From harnessing cutting-edge technology and artificial intelligence (AI) to redefining client relationships, the next chapter of public accounting promises to be one of reinvention, with innovation as the key to thriving in a rapidly evolving market. Following are my predictions for public accounting:
As the war for talent is still in a crisis mode, CPA firms will invest more resources into outsourcing work offshore, acquiring and starting firms abroad, or growing their existing firms in India, the Philippines and other countries. Growth-oriented accounting firms will outsource at least 25% of their chargeable time.
Progressive firms will significantly increase their staff performance management, mentoring and counselling. To remain competitive and avoid merging into a larger firm, accounting firm partners will have no choice but to invest heavily in their best and brightest staff in all stages of their careers.
Public accounting firms will increase their efforts to recruit talented partners from other firms. Ideal targets will have leadership and practice development skills and partners who are experts in industries and niches.
Diversity, equity, and inclusion (DEI) initiatives will remain a competitive differentiation for many firms, especially in attracting and retaining talented professionals.
To compete for talented professionals, accounting firms will continue to offer remote and flexible work options for partners and staff.
M&A and PE
Consolidation of accounting firms will continue at a faster pace for firms of all sizes. The next five years will break records for CPA firm mergers and acquisitions (M&A) and private equity (PE) transactions.
There will be more partially leveraged and hybrid-traditional deals with buyers and sellers not interested in the PE structure or those that do not meet PE criteria.
More than half of the Top 50 firms will take on a PE investment in the next five years.
Half of the CPA firms below the Top 200 will tuck-in to a PE deal or will merge as a competitive strategy. The objective will be to gain more resources and obtain greater service capabilities, industry expertise and advisory services rather than for near-term succession problems. There will be more mergers of mega-firms into larger regional and national CPA firms.
CPA firms with succession challenges that wait too long to merge or be acquired will experience significant decreases in practice valuations.
Ongoing consolidation of accounting firms will force mergers of public accounting associations and networks. More Top 25 CPA firms will become global forces as they acquire firms in the UK and other countries along with creating their own branded international associations.
Marketing and Growth
More CPA firms below the Top 150 will outsource their marketing, practice development and lead generation programs to consulting companies.
As businesses expand globally, it will be essential for CPA firms to better understand and communicate international accounting and tax regulations, as well as the complexities of cross-border transactional reporting.
As the lack of qualified accounting, tax and advisory professionals continues to be an obstacle to growth, the role of internal marketing professionals and external marketing consultants will continue to expand. Their marketing roles will increase and include the areas of recruiting to attract and retain quality partners, staff and M&A candidates.
As routine accounting and auditing tasks become more automated, CPA firms of all sizes will be expected to shift toward providing more advisory services.
Marketers will be better equipped to generate sophisticated ROI-driven reports, perform precise market research, collaborate with business development professionals, target prospective clients, implement sophisticated digital marketing and social media campaigns, and use AI and creative technologies.
CPA firms with client advisory services (CAS) practices will focus more on higher-level services, including CFO services versus bookkeeping.
Progressive CPA firms will increase their AI usage related to marketing, lead generation and thought leadership content, including blogs and webinars. Also, more firms will create new C-level and leadership AI positions, i.e. chief AI officer and director of digital strategy.
Management
The traditional CPA firm partnership structure will continue to fade away and will be replaced by a more corporate structure. More CPA firms will hire professional chief operating officers to assist the partners in managing their organizations.
Managing partners and executive committee members will be held more accountable by their partners for strategic actions and profitability. Attention will focus on their ability to lead and manage successfully and achieve the goals and objectives, as documented in the firm s strategic plans.
CPA firm partners will be held more accountable and take on the roles of highly effective client relationship managers, trusted advisors and rain makers not grinders.
There will be a growing demand for sustainability and environmental, social and governance (ESG) reporting. Firms will need to develop expertise on measuring and reporting on sustainability measures, as clients face increasing pressure to disclose their ESG efforts.
Accounting firms will continue to acquire consulting and advisory companies that complement their traditional services.
Client engagement profitability will be more scrutinized and evaluated, and CPA firm partners will be held more accountable for increased realizations and other profitability key performance indicators (KPIs).
More accounting firms will build their knowledge of generative AI and assess the opportunities and risks of implementing the transformative technology into their practices.