The Numbers Paradox – Accounting Is Not About Numbers
It’s ironic. The tag lines of various accounting professional bodies tend to include references to ‘numbers’ and ‘count’ in puns that no doubt please them and their marketing teams, but which reinforce the unhelpful perception the public has of accountants, namely that accountants are…
Bean counters. Number crunchers. Numbers nerds.
The irony is that whilst numeric tax and accounting skills are obviously at the basic core of the profession, they are not differentiating skills. They are not what makes a great accountant. These numeric, number-crunching skills are expected prerequisites, not competitive advantages.
The Numbers Paradox:
The accounting profession is not about numbers.
It is about people.
You read that correctly.
Here’s some coffee to wake up and smell: The basic tax and compliance work currently done by accountants will soon be performed by technology.
That is inevitable. You know it is.
The tax and compliance skill-sets on the low end of the spectrum are commodities. This is already evidenced by the outsourcing of this level of work, by many firms, to lower-cost providers globally. The next step along this cost-reduction path is automation. In the history of commerce, across all industries and sectors, low-value skill-sets get replaced by machines. They get automated. Think vending machines. Think (low-value-adding) travel agents. Think… the low-end tax compliance work; work that has been the bread and butter of many accounting firms for decades.
That gravy train is stopping, next station.
Now is the time to start planning and making changes for a different future for accounting. Don’t wait for the need to change to be pressingly urgent. You don’t start paddling once the wave is upon you. You see the wave coming, point yourself in the right direction, then start paddling. In advance. Well before the wave arrives. Do that, and you’re riding it, dude. Start paddling too late, and you’ll fall off the back of the wave, disappointed, watching others ride off.
Thankfully for accountants, the higher-level advisory work across more complex tax matters, business advisory and financial advice provide them with a solid future. But it will be a very different future.
The great thing is, all this work still has at its core, numbers.
But what is the point of a good set of numbers?
When you think about it, what is the ultimate purpose—beyond the basic compliance of lodgements—of a set of numbers for a business or an investor?
In short, making changes and improving performance.
And the best way that a set of numbers will influence a business owner to make decisions, to take action, to embark on changes, is when they are guided by a great advisor. Someone who can explain the future scenarios that will result with and without corrective action, the suggested improvement strategies, the risks and how to reduce them, how to measure effectiveness of the changes.
The person to provide this advice should be the business owner's accountant. After all, they have all the numbers. The data. The ‘intel’.
But all too often accountants don’t provide future-focused advice. They merely manage deadlines and report on the past. Important stuff, yes. But it won’t markedly improve their clients’ business or wealth position.
The ongoing lack of proactive advice given by accountants has spawned advisory spin-off professions such as business coaching. The clients of accounting firms wanted advice on how to improve their business, but they weren’t getting it from their accountant. Accountants showed no leadership. So their clients looked elsewhere.
The market had a need, and accountants failed to fill it.
Sadly, there are many flaky business coaching franchises where business coaches who have simply paid a franchise fee and then spent a week in a training and induction process believe they have the ability to advise businesses on a range of crucial commercial matters.
They do not. Not in my opinion. These business coaches should be avoided.
Management accountants, on the other hand, have a deep understanding of the financials and drivers of a business’ performance. They can take into account various tax implications, do 'What If' sensitivity analyses on different scenarios, forecast and track cash in-flows and out-flows for a business, and—when trained in management accounting—advise on strategies for improving the liquidity, profitability and value of a business.
What a shame it is that the accounting profession, by and large, has let this opportunity pass them by.
What has caused this?
So much of the under-utilisation
of the accounting profession stems from
the definition of the profession…
… as revolving around numbers, rather than around people. It is advisory skills that matter, and these are largely people skills. 'Soft' skills.
"We are number crunchers" is a limiting definition and over-arching paradigm that precludes the accounting profession from maximising its value to society.
In short, accountants aren’t nearly as useful as they could be. That saddens me, because their potential to add more value to society is immense.
It's happened before. In different fields.
Consider this fascinating historical example… (Grab a coffee. Settle in.)
Back in ancient Greece, people believed that their lives were controlled by the Gods who wandered around in the sky, imposing their will upon them. (Interestingly, the word planet comes from the Greek planan which means ‘to wander.’)
This "Gods wandering the skies" view seems quaint to us now, but that was the reigning belief system. It was not questioned.
People believed that it was the Gods who decided if crops would grow, whether it would rain, or snow or whether people would live or die.
The Greek philosopher Aristotle didn't buy into this idea. He theorised in 340 B.C that the planets and other heavenly objects in the night sky were not Gods, but were spheres revolving around the Earth.
He got one major thing wrong there, but this new geocentric view of the world was a hugely controversial shift in thinking.
