The Changing Role of Accountants

By

Benjamin R. Byo

A Paper Presented in Partial Fulfillment

Of the Requirements of

MGMT510 Financial Accounting

December 2008

For many years the role of the accountant has been focused on collecting and

presenting financial data based on the historical results of the business. This consolidated

data could then be utilized by executives and management to determine the future

direction of the business. However, over the past decade the role of the accountant has

gradually shifted from bean counter to business partner or business strategist. Utilizing

professional sources and personal interviews this paper will examine why the role of the

accountant is changing along with the impact of the modern accountant on management

and business in general.

As mentioned, the traditional role of the accountant has been to consolidate

budgets and track the finances of a business. Ivan Epstein (2006), CEO of Softline, notes

“maintaining and auditing financial records has always been the accountant’s bread and

butter (para. 4). Frank Heckadon, secretary and chief financial officer of the Society of

California Accountants, suggests “for years, it was the historical costs. We [accountants]

reported what had happened” (Perkins, 2001, para. 20). Both of these professionals

suggest the historical accountant acted primarily as a scorekeeper rather than a decision

maker but also emphasize the changing role of the accountant. Epstein (2006) notes “the

ability to translate raw financial numbers into usable business information is now a

priority for accountants” (para. 7). Heckadon suggests accountants are now thinking

“more of where they [the business] are going instead of looking back” (Perkins, 2001,

para. 20).

In a personal interview, Michael Grant, the director of operations at Rubbermaid

Home Products manufacturing facility in Winfield, KS suggests he has personally

witnessed the changing role of the accountant. “When I started as a manager with

Rubbermaid my interaction with the plant controller was limited to monthly budget

reviews where we discussed the previous month’s performance versus budget and budget

preparation where we would build the budget for the following year.” Mr. Grant

continued “today, our plant controller is involved with all plant leadership decisions and

is a significant influence on the strategic planning for the plant.” Mr. Grant does

acknowledge personnel changes along with changes in his own roles and responsibilities

have influenced his perception of the plant controller but still views the accountant as

being “more influential now than ever.”

Still, with the noted changes by Epstein, Heckadon, and Grant, what has created

the need for an accounting role change? After all, in an informal questioning of business

associates most still perceive the accountant to be like the banker in the popular NBC

game show Deal or No Deal where the banker is somewhat of an unknown figure in a

dark room manipulating data to best benefit the business. While this perception suggests

the role change is gradually taking place three primary factors have led to the increased

responsibilities of the accountant: the Sarbanes Oxley Act, the IT revolution, and the

increased need for accurate financial forecasts. The first factor, the Sarbanes Oxley Act,

caused businesses to be increasingly concerned over internal controls (Caron, 2006).

This concern opened the door for improved communication between accountants and

managements and empowered accountants to influence the future direction of the

business.

The second factor, the IT revolution, has enabled accountants to remove

themselves from their desk and be more involved with day-to-day activities of the

business. Burns and Scapens (2000) note that “routine accounting tasks are dwindling

very rapidly” as “IT has made them easier and more automatic” (para. 6). In addition, the

increasing use of computer software and the internet and intranets has enabled some

accounting functions to be performed by managers and audited by accountants rather than

solely depending on accountants (“The role of the CFO”, 1997; Burns & Scapens, 2000).

Ultimately the IT revolution has freed up time for accountants and given them the

flexibility to be in the field understanding and supporting the business. As Norman Lyle,

vice-president of the Chartered Institute of Management Accountants and general

manager, finance, at Zeneca Group suggests “the outstanding management accountant…

will not just prepare draft budgets, but will prepare and negotiate” (“The role of the

CFO”, 1997, para. 6). The negotiation portion or Mr. Lyle’s suggestion is critical as it

suggests the accountant understands the business well enough to negotiate intelligently

with the department manager who is often the subject expert within the business.

The final factor in the change of roles for the accountant is the result of the

increasing expectation of investors to receive accurate financial forecasts. Brad Bryant,

financial controller for Rubbermaid Home Products manufacturing facility in Winfield,

KS suggests he’s never seen “the need for accurate forecasts at every level like what is

expected today.” Mr. Bryant explains “in the past, we [controllers] would provide a

monthly forecast and update it if we discovered a significant change throughout the

month but today we provide a rolling three month forecast and review the current month

each week.” Mr. Bryant understands the desire for accurate forecasts but suggests such a

desire requires “controllers to understand the day-to-day actions of the business in

addition to the strategic plans of the management team.” In addition, “it is completely

unacceptable to present a missed forecast or unfavorable budget after the fact. We must

be able to work with each individual manager to ensure the needs of the business are met

without sacrificing the expectations of investors.” Mr. Bryant concludes by suggesting

“this is often the most difficult part because it’s easy for a department manager to

perceive us as road blocks to progress because the manager is primarily concerned with

his department when, in reality, the controller is simply trying to balance the needs of the

plant with the expectations of the executive team and, ultimately, investors.”

This paper has discussed the changing role of the accountant and the three

primary factors that have triggered such a change. As noted, accountants have

traditionally dealt with historical data and been responsible for reporting the results of

business activity. Today, the National Association of Colleges and Employers reports

accounting as the number one major in the U.S. and considers it the best field for

prospective employees (Wilcox, 2007). The prospective accountants must deal with

more than just numbers as accountants have evolved into business partners and strategists

giving managers a resource to help understand the current and future impact of their

decisions. This expanded role allows accountants to be more involved with the planning

and execution of business strategies which ultimately helps the business be proactive

rather than reactive.

References

Burns, J., & Scapens, R. (2000). Role rehearsal. Management Accounting, 78(5), 18.

Caron, M.-A. (2006). Five steps to becoming a business partner. CMA Management, 80(1), 32-35.

Epstein, I. (2006). KEEPING up with the PACE from bean counters to strategists. South African Institute of Chartered Accountants. Retrieved December 20, 2008, from http://findarticles.com/p/articles/mi_qa5377/is_200609/ai_n21399047

Perkins, B. (2001). Accountants of the future. Silicon Valley / San Jose Business Journal. Retrieved December 20, 2008, from http://sanjose.bizjournals.com/sanjose/stories/2001/06/18/focus1.html

The role of the CFO in the next millennium (1997). Management Accounting, 75(2), 6-8.

Wilcox, R. (2007). High demand for accountants gives ‘bean counters’ makeover. Houston Business Journal. Retrieved December 20, 2008, from http://jefferson-wells.com/DefaultFilePile/InTheNews/JeffersonWells_112607_HoustonBusinessJournal.pdf