What it means to be an accountant is changing — and that may be an important part of attracting more young people too the profession, says David Bergstein.
Transcription:
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Dan Hood (00:03):
Welcome to On the Air with Accounting Today, I'm editor-in-chief Dan Hood. You know, for generations, the CPA has been the ne plus ultra of the accounting profession, and accounting firms were full of CPAs and accountants, but there's not enough of either accountants or CPAs these days.
Here to talk about whether that's a problem or not and what it might mean for the profession is David Bergstein. He's chief innovation officer at Bergstein CPA. He's a blogger, an author, a former technology executive, an all around expert on the profession and a member of it. David, thanks for joining us.
David Bergstein (00:28):
Thanks for having me here. You can study that. I'm the old guy in the professional. Well, one of the old over 65 guys that was supposed to retire a long time ago.
Dan Hood (00:37):
Right, and never did. And that's good because if you had, we wouldn't have you here to talk to today. And one of the great things about that age, that veteran statuses that you've seen in the profession grow and change over a long period of time and have a lot of perspective on it. And I want to start to start by saying, do you need to be a CPA these days to be an accountant? Do we need accountants in accounting firms? What's the role of the CPA and the accountant and do we need them?
David Bergstein (01:04):
Okay, good. You broke it down to two questions. So first question, do you need to be a CPA to be an accounting firm today? The answer's really no. You can be a super smart individual. You can graduate with an accounting degree. So if you want to be in the accountant but not a CPA, that's fine too because there's plenty of work to do out there in the non test function. Again, when you become A CPA, there's a couple of things you can do that nobody else can do, but that doesn't mean you can't be in the CPA profession. So if I look at what it is that A CPA can do that nobody else can do, A CPA can perform the test function, which means they can audit the financials of companies and attest to the fact that the financial statements of prepared in accordance with generally accepted accounting standards in accordance with the generally accepted auditing standards be performed. Now, they could also represent people before the IRS, so that's a plus. Now people don't really talk about that and rolled agents could also do that. So you don't have to be a CPA to represent people before the IRS. You can get a P
Dan Hood (02:13):
And tax attorneys can as well, right?
David Bergstein (02:15):
Tax attorney, I'm leaving attorneys out of this because we're just in the accounting space and the countless, some attorneys love to fight with each other. So enrolled agents get to do the tax stuff CPAs do. But if you're just a regular preparer, you can go out and get a P tin number, but you really can only do so much in terms of giving information to the IRS. When they sit down and talk, you can only really go leader with them and do certain things, but you can't work your way up the chain. When it comes to CPAs, they can do external and sods audits, which is really checking on the organization's internal controls, security controls is what it's all about. And that's something they can do. But do you need to really be able to do these things at an accounting firm? Because more and more accounting firms are authoring a plethora of services.
(03:08):
If I just click on my links to some of the sites up here, I brought up a top a hundred firm, LBMC lam or Black Morgan and Cain, I clicked on services advisory and business consulting don't have to be a CPA to do that. Finance and account team don't have to be a CPA human resources. They're probably hiring human resource people to help their clients staff. The beauty about being an accountant is every firm needs someone to help them with their accounting or financial information. The key to understand accounting is a process. Recording sorting and summarizing data doesn't mean anything until the data is put together. Now technology is actually performing those services and more and more firms are coming together as non CPA firms to automate the clients and help them build the information. And then they're saying, Hey, come to us. We'll be you a fractional CFO.
(04:12):
We'll be a fractional controller, will help you play the service. And again, I didn't finish reading lateral Blackpool, GU Cape procurement, recruiting services and staffing that had nothing to do with the county technology. Yeah, have a huge tech practice. It's a separate practice. I looked at another one, Berkowitz Pollock brand, another top of your firm. First thing I see is affiliated firms real estate. If I look at their affiliated firms, it says Providence Wealth Advisor, their wealth management firm. Yeah. Bay Bridge Capital Advisors. Bay Bridge, real Estate Capital, certain niches, and they're into other things. I can go on and on. So answering the question, it's great to be A CPA and honor A CPA. I teach college accounting and I'm trying to encourage people to be CPAs because it's the most trusted advisor status. But when someone goes well, I ask the question a lot.
