technology playing center stage in cpa profession

woman using midair interfacealso: retirees who want their buyouts had better transition their clients.

by marc rosenberg
rosenberg map survey

anyone knowledgeable about the state of the cpa firm industry would agree that technology is playing center stage

the potential of blockchain, artificial intelligence and data analytics is set to transform cpa firm technology in the same way that previous blockbuster inventions – pcs, laptops, the internet and software – did that almost instantly made obsolete the manual work cpas painstakingly performed for decades.

every year, the authors of the rosenberg map survey ask the industry’s top consultants to share their observations of what they are seeing at cpa firms. specifically, they are asked the following questions:

  • what kind of year was 2016? what were the major trends you observed? what were the issues you saw firms struggling with the most?
  • 2017 is half over. based on your experiences this year, what are you seeing? what are the major trends? what are firms struggling with and what are they working on as the year progresses?

with the advent of this technology, the profession is poised to finally ease the omnipresent stress of two huge factors previously thought external – code word for something a cpa firm cannot control.

first is the woefully inadequate supply of qualified labor. can anyone remember the last time this was not a worry? technology advances will soon dramatically reduce – probably by well over 50 percent – the demand for traditional cpa firm auditing and tax compliance labor (though this demand will most certainly be replaced by a different kind of labor).

the second external force that should be greatly eased may very well be busy season compression. because technology advances will greatly speed up firms’ access to their clients’ data and automate the auditing and tax compliance processes, there will be a greatly reduced workload crunch during the first four months of the year.

cpa firms are enjoying a great deal of success these days:

  • growth is robust.
  • profits are strong.
  • succession planning is well under way, either voluntarily (successful leadership development) or involuntarily (via firms merging out of existence).

there is an avalanche of new mps at firms.

they are more sophisticated and management-oriented than their predecessors. thankfully, they are bucking the ages-old counterproductive trend practiced for decades by firms – appointing the best rainmaker as the mp. often, this meant that management took a back seat to the mp’s client activities and that the mp’s effectiveness would be held back by his/her innate weakness at management and organization.

new mps are increasingly typified by:

  • greater focus on leadership
  • being less inclined to allow devotion to client work to distract from the time necessary to effectively manage the firm
  • partner accountability being focused on greater than ever before –  fewer free rides
  • more of a strategic planning approach to managing the firm

in recent years, one of the drags in writing “state of the industry” treatises has been that, at a big-picture level, relatively little changed from year to year. every summary of the state of the profession for the past 10 years has started with the so-called “merger frenzy” … but this year, it has been clear that, despite firms’ continued appetite for merging in smaller firms, more and more firms – especially the top 200 firms – are being more selective in choosing firms to merge in.

there are a lot of truly puzzling things about cpa firm partner retirement/buyout plans, too numerous to list here. (can you say “ponzi scheme”?)

one of them, which has caused many younger partners to lose sleep at night, has been paying out millions of dollars of buyouts to partners who didn’t deserve the money and/or weren’t required (different than “suggested,” the milquetoast term seen all too often in most partner agreements) to proactively transition the client relationships to other firm members.

that’s changing. more and more firms are adopting the slogan: “no transition … no goodwill.” these younger partners are asking themselves why they are making these humongous payments. the only acceptable answer is “to get the retirees’ clients.” so they ask “if we don’t retain the clients, why are we paying the buyouts?” they are seeing that the only way to optimize retention of retirees’ clients is by requiring, not suggesting, that retiring partners proactively transition their clients to other firm members.