Accounting industry has evolved to embrace technology and serve as advisers to clients
Terry McMahon began his accounting career at a time when it was standard to keep paper ledgers, using pencils and manual calculators to balance the budget.
Today, his business operations look distinctly different. His clients have computer programs that give them those figures quickly and accurately — no paper, no pencils, and generally, no errors. So now, companies look to McMahon & Associates for something no software can offer: an opinion.
“Some of the more traditional preparation work, like bookkeeping and payroll, has turned into more analytical work,” McMahon said. “We put those numbers in a format that will help our clients make business decisions.”
Indeed, staying competitive in the accounting industry means today’s accounting firms do more than basic bookkeeping and payroll. They are taking an increasingly analytical approach for clients, stepping in as trusted advisers and strategic consultants.
What began as a fear that automation would overtake the industry has transformed into a human/computer partnership of sorts.
Accounting professionals realized that computers weren’t replacing them. Rather, they were handling some of the fact-based calculations so that accountants were available to interpret those numbers.
“Accountants are doing everything,” said Courtney Kincaid, president and CEO of the 7,000-member Indiana CPA Society, an advocacy group for accountants throughout the state. “They are understanding trends and risks, supply chain management and looking at the business outside of basic compliance issues.”
As it turned out, technology wasn’t something for the accounting industry to fear but to embrace. Automation gave the industry a boost by improving speed and accuracy, leaving human brainpower the bandwidth to interpret the figures. It has required an evolution of sorts among accountants, changing the skill set and the future business potential.
“We are encouraging accountants to expand their services into advisory roles,” Kincaid said. “That developed out of things that computers couldn’t do.”
She said CPAs are primed and ready to provide these new services.
A changing service menu
Traditional accounting services still make up about 75% of business at Munster-based McMahon & Associates. Those services have accountants providing tax documentation, financial reporting and auditing services. It might involve payroll or basic bookkeeping.
But the remaining quarter of McMahon’s business is filled with more analytical work. Accountants might take those payroll figures and establish whether an employer’s wage costs are higher than standards. They might prepare tax documents and identify missing tax deductions that would benefit the business.
“These services are an evolution of technology,” McMahon said.
It also brings a higher level of service to clients. Automation lowers the error rate and allows businesses to make data-driven decisions.
“That’s a dramatic change from the way things used to be,” said Gary Fox, managing partner of tax services at Crowe LLP in South Bend.
Forty years after he started his career as an accountant, Fox finds himself in a more niche-focused, evolving industry.
“Back then, everybody did everything,” he recalled. “As we grew, we became more specialized.”
His job has gone from compliance to consulting, Fox said.
That change also necessitates a shift in employee skills. Today’s accountant is analytical and business-savvy. He or she needs to be able to communicate effectively, understand their client’s business needs and balance industry demands with government regulations.
McMahon said the trend is definitely changing the composition of the staff.
Kincaid, from the CPA Society, said today’s CPA firms require staff with varied skill sets, noting soft skills are increasingly important for accountants, including critical thinking, communication and networking.
“It opens up time for accountants to interpret results, rather than just deliver results,” she said. “The field isn’t math-based as much as it is being able to interpret data.”
Above all, successful accountants must remain personable.
Fox said his profession is a relational business.
“Our people need to understand how to work together,” he said. “A lot of the world has changed, but accounting is still about relationships.”
A shift in client dynamics
Moving forward, these changes make accounting firms more of a business partner for their clients rather than simply a vendor. Accountants are in demand statewide, but they also can serve as an industry consultant, financial leader or planning adviser.
Take, for instance, Merrillville’s Gregory Ward. A principal at Swartz Retson, he has more comprehensive services for his clients than might have been expected in the past.
“I have always considered tax preparation, audit/attest and accounting as traditional services,” he said. “Our firm has added additional services such as business valuation, estate and trust consulting, succession planning and human resources consulting.”
The evolution to those services was a clear one, Ward said.
“Clients already have a trusting relationship with their CPAs,” he said. “If they have a need for services that are closely related to their CPA’s skill sets, they often prefer to use someone that they already know.”
While it’s far from essential for an accounting firm to offer nontraditional services, it’s much more important that the firm maintains a high level of quality.
“I don’t know if there’s any services that an accounting firm has to offer, but I think it’s more important for the firm to be good at the services they do offer to remain competitive,” Ward said. “If you’re going to offer a nontraditional service, make sure you are doing enough of that service to get good at it.”
The shift in services that accountants provide make it an increasingly attractive option for prospective professionals, said Indiana CPA Society’s Kincaid.
“There’s a lot of opportunity for the next generation,” she said. “They are really following the idea of working with computers and expanding the professional role to one of a trusted adviser.”
Newcomers might also be attracted by the work-from-home options that arrived with the pandemic — and don’t appear to be leaving anytime soon. The health crisis accelerated a trend already happening among accounting firms, which were beginning to draw from a global workforce.
“We can have conversations remotely now,” said Crowe’s Fox. “People are making significant investments in technology.”
Fox said he tells college graduates that what they’ll work on in three to five years doesn’t exist yet.
For now, however, it’s become an easy and obvious choice to hire virtual CFOs or draw on top expertise from across the country.
As the business world became smaller, and international business orders grew with mere keystrokes, accountants find themselves with new shoes to fill.
“Clients are really interested now in wealth management and consulting around the regulatory environment,” Fox said. “Clients want to know how to make their business better more than they ever have.”
Moving forward, no one knows how technology will affect the future of the industry, but one thing is certain.
“It’s going to change,” Fox said. “It will be more data-driven — where the data sits, who owns the data and how will it be utilized.”
He said the world of accounting will need to invest to stay current.
“We will need to have a mindset of change,” Fox said.
Click here to read more from the December-January 2023 issue of Northwest Indiana Business Magazine.