Episode 83:

Hello, and welcome to The Upstream Leader Podcast. I am excited for our conversation today. This is our first episode of the new year, we just had our recap episode—which I’m sure many of you listened to—and now we are shifting our focus toward the future and what leaders in the profession need to be thinking about for 2025. And for that conversation, I have with me the Editor in Chief of Accounting Today, Dan Hood. Dan, thanks so much for joining me today.

Thanks for having me, and Happy New Year!

Happy New Year to you as well. Alright, we are going to jump right into predictions, but before we do, everybody is going to know what I’m going for here. I’m going to ask you the same question we ask every guest when we start, and that is, how did you become the leader that you are today?

Gotcha. You know, the answer on every level, no matter how you interpret that question, the answer on every level is, by accident—not intentionally. A sort of weird career path that started in production and design, and then there was a period where production and design merged with editorial and editors were laying out magazines, and they were like, well, you can spell, you can lay out a magazine, so you can do both. And then those two things parted and I ended up sort of stuck on the editorial side, or luckily escaped to the editorial side. It was not, I didn’t, I haven’t studied journalism, wasn’t my background, and I just sort of, like I said, ended up there because I could spell and knew how to lay out a magazine.

The time when that happened was about 25, 26 years ago. I happened to be, at that point, Managing Editor of Accounting Today, and from there, rose up to become Editor in Chief, just sort of by outlasting everyone else in the publication. But now, at this point, sort of feel like, I almost know what I’m doing. I almost know what journalism is supposed to be like. I know a lot about accounting. I always like to say, I know more about accounting than anyone who isn’t an accountant should know. So, that’s sort of, like I said, sort of by accident, but ended up in a very happy place.

Well, and the fact that you know more about accounting than anyone that is not an accountant, that’s why we’ve got you here today, because I would argue you probably know more about the profession than most anybody else. And it’s because you’ve got conversations, you’ve got connections with folks from every level of the profession, stakeholders that are in the profession, outside the profession, vendors, software providers, managing partners, and everything in between.

So, let’s jump right in. As we’re thinking about this year ahead and what leaders need to be prepared for, what’s the biggest thing that you see on the horizon? I realize it’s easy to start with the biggest, but why not? What’s the biggest thing that leaders in our profession need to be ready for in ’25?

Right, I’m going to cheat a little bit on this and I’m going to say it’s the same thing they’ve needed to be prepared for, for the past several years, and it’s change. We talked to a lot of people in accounting. One of the people that we talked to as much as we can is Barry Melancon, the head of the AICPA, and he’s repeatedly said over the past three or four years, he’s made the point that the pace of change that we’re currently experiencing in every aspect of the profession is not going to get any slower, it is only going to increase. Things are only going to change at a faster pace and more broadly across the entire profession.

So, like I said, I will point out, I’ll name one or two big challenges or big things that firm leaders should be thinking about, but broadly speaking, I think being ready for change in every area of your practice, whether it’s how you serve your clients, what services you bring them, what technology you use, how you find and retain staff, how you deal with your partnership, how you structure your partnership, all those things, and a million more, the pace of change in all those areas is only going to increase and we’re only going to find change coming at us from totally unexpected directions. So, I think the need for accounting firms to develop change management and comfort with change as a sort of muscle is going to be not just the theme of next year, but the theme of every year to come until the AI singularity, when at that point, then we’ll all be freed from the everlasting round of work, either as slaves to the AI or as indolent masters living off its work.

But then, like I said, I will pick one or two big changes or big areas of change that I think accounting firm leaders, you know, so not to cheat, I’ll give you a real answer, which is that one area of change, and we do a survey every year that we call our “Year Ahead Survey,” where we literally ask accounting firms, what are you going to do next year in a bunch of different areas? Are you going to hire people? Are you going to, what are you going to do in terms of service areas? What are you going to do in terms of technology and a bunch of other areas? And one of the things, like I said, technology, we asked them, among other things, how much are you spending on technology now, and do you expect that to increase next year or not?

And in general, because we’ve asked this question for a long time, the general thing is about 50 percent of firms are prepared to spend more, expect to spend more in the coming year. And some of that’s just cycles, right? People expect to spend more on technology some years because they’re, it’s just the way their technology cycles work. So we’ve seen it be roughly 50 percent. This year, we saw 60 percent of firms saying they expect to increase their spending. And that’s unusual, mainly because, like I said, it’s been a flat, very steady 50-50, half firms not going to increase, half firms are. This year, like I said, 2025, close to two-thirds of them are expecting to. And I think some of that looks at areas like AI, artificial intelligence, what firms are expecting to do there, but also just generally a growing appreciation for the importance of technology and the variety of tools that are available to accounting firms and the need to use those to take care of, to handle things like capacity problems, right? There’s an enormous capacity problem in the profession. That’s a big issue that’s not going to go away. Technology is an area that firms are looking to for help for that. So, I think that’s going to be one of the reasons they’re spending a lot more there is to say, we’ve got to find tech solutions to our people problems. Similarly, I think we’re also going to find, this wasn’t part of the survey but I think we’re going to find more and more firms, they’ve already started to do this, but more and more firms are going to be turning to outsourcing. So, technology and change, more adoption of technology and more spending on technology is going to be a big area of change.

