The processes, technologies and people that helped you get to the level you're at may not be able to ensure that your firm is competitive and able to retain and attract quality people in the future.
The ratio of information technology personnel to end users and the percentage of revenue invested in technology are old-school measurements, and may be leading your firm to believe that it is keeping up with the competition.
Remember that average is where the worst of the best meets the best of the worst. While peer metrics are interesting, they don't always tell the story, nor do they measure a firm's success against its strategic plan. Sadly, many firms don't have strategic plans. They believe that planning is a waste of time, but without a plan, firms are adrift and may frequently change course without good reason.
With that said, it's what you don't know you don't know that is costing your firm. Rather than simply looking internally at old-school metrics, firms must measure how they are doing externally (from the client's perspective), as well as how they compare internally with peers and, more important, their own benchmarks. Leading firms should focus technology investments on innovation and security.
Some of the measurements that firms should consider are:
1. What new technology projects are you investing in that will improve client services, reduce time and leverage the performance of your personnel? Firms that spend a larger percentage on new projects rather than simply investing in old technology have a higher rate of return on their investments in technology.
Simply replacing hardware every three years and updating core applications is no longer enough. You should invest in digital content management and Web-based services in order to maximize the return on your investment and leverage your personnel.
2. What opportunities are you missing with regard to failed interactions with clients? How can you improve your processes in order to eliminate loops, redundancies and unnecessary steps? Many processes in the accounting profession were developed before the advancement of technology and, in particular, the Internet. A good example is how accountants have relied upon checklists, rather than auditing transactions with data-extraction and analysis tools. Checklists often promote inefficiency, rather than thinking and risk management.
3. Can clients access their information from any place, at any time? Client portals are becoming an important part of firm delivery systems and interactions with clients. Why? Because they are firmly secure - while e-mail is not. Client names, addresses and account numbers are valuable, and identity theft is a growing problem. Therefore, firms must utilize secure technologies in order to protect this data and comply with regulatory authorities.
4. Is your client data secure? Perception is important when it comes to security. What is your firm doing to ensure that its systems are secure? What is your strategy with regard to the storage of client data? Is data secure in your office, or should you consider the application service provider model? Do owners and staff utilize good security practices in the office and in front of clients? Are you and members of your firm aware of the Sedona Guidelines?
The new e-discovery Federal Rules of Civil Procedure went into effect on Dec. 1, 2006. As a result, many firms should upgrade their policies and content management systems.
5. How many transactions are you completing over the Web? Some will say that this doesn't apply to their firms or the accounting profession. Wrong! Most firms are still spending hours of partner and administrative time in the billing and collection process. With existing systems, new processes and a change in procedures, firms can electronically bill clients, as well as utilize automatic clearinghouse deposits. This simply needs to be agreed to in advance by the client and be incorporated into the firm's engagement letters. Billing and collection is an area where the majority of firms can significantly improve their performance metrics.
6. Do your accountants include IT personnel in engagements to improve processes and look for new opportunities? IT is the accelerator and can drive your firm's sales engine, if accountants will only work as a team with other professionals. Too often they are only concerned about adding hours to traditional engagements, rather than searching for new opportunities.
7. What amount per charge hour is your firm investing in technology? Because most of the accounting profession still bills by the hour, there is little incentive to invest in technology the way that other industries do. If firms are going to continue billing by the hour, they should utilize the same multiples on technology that they use on labor.
The shortage of quality people coming into the profession and the increased exit of older accountants is forcing firms to examine their technology investments, billing methods and processes. In many cases, it is prompting firms to look at the profiles of their best clients. It may be time to conduct a client-filtering exercise and revisit processes. Your firm may have outgrown some of its clients. It doesn't necessarily mean you have to eliminate them, but you should study innovative services that could satisfy an un-met (or even unknown) need that they possess. ITunes, for example, effectively re-invented the album single, which was a dying breed. Is there an undiscovered "long tail" that could serve your clients and increase firm profitability?
8. Does your firm promote the growth and development of a training/learning culture where everyone learns and everyone teaches? Training should not merely be offered - it should be required. Technical, IT and soft skills should all be incorporated into the firm's training/learning culture. This requires leadership, professionals with adult education skills, and time out of production. Use non-chargeable time to develop your people and clients. (Non-chargeable time accounts for 45 percent to 50 percent of total time in most firms.)
9. What is your current revenue per full-time equivalent? Revenue per full-time equivalent is a measurement that firms can use to improve internal metrics and compare themselves with peers and even other industries. Defining a full-time equivalent is important if firms plan to compare and compete in today's global market. We recommend that you define a full-time equivalent as 2,080 total (not charge) hours annually. This method incorporates part-time workers, as well as those who work over 2,080 hours. Improving this number can dramatically impact a firm.
10. Would your employees recommend your firm and their supervisors to others? If not, you have some tough decisions to make. Employees leave managers - not firms. You may have to terminate managers or even partners in order to attract quality people. You may even need to transform your entire work culture.
Rising to the challenge
To succeed, you need leadership, management and accountability throughout the firm. Accountability must start at the partner level. The focus of this article is on technology and management, so let's look at a few areas where advancement will make a difference in managing your firm's technology.
1. Someone on your management team should have technology and management skills.
2. You should manage from an IT plan that integrates with the firm's strategic game plan.
3. Your technology budget should focus on security, innovation and leveraging your people. The budget should be adequate to implement the firm's IT plans. Use sourcing where applicable.
4. Your IT department should keep time sheets so that firm management understands what the IT department is doing. Some of the basic codes are: planning and meetings; infrastructure (networks and communications); end-user support; software updates; hardware updates; security; internal projects, including Web development; external/client projects; professional development; recruiting; and vendor relationships.
All of these strategies require management and accountability, which present challenges to many professional service firms. The most important challenges are:
* Firm management lacks the skills to manage the area of technology.
* Technology people sometimes do not understand the firm's strategic plan.
* Both of the groups above may resist change.
You can overcome these challenges and improve your firm's culture simultaneously by ensuring that you have a plan, the right people and processes in place. Everyone in the firm should know and adhere to the plan. We call this Performance3, and technology is the accelerator. The decision is yours - where does your firm want to play? It is imperative to develop consensus among multiple owners. They must share the vision. Technology is a strategic asset, not overhead.
L. Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
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