(05:10):
When you're starting a business and you're looking for an accountant, what do you Google accountant? They'll Google CPA. Just that CPA comes up. So pick your out of what you want to do. And actually, I just interviewed for a webcast for, I was doing some guest work for bot keeper. I interviewed a young lady by the name of Jean Hardy. She has over a seven figure practice. Doesn't say accounting practice, but it does financial planning strategy and it provide us all the accounting services. What's happening. Actually, I think you have an accountant today, one of the top a hundred firms, which to be called. I think you're a part-time controller now. It's called now CFO. So is it an accounting firm? Do they do audit? It's no, probably, but it says they seem to do SEC work. So hopefully I'm answering your question. Even I could talk for hours about it. Yeah,
Dan Hood (06:13):
Well I, but I think to make a point that more and more firms are doing not less and less, but more and more work other than what you need to be a CPA to do. Right, right.
David Bergstein (06:24):
And that leads to another question. We got private equity coming into all these large firms and they're dividing the firms because let's take New York for instance, in New York City, I believe to be a CPA firm and provide the test function. A hundred percent of the owners have to be CPAs. And a lot of other states it's only 49%, but I believe New York's still a hundred percent. So you divide the firm up. You can correct me if you know anything different than that.
Dan Hood (06:55):
I thought they had changed recently, but I'm not a hundred
David Bergstein (06:57):
Percent sure that's I saying it might've, but Yeah, but typically it's 49%. But my question is, okay, you got the audit firm over here and you got everything else on the other side to a client, accounting services, consulting technology, whatever the case may be. Where are you getting the CPAs to do the audit front? Are you borrowing 'em from the other side? So that raises the question of independence if they go back and forth. I'm just throwing that out because independence becomes a big issue here,
Dan Hood (07:28):
Right? Well, I mean I think they treat them. I think though, usually with that alternate practice structure, it's pretty much a straightforward, we're exactly the same firm as we were yesterday, but on paper we're two separate organizations. So I think they maintain the same conflict of interest policies and stuff like that because they do, as you say, what they do is one firm basically has an agreement with the other firm. I'm putting quotes around firms really, they end up operating as the same thing and they just share personnel back and forth.
David Bergstein (07:54):
But the question is, if someone's out there on one side doing client accounting services and advisory services to the firm, can they get picked to do the order? Technically they shouldn't be.
Dan Hood (08:06):
Right? But I think that's true of even firms that don't have an alternate practice structure. I mean, you have to maintain that to be careful about your conflicts regardless of whether you're,
David Bergstein (08:17):
I'm just throwing it out there to show some conflict. And a question about CPA firms, I don't know. There's a publication out there, audit analytics, and I was reading it, what it says, there are 258 firms conducting audit for 6,950 SEC registrants. But when it talks about, it says the top 10 firms that do those audits do 68% of the SEC work, right? So the question, do you need to be a CPA to be an accountant? You need a CPA be to CPA A to do an audit, but that audit field of large SEC registrations and as you work the level down is diminishing. The question of why she to become an accountant is to help your client be more liquid solving and profitable, help 'em solve their problems. And for that, if you've got a good accounting lawyer and you know how to use the numbers and you know how to look at 'em and analyze them with data analytics, well, you don't ever really have to be a CPA to do an audit, but companies, large companies do need audits to make sure they're wrong. Right.
Dan Hood (09:28):
But as you say, there's only, I mean, there's other areas of audit, but I mean, you said there's only about six, 7,000 public companies that require audits, right? Other companies, private companies may get audits as well, and for them, they'd want CPAs. But still, the audit world is relatively small and a lot of firms aren't involved in those kinds of audits. You said was 260 70 firms, and there's 44,000 firms in the country. So the vast majority of firms aren't going anywhere near that kind of audit. So at that point, you start to say, if there's a shortage of CPAs, yes, that's a problem particularly for the audit world, but all of these other firms, with all the sorts of services you listed at LBMC or at Berkowitz Pollock brand, none of that needs to be done by CPAs. So do firms need as many CPAs as they think?