I think we’re going to continue to see the impact of private equity in a lot of different ways. Less in terms of people’s actual, you know, contact with private equity, though I think that will increase for more firms, but I think it’s the how that’s impacting the profession is trickling down to smaller and smaller firms in changed valuations, in changed expectations among staff, and changed expectations among M&A, potential M&A targets, right? We’re finding accounting firms who have no interest in P.E., talking to other accounting firms who have no interest in P.E., but they all have very different expectations of what the price is going to be for an accounting firm because of what P.E. is doing at the upper reaches of the profession. So that’s going to continue to be an impact.

What else is going to change? There’s so many other things I can keep going. I said, I just, I said, I just do one. And I started a list. How long, what do we have, four to five hours for this?

Yeah, yeah, yeah. That might cover a portion of it, right?

Yeah, exactly. So, sorry, yeah, let me stop there.

So, let me ask you, on the technology side, that is fascinating that you finally saw that uptick, and I’m sure that a lot of people would say, well, maybe I would expect it to be more than 50/50, but you point out, you know, but really importantly, that technology is cyclical. It’s not like you spend more every single year. You invest, you implement, you invest, you implement. There is a natural cycle to that.

As you’re thinking about, you know, technology is solving the people problem, but when I think about it through the lens of running a firm like a business, if we’re going to be increasing our investment in tech and the wide-reaching nature of that, do you expect firms are going to have to invest in more people to manage the technology side of the firm, whether it’s a CTO, a CIO, full-on in-house IT teams? Because I know for a lot of firms over the past several years, as they moved to the cloud, they were actually getting rid of maybe IT departments because they didn’t have servers on-prem and all of that, so they downsized the internal IT. Are you expecting to see a switch as firms now have to, I mean, it’s change management, it’s a lot more money invested, we’re not just going to do that on a whim. How are firms going to manage that going forward?

That’s a great question, and I think the annoying answer is to it is it depends, and it depends really on the size of the firm and the technology you’re using, right? So, if you are a larger firm or a growing firm, definitely you’re looking to, as part of your investments, you’re going to have to have those professionally managed. In some cases, that may mean, you know, an outsource provider, right? Someone who’s, you know, someone who’s managing your technology for you, hosting your tech stack, handling it for you, that kind of thing. But in some cases, it may mean bringing back some of those  people that they were happy to get rid of in the past, as they said, you said, we moved it all into the cloud, so we don’t need you here to look after the server that sits in the closet behind the lunchroom. That’s not coming back, right? The cloud is firmly established. That’s not a concern.

But I think if the type of people they might be bringing back, and again, this will be at larger firms or mid-sized and larger firms, will be people who are thinking much more strategically about technology. It will not be a help desk. It will not be a maintenance and repair. It will not be, hey, we just got to make sure our technology is implemented, and the bug patches are being installed and all that sort of stuff. It’s going to be people who are saying, okay, this is how we use the technology to enable this service line, or this is how we use the technology to handle the increased workload. They have to think and fit strategically into the plan, the growth plan of the accounting firm. So I think, yes, we’ll see some firms hiring more people like that in terms of technology, but it’ll be with that more strategic sort of CTO role, as opposed to, like I said, a help desk kind of thing, or even the CTO or chief information officer role that they might’ve filled in the past, where it was much more maintenance and upkeep sort of role—it’s going to become much more of a strategic partner.

For smaller firms, I don’t think they’ll be doing the hiring. I don’t think they’ll be needing it because they’re using, in many cases, a very different set of tools. They’re going to be investing in technology, but I think the types of tools that they’ll be investing in are going to be types of tools that are really built with their needs in mind, and when I say their needs, I mean the needs of businesses that don’t have a lot of money to spend on technology staff. And so they need tools that are much more turnkey, much easier to use. In many cases, they’ll be using AI, though I think some of the use of AI in those tools is a little premature in the sense of it’s not that much AI at this point. But we’re going to see more of those tools come up where they are turnkey, easy to use, and solve problems that are front and center for smaller firms.

Okay. That’s good to hear that, you know, firms of all sizes are going to be investing, firms of all sizes are going to be implementing tech. It’s going to look differently, and your point is well taken that those firms that are looking to grow, they’re already thinking strategically, so it makes sense then that the management around the investment in tech needs to have a strategic component to it as well, rather than a tactical implementation component. There’s probably some element of project management and all of that that comes into it, but having that strategic player at the table to help is going to be important.

