Just for fun I searched the Internet for trends in “accounting financial services.” I wanted to see how my target audience was viewing the shift in the industry from transactional to advisory services. My search revealed some interesting patterns. The one that stood out the most was the absence of small and mid-sized firms in the search results. I sifted through 5 pages of listings before finding a firm name that I didn’t recognize.
For some time now the more dominant accounting firms, like Ernst & Young, PricewaterhouseCoopers, and KPMG have provided mid to large corporations with powerful advisory services. The intent was to not only sell their auditing services, but also project work through advisory services to increase their revenue per customer.
In addition to increasing revenue, it helps deepen relationships with their customers. The most critical time in any business relationship is when you can help solve a problem. Helping a small business owner work through a business problem will go miles towards developing a lifelong relationship that is prosperous for you both. The big firms understand this, but it’s just now being considered by the smaller accounting firms.
In late 2013, Oxford University published a study that determined the likelihood that the top 702 most common jobs would be performed by a computer in the future. Surprisingly, almost 47% of all jobs were at risk of computerization. There are varying reasons, but the most common was the presence of tasks that could be automated. Here’s a link to the study: The Future of Employment.
This study would be the catalyst in the accounting industry to remain relevant in an automated world. Everything is against them and automation seems inevitable. The study determined that there is a 98% chance that the tasks a bookkeeper or accountant perform will be automated. The financial technology industry is exploding and routine bookkeeping tasks are quickly disappearing. In fact, I took a picture of a receipt yesterday and the software I use entered the transaction automatically into our accounting system. No one types in the information.
If you add the fact that approximately 70% of all services performed by a typical accounting firm are tax or audit related, you can imagine the fatal impact that automation could bring to these firms. Additionally, the government wants to make revenue collection easier and simpler, meaning that obsolescence could accelerate if there is a change in the tax code. The greater good of society could potentially eliminate a billion dollar tax industry with the stroke of a pen. I’m referring to a change to the flat or fair tax programs.
In any event the stage is set for the role of the accountant to change. In an evolving technological environment the way to stay relevant is to perform tasks that are resistant to automation. Such as advisory services. It’s more important to interpret data and help a small business owner develop a plan to help his business than it is to simply regurgitate data computed from a software program. Those accountants that leverage tools like Finagraph to help their clients understand the dynamics of their financial position will be better suited for a sustainable business in an automated field.
Lastly, business owners need a trusted advisor. That person who helps them avoid potential financial disasters or assists them in overtaking a windfall opportunity. My advice to accountants is to shift the service mix of their firm and add more advisory service hours with your clients. The relationship you build while solving a problem together will last a lifetime.