The Hidden Forces Shaping the Future of Accounting and Tax

In the ever-evolving world of accounting and tax, change is a constant companion. But what's happening now is a different kind of transformation — one driven by money — and it quietly promises to reshape our industry in some pretty exciting ways. So, let's dive into it, shall we?

We've certainly seen our fair share of changes, whether they were spurred by regulatory updates or the march of technological progress. However, this current wave of disruption stands out. It's invigorating, and, yes, it might cause a few sleepless nights, but it's also a golden opportunity.

Here's where my journey as the Radical CPA comes into play. I've had the chance to connect with some amazing folks who've shared their thoughts and concerns, giving me a treasure trove of insights and behind-the-scenes knowledge. From my unique vantage point, I can tell you...

Now is the time to really pay attention to the accounting profession while we're in the relative calm before the storm.

So, what are these hidden disruptors, and why are they such a big deal?

Understanding the Chessboard of Accounting

Imagine a gigantic chessboard where different players are making strategic moves. On one side, you've got the "old school" accounting professionals, the seasoned pros who've seen it all but are now navigating a rapidly changing landscape. On the other side, you'll find the "new school" disruptors; innovative entities reshaping the industry with cutting-edge technologies and fresh approaches.

These players on the accounting chessboard represent two distinct approaches to modern finance. Let's take a closer look at each group and see how they're shaping the future of accounting and financial services.

The Traditional Players

The "old school" folks are like the veterans of the industry, with tons of experience and a loyal client base. However, they're at a crossroads now, with the rapid pace of change and technology demanding swift adaptation and innovation.

• Legacy Small Firms: These smaller accounting firms have been around for ages but have been a bit slow to modernize and embrace emerging technologies. They've got loyal clients and a strong reputation, but they're finding it a bit tough to keep up with the times.
• Legacy Midsize and Large Firms: As we move up the ladder, these firms are facing their own set of challenges. Their size and structure make it harder to implement quick changes. Some are even considering new strategies, like getting acquired by private equity (PE) firms, to change up their strategies. Many of these firms are still using traditional methods and processes, not quite ready to fully embrace the technological shift.

The "New School" Competition

The accounting industry is no longer just about the old guard. There are new kids on the block, well-funded disruptors, who are shaking things up. Let’s look at these “new school” contenders:

• Progressive Small Firms: These are the early innovators who have integrated modern technologies and innovative business models into their operations. They're forward-thinking while still keeping a personal touch for their clients.
• Progressive Mid-sized Firms: These firms are on a journey to adopt new technologies and business models but at a slightly more measured pace. They're actively making changes at the partnership, leadership and operational levels to stay competitive.
• PE-Backed Firms: Firms in this category have some significant financial backing from private equity (PE), which puts them at the forefront of pushing the industry forward. They're actively implementing modern technologies and expect big returns on their investments.

The True "New School"

These new school players are truly disrupting the market as we know it. They are using new approaches in new ways and it’s the most rapidly changing segment of the market today. These include:

• Uber for Accountants: Services like Taxfyle and Picnic are making it easier for accountants to outsource some of the heavy lifting with tax returns. They are looking to expand their market share and offer more intuitive software to business owners.
• Intuit Platforms: AI integration is transforming products like TurboTax and QuickBooks. These software products have evolved to include a human element, which is stirring significant disruption in the industry. This change is bridging the gap between technology and personalized accounting services.
• Fintech Companies: Fintech firms have recently branched out from credit cards to accounting and tax services, offering a more holistic approach to financial management for small and mid-sized businesses. Plus, they have exchange fees so they are essentially making money on money.
• Legal Tech Companies: Legal tech firms like Rocket Lawyer and LegalZoom are extending into accounting and tax services, providing a viable alternative to traditional CPA firms. Leveraging their legal tech DNA, these companies offer comprehensive financial services to businesses.
• Newer Non-CPA Startups: Startups like Bench, inDinero, Zeni, and Pilot have secured funding and are ready to disrupt the industry with fully integrated fractional accounting services, giving their clients new and innovative approaches for their financial needs.
• Stealth Startups: Innovative startups in this category are quietly working behind the scenes to develop specialized solutions for accounting and tax services, targeting specific market segments and potentially revolutionizing the industry.

The Common Thread

What ties all these changes together? Well, the answer is simple: money.

Old-school firms have traditionally not reinvested resources in innovation, and the new market is putting a ton of money into innovation which is pushing the market. PE money has the same effect.

In other words, more financial resources translate into greater innovation and automation, all happening at breakneck speed. Basically, fintech is challenging traditional norms, leaving you with a choice – adapt or risk becoming obsolete in the marketplace.

The Role of AI

Now, let's talk about the significant role of AI in all of this. How will AI disrupt accounting in the near future?

AI isn't just about automating routine tasks; it's about fundamentally reshaping the industry and making advisory services the cornerstone of most CPA firms. It's about reimagining how we interact with our clients. The “new school” competition is already ahead of the game here. Traditional follow-up phone calls and coffee meetings won't cut it for the newer generation. It's all about delivering a seamless customer experience across all platforms and human touchpoints.

A Call to Action

This is our wake-up call. We must adapt, innovate and embrace these disruptors head-on. The future is ours to shape, and it's going to be an exciting journey.

If you want to discuss the changes I see and how they compare to what you’re seeing, I’d love to get your perspectives. DM me and we’ll set up a time to chat.