David Bergstein (10:15):
Well, I think that's changing as we move forward. By the way, there's always the small firms and even the small five person firm that specialize in school district audit, it's a whole different auditor or not. So for that, you got to be a CPA, but the people you hire to do some of the work don't have to be the CPAs. You are the signing authority as it goes. And when we look at it now, all major firms and even small firms are saying We want to be your outside controller, outside CFO outside accounting broker because technology is coming into play. So where can you get the CPAs from? I believe India and I just looked it up, has somewhere around 390,000 chartered accountants out there. And I think it's 16,284 because I looked it up CPAs.
Dan Hood (11:10):
Yeah, you can take the exam there now,
David Bergstein (11:12):
Right? We're becoming global. So do the CPAs have to be here? Because as we talk remote office or non remote office, you employees can be anywhere. So I think we do have established shortage. And actually you just published, I thought today in accounting today, but I've read it a couple of other places. The National Pipeline Advisory Group just put something out there and what it said was quite interesting. It's saying that to get future accounting, what are you going to make this exciting to get? Future accountants, they may look at 120 credit hours graduating and they experience wise working in a effort. Well, that changes the picture. They said the one 50 hour based on their surveys was a roadblock to some people. Go back to one 20. It changes the picture. And actually I wrote down, I have here Florida Address Institute, the Florida Institute, CPAs through Bridge to CPA with Nova Southeastern University and three South, Florida, Florida, and other states are doing the same.
(12:24):
So I think you can forget about saying, Hey, you got to get one 50. There's going to be alternatives around it as we move forward. So what's stopping people from becoming CPAs? It's got to be an exciting career. It's not about the number crunching. It's about other things. And actually, I just taught my, I'm teaching a summer class at the college, Valencia College, and you got to go through the basic bookkeeping. That's what it is. But I took the time to show my students actually on Monday night, since I know QuickBooks all online, it could be zero, it could be FreshBooks, it could bezo whatever you want. I showed 'em the work that took them about 40 minutes to do a journal entry and a posting to draw ballast, the financial, I put it in. I said, here, we're doing a transaction on a tablet to enter a transaction. And I did like 10 transactions, which is what we did on the manually. And I showed him how, Hey, it produced the results from media. Look at these dashboards showing cash flow financial that's wowing them, that they don't have to do this work. It's giving 'em a different mindset.
Dan Hood (13:35):
That's an awesome example of something. We actually were talking to a couple of peaks to Sue Coffee and Lexi Kessler from the National Pipeline Advisory Group. When that report came out, we had a call. We were talking to them and one of the things they mentioned was that in colleges, they're discovering that one of the things that turns a lot of people off from accounting is they take their accounting 1 0 1 course and just are like, Nope, don't want to do this. I don't want to do debits to the left and credits to the right or whatever it is. And they just get turned off by it. And they said that colleges, the American Accounting Association, others in accounting academia are starting to look at that and say, Hey, how can we change the curricula or rearrange it so that we're not starting with the sort of dry, dry theory and we'll do something that's more exciting, something that's more interesting that won't turn people off as early, gives them a chance to stay in the profession. So it sounds like you're ahead on that at least, but maybe they should come audit your classes and see what you got going on. That was one of their points was that we're losing them right away. They come in, they look at accounting, they just number crunching and they go, Nope, not going to do it.
David Bergstein (14:43):
And it is a turnaround. I try to express one that accountable is a language and they got to learn the terminology and it's a, but when I show 'em, it's all about helping someone. I tell 'em to the fiscal doctor, but when I show 'em the computerization, I said, this is going to be all done automated. What you want to do is be able to advise the client what to do. I give 'em great example, and I say, you don't want to go out with someone who has no working capital. They won't be able to take you out on a date. You want to have cash. And then they go liquidity insolvency. And I explain to them about dating and they'll, okay, it makes sense.
