BDO Alliance USA’s 2023 Predictions for Accounting Firms
BDO Alliance USA’s 2023 Predictions for Accounting Firms
Recently, our Executive Director Michael Horwitz participated in a fireside chat, hosted by our friends at Aiwyn. He was accompanied by peer leaders from two other accounting associations, where they engaged in lively commentary on changes seen throughout the accounting profession in 2022, paired with their best predictions for 2023.
Here is a recap of points made by Michael Horwitz from our perspective at the BDO Alliance USA:
Leading Observations from 2022
- Accounting Firm M&A: More M&A activity is going on today than we can ever recall. Within the BDO Alliance USA, we had 13 members in the last seven months advise us they were going to be acquired as part of a transaction. On the other side, we had a number of firms tell us they would be merging new firms into their practice. Mergers can be thought about in terms of capacity, geographic positioning and access to capital. At some point, firms decide they will sacrifice independence to team up with a larger organization on a more permanent basis. Accounting firms are more profitable today than they’ve ever been, so the partners who choose to cash out are doing quite well, and that’s accelerating the process.
- Private Equity Investment: It’s happening at lower-level firms, not just the platform-level firms. We’ve had a couple of our member firms respond favorably to PE investment. It’s likely that most firms, by this point, have been directly or indirectly contacted by private equity. It will be interesting to see how this plays out for the next generation in firms – those individuals who aspire to become partner. The offer on the table from a PE firm is a very different offer than what’s in play with most traditional partnership structures, where you put in your time and get promoted, essentially buying out the other retiring partner(s).
- Capacity Challenges: It’s not a new thing, but certainly created a lot of buzz in 2022. For the last 20 years, we’ve been talking about it. Maybe in two of those years, in 2008-09, the challenges weren’t as pressing. But even then, there still weren’t enough people to do all the work. In five years, we suspect we’ll be talking about capacity challenges still, but perhaps in a different way.
- Technology: We’re at an inflection point now where you must be leveraging technology to thrive. BDO USA, for example, is adopting more and more new technology, as are our independent member firms. A few providers that caught our eye this past year include Aiwyn (payments, collections and billing), Botkeeper (bookkeeping and pre-accounting solution), TaxExact (1040 verification), Unit4 (ERP software) and Fieldguide (workflow automation).
- Automation: People are much more comfortable using technology today. We trust technology in a way that we didn’t five to ten years ago. The same phenomenon is playing out in our profession. Accounting firms are full of skeptical people by nature; they want things to be proven and well tested first before adoption. While automation and AI technology is still being perfected, it’s been around long enough and is being invested in more heavily every year. The reality is that the use of automation is here to stay, no question about that, and that more firms are now jumping in to take advantage.
Our Crystal Ball Predictions for 2023
- Getting Connected: You don’t have to know everything; you just have to know how to get access to everything. It used to be that the tax partner who memorized the tax code was the king or queen. Now there’s no value in that. The value is being able to get access to that info quickly, but without needing to memorize it. In 2023, we’ll continue to prove that with automation and technology, the sooner we adopt it, the better we will be at retaining and attracting the next generation of talent - and the more profitable our firms will be.
- Marketable Services: Services that may become more prolific this year, in the face of a possible recession, include those business restructuring and turnaround services needed for underperforming companies and distressed organizations. Additionally, there may be higher demand from clients in assisting them with financing needs for their business.
- Client Accounting & Advisory Services: The pendulum will continue to swing further in the direction of advisory services this year, specifically in the CAS/CAAS arena. Last fall, the BDO Alliance USA hosted our first virtual CAAS Summit for members, attracting over 1,000 participants – one of our most highly attended virtual events of the year. That gave us a small taste for the appetite of non-accounting services being contemplated and provided by firms today. The trend is only going to continue upward in 2023.
- Offshoring: The willingness to utilize offshore resources has been available for years. These are good, quality resources, offered at a much lower price than we can afford to pay here domestically. That, alone, is going to help make it more prevalent in 2023 and the years ahead. Just like the pandemic accelerated our access to and comfort with using talent outside of our traditional locales, we think a possible recession could help us move even more quickly to utilizing talent outside of the U.S. A number of our member firms who would never have thought to use offshore resources three years ago, did it for the first time in 2022 or have plans to in 2023.
To watch the entire webcast discussion with Michael Horwitz and others, visit this page.
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