And it wasn't questioned for the next 1,800 years, despite the fact that the calendar in use back then was, as a result of this assumption, inaccurate. About every 100 years or so it would be winter when the calendar said it should be summer, and the Pope would then announce, "Ok everyone, the calendar is out again. Let's wind it back." (And many of us think daylight savings is a big adjustment to make each time it comes around!)
That seems incredible, I know. But why was this happening?
It was because astronomy lacked an effective model. It simply was not working. Consider how crucial this was for an agricultural society, with the need to predict the timing of the seasons in order to maximise crop production.
But the plot thickens. 1,800 years after Aristotle's initial erroneous assumption, in the early sixteenth century, Polish astronomer Nicolaus Copernicus calculated using mathematical equations that the sun—not the Earth—was at the centre of our planetary system. Clever guy. (That’s some serious ‘number crunching’, right there.)
However, at the time Copernicus' new heliocentric view of the universe was considered heresy. The consequences of this were so grave that Copernicus waited half a century to publish his De Revolutionibus Orbium Coelestium in 1543, once he was on his deathbed.
But even after the theory's publication, change took some time.
Another 66 years later, Galileo Galilei, the Italian mathematician and physicist, invented the telescope. This allowed him to see that the sun rather than the Earth was at the centre of 'our universe'. (The term 'solar system' did not exist at this time, due to their belief that the Earth was at the centre.) Galileo had visual evidence to support Copernicus’s mathematical theory, and so he wrote a treatise about it.
In an attempt to spread the word—as this was one of the most fundamentally perception-shifting discoveries in the history of mankind, reshaping our view of where we 'fit' in the universe—Galileo wrote his treatise in Italian, rather than in the Latin of academia. This allowed the public to read it and as a result, the heliocentric model of the universe rapidly achieved support in the Italian community.
But not everyone was happy about that.
In 1616 the Church commanded Galileo to never again to “hold, teach, or defend […] in any way whatever […] the doctrine attributed to Copernicus.” The penalty for not complying was to be death. Heavy stuff.
Under attack from the Church, Galileo retreated in his promotion of the heliocentric view of the universe. Just as Copernicus before him, he decided that, for self-preservation, it was best to lay low with the idea.
Then nine years later, a childhood friend of Galileo's became Pope Urban VIII. A lucky break. Believing the ‘I have friends in high places’ factor gave him some protection, Galileo began writing about the theory again.
Alas, despite his childhood friendship, Galileo was forced to recant his belief in the Copernican system in front of the Inquisition. For disobeying the 1616 order, Galileo was condemned to life in prison, his childhood friendship most likely saving him from being burnt at the stake.
Galileo's publications were listed on the Pope’s Index of Prohibited Books. And get this: It wasn’t until 1992 that the Roman Catholic Church reexamined the case and admitted its mistake.
Justice—and admitting when you are wrong—can take time, it seems.
So can change.
And here’s the point…
Throughout the almost 1,900 years of society enduring the effects of having an inaccurate calendar, astronomy was defined as the study of the movement of planets around the Earth.
The very definition of the field of study precluded it
from ever providing its full value to society.
This is precisely the issue I see
with the accounting profession
thinking it revolves around numbers.
That's tantamount to thinking the planets revolve around Earth. That's old thinking. Yet, it remains the current paradigm. No-one questions it.
The accounting profession—being an advisory profession—ultimately revolves around people, not numbers. The advice game is a person-to-person game. Not a computer-to-person game. That’s why it can never be replaced by technology or fully automated.
Only once it redefines itself, and shifts its paradigm, will the accounting profession reach its full potential for adding value to society.
Heliocentric replaced geocentric in astronomy.
It’s time that people-centric replaced number-centric in accounting. Our hope is that the accounting professional bodies focus on this shift, but in the meantime, it needs to happen at a grassroots level — at the individual firm level. As Mahatma Ghandi said, "Be the change that you wish to see in the world." Make your next hire a ‘people person’, not solely a ‘number cruncher’. (The two attributes are not mutually exclusive.)
But let’s not wait 1,900 years to bring about change.
Once the people-centric view of the accounting profession is widely accepted, the accounting profession can start on a more exciting path. One that will be far more valuable to society. This will flow on to allow the profession to more consistently attract the expressive and assertive 'people person' personality types that will give firms the ability to build teams with the mix of people required for providing a great client advisory experience. (Refer to The True Advisor eBook for more on this topic.)
The typical analytical, bean-counting, number-crunching, people-averse 'Grinders' that accounting firms tend to hire do not make good advisors.
We'll explore why in the next post, The People Paradox.
End Note: This blog post will form the basis of a chapter in the upcoming book, The Practice Paradox – Reinventing The Accounting Profession by Michael ‘MC’ Carter, founder of PARADOX.
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