The Accounting profession has a fundamental problem. Even though “accounting is a reliable path to stable, steady work”
- People are leaving the profession
- Student populations in accounting degrees are plummeting
- Big firms have crumbled
On December 28th, the Wall Street Journal reported:
Over 300,000 accountants and auditors in the US have left their jobs in the past two years, a 17% decline. Students are increasingly not choosing to study accounting, and even those who do major in it are often put off by the tedious, time-consuming nature of the work and are choosing to work in other sectors.
This should not be surprising to anyone.
Its not surprising to us. As a Chief Financial Officer since 1998 I have interacted with Certified Public Accountants about twenty times – just for help filing taxes and getting compliance audits done before an IPO.
So yes, the accounting profession has fundamental problems lets start here:
The accounting industry shuns innovation
You might say that the last major innovation in accounting was when Luca Pacioli first documented the Dual Entry System of accounting in 1494.
“Summary of Arithmetic, Geometry, Proportion and Proportionality” It had a section on the Double Entry System of accounting.
Before the double entry system:
- there was no balance sheet,
- books were almost always wrong and they were
- impossible to audit.
Imagine the strategic advantage that a company in 1494 would have gotten by adopting this system!
CPAs focus on tax and compliance
Since then, the Securities and Exchange Commission has codified the rules.
The SEC’s rules are called Generally Accepted Accounting Principles or GAAP.
Accounting students have to take exams about esoteric rules of GAAP to get their CPA designation.
Most of the revenue to CPA firms from small business is for complying with IRS Regulations
Accounting students don’t learn about business
Raise your hand if you want to learn arcane rules!
As CFO, co-founder & founding investor, we have helped a number of successful startups since 1998 including Second Life & General Assembly. We are currently helping venture backed companies including Trust & Will, Crowdbotics, Amino, Robin Healthcare, Brave Healthcare and seed funded emerging consumer brands such as Aplos and Every Day Dose. As a co-founder of Assembled Brands, we have seen the financials over over 3,000 emerging consumer brands since 2016.
From that experience we can say:
- The books of most small businesses are not done well,
- Few small businesses even forecast their balance sheet all all,
- Almost no one finds value from their CPA other than filing taxes,
- Hardly any small businesses have a data warehouse and don’t even know why they need one.
And its getting more complicated every time a new SaaS business is funded.
At Weekly Accounting we think there’s a big opportunity for helping every small business see their business better.
We see these kinds of results all the time.