Thinking about it from a small firm hat, if I put that on for a minute, it’s encouraging to hear that, hey, small firms are going to have solutions that work for them. It’s not like if I’m running a small firm that I have to be looking to invest millions, or I have to be looking to take private equity to be competitive, or that I even have to merge up to be competitive, because I can find the solutions that are going to meet my needs. So it sounds like one of the changes that maybe you’re not predicting, and not to put words in your mouth, so I’m going to ask it as a question, you’re not predicting that the smaller firms are going away. Is it more so that as firms are going to become much more fit into their markets that they’re serving, do you see any change in kind of the overall structure? I always joke that the IPA top 500 is always going to have 500.

Yeah, right.

What do you anticipate from a change  standpoint there,  as it relates to the big firms, versus the midsize, versus the small firms?

 That is  a fascinating question, and I will caveat this by saying some of this is pure prediction, pure guesswork, and we’ll see what plays out over the long term, but I think what we’re going to discover, and one of the things that goes into the difference in technology tools for small firms, is that they’re not going to get tools that will allow them to do exactly what the bigger firms do, right? The assumption, I think, is that they are serving different sets of clients with different sets of services. We may see more, a growing differentiation among small firms, midsize firms, and large firms in terms of the services they’re offering and the way they’re offering them and the clients they’re serving. You know, when you look at the Big Four firms, they don’t look like any other firms in accounting, right? They have much more in common in some cases with like a McKinsey or a giant consultancy than they do with a large accounting firm. And some of the, we’re seeing a lot more billion-dollar firms that are approaching that different model, right? It’s much, much less of a standard old-fashioned CPA firm model.

I think we’re going to see that continue in the sense of there’ll be maybe more, you know, ever more clearly delineated differentiations between the bands of accounting firms, right? That the small firms will continue to, and none of this is in any way to say that one is better than the other, or worse, right? The work that small firms are doing is critical, but they’re doing different work, right? They’re doing work for smaller businesses that have, in many cases, less complex requirements, less complex tax positions. Doesn’t mean that their compliance needs aren’t as serious or as critical or mission critical. It just means that they’re different, and who’s serving them is going to be different. So, let’s make that distinction, I would say, is the first place to start. I don’t think we’re going to lose any smaller firms. I don’t think smaller firms are going to go away. There’s always going to be small businesses, they’re always going to need help. We may see a little bit more, like I said, a little bit of a stronger delineation between small firms and large firms. They may feel less and less like part of the same profession, even though they’re all CPAs or public accountants.

I think where you see the weirdness, if I can put it that way, is in that middle band of the firms, the firms that are that midsize, they’re, you know, small firms that are growing. Are they going to become midsize and large firms? And not all of them do, not all of them want to. But it’s in that group, I think, where it really gets confusing, and I honestly don’t have strong predictions. I think it’ll be as different as every single firm amongst themselves, how much they’ll be like a large firm and how much they’ll remain like a small firm will in many cases, depend on their appetite for growth, their ambitions, whether they want to become a larger firm. In some cases, we’re seeing not a huge number of firms, but I think it’s beginning to happen, we’re seeing firms embracing that sort of the lifestyle firm model, where it’s, I don’t need to become huge. I don’t need to constantly grow 10 percent or 15 percent a year. I need to produce a comfortable life for myself and my staff and my family and serve my clients well, but I don’t need to be hugely ambitious. So, I think we’re going to see in that middle band more and more firms sort of, not to say taking that on or anything, but just being different.

And that takes us back to sort of the original question of what does it look like for them? And I think that’s interesting in the sense of, there’s a lot of decisions they’ll be needing to make to determine whether they want to become big. To go to the original question, right, of you said there’ll always be an IPA Top 500. I think that’s 100 percent true. We’re definitely continuing to see firm formation, you know, at the small levels. That’s tough to track, and we’re not good at it, but my impression of it is that we’re seeing, continuing to see more and more new firms pop up so that they’ll rise to the size of, you know, the IPA 500. The lower threshold of that may get a little lower, right, as more of those firms are snatched up by P.E. firms or accounting firms looking to grow. So we may find some fluctuation where, you know, the lower level of the IPA 500 may drop or rise a little bit from year to year more perhaps than it has in the past as P.E. firms and other large accounting firms sort of go through there and hoover up more firms or fewer firms. But I think we’ll continue to see a sort of regular growth of firm formation from, you know, small firms rising up. And then, like I said, I think we’ll see this weird patch in the middle where we’ll see more people in the middle deciding to stay in the middle, or deciding to rise out of the middle much more quickly.