Dan Hood (15:21):
Right, right. Real quick, we're going to take a break in a second, but real quick, I wanted to talk about, you talked about being fractional CFOs and that sort of thing, and I was thinking about that in terms of the cpa. A question is that if you look at who are CFOs, almost less than half of CFOs are CPAs. Something like 39% of CFOs are CPAs. Far more of them have MBAs. Over 50% have MBAs. And then it turns out that of CFOs, this is from a relatively recent survey, only about 25% of them actually studied accounting in college. They may have taken a class or something like that, but they weren't accounting grads, which sort of suggests that that work, again, doesn't have to be a CPA to do it. So if you're going to be a fractional CFO, you can be, as I said, have a business degree or an MBA or something like that and still be able to do that work. So it doesn't necessarily require an account.
David Bergstein (16:17):
And those courses that they take are less dry than the basic accounting costs and less dry than a cost accounting class. And that's really what it is. If you've been teaching accounting a long time, and I try to freshen up all time, it's really all about the numbers. But you got to make it more exciting because the numbers are going to all be automated as time goes on.
Dan Hood (16:43):
We're going to take a break and then when we come back, I want to talk about what this all means for the firm of the future, what the firm of the future is going to look like given the staffing constraints, given, as I said, the list of services, you read off that a lot more and more firms are offering. Some are all of them. It's going to be a very different profession going forward. But let's take a quick break. Alright, and we're back with David Bergstein. We're talking about do you need to be an accountant to be an accountant? Do you need to be a CPA to work in an accounting firm? Dukes accounting firms need CPAs. I think obviously we would say the profession needs that expertise and that credential brings a lot of value to the people who hold it. But that there is lots of room in firms for non-accountants, for non CPAs, and even for non-accountants to do lots of work. And I want to push further on the, that said, you read a long list of the services that a couple of top 100 firms and the word accounting didn't show up. In a lot of those services, they're offering a lot of non accounting services. So I guess the question is, what does the firm of the future look like? Is there a point where it stops looking like an accounting firm?
David Bergstein (17:51):
Well, the more modern account firms don't look like an accounting firm. When you walk into their office, it's actually more modern. I remember when I first went into accounting firms, they all had the old furniture you wanted to look like you've fiscally responsible. Now they're modern, but the firm of the future is going to be a digital firm. It's going to be a firm that embraces technology and just generative AI has changed the name of the game. I've been working with chat GPT since it came out, and now I just subscribed to copilot since it does include chat GPT in it. And it was amazing. I put some financial statement numbers in Excel and Copilots in Excel now. So instead of asking to create the formula outside of, it's creating it inside of it and making it easier. So as I tell my accounting students the other day, you don't have to learn. You do have to understand the flow, but now what you going to do is ask AI what the formula is and how it works so you don't have to remember it. And the more you do it, it'll get into play. And then I did a PowerPoint the other day. I lovely tried it with copilot in Microsoft PowerPoint. I said, do me a PowerPoint on what is accounting and do the slides. It did it all.
(19:16):
I didn't even have to pick the design. But then again, I changed some afterwards. But that's just the nature. So future of accounting is, yes, there'll be audits done by some firms, but I really feel the future of accounting is people come to you because they need help. Again, compliance work is never going to go away. It may be easier to do in the future and more efficient, but the future of accounting is all about financial planning and analysis, helping your clients make decisions strategically. And that's going to make you the accountant, the go-to accounting firm.
Dan Hood (19:52):
Gotcha. So do you need to keep doing the compliance work? I mean, someone has to do it, right, because compliance is always going to be here. But do you need to do the compliance work to offer those services?
