Based on LinkedIn discussion, posted by Chip Cutter.
Recently on LinkedIn, there was an interview with Ron Baker, the founder of the VeraSage Institute, where he stated that the accounting industry is heading toward a state of irrelevancy. Baker claimed that accountants are “high-priced bookkeepers… they’re historians with bad memories.” Additionally, he complained that, “they’re doing very low-level work and then they sit around and complain and moan that it’s a commodity.” He continued on to question their morale regarding terms & fees, and declared that they cannot possibly be independent when they are paid by the companies they audit. This obviously caused quite a stir.
Although some respondents did agree with Baker, just as many fervently differed from his point of view.
Accounting, as a profession, is not becoming irrelevant. Businesses need to be able to look back and analyze past records in order to understand the possible consequences of their present/ future endeavors. In order to determine these consequences, they need accountants to look back and identify what trends were most profitable, and what trends were least profitable. Someone commented that having an accountant run a company is like trying to drive a car looking through the back window. Well, trying to run a company without an accountant is like trying to change lanes without looking in the rear-view mirror; it might turn out okay, but if you don’t look back to see what could happen, you may have problems you could have avoided. Accountants have the ability to harness past information and guide current endeavors of a company in the most efficient way. They have the training to identify past trends and their results, in efforts to avoid the bad decisions and build on the good ones.
Additionally, what other professional is supposed focus on legal compliance, trends, preparing budgets and so on? An accountant’s main function is to maintain a company’s legal compliance, and to keep management well-informed of a company’s financial state. Accountants, when used properly, function as guides to continuously improve an organization’s profitability, and without them, business’s would be more likely to cycle bad decisions again and again.
To read Chip Cutter’s discussion on LinkedIn, click here.
Accounting being a business language will exist till business lasts in this world and will never end therefore. Hence accountants who perform accounting function will also exist. Accountants cant’ be separated from business, business cant’ speak, walk, move and express without them.
Posted by Ashutosh Gupta
I think accountants are necessary and should be used. If you want to make sure that your taxes are done right and that you get the most money back possible you cant count on software.
Posted by Steven Pickett
Posted by Rich Waksman
RE accountants, what are we talking about… CPA’s, EA’s, general accounts (with or without degrees) or bean-counters with 10-key proficiencies? Individuals or groups?
From my experience, in larger corps I have worked with them, especially setting up new corporations and small businesses…or accounting departments; and as stated “An accountant’s main function is to maintain a company’s legal compliance”, and I would add organizational skills within accounting and accountability.
Here’s one of my issues: Like attorney’s, accountants have a tenancy to over step their expertise, especially at the operational level. Both are willing to give their opinion. The problem, they are only looking at an issue from their area of expertise, not that of a general manager’s, or operational manager’s point of view. For the most part “they” don’t have a clue in how to run a business. Example: I had the CPA list the outstanding bills and bring them to me to be paid, in a casino that I was the general manager. The CPA, was not aware of the marketing plan, the priorities, or the direction I wanted to take the casino. I had to prioritize what and when the bills should be paid. I knew, as an example that I needed extra money next month for new marketing, therefore I kept an extra reserve for that up coming expense, instead of spending all of our reserves for the current bills, which I could put off paying i.e. net 30-40-60-days. Also, depreciation is not a real expense on the operating expenses. It’s good for tax purposes…but I can’t use it as an operations manager…was always a dispute with the accountant. They always have an eye open towards tax-preparation. This principle applies to attorney’s too. They have a tenancy to give their opinions…in areas where they have no expertise. And yes, we need them and their expertise…their expertise…otherwise stop mudding-up the water with your lay-opinion.
Posted by Ray Smallfields
Accountants can play a role in reviewing the control mechanisms within a company’s ERP system. A good running ERP system does eliminate much of the traditional work of a staff accountant. Data is entered at the lowest transactional level, never needed to be touch again until it is in the ledger and ready to be consolidated with other data and published in summary form in the financial statements. An accountant needs then to understand the source of the information to ask relevant questions, but does none of the recording.
