Last updated on August 16th, 2022
The accounting profession has gone through some significant changes over the past several years, and many challenges are still on the horizon. Advances in technology are demanding that accountants and CPAs expand their core compliance and transactional service offerings to provide more advisory and consulting services.
At the same time, professionals are adjusting to the major changes tax law brought about by the Tax Cuts and Jobs Act of 2017 and the SECURE Act. They’re dealing with the global impact of COVID-19 and helping clients navigate the CARES Act, Paycheck Protection Program loans, and forgiveness applications. All this on top of the usual demands of tax and audit season.
With so many current risks and upheavals to navigate, it can be difficult to look toward the future. However, accountants and CPAs must continue preparing for what lies ahead in order to minimize risks and gain a competitive advantage.
Top 5 Challenges Accountants and CPAs Face
Here are the five biggest challenges accountants and CPAs face today, along with actions you can take to turn crisis into opportunity.
1. Commoditization of Core Services
With the rise of DIY tax and accounting software and automation, many accounting firm clients now see tax and bookkeeping services as a commodity. Clients increasingly demand lower prices because they don’t understand the value their accountants provide. They see tax returns and audits as a cost of doing business. As such, they will go with the least expensive option rather than paying a premium to build a long-term relationship with their advisors.
To avoid a race to the bottom, accountants must take advantage of technology to automate or outsource low-value, repetitive work. This frees up time, creating capacity for accounting professionals to position themselves as true trusted advisors for their clients.
The potential time savings is significant. Gartner estimates that by automating repeatable tasks, a 40-person accounting team could save up to 25,000 hours per year.
The question is what to do with that increased capacity? Some advisory and consulting services that can create new opportunities and add value for clients include:
- Helping clients raise equity, expand into new markets, or go public
- Estate planning and gifting strategies
- Industry-specific consulting
- Strategic planning
- Succession planning
- Mergers and acquisitions
- Technology consulting
There’s been a shift in what clients want from their accountants and CPAs. It’s no longer enough to simply provide accurate bookkeeping, tax returns, and financial statements. Clients want to work with professionals who can bring new ideas to the table and help them reach their goals.
Accounting firms are an especially attractive target for hackers. They tend to have a wealth of sensitive information, including Social Security Numbers, bank account numbers, credit card information, and more. Small firms, in particular, are targeted more often because they don’t have the sophisticated cybersecurity defenses that larger firms possess.
It’s the responsibility of accountants and CPAs to protect client data. In fact, the IRS has repeatedly cautioned tax professionals in the U.S. to take steps to secure their systems. Their recommendations, as outlined in IRS Publication 5293, include:
- Ensure all employees receive ongoing training in how to recognize phishing emails and why they should never open a link or attachment from suspicious emails.
- Review the firm’s internal controls around data security, including installing anti-malware and anti-virus software on all devices and ensure the software is kept up to date.
- Enforce strict password policies, requiring staff members to use strong and unique passwords that are changed periodically.
- Encrypt all sensitive files and emails.
- Ensure your systems are backed up regularly
- Be sure to wipe clean or destroy old computers, laptops, hard drives, and printers that might contain sensitive client data.
The following resources can provide more information and recommendations on how to protect your firm’s data:
- The AICPA’sCybersecurity Resource Center1
- IRS Publication 4557, Safeguarding Taxpayer Data2
- The National Institute of Standards and Technology’s Small Business Information Security3
- Ace Cloud Hosting’s guide on 9 Security Threats You Should Be Aware Of
Accountants and CPAs have a lot of opportunities to leverage increased information and data analytics with their clients. In fact, the Journal of Accountancy predicts that accountants who ignore data analytics “may be forced out of business in the long run.”
Data analytics is essentially the process of gathering and analyzing data, then using it to make better decisions. That’s something that accountants and CPAs have always tried to help their clients do. However, today there is more data available from more sources than ever before.
The problem is many accountants and CPAs aren’t trained in data analytics. Their training and experience have focused on technical expertise in accounting rather than predictive or prescriptive analytics.
