Accounting Is Dead - Long Live The Accountant!

Accounting Is Dead - Long Live The Accountant!

It was 1980 when IBM introduced the PC, the first micro-computer to be built with "off the shelf" components. Bill Gates, a college dropout tinkering with computers in his garage, got the contract to develop the operating system for them, and retained the rights to also market copies of the software as his own product, thanks to the brilliant negotiating of his mother, who was also his attorney.

With contract in hand, and ,000 from his mother, Gates then bought rights to an operating system named QDOS from Tim Paterson, it's creator.

Then, in 1983, Phoenix Technologies introduced an IBM compatible BIOS, and clone manufacturers started rolling personal computers off assembly lines in droves. Computerization of small accounting firms took hold and computers were no longer just the province of the large firms.

The "Big 8" lasted until 1987. The "Big 6" until 1998. And, the "Big 5" until 2001.

Now it's the "Big 4" and they're struggling.

Add the "brain drain" the big accounting firms experienced as they went through the "go-go" days of the 80's and 90's consulting, when the consulting divisions of the large firms were billing ten and twenty times as much in non-audit services as the audit division was billing. Salaries being paid to consulting divisions were growing at astronomical rates and salaries for new auditors were in the tank.

Then, we had the "outsourcing" and "offshoring" fads.

Yeah, they're fads. Wages will rise, and the work will come back (if there's any left to be done, after industry declines to unheard of levels).

Now we have Cloud Computing. It's not computing "in the Cloud." That's just a fancy and extremely large computer network. You think of it as "in the Cloud" because its almost like you don't really have something in your hand that contains your data like you could when it was on your local hard drive instead of one somewhere across the country.

Yeah, we've gone through a lot in the world of accounting practice, and as technology advances, were going to go through a lot more.

The computer revolution has only just begun. But, it's not just "computers" per se, there's a whole litany of things that were spawned by computerization.

Now you have things like POS systems in retail establishments, inventory and process control systems in manufacturing, and data mining through information retrieval systems. The whole spectrum of tools and systems to give answers to questions that no one ever thought to ask before. The first phase was the consulting craze that killed off Arthur Anderson.

Of course consulting started before that, but the rise of the consulting firm as a commodity began in earnest when the big accounting firms started moving in where McKinsey & Co., and Boston Consulting Group (BCG) had once ruled the roost with their "secrets." Consulting became a commodity because the data was available. The data was available because the world was computerized on Powerful computers sold at rock bottom prices.

Soon, every unemployed or semi-employed "expert" was hanging out their shingle as a consultant.

Then the niches arose.

Accountants had been auditors and tax professionals. Now they were rate auditors, loan auditors, internal auditors, and even IT auditors. Tax preparers became tax planners and sold investment advice. Auditors became forensic experts and testified about fraud. Niches were created, and then niches were broken further into sub-niches and specializations. Before long everyone became an expert just like everyone else, and the result became that no one was looked at as an expert.

Auditors began to tout "Assurance" services and investing in politicians much as the AMA (American Medical Association) and the Trial Lawyers Association had done before them, until they were able to start providing "Forward Looking" statements (as long as they were labeled "Forward Looking") and they were able to get limits to liability enacted.

With all this change and confusion in the industry, even the auditors couldn't get a break. There are rising calls for the removal of the SEC audit requirement for public companies, with the demand that audits be left as a choice for firms rather than be a requirement.

And, the nail that will drive the lid onto the coffin? Fair Tax. National Sales Tax. Or some other theory that eliminates the IRS. (Could this be why the new healthcare bill was written, to change the function of the IRS from tax collector to healthcare billing service?)

With the elimination of the IRS, and the elimination of the requirement for audited statements, what is left for the poor accounting profession?

It could be consulting, or it could be account services, or transaction services, or any of a myriad of niche like specialties. It could be anything "below the line," or it could be something "above the line" such as asset management, fraud control, legal support or forensics.

Trying to figure out what will become of the industry is like fortune telling, all smoke and mirrors. But, because you need to be able to make strategic choices, it's the only option you have if you want your practice to thrive.

One suggestion is that you do what you were taught in school, and what you talk to your clients about doing. You perform an SWOT analysis. Yeah, the good old SWOT analysis. Just sit down with a piece of paper and write out your strengths and your weaknesses, what opportunities you have and what threats you face. Write it down and study it.

Personally, I think that one of the strengths of the typical accountant is their familiarity with numerical analysis. So, where are the opportunities for numerical analysis? Maybe you also have a legal streak. You could add contract analysis, and revenue recognitions to the list of services you offer.

There are all types of niches and services that will require the skills of a "number" person, and as information becomes more database driven, the opportunities for growth and specialization abound. They just aren't the simple debits and credits of yesteryear.

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