Posted by Tom Teune
Hi Ren, I too appreciate your comment, however, it may be a bit bias, since you are a CPA. But, it appears from your profile that you are more than a CPA with your experience as a CFO and a teacher. You personally may be the exception to the rule. Your position of “poor communications”…we may agree. It has been my experience that accountant-types are not good communicators. There is a major difference in training and focus, including personality-types between the two disciplines. Mediation, I have been in several mediations-negotiations, and use accountants where needed for numbers, trends, and comparisons. Not for communications. And I do have a degree in mediation…which again is a complete different discipline than accounting. Now, since you personally have been a CFO, communications with the CEO, the Board, the Operation’s Manager, etc., is again completely different that “just being an accountant”. Politics play a major role along with communications as a CFO; there we would agree. On the other hand, generally speaking, accountants do not know how to run a business…just like attorney’s don’t have a clue how to either. One last thought, CEO’s, General Managers, Operation Managers run businesses with business goals; the accountant (s) only know accounting goals usually focused toward tax goals..,and the accountant doesn’t know the “How to” to reach the business goals or run a business. They do help the “Business Manager” by achieving their “accounting goals” as established by the CEO, the Board, or the General Manager.
Posted by Ray Smallsfield
One of the reasons I finally became an accountant was the fact we are the centre of business from decision making, monitoring, strategy, funding and investment. Even the most sophisticated entrepreneur pause and run ideas by the accountant because they have already lost there money on a bad deals.
Posted by Richard Sheridan
I agree that accountants are definitely not becoming irrelevant but on the contrary, they are becoming very relevant. Most businessmen and businesses at large want to put focus on their products, they want to specialize in areas of their expertise, so what they need is someone else to handle their compliance to the statutory laws, work out their taxes, help in objectively preparing budgets and the likes, things that they don’t want to take too much time learning in details as they have other areas of focus. so, if you asked me, accountants are becoming increasingly relevant.
Posted by Dorcas Nangekhe
Charlie Munger, business partner of Warren Buffett once said: “You have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization. …double entry bookkeeping was a hell of an invention.”
It is always up to the accountant go get the maximum from his/her role and become a good steward of the assets & liabilities of the company. This is, I belive, the primarly essence of her/his profession.
Posted by Akos Melecske
Accounting nowadays is not confined merely to book-keeping, recording and reporting but also extended to advanced level of accounts analysis, costing, financial planning and management, tax-planning and management, auditing/attestation work and even to non-finance information processing in the business sense, virtually MANAGEMENT ACCOUNTANCY.
Management Accountancy does not only cover Financial Accounting but also Cost Accounting, Social Accounting and Environmental Accounting, etc. for various stake-holders of the economy with a feasible combination of financial and non-financial information, analysis, reporting and decision-making base not only on past data/trend analysis but with a proactive approach in view of advanced management accounting tools and techniques such as ABC/M, Target Costing, TQM, Value Added Analysis…etc……till money, economy..business….survives accounting and accountant will survive…
Posted by Ashutosh Gupta
Decided to check on Mr. Baker’s background. Looks like he has an accounting degree and less than three years experience (all with a Big 4 firm) and then a 12 year gap before founding VeraSage. Hard to say if he is just spouting off or if it is educated opinion. I don’t agree with the premise that accountants are becoming irrelevant. Are their roles changing? Of course they are. I could just as easily say that management consultants are becoming irrelevant or that they are a dime a dozen and it wouldn’t be any more credible than his statement.
Ultimately though there is going to be someone in the role defined as “accountant” that will be preparing the financial statements, paying the bills, making the payroll and collecting from customers in order for business to run as it should. And that isn’t even mentioning those with specialties in tax, cost accounting, audit and other areas.
Posted by Brad Merrill
I can never see an accountant becoming irrelevant…especially a good one who just doesn’t know how to “post numbers” but also has a good sense of how things are and how they “should” be. That isn’t something you can use a software program for. It’s the intuitiveness that you get from a well trained accountant who is good at what he does that makes the difference between a thriving and barely surviving business.
Posted by Anthony Didato
Wasn’t lack or slack accounting what got Groupon into trouble? Is the government going to stop collecting taxes? Will investors want information?
