Six Rules for CPA Firms in the New Economy
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August 24, 2009
The recession may or may not be officially ending, but savvy CPAs and accounting firms aren’t planning for a return to “the good old days.”
Instead, smart accountants are retooling their skills and overhauling their offices for the next new economy. At General Electric, for instance, Jeff Immelt, the CEO who was once GE’s CFO and an accounting standards wonk, is calling it “the reset economy.” Some, like Intuit CEO Brad Smith, prefer to call it the “new normal.”
Whatever you call it, you can’t just cut costs, lay off people and expect a routine “post-recession” comeback. This new economic picture may be much different than any in a lifetime.
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“It’s not just about cost-cutting” according to Mike Ramos, CPA and author of the first book in a new AICPA “Practice Forward “ series, Ride the Bear: Strategies for CPA Firms to Thrive, Survive, and Grow in a Down Economy (Ride the Bear). Ramos, a consultant to CPA firms, has written nine books, most recently the AICPA Audit Guide, Assessing and Responding to Audit Risk in a Financial Statement Audit, an authoritative interpretation of the risk assessment standards.
Citing the economic earthquakes that brought us TARP (Troubled Asset Relief Program) and ARRA (American Recovery and Reinvestment Act of 2009), Ramos predicts long-term changes in public policy. “There are disruptions,” he says, “but there are also opportunities.”
“We are in the middle of some of the biggest changes in the economy anyone has ever seen,” Ramos says, “and there are huge opportunities for anyone who wants to look for them.”
His advice would warm the cockles of every CPA’s heart: Follow the money. It doesn’t take a close reading of the federal budget to see that for years to come the United States (U.S.) will be supporting investments and incentives in public works infrastructure, renewable energy, education and health care. To be sure, the details remain politically uncertain. But few serious observers doubt the U.S. government will be making huge new long-term commitments to new sectors of the economy.
In Ride the Bear, Ramos provides a brief history lesson, citing two great events for the CPA profession, from Roosevelt to Reagan:
Today, Ramos writes, “the amount of stimulus money provided to some agencies is staggering.” To cite two examples:
The opportunity for accounting and finance professionals becomes clear: “This directive to spend huge sums of money as quickly as possible will put severe strain on the accounting and reporting systems of those receiving stimulus funds and will expose the recipients to increased risks of fraud,” Ramos writes. “CPAs can provide invaluable assistance to these recipients in structuring systems that will facilitate a rapid distribution of funds without compromising transparency, accountability and internal control.”
But don’t think that these are isolated events or one-time-only opportunities. We are witnessing, Ramos says, a fundamental and long-term shift in the American business landscape. The 2010 federal budget represents an “economic blueprint” and the stimulus plan is “just a big first step in what promises to be a long-term commitment by the federal government.”
By Ramos’ calculation, smart CPA firms will be the ones accelerating investments in:
Ramos acknowledges that the current recession is deep. But, he writes, “the changes coming from Washington are staggering in their scope.”
In response to a once-in-a generation recession, the federal government, he writes, “is taking bold, once-in-a-generation action, and they are redirecting huge sums of money to middle-class tax relief, education, energy and healthcare.”
His advice: “Follow the money.” That ought to come naturally enough for accountants.
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