David Bergstein (20:03):
I think you develop a relationship with your client over a period of time, but that doesn't mean you have to do all the compliance work. I think in the next three years you can teach your client how to get the data and put it into your tax return almost automatically. You still have to advise them on the tax planning or the financial planning and decisions. It's all about relationship and staying in touch with your clients. They can do more and more of the work. The financial statements are pretty much done automatically. If you set 'em up and now there's new software out there that'll do the provisioning for you, that'll account for leases. How to recognize revenue. So use the tools. But I got to admit, I'm a solo practitioner. This is the last year I'm doing tax returns is what I told myself and I trained my clients. But you still have the personal thing that they never get ready till the last minute. So I don't think that the hours go away when it comes to taxis. Until you trained everyone to almost self prepare,
Dan Hood (21:10):
Right? Well, I mean the IRS is starting doing some people's tax returns form, right? Or offering them free filing. Is there a point where the IRS just does all that? Or some form of generative ai? You say, here's my, here's all my paychecks and here's my bank account and my investment holdings. What's my tax?
David Bergstein (21:32):
Well, you can probably do that. Now, what I do with the tax return, I pull in the broker statements automatically. I pull in the bank statements automatically. I pulling the wages by pressing a button. But again, it depends on the level of the client, the sophistication, the investments. But that's why everyone's talking about tax advisory services as well as accounting advisory services. They still have a need for how can they accumulate wealth? How can they minimize their tax burden? What should they do depending on the situation. But compliance will become easier as time goes on. The deadlines are always there, but I think the future accountants don't want to work 60 hours a week during tax season. But I'll tell you, I had one of my friends call me up, got a small practice all Long Island. He told me he did 150 returns in his practice. He's not alone the last two weeks of tax season. I said, and he said, how can I overcome this? He said, he's called all the, he thought he would lose clients, but they came back.
(22:47):
I had personal situation, I couldn't send it. It is what they tell him. So I told him the next year's engagement letters, put an engagement letter out in November that if the tax return is not moved by such and such a time, the price will be X instead of Y, so that it triple. So maybe they go away at a certain point in time, but keep the clients you want and develop them. But that's the Y. When people say, I can't face the 60 hour week, it's not necessarily us as accountants with dealing with our clients. And the clients have personal situations and it multiplies
Dan Hood (23:20):
Well. But this is interesting. This is one of the things, like I said, when we talk about the National Pipeline Advisory Group or anybody who's looking at the staff shortages, one of the things that drives people away or keeps people away at the beginning is those crazy tax seasons. And accountants love to talk about how crazy tax season is, and you can kind of understand that from their perspective. But it's harming the profession in the sense of it's driving people away or keeping people away. So anything they can do to make that situation better, to make taxi season a little less hectic is going to help draw people into the profession as will. Expanding the, I mean building that relationship, you said becoming their trusted advisor, delivering value, real value to people or value that people recognize in the form of helping them get their financial future in shape. Those are things that are going to be attractive to drawing people into the profession. But the depression doesn't seem to talk about them as much as they do at the crazy hours of taxis.
David Bergstein (24:18):
Right? They should talk about the good stuff. In reality, if you are proactive with your client base, and that's really what it comes down to. If they're business clients and you do a client accounting work, let's call it client accounting and advisory services, client advisory service 2 0 3 oh, and you've automated and you meet with them more regularly, yes, you're charging them more because you delivering more value while the delay in getting the information for a business client will probably cease to exist. If you're in there proactive and not just once a year, they're coming in with their tax stuff, that changes the delivery model and makes things a little bit better. But I think for younger catalysts, I think part of the game changer is going to be when quantum computing comes into play a little while because there'll be a little bit more you can do to automate things and make it faster.
(25:08):
And that lays into generative ai. Again, we don't know what's going to happen over the next five years. We don't know what's going to be invented. We think we don't. But this is a profession that is taking advantage of technology at every level, and that's reducing the time it takes you to do things. So spend the time enjoying and realizing you're just like a doctor. You don't want to be a doctor and help people stay. Well, become a fiscal doctor and become a CPA or become an accountant and advise them on how they can be fiscally healthy. And that's what it's about. And that's why people go with the finance also to figure out how to make deals.