Accounting is a SCIENCE just like Biology. The principles will exist until end of time. There will be a need for practitioners in every business. It’s like saying that doctors may become irrelevant.
I know there is software, but they don’t think or know what users are thinking. If users don’t know the science, they’ll put a bunch of wrong and useless information into the software and it will produce wrong and irrelevant results.
Posted by Revee Davis
Accountants are becoming more and more relevant everyday. No company can reach its ulitmate goals or even its vision for that matter without having an accountant on board.
Posted by Linda Yako
When a non-accountant says that accountants are irrelevant, one has to ask that person as to what his idea of an accountant is or what an accountant does. If what he has in mind is a number cruncher or one dealing mainly with figures in currency, then we might as well include other professionals such as actuaries, statisticians, etc. To my mind, an accountant defined as only dealing in numbers might become irrelevant because he can be replaced by a software or machine. As my math professor used to say, statistics are just numbers; be careful in using such numbers in making decisions without placing them in the proper prospective or without considering the whole environment. To my mind, an accountant who has gained the expertise of collating, relating and interpreting such numbers for meaningful conclusions to be used by business leaders or decision makers will never be irrelevant.
Posted by Al Sta Clara
For the global recession (Euro & US) we all depend on the CFO of world Ben Bernake (US Chief Accountant). Neither SAP nor a doctor nor a nano scientist comes to help us to come out of recession.
Posted by Ramji Yahoo
Al is absolutely correct. Merely assembling data is of little value and only a small fraction of the role. Much of that activity should be automated.
Great accountants understand the performance drivers behind the results, what to do to change the score and go about influencing key decision makers in the organization to optimize performance given the results.
Accountants are usually the first professionals to view all of the business results. Their true value lies in understanding the story behind the results, communicating with and influencing the key constituents to change the score to produce a win before time expires!
Posted by Paul Wharton
Accountants and more specifically auditors, are the folks no one in marketing, sales, operations or even finance want to have at their meetings. But whenever the financial health of the organization is in question, we always defer the “what’s happened” and “what can we do to dig out of this mess” questions to the so-called bean counters.
A buddy of mine who happens to be the assistant controller for my organization put the accounting profession into clear perspective for me. He said, “I’m trying to keep your boss out of jail” by asking direct questions and digging into the messes we sometimes create in the interest of immediate positive results.
Accountants and auditors are like railroads: you need them to keep things on track. And unlike many other disciplines in the vast macrocosm that is business, they are indispensable.
Posted by Michael Rodriguez
An accountant is doing what any one in a changing and evolving environment would do..
The best software is not going to replace a person that can look at those numbers and be able to map a strategy or pick up a clue as to where money is disappearing into what black hole. Sometimes the latter is not as obvious as some people might presume. My 2 cents.
Posted By Dennis Deal
Accountants will never become irrelevant even when you have high quality software. For any software to function you require “Input” the process and “Output”. There is a GIGO “Garbage in Garbage Out” Principal. What you input in the Software system will produce the output – Final Accounts. A Professional and experienced Accountant will be able to analyse the numbers and identify the risks in the business and warn the Board.
At the end of the day the Board has the right to follow or reject the Accountants advice. Or the Board can manipulate the accounts (Enron) to satisfy their personal greed. The Accountant here should have been the guardian of company’s funds.
Posted By Arun Joshi
Engineers, doctors, lawyers, computer scientists and hundreds of other professions are relied on by industry, academia and government. They all have a body of knowledge and experience that’s hard to acquire, take themselves seriously, think they are important, and many of them are right.
Posted By Jeremy Boyd
Are Accountants becoming irrelevant?
Another teaser question.
Great companies that I have worked for had great accountants. They understood the value of strong accounting teams connected to their operations and business.
Does one know of companies that failed with bad accounting?
Posted By Jan Lower
I believe designated accountants are becoming more relevant and will have an increasing demand for them in the future. A professional designation is required (particularly in Alberta) to advance to the senior level positions in industry, government, public practice or not-for profit. This is easily verified by looking at salary statistics for designated accountants vs. non-designated accountants. As the baby boomers leave the workforce over the next 6-10 years, the ones with a designation will have opportunities to advance.
