IMGCAP(1)]According to our most recent survey, your peers are spending just under $10,000 annually per full-time equivalent on technology. Technology includes hardware, software, phone and data, scanners and copiers, labor, and sourced services.
Is that too much? Is it enough? What is your firm spending? Are you getting the return on your investment you should be getting? Is your technology up to date? Are you focused on maintenance or innovation?
The answers to these questions are often subjective in multiple-owner professional service firms. In other words, value is the key and different people have different value systems and requirements.
Many firms have focused on reduction of expenses over the past few years, and are at a critical point facing significant decisions regarding their IT strategy. Some firms have already moved to "the cloud," while others are planning or even resisting such a strategy. I encourage you to follow these 10 strategies, and the technical part of the equation will be resolved through a proven process. For over 25 years I have said, "You don't have to know how to build the watch, but you had better be able to tell what time it is when it comes to technology."
In case you missed it, someone wound the watch and Mickey's right hand is going faster than in the past!
Technology is rapidly changing and companies are looking at alternatives to maximize the return on their investment and rapidly deploy innovative technology that improves client services and the related revenue stream. Consumer technology now drives business IT. Look at the impact of the Apple iPad and how, in just over one year, it has changed how people are using technology and how software is developed and distributed. Technology has a huge impact on the value of your firm and your ability to create value for your clients. Let's look at the 10 strategies and see how they will differentiate your firm.
1. Operate with a plan and a three-year budget. While this sounds basic, most firms do not have IT plans and budgets. An IT plan does not take a great deal of time to develop if you have the right planning tools and process. Planning does require input from key people in the firm, but primarily is driven by firm leadership and the ability to identify priorities and focus resources on addressing these priorities. It is highly recommended to use someone outside the firm to facilitate this process for several reasons (reduced politics, knowledge of peer-firm best practices, reduced time requirements, and improved focus on strategic, rather than tactical, issues).
2. Utilize an IT committee. IT governance is critical and should involve end users. The mission of this committee should be to ensure that adequate planning occurs, priorities are established and every project has a champion. Firms should focus on firm projects with end-user champions. A mistake many firms make is to look at these projects as IT projects. We have found that the most effective IT committees meet at least quarterly with an agenda and limit discussion to strategic issues and integrating technology with the firm's strategic plan. At least annually the committee should spend one to one-and-a-half days on the planning process involving the managing partner or chief executive.
3. Communicate. Most IT leaders make the mistake of not communicating often and effectively, especially with regard to accomplishments. End users should be aware of all projects, expectations for implementation, training requirements and time lines. Focus on successes and deal with the reality that change is difficult for many people. Consistent and continual communication is required in a rapidly changing IT world. Experiences impact beliefs, beliefs drive actions and actions determine results. Outdated beliefs generally result in resistance.
4. Trust determines speed and cost. Firms that have a low level of trust pay a tax when it comes to IT, while firms with a high level of trust are rewarded with a dividend. In firms with high trust, most time is spend on implementation and training, rather than on justification and fixing problems. Many of the strategies listed in this article are designed to increase the trust within your firm.
5. Utilize business analysts. Business analysts have the unique ability of being able to understand both the technology and the firm's processes. In other words, they bridge the gap between those who know what they want to accomplish and those who know how to leverage technology. It is not unusual for partners and managers to lack knowledge as to what is possible. Likewise, programmers and engineers often do not understand the business requirements and processes. Business analysts are typically better communicators than programmers and engineers. All major projects should have a business analyst involved in the planning, process improvement, training, and implementation phases.
6. Participate in peer communities. The "not invented here" syndrome does not work when it comes to technology. No firm owns the market on technology. The wisdom of crowds and the ability to network with leading peers is very valuable. Since 2000, we have been conducting the Boomer Technology Circles where a firm decision-maker and IT professional come three times a year to share strategies and results, and exchange what works and what doesn't work. These meetings provide clarity, confidence and increased capacity. Most firms have core knowledge, but it is the access to the "tacit knowledge" from other peers that differentiates the best from the rest.
7. Treat vendors as business partners. Technology should not be managed as overhead; it should be managed as a strategic asset. The primary vendors in the accounting industry have a wealth of resources they will gladly share with firms, if treated as a partner. This strategy is more important today than ever due to the transformation to the cloud and the integration of applications into systems that contain many processes. Most firms can relate to multiple databases that contain duplicate information and are often inaccessible for reporting purposes. Business intelligence and real-time data will allow firms to provide increased value to their clients.
8. Know your metrics. Key metrics are important in managing technology. Some of the most important metrics are revenue per full-time equivalent (2,080 hours), amount spent on IT per FTE, percent of revenue spend on IT, average hourly rate collected, and end users per IT support person (internal and external). Much like your golf score, these metrics should drive improvement. Peer metrics are interesting, and "average" is where the best of the worst meet the worst of the best.
9. Utilize "meshing" when possible. This may be a new term to many CPAs, and is based upon the premise that it is often better to lease than to own. The Internet platform today allows firms to utilize external resources to ensure the return on their IT investment and provide the necessary resources when needed. Much like electricity, technology has evolved to the point where it is often cheaper, easier, faster and better to use external resources than it is to control all resources and rely on limited internal expertise. Firms do not have their own power plants for electricity (other than for disasters, in some cases), and why should they own and maintain an expensive infrastructure when they can lease those resources? While this sounds good to most business people, the reality is that the CPA profession is in a period of transition from client/server-based systems to Software-as-a-Service. Most firms will require a few years to transition due to the fact that the vendors do not have all of their applications in a true SaaS environment, and some firms have already made significant investments in virtualization and storage capabilities.
10. Focus on innovation and growth. While the IT investment in most firms will probably remain at the 6 percent to 7 percent of net revenue level over the next few years, how your firm spends its IT budget will be critical to your ability to attract and retain clients. Today many firms are investing the majority of their resources in the maintenance of their existing systems, rather than on innovation and the delivery of new services. Innovative services require a platform that is both scalable and accessible from any place at any time. New and affordable cloud-based accounting systems where clients and the firm access data in the cloud, rather than exchanging files and reconciling differences, exist. The focus should be on capturing the transactions digitally, rather than on entering transactions and ensuring correctness. Accountants can move up the value chain beyond the capturing of the transaction, to higher-valued services. How firms package, name, price and deliver these services will be critical. The hourly method of billing is based entirely upon the value of labor. Increased investments in platforms and capabilities that allow clients real-time information suggest that firms evaluate their pricing and collection policies. Credit cards and ACH payments should be the norm. Checks are rapidly disappearing.
While these 10 strategies are not intended to be all-inclusive, they do represent a thought process that will enable your firm to capture a return on investment, meet client requirements, and increase the value of your firm. AT
