The competition between CPAs and non-CPAs is about to get more aggressive.
With Steven Sacks
The NEW Fundamentals: Thriving in Disruption
The CPA profession, or just plain old accounting profession, is currently facing challenges of getting more people to become CPAs or even having young people think about accounting as a career.
MORE STEVE SACKS: 150 Hours Revisted: The Profession Needs a Makeover | How Do You Value Your Most Important Asset? | Which is Better: A Year of Education or A Year of Experience? | Sell Service, Not Hours | Private Equity vs. the CPA Firm Partnership | CAS or CAAS? Getting Clarity | Fine-Tuning the Subscription Fee Model | When Cyber-Crime Hits Close to Home | How to Build a Winning Proposal | Six Ways to Fix Your Firm Agreement | The Great Resignation or a Reshuffling? | Listen to Learn | Build the Framework to a Solution with Five Answers | Try for Success, Not a Win
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We hear about the slow drip of the professional pipeline; all sorts of remedies or suggestions have been offered. Is it because the profession still suffers an identity crisis exacerbated by an additional (if questionable) fifth year? There are those already in the profession who are bemoaning low pay, long hours, and doubts about whether gaining a partnership is achievable (or worth it).
Oh, yes, there is the extra tuition load that must be taken on. So, higher debt, stagnant pay, long hours, and increased competition (think MBAs, CFAs) is a perfect storm.
In this video, David Bergstein and I discuss the accounting profession’s challenges, not the least of which is whether accountants should be CPAs. Is foundational accounting knowledge sufficient to specialize in other value-added services? Will there be a shortage of accountants or CPAs, and if so, what can/will the profession do?
Finally, is Client Accounting Service (CAS) the panacea to revive the accounting profession? David and I talk about value-added services without really labeling it as CAS. As CPAs, we want the profession to succeed. No one has quantified the impact of CAS on clients and the value derived.
5 Key Takeaways:
- An accounting degree opens up many opportunities in different businesses and in different functions. But is it necessary to become a CPA? There are benefits to being a CPA, though the ability to provide assurance services and certify financial statements has limited brand value.
- If CPA firms continue to pay low salaries and demand long hours as they seek to attract and retain talent, the approach is either insanity or pure genius.
- Artificial intelligence will replace much of the audit process, thus freeing up time for advisory services, which will create a competitive landscape between CPAs and non-CPAs.
- The argument continues as to whether the fifth year of a combined BA/MA degree is worth the additional cost (and requirement to sit for the CPA exam) when there is uncertainty about the value of the CPA designation.
- There should be a greater partnership between universities and high schools to create a practical career map for students interested in business — with accounting as the core foundation. Once there is an understanding of financial statements, the focus should then be on overall business literacy, which includes finance, economics, marketing, and management.
Transcript
(Transcripts are made available as soon as possible. They are not fully edited for grammar or spelling.)
Steven Sacks 00:00
Hello, my name is Steven Sacks from Solutions to Results, LLC. Today, I’m here with David Bergstein, CPA, in another one of our installments about the CPA profession and where it’s going and who will be most impacted by it going forward. So, David, welcome.
David Bergstein 00:18
Thanks for having me today.
Steven Sacks 00:21
So why should someone become an accountant?
David Bergstein 00:25
They say you earn higher than average earnings by becoming a CPA.
Steven Sacks 00:32
I think we have a little issue with that, especially like, since salaries haven’t jumped that much higher. If you’re talking about looking at it like this. No, it hasn’t been like that. And it hadn’t been like that pre-COVID. And it hasn’t been like that, post-COVID. And firms are thinking about what they can do to entice their talent to come and to stay with them. But, be that as it may, I have all these people on my staff, and we do different things. So this person here is a financial guru, or this person here has a marketing background. We help the small firms get out there into their, their customer base, their client base. You know, oh, this person is an operations guy. He understands business processes and such. So we have this full cadre of skill sets that we can provide. Now, the only thing missing is, the guy wants, my client wants to have financial statements. I don’t know the difference between debits and credits and the Bronx Zoo. However, you know what, a QuickBooks advisor can come in for maybe less than the cost of having a CPA do that and has all the relevant books and records in the form of financial statements. And then we have our people analyze the financial person speaking with our marketing person, speaking with our operations and budget. But we had a confluence of expertise for our small firm clients. Okay. Now, what’s missing from what I just described? The CPA element. Thoughts?