Fortunately, there are a growing number of resources designed to help bridge that skills gap, including:
- The AICPA’s DataAnalytics Certificate Program4
- The CGMA’s Analytics and Big Data for Accountants online course
- Deloitte’s Data Analytics Curriculum5
- PwC’s Data Analysis and Presentation Skills6course
Leverage technology that brings analytics into your current tax and audit work to bring additional insight and value to clients. Your technology vendors can also be useful resources for training in this area.
4. Diversity and Inclusion
Many large accounting firms and public companies have announced diversity and inclusion initiatives. However, there is still a lot of room for improvement in the profession.
According to the AICPA’s 2019 Trends Report15 although the number of students graduating with bachelor’s and master’s degrees in the last few years has remained relatively steady, Black and African American candidates make up just 4% of new grad hires in the profession. From there, the percentage of non-white CPAs who reach the partner levels goes down. In fact, white professionals make up 91% of CPA firm partners.
Fostering a more diverse and inclusive profession isn’t just nice to have. It can help organizations become more productive and profitable. In fact, McKinsey’s Delivering Through Diversity7 report reinforced the link between diversity and financial performance. It found that companies with the greatest gender, ethnic, and cultural diversity on their executive team are 33 percent more likely to outperform in profitability.
The good news is that firms can make progress on diversity and inclusion by using the following best practices, as recommended by Accounting Today:
- Track key performance indicators surrounding diversity– All progress begins with the truth. By measuring where the firm stands today, accounting firms can start making improvements and evaluating the effectiveness of diversity and inclusion initiatives.
- Require unconscious bias training– Unconscious bias causes hiring managers and other decision-makers to form an opinion about candidates based on first impressions and gut feelings. This leads to unfair judgments, overlooked talent, and discrimination. Today, unconscious bias training is a standard part of training for many human resources professionals. If your accounting firm doesn’t currently offer such training, make it a priority.
- Foster a diverse talent pipeline– If your accounting firm tends to see the same type of candidates every hiring season, it’s time to build a more diverse talent pipeline. Expand your recruitment efforts to include diverse colleges and universities and partner with minority professional associations to advertise open positions and offer internships. These efforts can help ensure your candidate pipeline reflects your diversity goals.
Don’t just talk about diversity or mention it on your company’s Open Positions page. Put your words into action with measurable goals and commit to creating an organization in which everyone is welcome and respected.
5. Staying Up to Date on Technology
Accountants and CPAs need to keep up with constantly evolving technology in order to continue serving clients while remaining competitive. Being IT-savvy is no longer a competitive advantage – it’s a business requirement.
According to Peter Weill, senior research scientist and chairman at MIT’s Sloan Center for Information Systems Research, “digitally-savvy companies outperform the competition by at least 34 percent8 in the areas of market cap growth, return on assets, and revenue growth.”
Gaining an understanding of emerging technologies that are impacting the accounting profession and your clients’ industries is crucial. For example, QuickBooks cloud accounting solutions have transformed the profession in the last decade, making it possible for accountants and clients to collaborate in real-time, from anywhere and on any device.
You don’t need to become a tech expert, but you should start cultivating a collection of trusted voices and reading up on the latest developments.
While personal research into the latest technology trends is a good start, attending industry conferences and taking part in a peer network can help you learn from the experts in less time. Some excellent resources include:
- Accounting & Technology Conference9
- Accounting & Finance Show10
- AICPA ENGAGE11
- Boomer Technology Circles Summit12
- Intuit QuickBooks Connect13
- Sage Summit U.S.14
Many of these conferences are taking place virtually in 2020 due to COVID-19.
Identify the people in your firm who are passionate about technology. Send them to conferences and peer networking groups to learn about the technologies available today and how other firms are leveraging them. Make sure they share what they’ve learned with the rest of your team.
These experiences can push you beyond your existing limitations, providing a fresh perspective and confidence that your firm is making the right technology decisions.
Understanding the challenges facing accountants and CPAs today can help you plan for the future. If you take action now, you’ll have more control over how these pressures impact your business and the opportunities they’ll create for you in the market.
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