Let me save you some time. Yes, the accounting profession is going through (another) period of unprecedented change. There will be fewer jobs for accountants in the future. There will be fewer large firms of accountants in the future. But there will continue to be plenty of work for savvy sole practitioner accountants for many years to come.
The remainder of this blog post explains my thinking. I’d love to know whether you agree.
Another period of ‘unprecedented’ change
Many commentators are (again) suggesting that the move to cloud accounting has reached a tipping point and is now creating a period of unprecedented change for accountants. I’ve tracked similar warnings about cloud accounting back to at least 2009 when I dismissed the warnings as being too loud and too soon. There has been an increasing move into the cloud over the years and accountants have adapted – as they will continue to do.
Another big change ‘now’ is the rise of Artificial Intelligence (AI). Again, I suggest that the real impact of AI is somewhat down the line. And no, I do not see how it can replace the role of sole practitioner accountants – any more than the move to quarterly reporting to HMRC (part of the Making Tax Digital initiative) will decimate accountants’ client bases.
Fewer jobs for accountants in future
This prediction follows two key changes. The first is the (now) increasing move to cloud accounting, the influx of apps and automated facilities that reduce the need for so many accounting staff in finance departments and in firms of accountants. The second change is the rise of AI which, over time, will only add to this trend. But neither of these changes will reduce the need for savvy sole practitioner accountants. Their activities may need to evolve but, as always, nothing will change their client base overnight.
Fewer large firms of accountants in the future
This seems obvious to me as the costs of running large firms continue to increase without any commensurate rise in productivity or quality of service to their smaller clients. Every decade sees more mid-sized firms merging and claiming this will help clients. Typically though the mergers are driven more by a desire to reduce overhead costs and thus maintain profits per partner.
Clients, on the other hand, are increasingly looking for lower fees and want evidence that they are better served by a larger firm with higher staffing costs than smaller firms. Over time this means that more and more smaller clients are moving to smaller firms of accountants. The exceptions are those who perceive that they are better served by a larger firm with higher fees and staffing costs than smaller firms.
It is no longer cost prohibitive for smaller firms to promote themselves aggressively in competition with larger firms, thanks to the internet and low-cost online marketing opportunities. I have long seen a future where accounting firms are increasingly polarised – a few very large ones and thousands of very small ones. This will better match the demographics of the business world. Although many people glibly talk about SMEs, the official stats reveal that over 99% of UK businesses are small (not medium-sized). And a very large proportion of them are, in fact, micro businesses. How many of these businesses or individual taxpayers need services that cannot be provided by smaller firms of accountants?
A while ago, I decided to focus my advisory and support services on sole practitioner accountants. Yes, I also have plenty to say that is of value to those in larger firms and this is why I am engaged to speak at conferences for larger firms and for international associations. But I love working with savvy sole practitioner accountants who are keen to become more successful. And so yes, of course, I see there is a future for them. Their roles and activities will continue to evolve, as they always have done, and I will be there to help them.
I have worked with sole practitioners for many, many years. And I have constantly been debunking the ill-informed nonsense they are fed about the short-term impact of major changes. When the first Accountex conference took place in November 2012 I was invited to write an editorial for the show guide. In it I set out dozens of ‘major’ changes to the accountancy profession that we had witnessed over the preceding twenty years. Most had been predicted (by others) as likely to have a major impact on accountants. However, in every case accountants adapted. Some retired early but they were replaced by more accountants choosing to start their own practice. Many of these new entrants had been made redundant by the larger firms who were slimming their workforce as a result of mergers (see above). This trend is continuing.
The rise in home working and mobile working is also contributing to a rise in the number of sole practitioners and smaller local firms. For some years the professional training syllabus has been evolving to ensure that newly qualified accountants have better business skills than ever before. This, I suggest, is fuelling a desire to be one’s own boss, to run one’s own practice and to move away from the politics and cost pressures of working for mid-sized firms. An increasing facility to allow staff to work from home and whilst mobile can only increase the desire to cut loose from the mother-ship and go it alone or to create a new smaller and local practice. As I noted earlier it is much easier and cheaper to market a smaller practice than ever before.
Those sole practitioners who are resistant to change will become increasingly frustrated. More will retire early (as did their predecessors) rather than adapt and develop their skills. Other commentators talk about the need for accountants to develop new skills. In many cases though, it’s simply a case of refining and repackaging services to highlight the benefits to clients and the value delivered. Guess what? These are topics I have long addressed through my own service offerings to sole practitioner accountants.
The future for accountants depends on whether you are employed in industry, employed in practice or engaged in practice. And on whether you will be in a large firm, running your own accounting firm or running a niche practice of some sort. I believe there is a strong future for savvy sole practitioners who are willing to adapt and move with the times.