David Bergstein 02:12
If you want to provide audit and attest functions, become a CPA firm. Hire CPAs. But again, I went into accounting, not because I wanted to work in public accounting. I wanted to be an FBI agent way back when, and that was a requirement. But I’ve learned that having the accounting skills and knowledge to do an audit , to analyze books, and help people gives me a much broader base of knowledge to help businesses.
Steven Sacks 02:43
Then why are we having an issue with people entering the profession? It’s, it’s, you’re, you’re painting such a rosy picture. And David, you and I are playing the role of devil’s advocate here. As I said, I’m a CPA, you’re a CPA. Okay. But you’re painting a rosy picture of what it could be at the end of the rainbow. But it’s people are not getting to the end of the rainbow. Well, the issues and challenges that they said I didn’t sign up for. So where are we going?
David Bergstein 03:20
The question becomes, you know, what’s your rainbow chase? And it goes back to you know, we got a vast country, a vast world. If you’re not gonna work for the top 10 firms, the top 100 firms, the top 10, firms, you got to sell yourself to whoever’s hiring you as to what you can do to help them achieve their goals in their business, and you’ll get paid accordingly. You know, but when one starts off in the accounting profession, at least in today’s marketplace, they’re generally doing the menial tasks, which will be taken over now in the next five years by artificial intelligence. And the future of being this accounting service is being able to do advisory services of various natures, that some relate to accounting, and some don’t. So if there — I think there are 669,000 CPAs out there, versus, you know, 66,000 firms. And once you get by those first 500, firms, the 65,500 firms, small to medium firms. You know, if your goal is to work for one of them and enjoy yourself and achieve a level of success, go work for them. Rise up to the top. How do you stand out from the rest of the talent? While you tell your boss, I sat for the CPA exam? I’m a CPA. Nobody else here is a CPA, so I should be getting more money and I’ve also proven to you that I could do things, but okay.
Steven Sacks 04:50
So okay, you said that to me, so I’ll say alright, so you’re a CPA. So what can you do for me? What do you want me to do? Well, these other people are doing that person’s a financial expert, this person understands the market trends. And as a marketers, this is a business development as we have a full cadre. So you’re coming to me Mr. Bergstein telling me that you have a CPA, therefore, you should be being paid more than these other people who are providing proven value. The only difference is that you can do and provide a certified audit. So what you’re giving me as is the case, you’re giving me a report X number of months later about what happened in the past. Well, gosh, darn, that is really valuable to me…. Not.
David Bergstein 05:00
You prove my point. You’re agreeing with me.
Steven Sacks 05:20
I’m not agreeing with you.
David Bergstein 05:26
You agree with me.
Steven Sacks 05:36
I’m not agreeing with you
David Bergstein 05:50
You don’t? You are. You’re saying you don’t need to be a CPA to be successful. And I’m just saying…
Steven Sacks 05:56
That’s exactly my point. But you came at me saying to your boss, that I’ll be your boss in this scenario that you that you’re a CPA, and therefore you should be being paid more. But I’m saying what value are you providing?
David Bergstein 06:10
Well, documentation says that CPAs get 10 to 15% higher salary than someone else, because people recognize that as having a certain level of competence. But when you’re starting out in the profession, don’t put me up against someone who’s says they can do data analytics better than I can because I’ve taken the same courses. But I also am a CPA. I’m saying, no matter how I say it, is, you don’t need to be a CPA to get a job. But it’s just one more notch in your resume. If it’s out there. Or you’re a CMA. Who do you hire? CMA, CPA. If you don’t need the audits you go to CMA.
Steven Sacks 06:49
Whoa, that’s, that’s kind of, um, yeah, that’s a contentious question, but we’ll just skip over that for now. So again, it goes back to my question. You painted a whole rosy picture about the profession, but yet, we don’t have anybody entering the pipeline. You talk about beating a dead horse, okay.
