CPAs become creative when pushed to solve problems without their traditional resources, and their primary resource has been an abundant supply of affordable labor. That has changed, and firms must look at ways to do more with less, while maintaining or increasing profitability.

An initial reaction is that, "We are going to have to work harder and raise rates." That is, at best, a short-term solution to a long-term problem. Doesn't it make more sense to re-commit to technology and increase leverage and margins?

While this may sound somewhat strange to some CPAs, they should consider taking the time to look at other industries, as well as spending more time planning and less time on chargeable hours.

There are two types of technology. The first is "sustaining," and that is what most firms have done - using technology for efficiency while continuing to utilize procedures that may be outdated.

The other type of technology creates "obsolescence," and that is what we are seeing today and will see more of in the near future. Many of the old procedures that firms are using are currently obsolete, and yet the resistance at the leadership level in many firms may be stunting growth and limiting profitability.

Let me mention just a few examples:

* Filing paper tax returns;

* Using paper for the billing process (billing drafts and paper invoices);

* Research via paper versus the Internet;

* Preparing financial statements using word processing versus automating the process and eliminating redundant data entry; and,

* Auditing around the computer, rather than through the system.

If some of these examples strike a chord in your firm, you may want to read on and look at what a simple change in attitude might do for your firm. Those firms that are profiting from technology view it as a strategic asset, while firms that are "sustaining" their outdated processes and procedures tend to view technology as overhead. It is not unusual to resist change, so awareness can get you started thinking differently.

The shortages of experienced and entry-level personnel are forcing firms to consider more creative strategies. According to statistics from The Boomer Circles, firms are investing an average of $7,500 per person per year on technology. Remember that average is where the worst of the best meet the best of the worst. Most firms don't want to settle for average.

Traditional thinking has been to hire more people, rather than to look at how technology might allow existing personnel to become more productive. Lip service is given by many partners in the area of technology, but the majority of partners are operating at a low level of efficiency when it comes to IT skills. They have a variety of reasons and justifications, but the bottom line is accountability.

Partner compensation must take into account ongoing self-development. Information technology skills and the adherence to standards, policies and procedures are as important, if not more important, than charge hours.

If a firm is serious about increasing profitability, it should invest in the following during 2005:

1. A training and learning program (including IT, technical and soft skills).

2. Improved integration of production and management applications (reduction of databases).

3. Improved remote access (security and speed).

4. Re-engineered standards, policies and procedures.

5. Implementation of portals for clients.

These all require leadership, discipline and accountability. If your firm is serious about doing more with fewer people, you should develop strategies now to accomplish the above challenges. Many of the best firms are already well on their way. Firms that invest in infrastructure and in training their personnel tend to grow faster and sustain a higher level of profitability.

Don't get caught in the "technology trap," where you try to sustain profitability by "milking" your current technology into obsolescence.

L. Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.

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