Accounting firm technology “pioneers” can generate higher profits and revenue, according to a new study by CCH.
The study found that accounting firms are able to capitalize on the strategies that other successful firms have used to harness leading-edge technology along with talent. The findings were released Monday in a new CCH whitepaper, CPA Firms Succeeding in the New Economy: CCH Leaders Now and Next Survey.
CCH president and CEO Teresa Mackintosh presented details from the paper during a keynote address Monday at the CCH Connections User Conference 2013 in Phoenix. “Successful firms know that being able to adapt and evolve in meeting their clients’ growing expectations is paramount as our profession continues crossing the tipping point of change,” she said. “It’s more than grasping what the latest technology has to offer, but also knowing how to align business strategy with leadership development to maximize potential.”
Instead of categorizing firms by size, the paper groups the firms that participated in a recent survey by CCH into four main categories:
Pioneers First to adopt new technology. Pioneer firms are often viewed as risk takers, willing to be first movers and recognize they may face pain points before seeing benefits when adopting advanced software solutions.
Early Adopters Not the first out of the gate to implement new technology, but ahead of the mainstream. Early adopter firms understand greater opportunities new technology provides, but are willing to hold off until hearing positive feedback from Pioneers.
Mainstream Willing to wait until solutions become more popular with peers. These firms tend to avoid risk and usually hold off on adopting new technology until its clearly proven and commonplace.
Late Adopters Similar to mainstream firms but may also wait until their previous solution is no longer available and forced to change.
Pioneer accounting firms stood out because of their forward-thinking approach to embracing change as they reshape how they operate. The study found they are leveraging emerging technologies more effectively than their competitors and applying greater emphasis on leadership development, talent recruitment and formal talent management to enable them to outperform their peers in revenue growth, profitability and overall firm value.
Approximately 89 percent of the Pioneer firms participating in the CCH Leaders Now and Next Survey reported profits increasing over the past year, as opposed to only 69 percent of Early Adopter firms seeing a profit increase over the previous year, while 63 percent of Mainstream/Late Adopter firms said their profits increased over the same time period.
In addition, 84 percent of the Pioneer firms also reported revenue increases over the past year, as opposed to 77 percent of Early Adopter firms and only 63 percent of Mainstream/Late Adopter firms.
The percentage gap is tighter between Pioneer and Early Adopter firms when they were asked about their firm’s value increasing over the past five years. Seventy-four percent of the Pioneer firms and 73 percent of the Early Adopter firms reported positive growth in value during the last half-decade. Only 62 percent of the Mainstream/Late Adopter firms reported increased firm value during that time.
“Obviously, not all firms are ready to take the full plunge in becoming Pioneers,” said Mackintosh. “What’s critical is for firms to pinpoint specific areas where they believe they can improve and selectively leverage some of the best practices of Pioneers to grow, manage and protect their businesses.”
Leveraging Technology for Success
Advanced cloud computing and mobile solutions continue to rapidly change the accounting industry landscape, the study showed. For all firms surveyed, their top five most important benefits for implementing cloud and mobile solutions are:
Ability to work anywhere
Improve client service
Improve security, back-up procedures
Ability to serve client in any location
Ability to work onsite more with clients
Deliver greater value to clients
Improve work/life benefits for staff
Improve client collaboration
Increase billable time
Newer cloud computing technology from CCH, such as the company’s CCH Axcess cloud-based tax preparation, compliance and firm management system, and its mobile app CCH Mobile, expand the ability of professionals to respond to clients at any time.
Cloud and mobile apps are no longer viewed as emerging technologies and have become more a part of the mainstream for accounting firms. According to the CCH survey, 73 percent of the firms polled identify themselves as Mainstream or even Late Adopters in their approach to technology, but they maintain a solid understanding of technology and its benefits for driving business results, enhancing client services and even recruiting top talent. However, concerns over adequate resources to manage system implementation, as well as the risk of not effectively integrating technology and the ability to quickly implement changes outweigh some firms’ potential rewards.
The survey results also indicated that Pioneer firms are more effective at leveraging emerging technologies that many firms find difficult to grasp. For example, 54 percent of all the firms surveyed agreed that they are effective at managing mobile solutions. However, that’s far behind the 89 percent of Pioneer firms’ ability to manage mobile capabilities and 73 percent of Early Adopters. Only 36 percent of Mainstream/Late Adopters said they effectively manage mobile solutions.
But the percentage gaps grow even wider between Pioneers and Early Adopters when asked about effectively leveraging cloud computing and social media. Ninety-three percent of Pioneers reported they effectively leverage cloud computing, compared to only 58 percent of Early Adopters and 26 percent of Mainstream/Late Adopters.
When asked about effectively leveraging social media, 92 percent of the Pioneer firms said they do, while only 47 percent of Early Adopters and just 22 percent of Mainstream/Late Adopters said they did. Separately, 70 percent of Pioneers said they used social media to engage clients, but just 41 percent of Early Adopters and 36 percent of Mainstream/Late Adopters said they reach out to clients via social media.
As for the industry’s emerging leaders, according to the CCH Survey, these are professionals who typically have fewer than 10 years of experience who aspire to become senior managers and leaders within a firm or start their own firm. Existing firm leaders are generally older, with the number of firm partners age 50 and older continuing to climb.
Besides age differences and years of experience, one key factor separating emerging from existing leaders is technology. Many emerging leaders have grown up in the digital age and are considered to be “digital natives.” Social media, mobile access and other forms of technology have been woven into their way of life. Existing leaders have seen technological change evolve in the industry and in their firms and they have needed to learn new ways of performing tasks more efficiently.
When they were asked whether technology is important to attract and retain future firm leaders, 96 percent of Pioneer firms agreed, followed by 73 percent of Early Adopters and 46 percent of Mainstream/Late Adopters. Eighty-two percent of the emerging leaders surveyed said technology plays an important role in future leadership recruitment and retention, compared to only 58 percent of existing leaders surveyed.
While the vast majority of firms surveyed are positive about their firm’s culture and work environment, certain factors differentiate the leadership strategy and focus of Pioneer firms compared to everyone else. When asked whether their firm has a formal mentoring program in place, 94 percent of Pioneer firms said yes, while only 45 percent of Early Adopters and 29 percent of Mainstream/Late Adopters did.
Asked whether their firms have a formal, ongoing recruitment plan, 95 percent of Pioneers responded yes, while 43 percent of Early Adopters and just 15 percent of Mainstream/Late Adopters acknowledged they did.
When asked if their staff support strategies followed a formal talent management program, 84 percent of Pioneers said they did have a program in place, while only 43 percent of Early Adopters and 20 percent of Mainstream/Late Adopters reported having that type of program.
Overall, the leaders of Pioneer firms indicated they have accepted different levels of risk in order to build a foundation of stronger growth, stronger profitability and greater value. While all firms may not have the full resources and capabilities to follow in the footsteps of Pioneers, CCH pointed out there are lessons that non-Pioneer firms can learn about identifying specific areas for improvement and taking a more strategic and steady approach to pulling levers of success.