David Bergstein 07:12
They’re not entering the pipeline, because they don’t see salary. They see 150 hours, and the 150 hours is not worth the remuneration they get at the end. And when — let’s get down to the real facts. When you look at the MAP survey by the AICPA, which is the statistics about how our accounting firms are run. Sure, the top 50 firms that making — managing partners are making millions and millions of dollars. But how many years did it take them to get there? How many people can get there? Versus the 65,500, small to medium-size CPAs, where people are starting their own practice or working in a small practice, and then making a half a million dollars a year, or a million dollars a year working in the small practice. You know, maybe that’s more comfortable, because then maybe they have more life — work life balance,
Steven Sacks 08:06
Or they’re doing an interesting area of consulting, where they enjoy doing it. Look, for years and years I was among professionals that really enjoyed what they did. It was specialty areas. And that’s it. Because, you know, if you’re going to do something that ends up being drudgery, and how many times David had you and I heard practitioners saying, uh, this is the last tax season I’m going through. I’ve had it. And then comes next year, you know. And then after January 15, oh, don’t talk to me for the next three months! I’m gonna be a zombie. And then they’re done with that and oh shit, I gotta go through this again. You know what? Then don’t do it. Don’t do it. If you don’t have the passion for it, don’t do it. And I will tell young people, if you have a passion for something, you know what drive through it, irrespective of whether it requires a certification or not. And if you can excel in something that that — you — put on equal footing with someone who’s certified, fine. Don’t let it be a ball and chain. But since we’re both CPAs all our thinking should be how can we help younger people to come into the profession? Now you and I are not going to solve that. That’s not what our discussions are here for. We just raised the issues. But this is for people who are in decision making powers. And it’s not just the AICPA. It’s, it’s university administrators and deans and provosts. It’s even going down to the high school level, because kids need to know 10th 11th 12th grade about career paths. And financial literacy. But you know? It’s business literacy. It’s using accounting as the core and then building around it economics finance marketing. That you can sell the younger kids on, because they need to have some sort of career path. And they get that understanding about accounting. But we shouldn’t say accounting is the only way to go. It’s …. opens this up. So, that’s part of the selling. But we’re not responsible for that. What would you do if you were responsible for trying to, to open up the valve of the pipeline?
David Bergstein 09:56
I’d be doing actually what you sort of just said. I’d be getting down to the high school and elementary school levels and talking about financial literacy the value of money, and show how accounting is needed to understand these things to some extent. And then build the economics and marketing and everything else around it.
Steven Sacks 11:00
Since there are 30 million small businesses in this country, that if a kid, young kid is not college material, but they want to be a baker, and they have a proclivity for baking, and they want to own their own business. Well, then, the high schools should be providing some sort of business curriculum that includes accounting as a core. So this way that they can deal with a CPA that comes in and says, Oh, my Baker understands this. Oh, he generated these financial statements. Now he’s looking for me to say what he can do with those numbers. You know, and that’s the thing. So then the younger kids understand what their relationship is, with respect to an outside service provider, plus, they understand what the direction they say, oh, you know what, maybe I do want to not only be a baker, but I want to open up franchise of bakeries. I’m going to need more education, and then they’ll find out if the schools are, are sort of accommodating them to do what can be accomplished in 120 hours, not 150 hours. And that’s my whole thing. So it’s five years really doesn’t make a difference, except for the fact it’s another $70,000 in tuition. Well, get the education to them the right way, and do it in 120 hours. Or, some talk about a 90-hour, uh, a 90 credits of Bachelor, another 30 for Masters. So get 120. That’s the way it should be. And you know what that means? That means stop teaching nonsense things that you learned from K through 12. You don’t need that in the early parts, get right to it. And it will continue the momentum if it’s worked out properly between a partnership of colleges and high schools. It’s that now the kid goes and starts to do what it is now 120 hours to get two degrees in instead of one. That’s it, David, that’s all I have to say. Under the current environment, we hear the same arguments, lousy salary, overworked, 150 credit hours, and on and on. So what will have to change? And this is not a CPA versus non CPA issue. It’s a culture thing. What CPA firms have to do? You’re managing partner, David, what are you going to do?
David Bergstein 13:26
I guess I’m gonna look to streamline my firm, I’m gonna look to hire young, energetic people who have a knowledge of accounting and want to excel. And I want to start them at a higher salary, I’m going to use them more for their analytical abilities than for their menial skill level. I’m going to put them to work doing things of importance, so they feel value in that day contributing to the business. And in turn, they will tell other people how rewarding the career is.
Steven Sacks 14:01
It’s not the usual thing where you’ll never — you’ll never see the client. You don’t know how the firm got the client. But you go to a firm where the partner will take out the young person and say you don’t have to say anything in this meeting. But you’ll listen to the questions that I asked the client. That’s a very important thing, because that same person will go and tell his friends you know what? Unbelievable, you know. I never learned this in school. You know, in one-hour meeting today, I learned a whole bunch. I learned the client’s concerns, how the partner extracted those concerns out of him, and how he was able to address each one. That’s really great. It’ll be great if more firms did it.
David Bergstein 14:47
I agree with you. 100%.
Steven Sacks 14:48
All right, David. That’s all we have for today. Thank you again.