Also, I’d like to add with IFRS replacing GAAP, I believe accounting is becoming more relevant in terms of harmonizing reporting standards and globalization. Those who have the proper credentials will be able to take advantage of providing accounting services for emerging markets over the next few years.
Posted By Javier Vinsome
If we do our fiduciary job with the #s, and and are good, value added partners with the rest of the business, accountants will NEVER be irrelevant. Hopefully we have all moved far away from the “bean counter” days. We can and should be some of the movers and shakers at each of our companies. But it’s up to us!
Posted By Tom Bucks
Accounting as a profession cannot become redundant, however, there is a point of stagnation. In some sectors knowledge and skills acquired by members of the CPA through education and training, is underutilised. The phenomena that an accountant is some one who is a book keeper who takes care of the company books in a financial year for audit, a compliance requirement, still prevails. Specially in the public sector, only 3% of the CPA members are employed, yet we manage billions of dollars in funding and revenue within the public sector. There are many areas within the public sector, where CPA, CA, CIMA members can provide valuable insight as a business partner and implement effective cost management strategies, performance measures and corporate governance to fill in the existing gaps. A joint effort by CPA, CA and CIMA targeting the growth areas such as Shared services, risk management and lean accounting will fit well within Australian government’s overall vision for ethical, efficient and effective financial management in the public sector.
Posted By Thiru Thiagarajah
Leave salesmen to do the accounting job or leave them free out of control, and then enjoy how quickly a successful company can be bankrupt…:)
Posted By Petros Katsimpernakis
Accounting is not confined merely to book-keeping, recording and reporting but also extended to advanced level of accounts analysis, costing, financial planning and management, tax-planning and management, auditing/attestation work and even to non-finance information processing in the business sense, virtually MANAGEMENT ACCOUNTANCY.
Management Accountancy does not only cover Financial Accounting but also Cost Accounting, Social Accounting and Environmental Accounting, etc. for various stake-holders of the economy with a feasible combination of financial and non-financial information, analysis, reporting and decision-making base not only on past data/trend analysis but with a proactive approach in view of advanced management accounting tools and techniques such as ABC/M, Target Costing, TQM, Value Added Analysis…etc
Posted By Asif Qureshi
This is for Ron Baker. If accountants have become so irrelevant, why is it that our countries need ministers in finances? Working with numbers does not lie within anybody’s bones and quite frankly I think you barked up the wrong tree. From Top Management to even lower management, accounting is changing all the time, yet the basics “AE” remains the same. It’s like saying that an entrepreneur and a business owner can be one and the same person! An Attorney might know the basics about debiting and crediting but he would hardly know the details about why an item needs to be debited and credited!! At Prerana, I am studying a BCompt degree in Accounting and with the economy that we are facing at the moment it is difficult to be placed without any experience. My advise to you is to keep looking and to look in every direction, accounting related. This will open doors for you within the accounting sector if you wish to pursue this career, you have to push on and push through!!
Posted By Erin De Waal
Accountants, and accounting will always be a necessary factor in business. But it needs to be the function that applies innovation to the mundane. As in the early 80′s when accounting embraced computer spreadsheets, it must now lead the way in cloud computing. Gathering information will always be necessary to take the pulse of a business, that part can use the full extent of technology, but the interpretation, and application of that information will force accountants to be consultants to senior management as well. Accountants are not obsolete, but their title, and skills will need to change ahead of the curve to stay relevant.
Posted By Clark Higgins
A business without the “right” accountant is doomed. Note the word “right.” It is up to us, as accountants, to be the financial consultant, to quantify the past results and estimate and advise on the results of future propsed action. Only when we step out of the role of “statement preparers and bank reconcilers” and into the role of “significant other” can we be of benefit. I agee with Paul, the value lies in understanding the story behind the results. However, the real value is in knowing that and then directing the company toward the desired results. “Here is what we did wrong” is helpful, but “here is how we rectify it going forward”. Don’t fall into the role of just providing the autopsy results.
