What will a return to normal in the tax & accounting industry mean for pandemic-fueled changes to work process?
In 2021, tax professionals are expecting to return to a more normal working environment and refocusing on some of the strategic priorities they had in mind for 2020, including improving client interactions, work processes, and efficiency both with on-site and remote staff, according to Thomson Reuters’ new report Insights for Tax Professionals 2021.
Post-pandemic opportunities in 2021
As such, the biggest opportunities for accounting firms in 2021 are likely to be found in improving their work practices while continuing to make investments in technology that drive efficiency, according to the report. Some of the key findings in the report include:
Greater use of technology — The overnight change that pushed tax and accounting professionals into remote working forced an acceleration in the use of technology. More than 40% of tax professionals surveyed in the report talked about how technology has become an urgent requirement for those firms that hadn’t sufficiently invested until now.
Remote working — The pandemic also ensured that performing key work activities outside of the office is more widely accepted and is here to stay. Of those professionals who have been remote working most of the time, 38% feel their working practices have improved, and 47% feel a positive impact on their well-being, the report noted.
What is interesting is that less than half (43%) of survey participants said they were working remotely at the peak of the pandemic, which means that 57% did not face any workplace change from the pandemic. More specifically, the top three priorities cited by professionals before the pandemic — driving efficiency, hiring talent, and growing the business — are less important for accounting firms today than they were in 2020, suggesting that just keeping the business afloat and sustainable is top-of-mind, yet could present one of the biggest long-term risks to the future success of firms amid the likely acceleration of ongoing disruptive trends on the horizon such as automation and AI.
Inaction as the biggest threat
Indeed, the report notes that such inaction is a choice; and unfortunately, it appears to be the future operations strategy for many firms, despite continued disruptive trends, the need for accountants to diversify their skillset, and the expected onslaught of retirement of many senior firm leaders — in fact, as much as 75% percent — within the next 5 to 15 years.
In fact, 54% of survey participants indicate that work practices had been much the same in 2020 throughout the pandemic, and 11% say they expected no lasting positive change as the result of the pandemic, according to the survey. This risk of choosing the status quo is further underscored by the fact that only 1-in-10 firms say they are looking to hire more tech or analyst support.
The short-term reduction of investment in efficiency, talent, and growth is likely to be detrimental over the next 3-to-4 year time horizon, especially as the disruptive trends of increasing technology and lagging skills gap continue to plague the tax and accounting industry.
You can download a copy of the report, Insights for Tax Professionals 2021 here.
The report points out several other challenges the industry is likely to face in 2021 and beyond:
Skills gap widening — The disparity in key skills is well known and has been discussed for more than five years within the industry. A study by Caseware revealed that 62% of respondents said there is “significant skills gap” within the industry in 2020, up from 51% in 2016. The industry is responding with major changes to the CPA exam coming in 2024, with the requirement to demonstrate skills and knowledge in one of the following three areas: i) tax compliance and planning; ii) business reporting and analysis; or iii) information systems and controls. These new requirements are anticipated to meet the demand for entry-level CPAs to perform work that requires deeper critical thinking, problem-solving, and professional judgment.
Client expectations evolving — Changes in client expectations are also accelerating. According to the report, 95% of tax professionals agree that their clients now want business advice from their tax advisors.
Threats of talent disinvestment — What may save accounting firms in the short term is the loyalty of accounting professionals, but is a risky proposition when you look at broader employment trends and ideal workplaces for younger professionals. The average tenure at the typical tax and accounting firm was 17 years, and only 15% might consider leaving their current employer, according to the report. This is in contrast to data from the U.S. Department of Labor’s Bureau of Labor Statistics that shows the average tenure at a job is 3.9 years. This insular longevity, however, is likely to end given the larger trends of Millennials and Gen Z employer preferences, which include seeking opportunities to learn and grow, desiring higher quality managers, finding purpose in their work, and having opportunities for advancement, overall compensation, and work-life flexibility.
To remain competitive and ensure that firms are around for the next generation, professional services advisors require effective support from their firms in order to continually develop and improve their skills and education throughout their careers. To provide the best possible service to clients, tax advisors need to deliver on client expectations, no matter at which level the client is paying — and more, in order to engender loyalty.
Finally, survey respondents were asked, within four categories, to share what they felt was most needed in terms of support to be able to operate at the highest level. There top responses included:
- People — Talent development should occur through continual education, combined with coaching and mentoring with on-the-job experience. Client communication and empathy were identified as the key competencies.
- Structure — Transparency in structure, clearly delineated career paths, available feedback, and mentoring opportunities were cited as factors that will enable people to progress in their careers.
- Leadership — The core strengths of flexibility, concern for employees, and adaptation to new market dynamics were cited as the most important leadership qualities.
Tax firm leaders’ preference for the status quo is a risky proposition. Tax professionals, according to the report, like to feel informed, involved, and even consulted. They also like to be recognized for their contribution.
Effective talent management really is the most important job for a professional services firm leader, and those leaders who don’t buy into more modern ways of working — such as investing in technology or streamlining work processes — are putting their future success, and their own legacy, at risk.