A couple of weeks ago, over $800 million was wiped off the market value of WH Smith — a name that may not ring a bell in the U.S., but in Britain, it’s a household brand. Founded in 1792 (!), WH Smith is a high street institution – think of it as a cross between Barnes & Noble and your neighborhood convenience store. In North America, it built a nice business in airports, selling travel gear and branded merchandise to captive audiences.
Then everything went south.
Unfortunately, the North American arm became the epicenter of a $40 million accounting apocalypse. The retailer revealed that profits in the division had been overstated, largely due to income being recognized too early. Supplier rebates—conditional on hitting future sales targets—were booked prematurely, inflating results.
The discovery forced WH Smith to slash its profit forecast, from $190 million down to around $130 million, and investors responded by sending shares down more than 40% in a single day. The company has since launched an independent review, but the damage has already been done.
It’s easy to read a story like this and cast aspersions, but I wouldn’t be too quick to judge. The problem wasn’t incompetence — it was complexity. These days, enterprise revenue recognition is absolutely brutal.
As my Chief Operating and Financial Officer Todd McElhatton noted last week, accounting today isn’t just about balancing debits and credits. It’s about managing sprawling systems, evolving business models, and ever-changing regulatory frameworks. And each of these dimensions makes the job exponentially harder.
Here are ten reasons why accounting is only getting more difficult:
1. ASC 606 Means Revenue Recognition Isn’t Straightforward Anymore
The WH Smith case highlights a classic pitfall: premature revenue recognition. Accounting standards like ASC 606 and IFRS 15 demand that revenue only be recognized when performance obligations are satisfied. But with complex, multi-element contracts, even seasoned teams can misapply the rules.
2. Systems Don’t Talk to Each Other
Lots of companies run multiple finance systems across geographies or business units. Weak integration, inconsistent policies, and bolt-on spreadsheets mean reconciliations are delayed, and financial data between different platforms doesn’t tie out. It happens all the time – critical information in one system that’s needed by another (eg. quote details that affect revenue) simply doesn’t flow through. If ERP rules are misconfigured—even slightly—the same mistake repeats everywhere.
3. Cash Flow and Collections Lag Behind the Ledger
Revenue recognition is only part of the story. Accounts receivable and collections tie directly to both cash flow and reporting accuracy. When payments are delayed, misapplied, or reconciled incorrectly, forecasting suffers. You can’t run the business on numbers that don’t tie out.
4. Smaller Teams, Bigger Burdens
Accounting talent is burning out. Long hours, repetitive manual work, and shrinking teams mean the pressure to “do more with less” is only intensifying. Fewer eyes on the books means greater room for error, and less time to catch it. And the problem is only going to get worse. because the accounting industry faces a major pipeline problem. According to the CPA Journal, first-time CPA exam takers in the U.S. have dropped by thirty percent over the last ten years.
5. Creative Deals, Messy Accounting
Sales teams love to get creative with multi-year ramps, bundled services, or non-standard contracts. Accounting teams are left with the aftermath: manually building and adjusting revenue schedules that rarely fit neatly into system defaults.
6. Usage-Based Monetization Is Exploding
From AI to SaaS, usage-based pricing is the new imperative. But your usage data has to line up with contract terms and revenue recognition policies. That means accountants must understand not just when a subscription starts, but when each incremental unit of consumption occurs.
7. Contracts Don’t Sit Still
In the Subscription Economy, contracts evolve constantly, including upsells, renewals, expansions, and cross-sells. Every change requires reforecasting, reprorating, and recalculating revenue schedules. Contracts live, change and evolve over time. They are a moving target with little margin for error.
8. Rules Are a Moving Target Too
The standards themselves—ASC 606, IFRS, local GAAP—aren’t static! Regulators are constantly issuing new updates, interpretations, and clarifications. For global businesses, keeping track of evolving standards across jurisdictions is a full-time job.
9. Manual Work Never Disappears
Despite advances in automation, countless processes—from rebate tracking to deferred revenue schedules—still live in spreadsheets. Manual handoffs are prone to errors, and when those errors compound, they become million-dollar write-downs.
10. The Stakes Keep Getting Higher
The market doesn’t forgive mistakes. Investors react instantly to accounting errors, often punishing companies more harshly than the numbers alone would justify. And with shareholder lawsuits, regulatory scrutiny, and reputational fallout, even small missteps can carry outsized consequences.
11. AI Isn’t Coming to Save the Day
Yes, all these new AI optimization tools are very exciting. But as we all know, AI makes mistakes. If you were a CEO or a CFO, would you sign off on a statement that you knew was 100% AI-generated? A quarterly statement is no place for a hallucination!
In short, accounting is harder than ever, not because accountants don’t know the rules, but because the rules, systems, and business models are evolving faster than the processes meant to govern them. The WH Smith story is just one reminder that in modern finance, the cost of getting it wrong can be catastrophic.
I sure hope the finance team WH Smith finds the right talent, workflows, and systems they need to avoid future unpleasant surprises.
