Founder and CEO of CPA Department, I share tips about growing and leading small businesses.
Many accounting professionals spend significant time preparing financial statements, conducting audits and preparing tax returns. All of these activities look historically at transactions and focus on compliance requirements of the organization such as submitting financial statements to investors or filing prior year tax returns and paying taxes due.
As the profession undergoes digital transformation, traditional roles and activities of accountants must necessarily change and transform, as well. PwC conducted a survey in 2017 of digitization’s impact on financial statement audits, which found that respondents expected that between 10% and 40% of activities related to auditing will be automated by 2022. Similarly, the Journal of Accountancy published an article providing examples of the impact of robotic process automation (RPA) on tax practices and processes. One such example reported the use of RPA created time savings of 70% in filing tax return extensions. While this digital transformation saves significant time for CFOs, controllers, auditors and tax professionals, it simultaneously provides opportunities for accountants to spend that time increasing their value to their organizations and clients.
How can accounting professionals increase their value? By shifting to a future-focused mindset. While compliance requirements such as financial statement audits and tax returns take a view of transactions and business profits in hindsight, business owners, executives and operations personnel navigate the day-to-day decisions of the business with a leading mindset. They are setting a path for the future, identifying risk, calculating potential benefits and taking well-hedged bets on the path that will lead to success. I offer three ways today’s accountants can step into a future-focused mindset and partner with business owners and operational personnel to provide significant value to the leadership team.
Accountants have tremendous opportunities to strategically partner with owners, executives and operations personnel. Operational divisions are faced with tough decisions, which will impact the success of the business every day, and accountants are uniquely suited to help inform those decisions. This can be accomplished by calculating the return on investment (ROI) of an asset purchase, by considering make or buy decisions or by developing what-if scenarios to model the outcome of competing solutions or decisions. For instance, consider a delivery business such as FedEx. As trucks age and require more maintenance and repairs, accountants can significantly assist operations managers in modeling the expected cost of continuing to maintain a truck, versus the cost of buying a new truck, versus the cost of refurbishing.
As more understanding is developed between accounting and operations personnel, opportunities for more collaboration will be recognizable, and the value provided to the organization by the collaboration will be measurable.
Develop Leading Indicators
Most businesses have developed at least a few metrics of interest and track them as indicators of business performance. Many of these metrics are historical views of financial performance such as gross profit, net income, days sales outstanding or perhaps inventory turnover. However, it is also possible to identify and track leading indicators.
As accountants become more embedded with operations personnel and gain a detailed understanding of business operations, new metrics will surface. These are typically operational metrics, which I call leading indicators because they are predictors of future profitability. In the FedEx example above, two leading indicators of profitability could be the number of packages delivered and stops made each day for each truck route. By first understanding the minimum metric for profitability, and then by monitoring the metrics at the day-to-day operational level, the accountant helps the operations team understand what is required today to meet future profitability goals.
Obtain And Upskill Talent
An article by Money Inc. listed accountants as one of the most in-demand jobs of 2020. In such a competitive job market, developing a constant recruiting mindset is a first step to locating and obtaining accounting professionals. While competitors try to lure employees away from each other, investing in employees gives them a reason to stay put. Providing formal and future-focused training programs will arm current accounting employees with the upskilling needed to be successful in the digital future of the profession. This investment builds better and stronger relationships between the employee and the organization and frequently results in improved retention, a key goal of every employer requiring a skill set in high demand.