The accounting and tax profession is transforming at a rapid pace in its entirety, right from the way the operations are managed and how communication happens with staff and clients, to the way our services are delivered, as well as the type of services we offer.
The most prominent driving factors to transformation are the changes that our clients are demanding from us, the rapid advancement in technology advancements, resistance from clients for “time-based” billing of fees (even though they may be asking “How much do you charge per hour?”), an increased competitive landscape, and a strong embrace of outsourcing. We break down each of these factors driving transformation below to give you an idea of what we believe is changing and how we think that change should be embraced.
Changes in demand from clients
Our clients have been repeatedly pushing for more advisory-type services and more proactive advice, rather than just transactional-based data entry service in maintaining books and preparing tax returns. Clients are looking for professional firms providing financial advice based on the past, present and future numbers they see, rather than just providing results that are after the fact. In other words, our clients prefer to look out the windshield, rather than out the rearview mirror.
What our clients are asking for, more than just financial statements, is the analysis, commentary, planning and advice to meet goals, etc. that we are uniquely qualified to provide. The requirement of fulfilling compliance regulations by filing income tax returns will always be there, but our clients just don’t see the value for tax prep that they used to and they don’t want to pay the fees required for something they don’t value. If existing bookkeeping, accounting and tax prep firms want to survive, then it would only be logical to offer advisory services in addition to the historical transactional services we have provided in the past.
Technology advancements
Technology is advancing faster than we ever anticipated through the maturity of the cloud, artificial intelligence and machine learning solutions. There are so many of these cloud-based SaaS apps using artificial intelligence and machine learning today, and they are reasonably affordable and fairly simple to implement, with minimal to no IT infrastructure maintenance, and best of all, they provide solid support for education and transition assistance.
These new technology solutions are not only around the core accounting and tax functions but also around practice management, and collaboration internally and externally with clients. The best firms are those that can adapt quickly, educate their team and their clients, and transition into new ways of doing things.
Expectations for billing
Over the past decade, there has been an increasing resistance to the traditional billing and fee collection model based on time-based billing. Respect and acceptance for time-based billing (hours x billing rate) has decreased in all professions, especially over the past few years. Even though clients and potential new leads have historically been conditioned to ask what we charge per hour, they are generally more interested in seeing a defined set of services for a monthly fixed-pricing model that helps with better cash outflow planning. The reason for this is that clients want to have the power of choice in deciding what they are paying for so they can see if the value exceeds the price. In contrast, clients don’t have any choice in the matter of what they are paying for when they get sent a bill after the project is completed that leaves them feeling powerless over the decisions that have already been made because the time has already been spent.
It is incumbent upon us to refine and redefine the service offerings that we have into packaged solutions with fixed-pricing models, making it much easier to showcase and exhibit the value of our services which makes it easier for clients to appreciate and accept the packages we offer to them.
Increased competitive landscape
It is a known fact that technology innovations help us to win in this new era. However, if not implemented correctly, technology innovations may be exactly what causes a firm to lose in this new era.
In the tax and accounting profession, software advances, new apps and new systems have presented a new opportunity for new solutions. The ease of data-processing services using technology such as artificial intelligence has opened the floodgates for a lot of nontraditional practitioners and business ventures to enter this market and overpopulate it. Most of the traditional recurring basic bookkeeping and tax work is being performed in these new solutions via sophisticated software that can provide streamlined results.
Because of the entrance of these new solutions like Bench, Botkeeper, and Pilot, competition in the basic tax and accounting work will be growing substantially in the future. These basic tax and accounting services used to be the primary solid breadwinner for a lot of traditional practitioners. Historically, there has been a lot of competition because of franchise tax prep boutiques, self-service tax prep, and do-it-yourself bookkeeping software, but now with the addition of human interaction into self-service software like TurboTax Live QuickBooks Live, the competitive landscape has advanced to a completely new level.
To survive in the middle of all this change, firms will have to change the model and method of service delivery, the type of services offered, the way we price our services, and a simple, repeatable and scalable system in order to manage our internal processes effectively and efficiently. This will allow us to become lean and provide the bandwidth necessary to move into advisory services.
More outsourcing
In the past few years, outsourcing has become democratized in the tax and accounting profession and adoption is becoming ever higher even by small and midsized firms.
Outsourcing doesn’t need to be just offshoring: A lot of firms are realizing that they can source remote talent within the U.S. from lower-cost regions and still attain the quality that they desire. Some firms are just focusing on staff augmentation to help tax and accounting firms with seasonal and temp models. Another model has been offshoring to countries like India and the Philippines, which has become very prevalent and easy to do in today’s environment.
Some of the reasons for success with offshoring and with remote work have been the advancement of cloud technology, solid online security controls, better collaboration tools using an audio/video setup, and a proven means to quality check the finished product. The work that is often selected to migrate to other outsourced options is the basic bookkeeping and mundane transactional work to cut costs which also provides the extra bandwidth for firms to expand their service offerings. In order to effectively enable an outsourced solution, firms have to change and implement repeatable processes to manage work streams efficiently.
Conclusion
Define what the “Firm of the Future” means for you. Your definition is key to thriving through change. This needs to be personalized to your needs depending on your existing and/or potential future capabilities, which include your client profile, branding, sales possibilities, team roles/expertise, and delivery of services.
This is the first part of a two-part series on “The keys to driving through change.” Part Two, on managing change projects, will appear later this week.
