up the game and reshaping the market dynamics. PE-backed firms wield financial muscle and carry sky-high expectations from investors, setting a higher bar for everyone else. The competition has shifted beneath our feet. It's not just about progressive versus legacy players anymore; it's about navigating the tide of PE-backed entities with their massive tech budgets.
But PE is only part of the equation. The other is all the "new school" firms that don't look like traditional firms as you know them today. Yet they now have pieces on your gameboard. Pay attention to:
- Stealth startups on the horizon. Behind the curtain, innovative startups are brewing specialized solutions, quietly gearing up to revolutionize accounting and tax services. Each targets specific market segments with surgical precision, and that's changing customer expectations along with everything else.
- The "Uber for accountants" phenomenon. Platforms like Taxfyle and Picnic make it easier for accountants to outsource hefty tax return tasks. They also make it easy for accountants to be self-employed where they just do work and don't have to even think about getting clients. They dream of even greater expansion and intuitive software, underscoring their potential to redefine service delivery and capture market share.
- Intuit's disruptive role. Now, let's talk about Intuit platforms. The infusion of artificial intelligence into products like TurboTax and QuickBooks marks a huge shift. These software behemoths have seamlessly tied technology together with personalized accounting services, altering the very fabric of our industry. On top of that, they are hiring accountants and even acquiring firms. They are competing with the more traditional firms for the same staff — accountants who will provide similar services to yours, albeit in a different way.
- Legal tech in the arena. Legal tech firms like Rocket Lawyer and LegalZoom are stepping into finance. Leveraging their legal tech DNA and Intuit small and midsized business backgrounds, they offer comprehensive financial services and challenge the offerings of traditional CPA firms.
- New non-CPA startups. Startups like Bench, inDinero, Zeni and Pilot have secured funding and are ready to disrupt the industry with fully integrated fractional accounting services, offering innovative, easy-to-use financial approaches for clients.
- Fintech's expansion. Meanwhile, fintechs with large amounts of raised capital have recently branched out from credit cards to accounting and tax services, offering a more holistic approach to financial management for small and midsized businesses. Plus, they have exchange fees so they are essentially making money on money, which is then reinvested into their tech stack.
The new market is putting a ton of money into innovation. They are pushing and will continue to push the market forward with their different way of thinking about accounting and tax.
The AI revolution
AI is a contributor to the change, but it's not just because firms are using it to automate tasks. AI is redefining client interactions and setting new standards for seamless experiences, putting traditional approaches at risk of becoming outdated.
The "new school" competition is already ahead of the game here. Traditional follow-up phone calls and coffee meetings won't cut it for the newer generation. It's all about delivering a seamless customer experience across all platforms and human touchpoints.
The common thread
The driving force behind these changes? It all boils down to money. Traditional firms have typically lagged in reinvesting in innovation, while the emerging market is pouring substantial resources into driving innovation. That's creating a palpable push in the industry. Private equity investment has a similar effect. All of this is amplifying the momentum of change.
In other words, more financial resources translate into greater innovation and automation, and it's happening at breakneck speed. Essentially, fintech is challenging traditional norms, leaving you with a choice — adapt or risk becoming obsolete in the marketplace.
This isn't some sort of doomsday prophecy; it's an opportunity to embrace a radical shift. The future isn't just about neighboring firms or the old versus the new. It's about recognizing disruptions from fintech and proactively engaging with them to shape the future. It's time to prepare, innovate and steer this dynamic transformation.
It's not just about surviving; it's about thriving in this evolution. So, buckle up, because the accounting and tax landscape is in for a wild ride.
