The average age of a tax accountant has crossed 60 years, and it has become
a matured (or decayed) industry. What vision should we have to transform
such an industry?
Before considering the above question, I would like to point out that there
are “things that cannot be changed” and “things that must be changed” in
a business. I would first like to discuss these two, so that we do not
mix them up.
“Things that should not be changed” ・・・Identity, Principle and Philosophy”
Contributing to society
Fostering human resources to do this.
This is an ultimate goal for any company. Management principles and philosophy,
long-term visions etc. are made as a means to accomplish this.
Management principles and philosophies are things that change with times, but
contributing to society is the role of a company that should not be changed
no matter how much the times change.
On the contrary, it can also be said that a company goes bankrupt because
its identity of “Social Mission” is lost.
“Things that must be changed” ・・・ Vision and Strategy
Companies should continue changing the mid-term vision, strategies and
tactics according to the changing times (trend).
Since the trend is a growth opportunity, a company cannot have a big growth
if it does not follow the latest trend.
However, a company will not have a continuous long growth if it only runs
after the latest trend. This is because it goes against the nature of management.
We must not mix these two points, and should focus on our long and mid-term
vision, and must make strategies to realize those visions.
How far should a company grow?”
How far a company should grow is, in other words, a question of the “appropriate
size” for the company.
In microeconomics, it is said that there is an appropriate size for a company
(the size whereby profits can be maximized).
However, when it comes to a company’s goal at contributing to society,
there is no fixed level. If there happens to be such a level, it is because
the management executive has not found a way to contribute to society (this
is called growth opportunity).
I am often asked, “How far do you intend to grow your company?”
I immediately answer, “Until the company goes bankrupt.”
The reason why a company goes bankrupt is because the company cannot contribute
anything more to the society, which is to say that the social mission of
the company has come to an end.
Managing a company is like steering a ship. The bigger the size, the more
difficult it gets to manage. This is because it gets difficult to cope
with the changes in the management environment. The bigger the ship, the
more stable it may look, but it loses its adaptability.
A small ship (company) is easier to manage, and can also quickly cope with
the changes in the environment. There are also managing executives who
think that the appropriate size of a company is the size that they can
manage within their abilities.
However, if we suppose that a company is a public institution, the size
of the company should then be based on the benefits to the society. Since
the society needs a huge contribution from us, the size of the company
must be decided from the social perspective.
As a company gets bigger, it loses its adaptability, and coping with the
social changes becomes difficult. Thus, as a result, risks of bankruptcy
also increase.
Whether the management executives dare to take this risk or not shows the
stature of their ambition and social mission. I want to become such a management
executive.
“History of the development in the Tax Accountant Industry”
I think that the tax accountant industry is facing a huge transition period.
The past success does not work today.
The main reason is because of the commercialization of accounting and tax.
However, it should not be merely thought of as a negative approach.
Rather than that, it should be thought of as risk management.
What is important for a management executive is not just to have an optimistic
approach, but also to assume a very pessimistic situation and to act positively
with a strategy.
Lets take a look back on the trends till now keeping in mind the tax accountant
industry.
Business opportunities come about when the time changes, in other words,
when the gap has to be adjusted. Following the trend is different from
pursuing the essence of management, and as long as people don’t follow
the trend, the business does not grow.
(1) Introduction of Computer Accounting
During the time when computers were expensive for small and medium companies,
companies like TKC leased computers and accounting software, and by such
mutual collaboration between the two parties, there came a time when computer
accounting was very successful. The 80’s were a prime for this business.
This business model also adjusted the gap during the days when computers
were expensive. However, in due course of time, with the popularity of
inexpensive software like Yayoi Accounting, the effectiveness of such business
models faded away.
(2) Accounting firms specializing in property tax and healthcare
At the height of Bubble period in the 1990’s, due to the sudden appreciation
in the land prices, inheritance became a social issue. Due to this, there
was a growing need for property tax, and so accounting firms specializing
in it became very popular.
However, post bubble period, due to the fall in the land prices, the market
for property tax became very small. Among tax accountant aspirants, there
are many who still have a dream to work in the property tax market, but
it is not be a dream that can be realized.
Even in the medical services, due to the increase in the number of doctors,
profitability for hospitals became very low, and the fee per client also
went down drastically.
