Accounting firm leaders can be broken down into two categories:
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- Those who see the retirement light at the end of the tunnel, just years or even months away from stepping away and making their [hopefully] graceful exit; and
- Those who are tasked with navigating their firm through this turbulent period of artificial intelligence, private equity and constant yet unpredictable regulatory shifts.
Younger generations always seem to envy what the prior generations have going for them. There’s no doubt that if you asked a millennial or young Gen Xer moving into a leadership position about the massive generational cohort of firm leaders and owners aggressively moving into their succession plan, they’d say how lucky those folks are to be getting out now.
It’s not because these new leaders are lazy or think the building is on fire; it’s because we are entering the most challenging period that the accounting profession will have to encounter since the invention of computer-based bookkeeping. We [the peers in my generation of young leaders] just so happened to get lucky enough to be dealt this hand at the same time we reached the point in our careers when we were poised to take over.
All of the factors that will impact the future, which are incessantly reiterated at every business forum and industry conference, are coming to a head and only the firms that navigate through the storm that will result as the culmination of all these will find themselves remarkably successful.
The rest will willow away; some slower than others, but all inevitably. As AI technology, PE and macro-economic factors push a majority of the work that most accounting firms offer to become commoditized, experience will be the great differentiator. That includes the experience of the people working at the firms, experience of the clients working with the firms, and experience of the users of the firms’ deliverables.
Experience is uniquely human, and is one of the only items of high value that rapidly depreciates with commoditization; because human care and emotion cannot be commoditized.
The commoditization of accounting work
I’ll address the elephant in the article, because after providing a seemingly endless array of “hot takes,” I know it’s important to give the background context on where these opinions have their perspective originate.
The reality is that technology is progressing at such a fast pace, that by the time we say, “It’s still got a long way to go before it can do this job,” it’s already been promoted and fired you.
It’s harsh, but true. Don’t think I haven’t laid awake thinking about this — and no matter how comforting industry leaders try to make it for us, a few conversations with peers quickly makes us realize this is happening at a macro level and the sentiment and uncertainty of what working will look like in the future and what jobs will still exhaust is very real.
Every basic white collar business work task is becoming commoditized, from marketing to IT to legal to accounting to engineering. Firms that specialize in fractional work of these departments are seizing the day, offering a few highly qualified individuals who with the support of technology can handle what used to take massive departments. Just like the food pyramid, the hierarchy triangle has been flipped upside down.
The impending and unavoidable talent gap (how large that gap gets and how long it lasts depends on how quickly we adapt to new ways of training young professionals, but that’s another conversation) has the highly coveted and valued wisdom concentrated in those with expertise from experience. Smaller firms of just the dwindling population of top-tier talent hold all the power in getting through the first success filter of the future.
Wisdom allows those holding it to provide impact to show value and earn revenue. Firms can systematize and automate their operations to reduce bloat, but as work becomes automated, headcount, resources and hours to perform services is materially reduced, and clients will expect the same respective price reduction.
This client expectation is already in motion, and there does not seem to be a way to reverse course.
That is where the true commoditization of basic accounting tasks occurs, and price becomes a filter of success. Those who have systems that enable competitive pricing without operations suffering will survive.
Don’t get me wrong — making it past the wisdom and pricing filters is a feat in and of itself, but as affordable and sustainable accounting services become the new standard (the “new normal” if you will) then the key to thriving will become brand affinity, loyalty and admiration, which starts with client experience.
Experienced-based value
The best experience you can have with travel is one where your responsibility ends after you decide where you want to go.
Imagine a concierge that handles everything else for you. They know your sleep habits and how you like your calendar built. They know what you’re interested in, so they book and plan excursions and activities accordingly. They know what food you like and properly identify and reserve your meals. They have their own systems and procedures for booking your ride to the airport, your flights, your pick-up upon arrival, and every other logistical detail you could encounter.
Under this model, you didn’t need to create accounts for every transportation element, buy from a variety of logistical businesses, call and put your card down at different venues, or even need to strategize and optimize your travel plan. It’s all done for you — stress free.
All you need to do is state your goal.
