Source: Bowman’s First Alert, Special Report

Bowman interviewed some of the accounting profession’s best thinkers. Here are some highlights:

Sam Allred ([email protected])

Staff shortages will continue, and will be no less acute in five years. The problem will be aggravated by the retirement of baby boomers.

To recruit effectively, firms must communicate persuasive arguments for choosing them over others. And they must continue to “recruit” current employees.

Talent can be found in disciplines other than accounting, and they can be trained to become superior.

Predictions: The firms that solve the recruiting and retention problem will succeed. Other firms will suffer.

August Aquila ([email protected])

Management teams are using the Balanced Scorecard to evaluate their firms not only in terms of financial results, but also in terms of their achievements in client service, learning, internal processes, and marketing.

Predictions: The Balanced Scorecard, now being used by larger firms, will begin to find its way into smaller firms. Firms that use it will do 20 percent to 40 percent better than others.

L. Gary Boomer ([email protected])

Although the number of accounting graduates is increasing, fewer of them are choosing public accounting. The dearth of talent will continue.

A significant cause of turnover is poor management by the employees’ immediate superiors. Firms need to provide management training at all levels.

Firms must learn to differentiate themselves to attract people. And to retain them, firms need to be certain their people understand how they contribute to firm goals.

Firms should consider outsourcing.

Predictions: The Internet, portals, and Web based applications will have a major impact on the delivery of client services. Firms will increasingly outsource IT services and data storage. Firms that become learning organizations will attract better talent.

Jean Marie Caragher ([email protected])

Developing niches necessitates a champion, a committed team, a marketing plan and budget, and diligent execution.

It is critical that you track the results of your marketing initiatives.

More firms are hiring salespeople, and using marketing personnel to create leads for partners.
Firing of clients is increasing.

Firms are measuring the returns on their marketing investments.

The firms that do not succeed will be those that do not pay close attention to managing the client service function. This includes programs to guaranty fulfilling client needs, being genuinely caring about clients, and having an effective client acceptance process.

Gale Crosley ([email protected])

Regulation will create new marketing opportunities and have a major impact on strategic vision.
It is not feasible to measure the return on investment in marketing activities.
The current boom will not last forever, but it is difficult for firms to accept that and invest in the future when present conditions are so favorable.

Prediction: The use of sales people will become pervasive. It will be more effective to hire sales people than to train accountants to be rainmakers.

Chris Frederiksen ([email protected])

The shortage of talent will continue. Graduates don’t choose accounting because it is boring, tax season is too onerous, and firms don’t provide good training.

Firms will cope by increasing partners’ books of business. They will outsource much compliance work either offshore, or to people who work from their homes.

Most opposition to outsourcing is not real. The real culprit is employee sabotage. Employees like overtime pay.

Prediction: Within 10 years most compliance work will have been outsourced, and most firms will have created paperless environments. Accounting firms will be stimulating places to work.

Robert J. Gallagher ([email protected])

Medium sized firms ($2 to $ 5 million revenues) that have narrow niches are vulnerable when the partners running them retire. This will impact the buyout payments to those partners. Firms need to change some of the provisions in their partnership agreements to account for this.

Prediction: Sarbanes-Oxley section 404 work may decline by as much as 40 percent in 2006. The big 4 may therefore reduce their staffs. The big 4 will target the top end of the middle market for consulting work. Will there be a decline in the shortage of experienced accountants?

Allan D. Koltin ([email protected])

Larger firms are abandoning formulas for evaluating partners and their compensation. Using formulas makes it difficult to motivate partners to do anything beyond the achievement of the measured activities like book of business, billable hours, etc.

Prediction: Firms will link partner compensation to agreed-upon goals—which will be different for each partner.

Bruce W. Marcus ([email protected])

For the accounting profession, the future is changing faster than anything ever experienced by CPAs.

The future is impossible to predict, but it is useful to understand the global dynamics that are affecting the future:

New technologies have already created profound changes in the profession. All the new technologies will continue to evolve. We don’t know how they will affect the profession, but we do know that we must keep up with them, because the clients surely will. Imagine serving a client with a fax machine if you didn’t have one.

Accountants sought to regulate themselves, but with the recent scandals, regulation has been put in the hands of government, and new problems may occur, causing other regulatory changes.

There will be changes in governance of firms as competition and client demands make autocratic management virtually impossible.

Prediction: Accounting is now a client-driven profession. The clients will shape the future of the accounting profession.

Dr. Robert B. Martin ([email protected])

The merger trend will continue, but may not be as lucrative for firms merging upward in the next five years or so.

The current boom for accountants may not continue. The big 4 will begin competing with the smaller firms if section 404 work declines.

Accountants may work well beyond the normal retirement age. The talent shortage may be alleviated.

Prediction: The bigger firms will become more discriminatory and restrictive in their acquisitions of smaller firms

Jay N. Nisberg PhD. ([email protected])

More young people are interested in the profession. They find it “sexy.” They see that CPAs in regional and local firms are doing very well financially. However, it may take several years for this new trend to impact the profession.

The regulatory environment may become more onerous for firms that thought they were immune because they don’t serve public companies. The new SEC chairman may feel the need to move to lower levels to regulate the accounting profession

This economic boom may be short lived. Firms should consider services for companies that might be most impacted by a slow down.

The consolidators, which have made few acquisitions in the last few years, may be poised for major transactions soon.

The relocation of the AICPA may cause its revitalization as new people are brought in.

Prediction: In 2006 to 2007 many more accounting practitioners will realize seven figure incomes.

Jeffrey S. Pawlow ([email protected])

The profession will be profoundly affected by the rate of technological change, the shortage of skilled workers, and the emergence of skilled workers in other countries. The future CPA firm may be operated by skilled entrepreneurial partners who perform advisory engagements, supported by a few professionals and a small administrative staff. The compliance work may be outsourced.

Two major improbable, but not impossible scenarios can arise as a result of watershed economic and regulatory phenomena. First, the inability of the government to control budget deficits could lead to a national sales tax to replace the income tax. The affect on accounting practices would be obvious. Second, another wave of regulatory initiatives resulting from another major accounting firm scandal could take the auditing function away from CPAs and put it in the hands of the government—and this could affect not just the auditing of public companies, but private companies as well.

As the succession crisis in accounting firms continues, the market for acquiring firms will favor the buyers, and the prices of accounting firms could plummet. Firms must focus their attention on servicing clients not only now, but when the older partners retire, so that those relationships will be secure.

The NASBA is in a power struggle with the AICPA trying to take over responsibility for accounting standards, ethics, and peer review. This would not be good for the profession as the AICPA has done well as an advocate for the profession in the wake of the Enron debacle. But the AICPA is vulnerable as it moves key functions to North Carolina and will have a turnover of 85 percent of its staff.

Donald B. Sholl ([email protected])

Mid-sized CPA firms, plagued by staff shortages and increased personnel costs, and challenged by increasing competition, must find more narrow niches in which they can become dominant. But to deal with the risk of losing the practice leader, firms must develop multiple leaders in each niche.

From Bowman First Alert, Special Report, Vol. III No. 11, May 12, 2006, Bowman Communications, 323 Wilcrest Drive SW, Atlanta, Georgia 30044-5253, 770-972-0783.