Yeah. And when I think about that middle band, Dan, to me, I’ve described it two different ways in the past. One, it’s kind of like adolescence. Everything’s changing and it’s all really awkward, and you’re not really sure what to do next. To me, that’s kind of what it is. It’s one of those where at the same time, you’ve almost got an identity crisis, because you can’t be that small firm anymore if you want to keep growing, but you can’t—you’re not fully yet a big firm, so you can’t operate fully like that, so you’re in that middle to where I find it, anyway, it’s really hard for partners to make that decision of what firm do they want to be because in a lot of situations, if you’re a leader in one of those midsize firms that’s in that identity crisis mode, you may be having to make the decision that we want to go serve clients that don’t look anything like our current clients, and that’s scary.

Yep. That’s awesome. We focus a lot on that group of firms, but I never really thought of them as, right, as teenagers, as awkward adolescents. That’s a fantastic description of them.

And it’s not a negative by any stretch.

No, no, no, no.

It’s just that awkward, yeah, it’s all changing.

Your body is changing. It’s beautiful, but no. But it is absolutely, and it requires all of these changes, and we talked earlier about the range of changes that are happening around accounting firms is enormous and it’s always been enormous for this group of firms because as you go from the group of three, four, five, even in some cases up to ten partners all sharing a roof, but really just partners sharing a roof, sharing overhead, and not really a full-fledged operating together kind of firm, to move to that next level is so awkward and so complicated and involves so much emotion, right? So many slammed doors and people crying on their beds and saying how much they hate their parents and no one understands them. But, you know, it’s these awkward things where partners have to realize that they may have to give up control. They may have to give up independence. They have to be accountable to other people.

And then, you know, we talked earlier about hiring a CTO or hiring a professional to handle some aspects of the firm. That’s awkward in the fact that, you know, my suspicion is always that most firms that eventually make the decision to hire an HR person, or a marketing person, or a tech person are probably doing it six months later than they should, right? They should have done it six months ago for real success, but making all of those decisions is difficult, not least because it involves giving up control or giving up some freedom or independence, but also because it involves money, right? And it’s going to come out of somebody’s pocket, right? If we’re going to hire a marketing director, all of us are taking some portion of their salary less home. That’s not, that’s terrible grammar, but you know what I mean.

I know what you mean.

That salary is coming out of my pocket. So it is a long series of awkward conversations. That is absolutely, I can’t get over it. I love it. Absolutely, the best metaphor for it is adolescence. That’s great.

Oh, thank you.

And then, except for the possibility that some firms can very comfortably stay in that stage, like I said, just say, you know, we’re not going to get any bigger. That’s fine. As long as we continue to, you know, there are some things you have to do to maintain the ongoing viability.

Gotta have sustainability, yep.

But you can do that without having to go through a lot of the awkwardness. It’s only if you want to grow. And the worst position of all is to sort of not make any decision at all, right? To say, yeah, we’ll just muddle along this way. Yeah, we could get better, but it’s awkward, no,  I don’t want to do it. If you’re comfortable in saying this is a lifestyle, this is where we are. We don’t expect to do any more other than, like we said, there’s sustainability stuff. That’s great. And if you decide to charge ahead and grow, as long as you’re thinking about the changes you need to make, that’s awesome too. Maybe some awkwardness, but less awkwardness than just sort of staying without making a decision.

Yeah, you’ve got to have a purpose as to what you want to be. I tell firms regularly, I think you should run it like a business, like you said. If it’s just people sharing a roof, we’re not running a business. But if you think about it like you’re running a $20 million company, you approach decision-making differently. But at the end of the day, it’s your firm, it’s your firm, you run it the way that you want to run it, but be intentional with what you do. Don’t just leave it to chance.

I want to dive into the private equity side just a little bit. You said that we’re going to see the impact of private equity is obviously going to continue. That’s going to be one of the changes. What are some of the impacts that you expect for firms that don’t take on private equity? What changes do they need to be ready for? Because I would imagine, as a leader, I’m sitting here thinking, well, I’m not taking private equity. I don’t really have to worry about those changes, but I don’t believe that to be true. If every firm in our profession is feeling the change that’s coming from private equity. What are some of the changes that you think leaders need to prepare for, even if they’re in a firm that says we are fiercely independent, we’re not merging, we’re not being acquired, we’re not taking private equity, we’re charging on forward—what do they need to be ready for?

Right. Absolutely. And then I think, in fact, the firms that are fiercely independent, that have made that conscious, intentional choice, particularly if they are above a certain size, are probably the ones that are feeling this the worst. But I think, you know, they’re feeling these ramifications in a bunch of different areas. Let’s start with, I mentioned valuations, right? If you’re looking to go out and acquire other firms, it’s a lot more expensive than it used to be, and you have to bring cash, which you used to be able to just bring partnership, you know, earn-outs, you can become a partner with us. But now you gotta bring cash. So that’s if you’re looking to acquire anybody, you got to bring that.