That’s the type of experience that companies will expect to have with consultants and service providers as AI optimizes the efficiency and maximizes the speed of formerly tedious and strenuous tasks. Building an app can take days instead of months. Content can be produced with a tenth of the people. Financial statements can be generated in real time.
What is furnished as a deliverable will become less important than how the deliverable is furnished.
As wonderful as technology is in enabling remote work, and as terrific as the flexibility to work from home as needed is, human connection is an unavoidable necessity. The experience of real-life human interaction cannot be replaced (hence why Mark Zuckerberg’s “Metaverse” was a failed initiative).
This principle applies to how clients receive a special experience from the professional service firms they interact with.
The same concept also gives a firm value in the eyes of its people. One of the biggest frustrations I had when I worked in public accounting was how limiting the technology was.
Firms felt that pizza, bagels, popcorn, sleep pods and game rooms could cure all culture problems; but the truth is, making the office better for the long hours people were stuck working there wasn’t the solution — finding a way to save employees from having to spend long hours there in the first place was.
Many times, the reason for being stuck at the office simply was because of how tedious and time-consuming the work is. With AI technology support, these tasks get completed in a faster manner, which means people can find work-life balance quicker, and the stress of getting things done timely is alleviated. The experience for people can be made better, and better people make for better outcomes.
The full-service firm of the future
Sequoia Capital has already come out and
If firms can have the technology that allows them to be maximally effective, perform outstanding results on the solutions they promise, and do it all in software and on platforms they can essentially own and operate, then they’ll no longer be stuck in a mission to identify efficiencies or fight a battle of lowest cost. Every firm is going to be able to offer these things, affordably and consistently. Instead, they can focus on what makes them unique: high-quality service.
Businesses and clients don’t want to have to go to a variety of sources to get their needs resolved — they want a one-stop shop.
Why?
You already know the answer: the experience.
As I mentioned earlier, there are few experiences better than one where the entire stress of a process is removed from your plate. By “bearing” this burden, professional services firms can provide an intangible value to their clients and stakeholders making a tremendous incentive for all of them to work with that firm.
In a recent conversation with CPAClub founder Chris Vanover, he brought up the experience that most clients have in needing to deal with professional service or advisory firms, and software or technology products completely separately. This is why software companies and consulting firms often find partnerships and alliances formed quickly between them. In many cases, firms become authorized implementation arms of a software company’s products for their clients.
It makes complete sense that those types of mutually beneficial relationships form — the software company has the tech and the consulting firm has the client’s trust. But what if these two were wrapped together?
Previously, it wasn’t possible, because only the software companies knew how to build the products; but AI has made it possible for almost any company (or person for that matter) to become a software product business.
The full-service firms don’t recommend a product, have the client buy the platform, and then hire someone to operate it. They do it all: nuts-to-bolts, start-to-finish. It is outcome-driven and experience-based value, which is the only way to succeed when information and knowledge is a commodity accessible to everyone.
To close out with a real basic example, think of a new business that needs to build out its accounting function. At some point, someone recommends QuickBooks, so they go and buy it. Then they have to go hire somebody to be their bookkeeper. If you don’t like that example, you can apply the same principle to any business function product that is outside the scope of what the owner-operator of that company knows how to do (or should be doing anyway).
For now, white labeling a product may work, but with the ability to build internal software products thanks to technology, I suspect there’ll be less partnering and more merging. It’s a survival of the fittest game, and the smart will be on top of this all-inclusive trend before they’re left in the past.
Those left who make it past that initial success barrier will very easily look just like everyone else. If every proprietor or firm is an all-inclusive one-stop shop, optimizing their tech stack to work as efficiently as possible, and effectively delivering results at a competitive cost (or even “commodity” rate), it’s a sea of endlessly reliable and affordable choices for buyers, devaluing the service.
Instead, the firms that truly rise above the crop and don’t just survive the future state, but thrive through it, will be the ones that offer an experience that the others don’t. They don’t just provide a price-friendly outcome. They invest in the relationship. They build rapport. And they focus on the authentic human elements that make someone buy anything in the first place: how it makes them feel.
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