By Martin C. Daks
SINCE 1898, THE 14,000-MEMBER New Jersey Society of Certified Public Accountants (NJCPA) has been advocating on behalf of Garden State CPAs, and supporting them with a mix of educational, networking, leadership and volunteer initiatives. To learn more about the trends, opportunities and challenges facing CPAs in New Jersey, COMMERCE interviewed Ralph Albert Thomas, who has served as CEO and Executive Director of the organization since 1999. Here are his thoughts, observations and insights about the accounting industry and profession.
COMMERCE: What are some key trends in the accounting field, both nationally and in New Jersey?
RALPH THOMAS: The national and local issues are quite similar. In both cases, smaller and midsize firms are looking to expand into niche areas such as forensic accounting and litigation to supplement their core accounting expertise. As firms fulfill their role as trusted advisors, more of them are buying or merging with human resources and other non-accounting businesses. We’ve seen this for some years with larger firms, and now this is percolating to the smaller and midsize ones, too. In fact labels like “CPA firm” and “accounting firm” are slowly giving way to the more-inclusive designation of “professional services firm.” Along with this, we’re seeing firms hiring more people who are not on a CPA track—instead,
they’re also looking for employees with finance and other consulting specialties.
Q. As CPA firms branch out, what role do strategic partnerships with banks and law firms play in their success?
A. CPA firms and banks and law firms can form mutually significant relationships. Banks may set up advisory boards that include CPAs and attorneys who can offer good advice about financial issues, enabling banks to tweak their products and services, while banks can offer referrals and other relationship services to lawyers and CPAs. Accounting firms are also working to get their people out on the street by becoming more active in local chambers. It’s a way to give back to the community, while building potential client relationships and strengthening existing ones. CPA firms are also encouraging their subject matter experts to write articles and to otherwise engage in thought leadership activity through digital, print and other media.
Q. Where do you see growth opportunities for CPA firms, and what practice areas are generating the most revenue?
A. In addition to developing niche specialties, some smaller firms are growing and becoming regional ones by partnering with complementary CPA firms, either in a formal M&A or through alliances. Larger firms, especially the Big Four [Deloitte, PwC, Ernst & Young and KPMG] are also going heavily into data analytics, or Big Data, electronically extracting information from companies and using the information in both auditing and consulting. Companies collect a lot of information, but they don’t always exploit it completely. In New Jersey, pharmaceutical companies and biotechnology firms are client growth segments, in addition to medical device companies and healthcare organizations. Cybersecurity is also a fertile segment for CPA firms; and the AICPA is developing a cybersecurity certification for CPAs. Sustainability is another opportunity—reporting and attestation on sustainability and social policy is already big in Europe and its now making an imprint in the United States.
Q. How do practice leaders compare with managing partners when it comes to career paths and incomes for accountants?
A. We’re seeing the practice leader emerging as a career path. The executive hierarchy used to primarily be managing partner (MP) at the top, followed by partners. But with the growth in niche services, we’re seeing increasing demand for practice leaders, or subject matter experts who often report to the MP and may be in line for that position. In fact, these days the MP or other top executive may not have to be a CPA; they could be a tax person or consultant. For example, the Chairman and CEO of Accenture, Pierre Nanterme, has a Master of Science degree in Management.
Q. How well are minorities and Millennials being recruited for jobs at CPA firms in New Jersey?
A. Here, as well as nationally, there’s some uptick in minorities and women coming into the profession. Women, in particular, account for more than half of accounting graduates in the United States, so CPA firms are responding by hiring and retaining more women and other minorities. As the population of female, African-American and Hispanic individuals increases, more businesses will be created by minority populations, and CPAs will have to be prepared to deal with a diverse population of clients and employees. We’re seeing them adapt to this in a variety of ways. Two of the Big Four have female CEOs: KPMG’s U.S. Chairman and CEO is Lynne Doughtie, while the U.S. CEO of Deloitte is Catherine Engelbert.
Q. Are small, midsize and large CPA firms competing for the same clients?
A. That started with the economic downturn, because you hire with the anticipation of growth, and you don’t want to downsize too quickly, but you can’t afford to pay people to sit around. The economy has improved in the past few years, so we don’t see as much fishing in each other’s pond as we used to.
Q. What are some key challenges for the accounting industry?
A. In addition to attracting and retaining more women and other minorities, it’s important for professionals to be engaged with educational institutions, so colleges and universities can get input from people with experience in the field. Also, Big Data is a big deal, and accountants will need to have that kind of competency when they get out of college. The practice of accounting is becoming more complex, and there’s a need and desire to provide information that’s useful for investors and the public, in addition to the client. In response, we’re seeing more engagement and collaborative discussions.
For example, NJCPA is proposing the expansion of its “associate member” category to include more non-CPA financial professionals. The goal is to get accounting, finance and other professionals to work together, so each can utilize the others’ tools. One of the challenges today is that a CPA can no longer just think like an auditor; instead you’ve got to think like a multifaceted business advisor.
At the same time, CPA firms continue to compete with industry for qualified candidates. Companies used to draw top executives from CPA firms, but now they’re increasingly recruiting directly from colleges, and then developing them through in-house programs. On the other hand, the opportunities for CPAs continue to grow, as federal regulations such as Sarbanes-Oxley require management to take more responsibility for certifying the soundness of internal controls and other issues.
Within New Jersey, we’re losing many of our college graduates to other states that offer a lower cost of living and better tax structure, particularly regarding property taxes. This state needs to find a way to improve the tax structure; the phase-out of the estate tax was a step in the right direction, but issues like the inheritance tax and government pension obligations still need to be addressed. New Jersey also needs to stimulate business growth. There are more than 300,000 small businesses in this state— think about what it would mean if each could hire one new employee.
Q. What are some future technologies that may change the profession?
A. We’re continuing to go paperless, and to use technologies such as Big Data and analytics to improve the professional services that CPAs provide. Technology also lets us work faster—the days of waiting months to turn around data are gone. The NJCPA is also examining how technology will change the learning process: we think there’ll be less face-to-face interaction, and more online delivery. One example is our own Continuing Professional Education programs: more CPE programs are being offered online, and instead of lengthy broadcasts, New Jersey CPAs may soon be able to earn CPE credit by watching 10-minute videos.