That cycle of, if you’re involved in M&A or interested in M&A, that cycle has gone much, much faster, is now spinning much faster. You know, we’re talking to some of the firms we talk to that have taken P.E. money, have accelerated their M&A strategies three, four, five-fold. They were intending to do ten deals in three years, and they did it in six months. And we’re going to see a lot more of that because that money is coming in and that’s one of the big things that they’re spending that P.E. money on, is acquisition. So it’s driving up the prices, it’s also speeding up the cycle, you don’t have as much time to have long drawn-out conversations to make your case for why as a firm that doesn’t have P.E. backing, they should still talk to you. So that’s one aspect of it and it’s, the number of firms that are involved in M&A isn’t that huge. I mean, I think we ask, how many firms do you, how many of you expect to be involved in, it’s like 15 percent say they expect to be involved. Most of them do say they expect to be involved as an acquirer and I’m kind of like, well, if all of you expect to be involved in deals and all of you expect to be acquirers, who’s going to be acquired?

Funny how that works.

Yeah, I don’t know if it’s survey methodology or delusion, but one way or another, that’s one aspect of what that M&A frenzy has been going on for, we ran out of ways to say M&A frenzy, not kidding, 15 years ago, because there had been 10 years, starting in the late 90s, of non-stop M&A activity in the accounting profession. It continues through from late 1998 through now, and it’s only getting more frenzied with the introduction of P.E.

What that does, it means that you are likely to face larger and better capitalized competitors much more quickly than you used to, right? And they are coming to every part of the country. They are, one of the things they’re doing, is expanding their geographies. So even if you’re in the smallest, most out of the way part of the country, we’re going to find more and more that the competition is seeking you out. It’s got a lot more money behind it. It’s got a lot more technology behind it. It can find you wherever you are and compete with you. I mean, it’s not as personalized as that. They’re not literally hunting you down, but firms should be expecting to see larger firms maybe coming in and competing with them, and at an even faster pace than even in the years before when M&A was still a big operator.

It’s also going to change salaries. Salaries across the profession are going to rise. Young partners are going to expect more. They are hearing about P.E. deals that involve equity and involve, you know, more multiple bites at the apple is the sort of phrase everyone uses, which makes sense. That means, you know, just the opportunity to get money out of the firm now, and in five years, and in 10 years, and you know, much earlier in your career than in the past. But also, generally speaking, accounting salaries, and this is a trend that’s true not just because of P.E., but because of a bunch of other things, accounting salaries are going to increase. Not only is it going to remain hard to find staff, but you’re going to have to pay more for them. And again, part of that is P.E., part of that is just trends in the profession. We’re kind of young accountants in particular, you know, entry level and right after entry level are woefully underpaid compared with other professions, which is one of the reasons why it’s hard to find them because it’s interesting. If you pay less than other areas, you will attract fewer people.

Which is different than it used to be.

Yeah.

I remember, you know, going through college and you wanted to go into accounting because it was one of the best paying. They paid for internships. They had all the things. And now here we are having these conversations several years later, and it’s not the highest paid, and in fact, it’s a deterrent.

Right. And some of that, I think, is part of the broader story of the staffing crisis in accounting, which is that two or three industries have popped up and expanded enormously—either come of age entirely new or just expanded entirely. And it’s technology and finance. Since the 90s, technology has become a whole branch of, you know, in a way that it wasn’t really before the 90s, before the dot com, the rise of the internet and so on. Technology has become a huge competitor for talent. And then finance has expanded enormously. It’s one of those, it’s sort of, I don’t call it the secret story, but sort of the underlying things, that when you actually look at how much money is involved in finance, how much economic activity is involved in the financial sector. It’s grown hugely over the course of the 90s and continues to go enormously today. So, it’s sucking in far more people than it used to even, you know, not like it was ever small before, but it’s just become a huge competitor, and they are all paying enormous amounts. So, accounting used to be okay, but it just didn’t keep up with their competition. So, we’re going to see that’s going to be, continue to be a problem, right? It’s not just going to be, it’s hard to find people. It’s going to be that they’re going to be asking and expecting much more.

Yeah. So in that regard, so that’s one way to perhaps solve a bit of the talent issue—that doesn’t fully solve the pipeline, simply paying more. And there are a lot of things that leaders won’t be able to individually necessarily have a significant impact on, right? So let’s take the 150-hour rule and the CPA exam off the table, even though those are everybody’s favorite talking points on this. What can leaders do in the next year, in your mind, Dan, to improve success in the recruiting space?

And maybe I should change that question a little bit, because I’ve had a few firms here recently, they’ve said that they are, what’s the phrase that we settled on, “overstaffed but under capacity.” Meaning that they’ve got people, but they don’t have them in the right spots. So, from your view, what are you seeing that leaders are going to need to do in the next year to really solve that, to draw the people that they need in the firm back into public accounting? We can pay them more. What else can leaders do to actually help in this regard from your viewpoint?

