It’s the end of the airlines as we know it, and I feel fine.

I travel a lot.  When you know more about where a bag will fit than a flight attendant, you’ve been on the road too darned long.  One of the things I have observed lately is the remaking of the major airlines by empowering and extending the frequency of flights by using regional commuter carriers.  The smaller planes provide better service (more frequent flights), are easier to maintain, and are easier to operate.  A couple of weeks ago, I flew to New York from my home in Knoxville, TN for $200.  Mind you, the same flight in the 1980’s would have cost more in absolute dollars than this one did.  Good grief- the hotel in NY for one night literally cost more than the airfare.  Not only that- I returned home on a direct flight. ( For those observers in larger cities, many of us in flyover country spend a lot of time in Atlanta, Cincinnati, Chicago, Dallas, Houston, and other hub airports trying to get to locations where you fly direct.)  This is causing much weeping, wailing, and gnashing of teeth in many old-line carrier cities, but the market demands it.  Just as the steelworkers priced themselves out of jobs by demanding benefits not justified by the economics of the business, the main line pilots, mechanics, and machinists are learning some hard lessons on economics right now.  Aircraft maintenance has moved from California and the Northeast to Brazil and low cost markets like Knoxville, Tennessee.  Embraer (in Brazil) is a serious aircraft manufacturer.  The wing for the Boeing 7E7 is going to be made in China (just like everything at Wal-mart).

Many may say that it will never happen to the CPA profession. I disagree– we’ve imported a lot of talent from overseas on H1B visas lately.  (If you don’t believe me, look at the change in the profession- we’re a lot less white-bread than we were a few years ago.)  While this is great for the diversity in the profession, we must continue to innovate to survive, or many of those visa holders will get their CPA, go home, set up huge offshore CPA firms, and outsource the non-innovators.  Some large firms have been outsourcing compliance-related work such as 5500s and simple 1040’s for years.

An example of this evolution is the custom shirt market.  Many years ago, businessmen would go to major cities so they could have custom shirts made.  The local sales rep would measure the customer, call the order into a tailor shop an ocean away, and the shirts would show up soon- with a hefty markup, of course.  This model has been applied to things like cell phone accessories and all sorts of things.  What? Don’t believe me?  Check out cellphoneshop.net on the internet- it’s a link to Asian accessory manufacturers who sell direct to you.  Now it takes 2-3 weeks for an order to reach you, so it’s better for those ‘nice to have’ items than the ‘must have now’ items like replacements for lost chargers, etc., but I have used their stuff, and although it’s cheap, so are many of the cell phone accessories you can buy today at full priced stores.

Where am I going with this?  We are a change-resistant profession.  We like our tax return and audit report routing sheets to look just like they did in 1982.  We like the latest and greatest office supplies.  We still swear by that old ticker we had in 1992, even though it’s been worn out for a long time.  So these three words may make you uncomfortable:

CHANGE OR DIE

Let me explain.  There are literally thousands of CPA firms in the country who don’t even have a time billing system.  A wise former boss often repeated the maxim, ‘What is not measured is not managed’.  The price of everything is rising.  Staff.  Insurance.  Electricity.  T&E.  Office supplies.  Software.  Fees for traditional services are struggling to keep pace with the expense increases.  With the inevitable globalization of our profession (note that the big 4 and even some top 100 firms are outsourcing much of their tax prep to India.), can attest services be far behind?  There is but one way to survive- innovate and use the tools you have.  Example: Word and Excel have supported template documents for years, but most of us have no clue that if you click on file, save as, and select Template, you can access those blank supersheets you created over four years, and focus on getting the work done instead of stupid things like how to use Excel.  When I was with Coopers & Lybrand in the early 1990’s, the Firm rolled out laptops and templates to staff in markets like lowly Knoxville, saving lots of time on paper workpaper setup, and replacing the adding machine with the numeric keypad.

So you ask, do I have to change? No, as my father often says, there are only two things in this life that you have to do- pay taxes and die.  But remember the lesson of the steel workers and the airlines- the market also says that you also don’t have to have an nice retirement from your practice, either.

[Posted with hblogger 2.0 http://www.normsoft.com/hblogger/]