Over the past 20 years, many public accounting practices transformed into accounting businesses, with some even becoming multifaceted professional services organizations.
The shift was precipitated by the emergence of effective, low-cost small business software; artificial intelligence and machine learning applications; and portable handled devices that can access information in the cloud. The coronavirus (COVID-19) pandemic accelerated these trends, but the biggest changes were in attitude and recognition of the effectiveness of virtual work rather than the overnight inventions of software and connectivity options. For many firms, COVID-19 compressed the adoption of already existing technologies into a few days or a month. Those firms already effectively using these tools had a tremendous head start on the almost complete migration to virtual work. Some new vendors jumped in, but the services were already available; COVID created a much wider playing field and allowed new entrants to grab market share.
The shift in the public accounting firm model was a reaction to clients having access to the preparation of financial statements, reports, schedules, and analytical data as byproducts of their low-cost accounting programs. At the same time, there was an increase in the demand for data that created pressure for new methods of reporting the information, increased disclosures, more expansive and transparent data, and more detailed and specific accounting rules to ensure proper reporting of the earnings. Traditionally, the scope of data has been defined by the availability of timely information. The explosion of small business software has led to a thirst for more thorough data. Users’ needs have outpaced the data available and led to a push for greater complexity; independent public accountants are best poised to meet these needs.
Some of the new information that is being requested reaches beyond the traditional limits of the profession. For example, typical accounting and tax expertise is no longer enough; there are now frequent and rapid changes, making it necessary for firms to engage specialists in particular areas. Tax changes drift into state taxation issues, professional status classification in certain industries, stimulus payments and credits, and inbound and outbound international tax issues. Accounting rules are defining revenue recognition, lease accounting, and fair value measurement in a finer way.
Accounting firms, including the smaller ones, have owners, partners, and staff who are able to keep up with many of these changes based on the needs of their clients. Moving away from these traditional services, assisting clients with borrowing (including finance leasing) has become more complex, as has risk measurement including internal controls, budgeting and strategic planning, inventory measurement, cash flow management, cost accounting systems, and personal financial planning.
What has emerged are clients’ needs for added services beyond the tax, audit, and consulting services traditionally associated with accountants. These added services have caused accounting firms to grow and change, leading them to transition into businesses more so than professional practices. Accountants are identifying the services clients need, without restricting themselves to what they have been engaged to perform, and then building the infrastructure to provide those services. Some of these services are endemic to accounting firms, and some require that firms reach out to others either as partners in delivering the services or by bringing them in as part of their permanent staff. This further moves an accounting practice to become more of a business, with a departmental structure, cost control centers, and stronger internal management—and perhaps a need to borrow to build into this new paradigm.
Most accountants typically have strong relationships with their clients and offering new services becomes an easy sell. Furthermore, there is a growing trend of clients outsourcing services that are essential, but not core to their business mission, such as their accounting, bookkeeping, and payroll functions—which accountants are ably positioned to perform. It is also easier, more efficient, and more effective if added services are performed by fewer providers and if everything is maintained under “one roof,” perhaps with a single relationship manager coordinating all functions.
Each step, each change, each added involvement is designed to add value to the client relationship. In the long run, clients become more profitable, able to concentrate on growing their core business without the distraction of managing ancillary and overhead operations—and the accounting practice, which has transitioned into an accounting business, will stand to benefit.
Nontraditional Services Added by Some Accounting Firms
- Real estate and facilities management
- Back office and supply chain operations
- Networked billing and collections
- Cost segregation
- Research and development tax credit studies
- Transfer pricing studies
- Tangible and intangible asset appraisals
- Forensic investigative services
- Business valuations based on long-term value creation rather than projected cash flow and return on investment
- Succession planning and training
- Investment banking services
- Merger, acquisition, and transactions advisory services
- Asset and wealth management
- Family office services
- Insurance and risk management
- Human resource management
- Employee benefit plan conceptualization, establishment, oversight, and management
- Medical practice, hospital and care facilities revenue optimization
- Chief financial officer on demand service
- Strategic, innovation, and change management planning and implementation
- Business management optimization
- Cybersecurity and incident remediation
- Turnkey web-based commerce sites
- Technology and vendor selection, and adaption and implementation
- Data privacy, compliance and security, and customer immersion
- Government agency regulation compliance risk assessments
- Electronic discovery
- Sustainability attestation