I’m going to answer a different question first and then I’ll answer that question, but it’s related. I think one of the things is that they cannot—because there is stuff that they can do and that they need to do in the next year—but then I think that there’s stuff they need to do in the next year that won’t pay off for five years. And that’s, you know, every firm and every accountant can play a role in filling the pipeline, right? Going to elementary schools, going to high schools, going to colleges, your state society, your local state society will help you find places where you can go and talk to young people and get them excited about accounting. They will not show up, obviously, because they’ve got to go to college, and you know, they won’t show up for five or six years. But if you don’t do it now, they’re not here now. And if you don’t do that recruiting stuff now, they won’t be here in five years either. So you have to do that now, right? It’s the old, “Best time to plant a tree is 20 years ago.”

“Next best time is today.”

Right. So they need to start doing that, right? They can’t put that off unless they’re expecting to retire in the next five years, in which case they don’t care. I don’t blame them. But what they should be looking at in terms of this year, as you say, they may have a lot of people. But are they the right people or are they in the right places? And I think one of the things a lot of firms are going to be needing to do is very carefully dividing out the work that everybody in their firm does, and figuring out who needs to do this? Do we actually need a CPA to do this? Do we actually need an accountant to do this? You know, CAS, Client Accounting, Client Advisory Services, however you want to break that acronym down, has, I think, got a lot of firms thinking smartly about this. And I hope that the trend sort of expands out to the rest of firms, which is thinking about when you offer a service, what does your team need to look like? Does one person need to do this, or can different people provide different aspects of this?

So, you know, from a CAS lens, just as an example, if you’re looking at what you’re offering through a CAS service, you’ve got some that’s doing just the basic back-office compliance work. Some people are doing the analysis work and some people are doing the talk-to-the-client work. Not all of those people need to be CPAs or accountants, right? In some cases, you may be better off hiring, the example people always give is, you know, hire a theater major for someone who can talk to clients. You can teach them what metrics matter and how to have a valuable advisory conversation, but you want someone who’s comfortable talking to clients. Now, maybe that’s not the right, maybe you want them to be the advisory person, maybe you want to be the team liaison, the person who is coordinating between the back-office compliance worker, who you may want to have be a CPA, particularly if there’s some technical issues that need to be addressed, and the client who may not be comfortable talking with someone who’s deeply technical and only speaks in code sections, and I don’t understand them, and I don’t know what that means. Can you get someone here who does understand it? That doesn’t need to be an accountant.

So I think firms in all cases need to be looking at all the things they do and very carefully dividing out tasks from roles and saying, we have to get the tasks done. We don’t necessarily have to have these roles. Which isn’t to say we want to get rid of all the accountants, but to say that you have fewer accountants. So you want to make sure that they’re only doing the work that you need an accountant to do or that only an accountant can do. And can you find other people who can do the other stuff, chasing down bills, chasing down invoices, chasing down information, right? Client documents and stuff like that. None of that should be done by a CPA, and none of that needs to be done by a CPA. So I think that’s one thing that firms need to be doing.

They probably also need to be looking at technology and outsourcing. We mentioned both of those. I mean, those are kind of cheats, right? It’s like, how do you fill the people problem? Well, don’t look for people, find other things, right? I think that’s all, you know, there’s this sort of, there’s a great program called the anticipatory account that used to be run, I think it’s still done out of the Massachusetts Association of CPAs. And the thing was, you can, to a certain extent, predict the future, and you can also skip problems or skip questions. If your question is, how do I find people? We’ll say, well, don’t find people. Look at what you need the people for, and figure out ways around that. So if I can’t find enough accountants, okay, we’ll find, is there stuff I’m asking accountants to do that doesn’t need an accountant for? And again, if I’m looking for a person for this, do I need a person for it? Can it be done by a machine or an outsourced, you know, someone who’s not here in the U.S.? So I think a lot of that sort of breaking stuff down is an important thing for firms to do.

So, do you believe that ’25 may be the year that we perhaps attack the status quo more than ever before? I know you mentioned Barry Melancon said the pace of change will never be slower than it is today, right? It’s just going to keep speeding up. Do you think it’s not just change with new things but the change that’s necessary in the coming year is more of a really hard look at the status quo, and what have we been doing the same for the last 40 years that we’ve got to change in the next 12 months?

I would ordinarily say yes, but I think it’s foolish to underestimate the capacity of the accounting profession to resist change. There really, it’s a core competency. And that’s terrible. That’s a bad way to put it. Because accountants actually, and it’s not fair, accountants do change a lot.

We’re good at change.

