The Fundamentals: Practice management systems

May 20, 2024 10:44 AM

As the demands on accounting professionals grow more complex, so too has their software. But with all the software solutions now offered on the market, choosing the right fit for your firm can be highly intimidating, even for those who are technologically inclined.

This is why Accounting Today is launching a new series we're calling The Fundamentals, where we explore the basics of selecting different kinds of software. What features should firms look for? Which ones should they ignore? How do you assess vendors? And, ultimately, how much should people pay? We asked these questions and more of firm leaders and other technology decision-makers to understand, beyond any particular company or brand, what people should be looking for in their software solutions.

The first entry in this series focuses on practice management systems, which handle the numerous administrative tasks that come with running a firm so professionals can focus more freely on work that's directly relevant to clients. In this way, practices can improve client communications, strengthen collaboration and offer better visibility into their own finances, among other things. But just as no accounting firm is one size fits all, neither are practice management systems, and selecting the wrong one can have significant consequences down the road.

To help our readers avoid this fate, we talked to experts in firms both large and small about what they look for in these solutions, and what tips and tricks they have for others who are confused about what they're buying. They include:

Jenni Bieck, chief technology officer for Wisconsin's Vesta (formerly Huberty);
Donald Logan, chief information officer for Grassi & Co., a Top 100 firm;
Akshay Shrimanker, founder and president of Queens, New York-based Shay CPA;
Jim Bourke, managing director of advisory services with Top 25 Firm Withum; and,
Steve Perkins, chief information officer with Oklahoma's HoganTaylor, a Top 100 Firm.

Each of them shared their thoughts on the have-to-have versus nice-to-have features of practice management systems, what features can be safely ignored, factors to consider regarding firm size, the biggest mistakes people make, how much they should expect to pay, obvious red flags and green flags to watch out for, and what questions they should ask their vendors.

The must-haves

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When it comes to the features a practice management system should absolutely have, accounting technology leaders focused on the brass-tacks needs of any firm, such as keeping track of clients, tracking the hours spent working for them, and sending them the bill.

Still, a good practice management system isn't the only solution a firm needs, which is why so many also cited strong integrations as a must-have: Without them, practitioners would be constantly switching from one software to another, eating up time that could have been spent on actual accounting work. And just as APIs are a key part of integrations, being cloud-based was cited as another necessity.

Here are our experts' must-have features:

Time and billing systems, which ideally should be aligned with the firm's own billing model, whether subscription, fixed fee or value-based.
Strong integrations with other software systems, like document management or workflow, and affordable APIs that support them.
Data analytics and reporting capacities, ideally supported by dashboards that can offer visualizations for both clients and firm leaders at a granular level. This should also include a broad library of pre-built reports and report-writing tools.
A cloud-native web-based interface.
Client portals.
Security features, such as two-factor authentication.
Workflow and project management capacities, ideally paired with automation and artificial intelligence/machine learning features.
Client and contract management.
The ability to scale with the firm, as practice management systems are not something people want to replace often.

The nice-to-haves

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While not strictly necessary, the ability to access the system remotely without having to be in the physical office was seen as a major plus, whether directly through an app or even just via email. Beyond connectivity, experts also talked about the ability to go beyond just knowing what tasks need doing and into how to arrange them most efficiently.

Here are all the nice-to-have features:

Mobile connectivity, especially for time entry, as accountants aren't always going to be at their desk when making a call or resolving a client issue.
Email integration.
Built-in resource and job scheduling to avoid having to track everything via spreadsheet or a third-party system.
Job budgeting.
Steve Perkins from HoganTayor categorized workflow capacities as a nice-to-have versus a have-to-have.

Potentially unnecessary add-ons

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When it comes to features, quantity does not always mean quality. While the particulars might vary from firm to firm, leaders should be paying just as much attention to what they don't need as to what they do. It does no good to pay for a system that has two features you actually use and 200 you never do. Meanwhile, even if you do need a particular feature, it may be prudent to ask how it compares to more dedicated solutions.