(3) Corporate revival restructuring consulting and SPC (Securitization)
Because of the burst in the bubble, many companies became bankrupt, and
due to this, there arose a new line of business called Corporate Revival.
However, the Corporate Revival business came to an end when the economy
recovered.
Property Tax, Corporate Revival and SPC are all linked by the keyword “Land”.
Land business is definitely related with corporate revival. It can be said
that the reason why accounting firms specializing in property tax expanded
to Corporate Revival business and SPC post bubble period is because they
capitalized on their strengths, and followed the trend.
When I decided to start my own firm and became independent in 1998, the
economy was at its worst. During that time the Corporate Revival business
was becoming very popular, but to enter this business, it was necessary
to have connections with professions from other fields such as lawyers
and so on. It was very hard for me to enter this business since I had just
become independent, and didn’t have any such connections.
I concentrated on management consulting, as I thought that there would
be needs for profit improvement since the economy was bad. This was the
new “trend” to me.
In a way, personally I could say that this business was quite a big success.However,
since it takes a lot of time to systemize consulting management and to
build a strategic team of staff, I changed my base from Management Consulting
to Financial Consulting three years after I became independent.I developed
a Consulting Tool by which my staff could do the consulting without me
having to intervene.
This also produced decent results, but since the growth of the company
was decided by the growth of individuals, the business didn’t have such
an explosive growth.
After that, from 2004 I focused on Human Resources business. The reason
for this was because there were many aspiring tax accountants who didn’t
have a place of employment nor a chance to build up their work experience.
I wanted to resolve this problem.
Even though there were many people who wanted to become tax accountants,
there was hardly any recruitment in the accounting firms. I adjusted this
gap.
Japan’s labor population will decrease in the years to come, which means
that Human Resources will not be a popular business for long. It can rather
be said that this is the is the time to start selecting the Human Resources
Business.
Hence, it is not necessary to pursue this business too far.
“What is the next trend?”
I think that the next trend in the tax accountant business will be “International
Tax”.
When I was in Price Water, most of tax related business was International
Tax, since most of clients were foreign companies.
At that time, since accounting firms good at international tax were only
foreign auditing firms, it was possible to develop high value added services
(high profitability).
However, it was thought that such services were “marginal skills” which
could be used only within such audit firms, and that it was useless when
working in independent or domestic accounting firms.
The reason why I am focusing so much on International Tax is because “Globalization”
is a keyword now.
We have heard of globalization for a long time, but globalization today
has a slightly different meaning.
Mr. Kenichi Omae pointed out in a magazine article that post bubble period,
the Japanese mixed the two terms, “Depression “ and “Deflation”.
This is a smart observation.
Economic Depression and Boom is a concept from Business Cycle.
Economic Depression, as time passes by, changes to Economic Boom.
On the other hand, deflation means fall in prices.
The biggest cause for deflation is the inflow of large quantities of inexpensive
and good quality products into Japan, especially from China because of
globalization.
Deflation is just a means to adjust the gap of prices of products among
different countries.
If we think in this way, deflation is only a price adjuster, and even if
time passes by, it doesn’t mean that we will face inflation.
If we look from the viewpoint of monetarism,” Inflation Target Theory”,
which was a topic of discussion some time back, simply increases the nominal
price by increasing the money supply. Currency exchange adjustment (towards
a cheaper yen) does not have an influence in consumption demand economy.
Rather it is also a cause to bring about Hyper Inflation.
Deflation is certainly not a bad thing, and we must be aware that due to
globalization, it functions as a price regulator.
Moreover, it can be easily predicted that globalization will advance more
and more in the days to come.
It is difficult to understand business cycle, but it is easier to understand
the advancement of globalization up to a certain extent. With such an understanding,
up to a certain extent, we can see what the next trend looks like.
“Tokyo Accountant Group Strategy”
Japanese industry is getting globalized especially in Asia.
The companies that are left behind by this wave will also lose their mission.
Times are changing very much today.
We at the Tokyo Tax Accountant will strengthen our “International Tax Department”.
We have already opened our offices in China and Hong Kong, and will open
up offices in other Asian countries as well.
Following the trend of “Globalization”, we will deal with business development
focused over the next 30 years as an “International Japanese Accounting
Firm”. |