Yeah, they may, I mean, when you think of the regulatory changes thrown at accountants on a regular basis, the tax legislation that comes out every year, the accounting standards that come out, and the ability of the profession to digest that change and turn it into something meaningful and something they can explain to accountants is enormous and totally worth recognizing and highlighting. So, I always try to do that because then I say, but for the rest of what accountants do, they don’t change at all, and they don’t like it. And it’s astonishing given how good they are at that change, they could be really good at other change.

And I would say that I think that the change is going to be spread over three or four or five years, because most changes in the profession are spread over three or four or five years, if not more, so there should be a lot of big changes happening in 2025, but instead what will happen is there’ll be a lot of big changes between 2025 and 2028 or 2029. You know, the only time we really saw huge, quick change in the accounting profession was, you know, during COVID, when everybody saw a huge, quick change, and that was a tremendous success, right? Accountants adapted to that enormously well. And then Sarbanes Oxley, which was, you know, outside imposed, but again, the profession rose to that, changed, adapted very quickly and made it happen.

Well, and I was going to say, building on that, Dan, that to me, there’s two types of change, and we’re really good at one and very resistant to the other. We are great at required change. And that’s what the regulatory change, the pandemic, Sarbanes Oxley—we didn’t have a choice. We had to change, and you know what? We do it really well. Like you said, we get regulatory changes every single year. Some firms have figured out how to turn that into, I mean, that’s a great opportunity. Regulatory changes mean you need to use us for more than you needed to use us for last year, so, hey, let’s turn that into an economic opportunity. We’re great, I believe, as a profession, we are phenomenal at change when it’s required.

Where we really struggle, and I don’t believe that it’s just an accounting profession thing, I think it’s a human nature, we’re not great at change when it’s optional. And arguably, these changes that you’re talking about, are they coming? Are we going to feel them? Yes, but the firms that get ahead of them are going to be the firms that are willing to change when they don’t have to, when it’s still optional, and it’s going to feel like we’re working harder than everybody else, because we’re doing things differently than everybody else. But to your point, if it’s going to go from ’25 to ’28 and you think, I don’t really, maybe, maybe I’ll just start in ’28. Well, that’s great. But now you’re going to ’31. It’s not like it necessarily gets shorter until it becomes non-optional, and then it’s catch-up, and then it’s reactive, and you don’t actually get a say in how it plays out, unfortunately. So I would love to see our profession get better at optional change. And that to me might set firms apart.

Well, then, that’s the thing, is there are firms that, as you say, they’re doing that. It feels like they’re working harder. It feels like they’re ahead. There are firms that are making the optional changes in different areas. So, you know, not every firm is making all the optional changes and that’s, I think it’s worth repeating: the optional changes are in like 17 different areas of your profession, everything from, you know, whether you hire remote workers to how you do your marketing, to how you incorporate AI into all your services, etc., etc., etc. But there are firms that are good at getting out ahead of those changes and taking advantage of them often in particular areas, you know, you see there, I can list a handful of firms that are fantastic at getting ahead of technology that are really groundbreaking in use of technology and bringing it to their clients. They would be great if more firms were like, yeah, I’m gonna be an early adopter. Not necessarily bleeding-edge, but maybe cutting-edge.

Yeah, I don’t know that, we don’t like the bleeding edge as a profession, I don’t feel like. I know a lot of firms, we’d prefer to just, a lot of firms that I talk to, it’s like, if we could just be behind the edge, just a little bit, we’d feel a lot more comfortable with it, right? We don’t want to be behind the knife, but I’d like to be behind the edge just a little bit to make sure that everything’s figured out.

Let me ask you a question as we, we’re going to get ready to conclude here, but those firms that are leading the way in technology and other changes that you see, knowing that you talk to a lot of firms, is it fair to say that those firms look at change as a continuous process? Yes, there’s a definitive start and end with each change, but they’re never not changing. They have got this continuous process that focuses on what’s the next right change, and how do we execute it well, rather than seeing it as, alright, this year we’ve got to change. I guess we’ll do it. Is that fair?

Absolutely, 100%. And I think the thing is that for a lot of firms, they look at whatever the next change is, and they say, okay, if I can just get through that, then I’m done. They don’t realize that behind that change is another change, and there’s another change, and then there’s another change. And as you say, the firms that are out there are fully aware that change is a series of waves. It’s not one big wave that you have to get over, it’s a series of waves. It’s just a great big ocean, and it’s going to keep coming forever. Now that can be kind of scary, but if you’re good at it then suddenly it becomes a differentiator.

Now I will say, one thing I would say is that there are firms that are prepared for that change and for that series of changes, but they may be prepared in one narrow area. You know, so for instance, firms that are really good at technology are totally prepared for oncoming waves of technology. They may get a little blindsided by demographic changes or marketing changes or something like that—or they may not. I’m not saying that it’s a necessary thing. But the point being you can be specialized for change in particular areas. Some firms have a great culture for social change, and by social change, I’m talking about things like dress for your day and those kinds of cultural changes. Cultural changes is probably a better phrase to put on it. Doesn’t mean they’re necessarily great at adopting new technologies, but they’re really good at adapting to workforce trends. So, I think that’s totally true that the firms that get it, get that it’s an ongoing process forever, but they may only get it in one or two narrow areas of change.

