A Next Generation Accounting Firm: Using Cloud-Based Technology.

Do you worry that the accounting profession is about to pass you by? Do you know how to respond to the rapid changes that are occurring given their impact on you and your firm? How plugged in do you need to be to the vendors that serve firms, the solutions that clients are looking for, and the jobs that millennial’s want in our profession today?

These are just a few of the questions that you can’t put off answering any longer. I’m not a “crying wolf” kind of guy, this is not about being an alarmist. I still run an accounting firm each and every day…so I know what your day is like. However, I write this with a perspective drawn from my experience of being the former Executive Editor of one of our profession’s top practice management magazines, the CEO of Rootworks (an organization that helps over 500 CPA firms across North America with practice strategy and technology) and with an understanding of the development strategies of the major technology vendors that serve our profession, including Thomson Reuters, CCH and Intuit.

I believe that the strategic decisions firm leaders make over the next five years may be the most critical of their careers. The profession is changing—it’s been a slow boil so far, but understand—the time to adapt is now.

To illustrate this point, let’s consider two different firms and their approach to some key strategic areas. One we’ll call “Firm of Today” to represent how the majority of firms operate now. The second we’ll call a “Next Generation Accounting Firm” representing what a successful firm will look like five years from now. 

Firm of Today 

Marketing –  Today, marketing is often defined as attracting whomever calls or walks through the door—the Firm of Today has no specialized niches. The firm’s website is essentially an online brochure. As such, the practice serves everyone and anyone using whatever technology the clients want to use. 

Onboarding – At the Firm of Today,the process of onboarding a new client is largely non-existent. Once the engagement letter is signed, the challenges begin. The firm lacks a standardized onboarding process and systems which, coupled with an unrefined business model, makes client training impossible.

Practice Management – The majority of firms today internally struggle to manage multiple databases. There’s tax, time and billing, depreciation, document management, portals, workflow and more—each with a separate database. In addition, little consideration is given to the kinds of work (and how much of that work) the firm should be doing.

Client Services – This, arguably, is one of the biggest drains on resources for our Firm of Today because there’s little standardization. Lack of consistency in client accounting services creates long hours for staff, inefficiencies and frustration within the organization. Standardization is also an issue when it comes to payroll services—which also lack defined systems and processes. Chances are this firm is not leveraging the benefits of e-filing and electronic payments, either. 

In addition, thisfirm is too dependent on tax business. Tax drives revenue, work cycles, overtime, and staff dissatisfaction. It creates a culture for those running the firm that encourages them to stop thinking about their businesses for at least seven months each year. It’s not the tax service line that’s the problem, it’s the amount of tax that firms do that becomes the issue. Essentially, firms like this one, have the wrong product mix.

The Team – The Firm of Today still focuses on how many hours someone works instead of how much is accomplished by that person. Firms are struggling to find good staff to work within an outdated service model. Asking millennials to work 60 to 80 hours per week during busy season is not an option—and there are more millennials in the workforce today than any other demographic. Yikes!

If you can relate to the above description of the Firm of Today, you’re not alone. What will separate your firm and propel it to success in the future is your willingness and ability to understand the changes taking place and adapt to them—by building a firm based on our second example, The Next Generation Accounting Firm® (NGAF).

The Next Generation Accounting Firm

In contrast to a Firm of Today, an NGAF utilizes a well-defined vision and efficient business model to serve ideal clients. Let’s compare how an NGAF approaches the same key functions that I described for the Firm of Today.

Marketing – Marketing for a Next Generation Accounting Firm is defined as identifying the right prospects, based on the kind of clients the firm wants to serve, and then demonstrating to them how the firm’s expertise can benefit them. The cloud removes any geographic barriers, so clients can be located across the country—or the globe. 

An NGAF’s website is built to attract its ideal clients and to provide them with a place to do business with the firm, utilizing the firm’s selected technological solutions. As such, the firm is no longer dependent on tax to drive their economic engine. 

Onboarding – In an NGAF, onboarding is the seamless integration of ideal prospects into a well-oiled machine, creating a stream of recurring clients who fit the chosen business model. Onboarding begins on the NGAF’s website where all necessary information is gathered from the prospect. The data is then easily integrated into the firm’s practice management system. The end goal is to have one database with all client information completely connected.

Practice Management – Being able to effectively navigate technology is one of the hallmarks of a Next Generation Accounting Firm because this type of firm operates in the cloud. 

Whether you like it or not, everything related to software technology in your firm is going to change over the next five years. Every solution will be cloud-based. This is not speculation; this is a fact. Each and every software vendor developing products in the tax and accounting space today is developing only cloud-based solutions. It’s only a small window of time before firms that don’t adapt are going to really struggle to remain viable. 

Client Services – An NGAF differs from a Firm of Today in the services it offers in several important ways. For one, an NGAF has a defined business model that allows it to enjoy the benefits and efficiency of a recurring and easily replicated revenue stream. This generally means fewer tax clients and more monthly accounting and payroll clients. However, whether it’s an accounting, payroll or tax service, all of the solutions used by an NGAF are cloud-based and they talk to each other so multiple databases are unnecessary.

The Team – When it comes to staff, most people find that an NGAF is a much more attractive and enjoyable place to work than a Firm of Today. Culturally, the focus is on productivity rather than punch clocks. Staff are happier and become more efficient with defined roles and more work-life balance.

As a leader, your challenge in the next three to five years is managing the amount of change brought on by all the technology disruption inside your firm. The tipping point is coming quickly. You need to be getting a jump on this now, laying out your strategy, moving the pieces to the cloud that are ready to be moved so that you can be confidently prepared for what comes next.