The traditional accounting firm that relies almost entirely on audit and tax work is rapidly becoming an endangered species.
Innovations such as IBM's Watson and blockchain technology make it relatively easy to imagine a day when machines entirely prepare tax returns and audits are no longer a valuable service. It's also not difficult to envision the government acquiring the technology necessary to prepare returns and simply send taxpayers a check or a bill.
Technology will likely revolutionize accounting in a way that saves taxpayers significant time and effort. However, this is a grim future for firms that continue to operate with a traditional business model and rely on the human service element of tax preparation and audit work for the vast majority of their revenues.
The need for a visionary approach
At Sikich, we recognized these trends early and made significant investments to diversify our service offerings and grow our firm. For us, that process started in the 1990s. Accounting firms today have far less time to adapt to this rapidly approaching future. However, a firm must expand service offerings beyond traditional accounting if it hopes to survive the technology-driven upheaval that is already starting to impact the industry.
Of course, overhauling a business model requires significant financial commitments and risk. So, another option is to merge with a firm that has already gone down this road. We have made several strategic acquisitions in recent years. These deals have helped to bolster our services and expand our geographic reach across the country. But they have also benefitted the acquired firms by giving them access to an expanded bench of experts and a wider array of services.
Whether it chooses to diversify on its own or merge upstream, an accounting firm today can't rest on the laurels of the past. This applies both to its services and its workforce. The industry faces a succession crisis that can only be solved by leaders who proactively work to attract younger employees and prepare a succession plan. This will equip firms to chart a more secure course for the future and make themselves a more appealing target for a possible acquisition down the road.
Aggressively embrace change
As technology upends the industry, change will be difficult for many firms. The good news is that adopting a long-term view and working to prepare for that future today will help a firm not only survive, but thrive.
With added service offerings, a firm's clients can benefit by having a one-stop shop for a wide mix of solutions. We've seen this firsthand. With services ranging from accounting to technology to supply chain to human resources consulting, we've helped companies across industries overcome a variety of business challenges. By offering a diverse set of services, a firm not only makes itself more sustainable but also becomes a more attractive partner to clients and prospects.
Further, diversification will help employees expand their skill sets - which is more important than ever as traditional accounting work diminishes. In a diversified professional services firm, CPAs can gain exposure to different service lines and industries, which enables them to not only grow their talents but also better serve clients.
There's no question the accounting industry faces a challenging future. The companies that recognize this and work to prepare today will position themselves to stay ahead of their competition. The ones that hold tight to the traditional model will fall behind rapidly.
Though the evolution of the industry can appear overwhelming, accounting firms don't need to face a dire future. By taking an aggressive, future-oriented approach, they can position themselves to effectively serve clients for years to come.
• Jim Sikich is the CEO and managing partner of Sikich LLP. He has more than 40 years of experience providing clients with assurance and management consulting services.