Yeah. Okay. No, that’s very helpful.  Well, Dan, as we, kind of conclude the episode here, any other quick hit predictions, rapid fire, things that you see on the horizon in ’25 that you’re hearing from the conversations that you’re having that you think are likely to get missed in maybe the mainstream, because it doesn’t rise to the level of say tech or private equity or, you know, kind of those flashier topics. Are there four or five areas just in a quick hit fashion that you think leaders need to be prepared for in 2025 that they may otherwise miss? 

God, how much time do we have? Like I said, there’s changes in every single area. I would say, you just want, just because I was thinking about this recently, one big area for this year is going to be tax changes. We’re all looking ahead to what happens with the Tax Cuts and Jobs Act,  but again, that goes to, that’s that core competency of the profession. Everybody knows that’s coming, so accountants in particular are aware of that. I would say we’re going to be surprised by the rapid advance of AI. More surprised than we expected to be, we expect it to be fast. I think that’s going to be, it’s an area of people everybody knows to be aware of, but again, I think you can’t stress enough how quickly things are going to change. I think we’re going to find that becoming more and more of a security issue that I think people are necessarily thinking of right now. I was talking yesterday with some people that were talking about the capacity for using AI to game an audit. You know, in the sense of, well, we’re used to thinking of two sets of books, well, if you’ve got AI, you can have 10 sets of books. You can just say, hey, give me a set of books that will pass this auditor’s favorite inquisitive tool, right? We know their tool looks for these kinds of outliers. Give me a set of books that doesn’t have any of those outliers, but that covers up this shenanigans that I’m doing or whatever it may be. So I was thinking, the risk there is probably going to be bigger than we expect and come faster, though I think everyone’s aware of AI, but I think those risks are going to pop up more quickly than we might expect.

What else? You know, it’s interesting, there are a lot of other changes and I’m trying to think of ones we haven’t touched on. You know, I think we alluded to a lot of them. And I don’t think—this goes back to our talk about accountants and their comfort with change—I don’t think there’s a lot of areas of change that people aren’t aware of. It’s a question of whether they’re prepared to adapt to them now, or they’re going to wait. And just briefly, I know we’re short for time, but you were talking about, you know, firms not wanting to be on the cutting edge or the bleeding edge, but a little bit behind that. And we find the firms that get onto our best firms for technology list routinely say that, say, we don’t want to be on the cutting edge, we don’t want to be on the bleeding edge, definitely. Unless they’re super tech focused. They say we don’t want to be there, we want to be a little bit behind. We want to pick and choose the changes we make. We want to be ahead of those changes, but we want to pick and choose them. We want to be able to look and say, that’s a change we don’t need to make. This is a change we do need to make. And I think that’s going to be the, one of the big differentiators is the firms that can make those choices, more intelligently and more quickly and more ahead of other firms. That’s the  skillset to develop for the coming year. 

Okay. Which goes back to that conversation around strategy. Gotta think about it like a business and have that strategic plan and how does technology fit into it.

So, Dan, this has been an incredibly insightful and fun conversation. Any resources? Obviously, folks can find you at Accounting Today. What resources do you think leaders need to be looking at for the coming year? Anything you’d recommend, whether it’s a book, a website, a TED Talk, just anything that you’re thinking that would be key for leaders?

I always, I, you know, one of the things I would say is, is wherever possible, get out for face to face meetings. Podcasts like this are awesome. There’s a million publications. There’s a million blogs that are all great. I can’t recommend all of them enough. But I really think that one of the best things accountants can do is get out in person to talk to other accountants. And it’s not that there isn’t value in the virtual, because I love that as well, but I think the more I go to accounting conferences and see accountants talking amongst themselves and sharing—because they do share stuff they shouldn’t be sharing, right? That in any other profession would be considered proprietary information, they’re happy to share it with their fellow CPAs, fellow accountants.

I think you don’t necessarily need to go to every single conference, but I would say, you know, find two conferences a year that you get value out of. Maybe it’s one’s a smaller local conference, maybe one’s a larger, more technical conference, or one’s an industry conference, whatever the case may be. Getting out there and talking with other accountants, face-to-face, in small groups is, I think, super valuable. And I think there’ll be a lot more accountants could profit from.

I appreciate that. Thank you for that, Dan. And thank you for joining me today. Hopefully, this won’t be our last conversation on the podcast. Perhaps we’ll check in midway through the year and see how the year is going, what predictions may have changed, but thank you so much for. Joining me today on The Upstream Leader.

Thanks for having me! It was great.