Thriving in the Digital Age

Michael Cerami

Vice President, Corporate Strategy,

CPA.com

Michael Cerami

• Background and experience includes strategic

partnership development, financial planning &

analysis, technology

• Leads the company’s corporate strategy,

marketing & strategic alliances functions

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Vice President, Corporate Strategy, CPA.com

@MichaelCerami

#DigitalCPA

CPA.com

• Technology subsidiary of AICPA

• Mission: To empower CPAs in the Digital Age

“The Robo- Accountants Are Coming”

“…Oxford University suggests that 35% of existing jobs in the

United Kingdom are at risk of automation in the next 20 years.

Among the top 10% of jobs most likely to be automated:

insurance underwriters, tax preparers, loan officers, credit

analysts, and accounting professionals.”

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Source: “The Robo-Accountants Are Coming: How professional services firms need to prepare for the robo revolution” by Brian Peccarelli, May 9, 2016, CFO.com

Are you Future Ready?

Source: “The CPA of the Future 2015 Study” by Institute of Global Futures & CPA.com

Hard Trends Identified by Digital CPAs

▪ “Automated Data capture is becoming more

accurate”

▪ “Virtual Reality will increasingly be applied to

accounting”

▪ “Data grows at an exponential rate”

▪ “Increase use of IoT as well as security issues

related to this”

▪ Learn ways to adopt the technology and

analyze the data

▪ Create a virtual reality app that walks clients

through financial data, highlighting trends

▪ “Increase our ability to take disparate sources

and make decision before it happens”

▪ Create cybersecurity audits on these IoT

devices

Trend Opportunity

Source: “Hard Trend Report – CPA.com Digital CPA 2016” – Burrus Research, Inc.

Innovation Trigger

Peak ofInflated

ExpectationsTrough of

DisillusionmentSlope of

EnlightenmentPlateau of

ProductivityTime

Expectations

Software as a Service

Blockchain

Cognitive Expert Advisors & Machine Learning

more than 10 years

obsolete before plateau

Years to mainstream adoption:

less than 2 years

5 to 10 years

2 to 5 years

Big Data & Analytics*

* Big data removed as a category by Gartner in 2015Source: Gartner (2016)

Greatest Near Term Impact on Profession

Executive Roundtable - Driving Change & Innovation

Impact of Technology on the Profession is Profound

Move to Relevancy has Never Been More Critical

CPA.com North Star

Val

ue

Automation

Today Tomorrow

Tru

ste

d

Ad

viso

r Tru

ste

d

Ad

viso

r G

row

th

Specialization

Business & Individual Insights

Software will win at low end

Higher Margin & Value

Low margin/fee pressures

Automation Of Services

TransactionalDecline

Transactional Tax & Bookkeeping

Trusted Advisors Role

• Transcend the routine

• Develop specialized knowledge

• Stay ahead of automation wave

• Be valued for expertise and insight

• Translate data into wisdom

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Source: “The Big Switch & Beyond” – Nicholas Carr, author, 2014 Digital CPA Conference Keynote

Supporting The Core Pillars Of The CPA Firm

TaxWORKFLOW

ADVISORY

FINANCIAL PLANNING

AdvisoryVIRTUAL CFO

REAL TIME REPORTING

BUDGETING/FORECASTING

AuditELECTRONIC CONFIRMATIONS

FINANCIAL STAT CLEARINGHOUSE

AUDIT SOFTWARE

AccountingVIRTUAL CONTROLLER

CLOUD ACCOUNTING

BILL MANAGEMENT

FIRM TRAINING IMPLEMENTATION

CONSULTING

LMS PLATFORM

BEST PRACTICESCASE STUDIES

WHITEPAPERS

COMMUNITY

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Changing LandscapeClient Accounting Services Evolves

TODAY: ADVISORY

• Improve client financial performance with proactive consulting

• Save time and reduce cost by standardizing and leveraging automation and repeatable processes

• Increase real-time collaboration with clients by accessing information in the Cloud

• Increase margins by providing higher value with increased productivity

BEFORE: TRANSACTIONAL

• Low margin transaction processing

• Means to an end; a Tax Return

• Pressure to keep fees low

• Non-strategic

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Accounting Services for SMBs

CLIENT VALUE PYRAMID

Client Value increases as You Provide More

Strategic Services

Controllership ServicesMonthly Close, Fin Statements,

Cash Flow Analysis

Virtual CFOBusiness Planning, Financial

Modeling, Strategy

Transactional ServicesTax, Write-Up, Bookkeeping, A/P,

Payroll, etc.

Why is Change Management So Hard

$19 $23

$12 $17

$9

$21

--

$10B

$20B

$30B

$40B

$50B

$60B

$70B

2010 2016

Revenue Growth At Top 100

Tax42% growth over 6 years 27% of revenue

Audit and Accounting21% growth over six years37% of revenue

Other

Source: *IBIS 2016 Accounting Services Report, 2016 MAP Survey, 2016 &

2010 Accounting Today, Top 100 firms survey,

Advisory services133% growthnow one-third of revenue

$63

$42

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Empowering CPA’s in a Digital World

TECHNOLOGY BUSINESS MODEL

PROGRAMMING &

STRATEGY

TOOLS & TRAINING

Building Blocks of Strategic Advisory Services

Strategic Value

Transactional,

Compliance

Automated

Processes and

Workflows

Business insights

and Strategic

Advisory

Human Capital

Management

Sales and

Use Tax

Budgeting &

Forecasting

Tax & Financial

Planning

CFO

Services

Strategic

Planning

Bill

Management

Expense

Management

Cash Flow

Management

Financial

Dashboards

Account

Reconciliations

Payroll Write-up

Financial

Preparation

Income Tax

Compliance

Expansion of Client Accounting Services Ecosystem

Pre-Accounting

GROWING FOCUS

Real time inputsoutside of finance

(expenses, transactions, etc.)

