This article goes into more detail about the reasons businesses will always have a legitimate need for accounting and bookkeeping services.
A recent student asked me how to respond to a well-meaning relative who felt that accounting was a dying occupation because of tax simplification. I’m often asked if a simpler tax code, meaning flat-tax or federal sales tax, would eliminate the need for accountants. Those who ask this question obviously don’t understand what an accountant does.
First of all, I don’t think such a tax bill could ever pass. Too many special interest organizations with powerful lobbying groups will lose too much to let any such bill pass without a fight.
- Religious organizations will argue that their funding from contributions will dry up.
- National homeowners’ associations will argue (and rightfully so) that homes will drop in value as mortgage interest will no longer be deductible.
- Medical organizations will buy TV ads telling stories about people with debilitating diseases and high medical bills going to ‘tax prison’ because they lost their medical deduction.
- And, those are just the obvious ones.
Plus, most tax simplification plans will tax the poor heavier and the wealthy lighter than they do now. That’s a hot-potato that neither political party will support.
No, the public will never let such a thing happen.
Even if we were to assume that such a tax program will be adopted, accountants will remain in high demand. Certainly simpler tax laws may eliminate tax preparers. But most tax preparers aren’t accountants.
The primary and most beneficial roles accountants perform are in the area of management controls, and cash management. A company stands to gain much more through staying on top of these areas than saving on lower taxes. Let’s face it, companies don’t go out of business because they are paying too much in taxes, but they will if they have poor controls, or poor cash management.
Big businesses certainly understand this. A large company I once worked for had four thousand accountants. Less than 1% of these accountants worked in the tax department. In other words, 99% of the accountants with this company were working on providing management with crucial information regarding profitability, while monitoring the company’s financial position. This company understood that income taxes are a necessary evil that require some attention, but the potential for business improvement is much greater in other areas.
So, do we ignore taxes? Certainly not! Taxes must be completed, and done correctly according to law. Besides, a good tax preparer may save a tax payer hundreds of dollars, if not thousands in taxes — sometimes many times the cost to have the taxes prepared.
Tax preparation will always be needed. And, my guess is that it will become even more complicated before becoming any easier.
Regardless of the tax law, however, accountants will always be a critical part of the business world.
Also, see the article entitled “Why are Businesses Begging for Your Services?” This is “must reading” for every freelance accountant.