Current economic conditions will create winners and losers in the accounting profession. Most accountants only think of winning and losing in financial terms, yet there are other areas in which firms are at risk but can also prosper during uncertain times.Three of these are:
* People development;
* Client satisfaction; and,
* Process improvement.
Hopefully there will be more winners than losers, but firms control their own destinies. Blaming the economy for poor management isn't acceptable.
Firms with a strong culture will excel because of planning, people and processes. Today's challenges require a team effort - not a group of rugged individuals sharing overhead while only looking out for themselves. Technology will be the accelerator that allows firms to compete with those that are less focused, lack the ability to retain/attract quality personal, and lack standard processes that make them both effective and efficient. These weaknesses don't often show during good times, but quickly become apparent during tough times.
In this article I offer 10 suggestions that your firm should think about and consider - five traps to avoid and five strategies to implement.
THE TRAPS
First, let's look at some of the traps firms often fall into.
1. Staffing. People are critical to every firm's success, yet for the last 10 years, many have too often settled for mediocrity, rather than quality, in a tight labor market. In some firms, this is evident at levels far above entry level, e.g., managers and even partners.
If you feel compelled to cut jobs, don't do what many firms do: cut only at the entry or two-to-three-year level while protecting partners. Consider performance at all levels if you are required to make tough decisions regarding personnel.
I believe that the accounting profession will benefit from the credit crisis in the long term. The value of independence and financial reporting will only increase. Don't get caught in all of the negativity and damage your firm for the long term. Staffing will continue to be an issue in the long term as a large number of Baby Boomers retire.
2. Communication. Communication is typically a weakness in many firms - with staff as well as clients. Partner perceptions and bias often get incorporated into communications; therefore, the message isn't always consistent. Don't be afraid to address the elephant in the room both within and without. Make sure that communications are consistent and positive. You are dealing with people's confidence, and confidence determines whether people remain motivated or are paralyzed.
Accountants are the No. 1 trusted business advisor. People look to leaders who are trustworthy and realistic - but also confident. Don't assume your partners and managers know how to communicate appropriately during bad times. Give them guidance by preparing a written statement.
Social networking is having a significant impact on how people communicate today. People want to be part of a community of like minds whom they can trust. Use the Internet to your advantage.
3. Avoidance. One of the biggest traps a firm can fall into is simply doing nothing and avoiding any discussion about what is happening in the global economy. Everyone is affected - directly or indirectly.
Firms should communicate with their staff and clients.
One of the best fixes is to communicate with clients and learn how the economic situation is impacting them. Ask about their biggest dangers, opportunities and strengths. Assist clients in eliminating those dangers or help them seek extra assistance. You will be surprised at the opportunities presented when you make the time and effort to show concern for your clients. Doing so will also strengthen your confidence.
4. Activity. It is easy to get caught in the activity trap. Firms have plenty of work, but the most significant questions are, will they get paid - and is it the right kind of work? The activity trap is directly tied to the avoidance trap.
Step back, take some time to think and determine priorities to move forward. Is your strategic plan current and relevant? Do your services provide value to clients, and are they willing and capable of paying?
5. Expenses. Accountants are masters at cutting expenses, but often get caught in the trap of a short-term perspective. There are several strategies, but one of the best is to compare budgets to your strategic plan and then prioritize expenditures based upon the strategic plan.
The areas often cut first are:
* Marketing;
* Staff salaries;
* Training;
* Travel; and,
* Technology.
While these are legitimate areas to consider, they are probably not areas that can be cut entirely. Think of the impact in one to three years as you make decisions regarding expense management. Too often it is easy to focus only on expenses. You should also look at new revenue opportunities, of which there are going to be many.
THE STRATEGIES
Now let's look at positive strategies firms can implement not only to survive but also to thrive during uncertain times.
6. Innovation. Creativity is one part of the formula for value creation. Leadership and relationships are the other components. Leadership provides direction, relationships provide confidence and creativity provides new capabilities. Firms that promote and foster creativity will be the winners. Creativity is a part of a firm's culture. The desire for constant improvement drives innovation.
7. Trust. The level of trust within your firm determines its ability to react quickly and in a cost-effective manner. Firms characterized by a high level of trust are rewarded with lower costs and reduced time, while firms with a low level of trust are taxed with higher costs and increased time. Trust is built over time but can be destroyed quickly. Avoid the traps noted above and take positive action on strategies to increase trust - both internally and externally.
8. Processes. Every firm has unique processes, but few are documented or named. In fact, many firms are not as efficient or as effective as they could be. Now is a good time to review your most important processes in order to eliminate redundancies, unnecessary steps and reconciliations.
You should also review how automation can save time and increase accuracy. Most firms are still operating with multiple systems that are not integrated. Confusion often persists over the difference between integration and migration of data. In migration, data is typically transferred from one system to another and then modified. Integration is the process of connecting systems so that data can be automatically updated or synchronized. Integration saves extraordinary amounts of time and increases accuracy.
Involve people outside of the processes to assist in the re-engineering. They tend to ask appropriate questions. Too often, people within a process do not see the obvious.
9. Cash flow. A firm's ability to remain in the game is determined by its cash flow. While there is an abundance of work, some of your clients may have cash-flow problems of their own. Too often, firms act as bankers when it comes to work in process and receivables. Firms should tighten credit policies for their clients and strengthen engagement letters, which should be worded as contracts, rather than proposals.
Not all partners are created equal when it comes to the financial management side of dealing with clients. Take those who are weak out of the process. Enforce policies regarding working for clients who are delinquent.
10. Leadership and management. Great leaders have a vision and excel at communicating while getting the commitment of others to pursue the vision. On the other hand, great managers are capable of motivating and managing firm resources. Too often firms believe that great leaders are also great managers and vice versa. Accounting firms require both leadership and management. Too often, firms overlook the need to teach management skills to their young technicians.
CONCLUSION
Each firm is unique, even though they face common challenges. Think, plan and grow!
The following four steps should help you avoid the traps and implement the strategies.
1. Immediately schedule a meeting to discuss the traps and strategies with your management team.
2. Develop the appropriate policies, initiatives, assignments and due dates.
3. Communicate these to your team.
4. Hold people accountable.
Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