Add-ons that are features of software already owned (but also evaluate the add-on to see if you can eliminate the other software).
Add-ons that don't align with the firm's size and operational needs. There could be features designed for larger firms that are unnecessary for smaller practices, or vice versa.
Add-ons that won't be utilized. Focus on a system that offers the right tools for the firm's operations and growth.
Withum's Jim Bourke said reporting features in practice management systems often don't have the flexibility accountants need, and said not to worry too much so long as data flows into reporting tools like Power BI and others.
Expense management versus a dedicated system that integrates with the practice management system.
Steve Perkins from HoganTaylor said to avoid overloading clients on different portals for different purposes like communication, file exchange or paying the bill; firms, he said, should pursue comprehensive client experience systems instead.

Red flags

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There are many red flags leaders should be aware of as they search for a good PMS, many of which have to do with how the vendor itself operates — if they can't seem to run their own business effectively, why should you trust them with yours? Poor customer service, high turnover for managers and bad cybersecurity are just a few factors that should give leaders pause. Especially nowadays, firms aren't just buying a piece of software from a vendor but forming a relationship with them over the long term.

Other red flags to watch out for:

Poor user reviews and feedback, especially regarding reliability and performance.
Lack of dedicated customer support representatives, or poor customer support. Also, customer support that refuses to screen share calls and only replies through support tickets.
High turnover for account managers.
Vendor has experienced multiple cybersecurity incidents.
Non-industry solutions that lack other accounting customers.
Pushy salespeople: An excellent solution will shine on its own.
Inability to talk to the CEO, president, founder or anyone else high up that will listen to a customer.
Lack of a secure SOC 2 audit.
A vendor that locks your data into their own silos versus embracing open APIs that allow for easy data ingestion and export to systems and programs owned by other vendors.
Not being cloud-based. (Though Grassi's Donald Logan said it's not so much whether or not the solution is cloud-based but more if it is flexible and aligns with the firm's current strategy and environment, along with the ability to switch later.)

Green flags

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Conversely, there are also green flags that signal a vendor is trustworthy and stands by their products. Chief among them is a positive reputation from other firms like yours, which will be reflected in positive testimonials.

Other green flags include:

A clear roadmap for future development and improvement.
Responsive customer support, whether over the phone or through a relationship manager who stays on top of the account and its needs.
The ability to tailor the software to the firm's specific needs and processes.
Strong security features.
Strong integrations and API support.
A user-friendly interface.
Efficient document management capacities.
The system has undergone the SOC 2 audit process.

Common pitfalls

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Selecting a practice management system is not a decision to be taken lightly, as a mistake here can reverberate through the whole practice. Leaders should take a deliberate approach to the process, considering not just the software itself but its suitability for the firm and its use by the staff.

Some common pitfalls include:

Underestimating the length of time needed to set up the software. This is not something that should be rushed, as practice management systems guide all firm operations.
Not paying attention to user adoption and training. Low utilization rates and failure to use all the software's features can prevent getting the full value of the solution.
Lack of due diligence on the software and vendor on stability, support, security, etc. Relatedly, falling into "shiny object" syndrome and letting hype guide decisions.
Not aligning with the firm's specific needs and processes, which can lead to a system that is either too simple or too complex.
Neglecting integrations.
Neglecting scalability and ignoring the big picture: Assume your firm is locked into the system for at least 10 years; how big will your firm be in 10 years?
Not getting buy-in from the team and making things seem like a top-down decision, which can lead staff to not engage with the process and frustrate implementation.

Budgets

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When asked how much a firm should spend on a practice management system — as well as what represented a budget, average and advanced cost — answers varied widely. Firms might spend as little as $10 a month per person or as much as $400.

Grassi's Logan said a basic or entry-level system should start as low as $13-25 per month; a mid-range one could cost around $39 per month per team member; and a high-end system often requires a custom quote based on firm size and needs.
Akshay Shrimanker from Shay CPA said an average system could cost between $10-20 per month. For a higher-end system, this could be closer to $100.
Steve Perkins from HoganTaylor said, "No one should select bargain software for practice management," so firms should expect to pay roughly $200-400 per year per license, depending on features.
Jim Bourke from Withum said there is no standard price, as features and scalability drive costs. He also warned, regarding bargain software, "You get what you pay for (more often than not)."