by L. Gary Boomer
The business value of information technology in CPA firms comes from its ability to conduct business processes more reliably, faster and at lower costs, to increase revenue, to reduce time on engagements, to improve client service and to improve the decision-making process.
Expectations are high, yet, sadly, the partners and leaders in most firms know little about IT management other than how to manage overhead. To be successful and to maximize your return on investment, you must go beyond using annual spending as your only metric.
This simple metric is not an easy task for many firms, yet it is only the basic starting point in managing one of your greatest strategic resources.
Every firm has a legacy of IT investments that has created their current environment -- operating systems, hardware platforms, networks and a host of core business applications -- and which touches everyone in the firm and will soon touch your clients, if it does not already.
CPA firms are spending from a low of $5,000 to over $10,000 per person annually on IT, according to my firm’s research. These expenditures include hardware, software, training, communications, outsourcing, support, labor and related fringe benefits.
Successful IT leaders are business leaders first, with the ability to achieve a competitive advantage.
Alignment of business objectives with IT is a must. It is therefore not surprising to hear unaligned partners making disparaging remarks about IT and the lack of perceived return on investment in some firms. A better approach is to get your partners aligned with a strategic plan and then align your IT plan with the firm’s strategic plan. This requires leadership, communication, commitment to firm objectives, and time.
Developing metrics and benchmarks sounds easy but has not been successfully accomplished in the accounting profession. The easiest should be the financial metrics; yet firms have a multitude of accounting methods when it comes to technology.
The three other areas are learning and training, processes, and client satisfaction. All four areas are important.
The following is an example of benchmarks that can be used in each area. Think of benchmarks as industry standards, but realize that, just like in golf, your firm currently is at a particular level and must make the investment if they desire to improve to the next level.
All progress starts with the truth, so it does no good to misrepresent your current situation. We will hold the financial benchmarks until last since this is the area that most accountants weigh the heaviest.
Learning and training
Learning and training is an important area and requires the establishment of a training culture. A training culture requires everyone to teach and learn -- a two-way street. This releases the power of intellectual property throughout the firm and leverages resources.
Knowledge is power in most firms, so this is a difficult task to accomplish. Learning and training are becoming increasingly important in attracting and retaining personnel.
The following are examples of benchmarks in the learning/training area.
- Evaluate each employee’s learning requirements and develop a written plan.
- Hire a learning/training coordinator who will be responsible for managing the learning/ training program.
- Develop and implement a firm orientation program complete with firm vision, mission and core values.
ProcessesStandards, policies and procedures are a must if a firm is going to maximize its return on investment in technology and employees. Most firms do not have well-defined and efficient processes that are adhered to by all partners and staff. Start with two of the basic areas.
Remember it is difficult to evaluate and improve a process if you are part of the process. Utilize new employees and outside resources in process improvement.
- Document tax return preparation processes and eliminate redundancies due to technology and workflow tools (i.e., electronic filing and document management).
- Document financial statement preparation processes and eliminate redundancies due to technology and workflow tools (i.e., work paper software and document management).
- Develop training programs for all partners and employees in these two areas focusing on the firm’s standards.
Client satisfactionWithout clients there is no need for a firm -- so listen to your clients (existing marketing channel) and learn what they feel are their greatest dangers.
Then develop value-added services to meet those needs. You will be amazed at the results and it will take you out of the commodity business and reduce pressure on fees.
- Complete a danger, opportunity and strength questionnaire with one-third of your clients each year.
- Terminate your bottom 10 percent of clients. (OK, start with 5 percent, but get started culling the herd.)
- Conduct client satisfaction calls with your top clients (20 percent).
FinancialThe financial benchmarks should be easy in the accounting profession, but they are difficult due to old habits. The profession has survived for years by the charge hour (effort) rather than by value (results) billing. So there is no misunderstanding, I am not speaking about contingent fees, but rather fees that are based upon value and the use of change orders in cases where the scope of the engagement changes.
- Revenue per full-time equivalent. (Determine full-time equivalent by dividing total hours worked (everyone) by 2,080 hours.)
- Pay bonuses to partners for collecting fees in advance. (Start at 2 to 5 percent.)
- Penalize partners who have accounts receivable over 90 days. (Start at 5 percent.)
Now that you have read through the various benchmarks and best practices, you may ask what these have to do with IT. Information technology is just a tool, not a substitute for good practice management.Too many firms are using IT as the "whipping boy" for poor management. They are using their technology as 2GHz typewriters rather than as strategic tools.
Technology is a strategic asset that can be leveraged, but it can also be overhead depending upon how you view it.
The problem with viewing technology as overhead is that you will spend almost the same amount (within 1 percent to 2 percent) and you will never get a competitive advantage.
The choice is yours.
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