Dan Hood (25:49):
Well, I mean that's certainly for a lot of people, that's a more attractive profession, but it's also a different profession than the accountants who came in when you were becoming a CPA. It was a very different profession, looked very different, attracted a different kind of person. Do you think, let's put it this way, they weren't necessarily people who were out there wanting to be deeply personal with their clients. It was not about building that personal relationship. It was certainly there was a relationship, but it was a business relationship. You provided their compliance requirements, you had to work. No one can see this, I know,
David Bergstein (26:24):
But
Dan Hood (26:24):
David has put on a green eye shade, the classic green eye shade of the profession. And that's a very different kind of person is attracted to that from the kind of person who is attracted to being a forward thinking, deeply, personally involved with their client kind of person. It's the difference between a tax preparer and a consultant. Those are very different professions. So does that change the profession significantly?
David Bergstein (26:48):
And that's what it's all about, changing your profession to be the consultant advisor, to be outgoing, not to be behind the scenes and just say, here's the numbers at the certain point in time. That's what makes it exciting. Plus the fact you learn about different businesses, it helps you or you learn about different things that are going on. I've seen so many different things out there that have helped me make better financial decisions just for myself. So being an accountant is something that everybody really is. They don't know about it when they think about making decisions, something as simple as, should I get this credit card from this company or should I get this credit card from another company? They each charge different instrument. It may be the same vis visa, but one's charging X and one's charging Y. It just makes you think about these things that you didn't think about.
Dan Hood (27:39):
Well, I think most people don't think about them. That's how, if you should be an accountant, if you look at that and go, let me figure this out for real. Whereas most people flip a coin or Hey, I like the colors of that card. So I mean, those are the kinds of things that, as you say, an accountant would think about and that's why you need an accountant.
David Bergstein (27:59):
Well, you'd be analytical. That's what it's about.
Dan Hood (28:02):
Excellent. Alright, well I mean it's going to be a very interesting future. As you say. We don't know what's going to happen over the next five years, but I think we can say it's definitely going to be interesting.
David Bergstein (28:11):
I think it's going to be interesting. I think the profession is changing because of the utilization of technology and people are going to be different in the field. You're going to need probably, I'm going to say less auditors and more people to interact with the clients and help them.
Dan Hood (28:28):
Alright, you heard it here. Fewer auditors, more interaction with clients. I think that definitely seems like the way it's headed though. If you add in things like ESG reporting and all sorts of things, the options, the opportunities for more a test services broadly written to test services is going to be skyrocketing as well.
David Bergstein (28:48):
I going to say one thing about that though, because that's where I think there's some changes coming. Of course, when you talk about ESG services, you ever hear of B Corporations?
Dan Hood (29:00):
Yep.
David Bergstein (29:01):
Okay. So B corporations are really putting a B lab as a not-for-profit organizations that certifies companies that have a social and environmental impact. So there are non CPA firms, they're doing a little different kind of audit, but they're still doing some certifications. So you can see other people do different types of certifications.
Dan Hood (29:25):
Well, and there are a number of, actually there's a number of accounting firms that have become B Corps, particularly in California. But it's interesting because what you also see with that is that you see accounting firms getting service areas in helping companies become B Corp, helping them get through that credentialing process. Blab does it, but accounting firms can help you prepare for it. And we can go, that's
David Bergstein (29:49):
Another service if accounting firm can provide besides the
Dan Hood (29:51):
Numbers. Right? But this is a whole other topic that we'll have to come back and talk about. We were talking earlier, we've got about 16 different topics for you to come back on. But for now, I think we're going to bring this one to hold to an end and say thank you for joining us.
David Bergstein (30:10):
Thank you for having me. It's always a pleasure. As I wean out of accounting,
Dan Hood (30:15):
You can't wane out yet. There's a lot more coming. So except to stick around and see what happens. Alright, well thank you all for listening. This episode of All the Air was produced by Accounting Today with audio production by Win Weis. Shamar ready to review us on your favorite podcast platform and see the rest of our content on accounting today.com. Thanks again to our guest and thank you for listening.