Competitive Edge: The Software Vendors' View; Asked to Peer into Their Crystal Balls, Executives Foresee Accounting Firms Experiencing Growth with Consulting Services, Value Pricing, and Data
[ILLUSTRATION OMITTED] Change is coming to public accounting, and firms that fail to adapt will be hard-pressed to keep up with the competition. That's the view expressed by executives from five prolific producers of accounting software. The executives, responding by email to questions from the JofA, articulated remarkably similar visions for how technological, demographic, and market forces will reshape the landscape for accounting firms. Across the board, in separately submitted answers, executives from Wolters Kluwer, Intuit, Sage, Thomson Reuters, and Xero agreed on the following: * Competitors from outside the CPA profession--and outside the United States--will emerge to test CPA firms in the coming years. * Younger entrepreneurs and other CPA firm clients, especially those from the Millennial generation, will expect high-touch, high-tech relationships with their accountants. Firms that offer only compliance services will be left at a competitive disadvantage. * Value pricing will emerge as a key component of accounting firm business models, because hourly billing discourages the frequent communication and collaboration that will characterize the new firm-client dynamic. The software executives'vision of the future aligns with the findings of a study conducted for AICPA subsidiary CPA.com by futurist James Canton and the Institute for Global Futures. That study found that 80% of CPAs believe their role will change significantly by 2025, with consulting, risk management, and advisory services playing a larger role in their businesses. Why should CPA firms care what software vendors think? The JofA approached the software executives because a significant part of their job is to anticipate the direction that the market and their customers' businesses will take. Vendors that fail to meet accounting firm needs in product development will lose business in that space. The JofA was curious to see how the vendors' visions of the future compare to one another's and to those of others in the profession and beyond. COMPETITION AND THREATS The software executives see accounting firms being tested by a number of outside competitors in the next few years. Automation and do-it-yourself technologies could convince some business owners that they can substitute software for an accountant and be self--sufficient, said Jennifer Warawa, vice president and general manager of Sage Accountant Solutions for Sage North America. They may come to an incorrect conclusion that they don't need an accountant, she said. Jim McGinnis, vice president and leader of Intuit's Accountant and Advisor Group, foresees clients' engaging non-CPA consultants and advisers to deploy strategic planning, succession planning, mergers and acquisitions, and business/wealth advisory and family office roles. In addition, more financial and wealth management advisers are testing the waters with tax compliance, either by establishing referral relationships with practitioners or cultivating a new service offering for their clients, said Scott Fleszar, vice president, product management and emerging businesses, Thomson Reuters Tax 8c Accounting. For firms looking to combat this trend, one option is to partner with other businesses in referral networks to meet other client needs, such as legal advice. Jamie Sutherland, general manager of U.S. products and solutions for Xero, sees accounting firms from outside the United States entering the U.S. market and challenging for clients. Small businesses in these smaller countries are used to looking for new markets across borders. Accountants in these countries are no exception. In addition, Sutherland already is seeing savvy, entrepreneurial bookkeepers--who don't have the legal restrictions that CPAs have in providing financial advice--attempting to become strategic advisers for clients. Clients will be looking for help interpreting data and developing strategies for success--a view echoed in the most recent report by The Sleeter Group on what small and midsize businesses want from their CPAs, which found that the top reason clients leave their accounting firm is that it did not provide proactive advice. …