Accounting

IN PLACE

Cloud Accounting(G/L, Payables, Payroll, etc.)

Post-Accounting

GROWING FOCUS

Business Intelligence(Budgeting & Forecasting, Planning, KPI Dashboards,

etc.)

Getting Certified In Client Accounting Advisory Services

Defining

CAAS

Client

Interaction

Technology

Roadmap

Client

Assessment

Guidance

On-Boarding

Workflow

Design

KPIs

Client Accounting Advisory Certificate

• Launched in January

2017

• 33 hours of CPE

• Advanced certificates

coming in the future

Professionalization of Client Accounting Services

Firm

Strategy

Market Demands

Training &

Certificate

Growth of

PracticeStandards

SSARS 21

Media

Coverage

Adoption

Curve

CAS is now a core practice area

for firms

Launched Digital CPA Conference in 2012

December 4-6, 2017

• Downtown San Francisco

• Epicenter of Technology

Keynote Themes

• Disruption, AI, Machine Learning

Global DCPA Track

• Reaching out to International Institutes

Education Through Case Studies & Best Practices

Structure,

strategy,

business

model

Client and

relationship

building

Use of

technology

Staff

development

and culture

Firms evolving for the future

Key factors for success

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26

CAS Moving into Late Majority…

CHASM

Helping Firms With

Adoption Curve

Firm Solutions

CPA Profession

CAS

Adoption

Evolution of Tax Area

Evolving Tax Landscape

Individual

▪ Personal financial lives have

moved to cloud & mobile

platforms

▪ Shift from tax being an annual

event to a year-round process

Business

▪ Increasing business complexity

& regulatory environment

▪ Importance of leveraging

technology in the delivery of

services

US Individual Tax Return Market*

Category MarketShare

TotalReturns

Five Year

TrendAverage

Price

Total MarketValue Comments

Manual 3% 5M -9% N/A N/A Steady decline over past decade

DIY Software (TurboTax, etc.)

40% 60M 5% $0-100 $2 B Growth driven mainly by gaining share from manual and storefront categories

Storefront(H&R Block, etc.)

11% 16M -4% $100-200 $3.5 B Majority of their clients make less than $50k a year. EITC key driver.

Non CPA Prepared 36% 54M 0-1% $100-300 $6.5 B Non complex returns losing share. New CPA competitors emerging

CPA Prepared 10% 15M 0-1% $300 – 800 $11 B Fundamentals solid. CPA firms primarily support upper 10% of US Market.

US Return Market 100% 151M 1-2% $150 $23 B

*2015-2016 Data from Intuit, H&R Block, IBIS, & IRSPrepared Returns: 57% , Software/Manual: 43%.

Evolution of Tax Compliance to Tax Planning & PFP

Should I start an IRA?

How can I help my

grandchildren? When can I retire?

INDIVIDUAL TAX

“How do I fund my children’s education? How should

I invest for retirement?

How much insurance do I need?

RETIREMENT PLANNING

ESTATE PLANNING

How does this impact what I am already doing?

What if I need to make

changes?

RISK MANAGEMENT

INVESTMENT PLANNING

Tax Compliance

Integrated Financial Planning

Brokerage

Accounts

Client CPA Firm

Aggregated Digital

Dashboard

Expense

Mgt

Online

Banking Lending

Tax

Return

401k,

529

Client Document Vault

Complete System of Record

(tax returns, statements, insurance,

key records)

InsuranceFamily

Accts &

Planning

Financial Aggregator Platform

Auditing in the Future

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Auditing In The Future

TECHNOLOGY EVOLVING MODEL &

APPROACH

STANDARDS

CHANGES

NEW SKILLS

Data

Extraction

Automation

Analytics

Data Standards

Continuous

Audit New Audit

Services

Evolution of Financial Statement Audit

SEC EDGAR

RIVIO

Clearinghouse

USERS

(Investors,

Banks,

Private

Equity, etc)

Public Company Audit

Private Company Audit

New Services: Business Analytics & Insights

We are at an critical inflection point for

profession around audit process and tools

Herzlichen Dank!

APPENDIX

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Entering the Digital Business Phase

2000 2005 2015 2020

AutonomousBusiness

Smart Machines

Indepen. of Humans

Robotics

DigitalBusiness

New Value

New Bus Models

Smart Machines

DigitalMarketing

Analytics

Optimize Interactions

Mobile, Social

E-Business

Automating Ops

Optimize Channels

BI, Portals

Web

Digital Technologies

Extend Relationships

Web

Business competition has been marked by technology phases.

DIGITAL BUSINESS:

The creation of new business designs reached by

blurring the digital and physical worlds.Source: Gartner

Deloitte 2016 Global Outsourcing Survey: Key Findings

No Longer Viewed as Just Cost Arbitrage

• Solves capacity issues

• Creates scalability

• Provides access to intellectual capital

Creates New Opportunities for Service Providers and Clients

• Improves quality

• Improves user experience

• Captures and enables innovation

Cloud Technology Can Be Used to Transform Processes

• Accelerate speed to value

• Reduces implementation times

• Improves functionality