Posted By Jim Smith
Extremely well put! You really hit the nail on the head.
We need to be game changers as well as score keepers.
Posted By Paul Wharton
Neither accountants, generally, nor the industry, presumably public accounting, are becoming irrelevant. Change is required an inevitable, and some individuals will fail to keep up. This issue impacts many skill areas, and all will have successful adapters, and dying dinosaurs. This risk even extends to futurists and others prognosticators.
Posted By Barrett Peterson
This was a very interesting discussion … both the original comments, and all the following comments. My observation is yes you do need to keep track of past history, trends, decisions, results as those who ignore past history … are doomed to repeat it’s failures.
I believe accounting is a support function and is necessary in that role for providing information necessary in the decision process and for compliance reasons. And therefore, it is relevant. However I don’t believe it is the “centre” of business. Nothing happens in business until someone makes a sale. I am biased coming from a sales and marketing background. But if you are not making sales, you don’t need accountants and a lot of other functional positions as well.
All in all excellent discussion, I learned much from the opinions expressed by all.
Posted By Robert Johnson
I agree with Paul Wharton. The Accounts Department is one of the many departments in an organisation and accounting is one of the funtional activity in the organisation functions. Hence the accountant is one of the many roles being played in the organisations. Without the accountant a big corporation or organisation is like a human without the hind brain, no memory. So whoever say accountants and accounting is irrelevant are those with some part missing in their brain.
Posted By Brisbane Edward Dandu
I am really enjoying this discussion. I believe what this shows in fact is the difference between a CFO/FD and an accountant. Its a point that I often have to make. There is a place for both in the world as the financial / statutory accounts and tax returns for filing with the authorities will always be needed and these reside with the accountant. The CFO/FD provides input on areas such as strategy concerned with improving and taking the business forward. I have seen this neatly summarised as an accountant deals with the past and the CFO/FD with the future.
Posted By George Ralph
As sure as the setting down of the sun is, accountants (or generally finance professionals) will always be required. The role has generally evolved beyond crunching figures into aspects such as being the custodian of performance management, delivering value, creating an understanding across the organisation of key performance drivers, efficiency & effectiveness, compliance (don’t forget SOX) etc. The role and focus including expectations will continue evolving but simply cannot be eliminated.
Look at it this way also. Consider the core functions such as operations, research and development, marketing & sales and human capital. Just try leaving those functions to operate on their own without the balancing role of finance, and see what happens. Despite the fact that these days other functional heads are also advised to, and indeed have some ideas about finance and accounting, I’m very sure that you will make haste to look for an accountant within a limited time, after your trial period.
To potential, young and upcoming accountants, move on with confidence.
Posted By Clayton Mwaka
A good accountant for a small business has to give information and advice to owners in a language they understand. If accountants fail to do this they may become irrelevant.
Posted By Graham Green
Accountants will become irrelevant when commerce does. That’s never.
Posted By Calvin Dale Brown II
Every year my business grows, I depend on my accountant even more!
Posted By Scott Polderman
As a CPA with more than 20 years experience I can tell you that Ron Baker’s comments are absolutely ridiculous. According to the Bureau of Labor Statistics accounting jobs are going to expand by 16% over the next ten years.
How can a company determine how profitable it is if it doesn’t have proper accounting?
As others have said accounting is the language of business; never have accountants been more relevant than today.
Posted By Mark J. Swanson, CPA, CVA
Employment of accountants and auditors is expected to grow 16 percent from 2010 to 2020, about as fast as the average for all occupations. There has been an increased focus on accounting in response to corporate scandals and recent financial crises. Stricter laws and regulations, particularly in the financial sector, will likely increase the demand for accounting services as organizations seek to comply with new standards. Additionally, tighter lending standards are expected to increase the importance of audits, as this is a key way for organizations to demonstrate their creditworthiness.
Posted By Binu Peethambaran
The Value Additions for Growth Strategies of Company Could Successfully handle by an Accountant only. By Improving INPUT-OUTPUT ratio & Reducing Operating Cycle Period.
Posted By CA Prakash P