by L. Gary Boomer

As firms plan for the New Year, they must be careful not to simply resort to the same strategies they have used in the past. Unique processes, differentiation and process improvement may be the keys for many firms as they operate in an increasingly competitive, commoditized and litigious environment.

Technology will remain an important tool as the accounting profession transforms itself; but remember, it is only a tool that can be employed with great vision, leadership and strategy. Technology cannot fix problems associated with poor leadership and management.

The profession has been too much into the “me too” mode when it comes to technology. The firms that are differentiating themselves are those that have invested significantly in end-user training and digital document management. They also tend to have one IT specialist for every 20 end users.

The investments have been significant in dollars and time, along with re-engineering and examining processes. Granted, they have experienced obstacles, but most of the obstacles are cultural and personnel issues, not technological.

The successful firms have improved their processes and are now ready to move significantly ahead of the pack. They are positioned to do it rapidly, and to take client service to an entirely new level.

Many firms have ignored the issues in these areas and simply deferred decisions. The decision to wait will prove very costly, if not disastrous. Firms that are digital can manage data far more efficiently than those still operating with paper. They can also offer new and improved client services beyond the scope of compliance work. They can mine data, as well as do special procedures related to data extraction and analysis.

Have you taken time recently to ask your small business clients what their top dangers, opportunities and strengths are? I assure you that a tax return or financial statement is not at the top of their lists.

In 2004, firms should focus on the following areas if they want to remain competitive, reduce costs and increase revenues through expanded client services.

●   Leadership: Without leadership, technology does not advance in professional services. The successful firms all have a partner or chief information officer who provides vision and leadership. Much like the managing partner position in many firms, technology leadership is undervalued by many partners. It is very difficult to focus limited assets on multiple projects without strong leadership.

●   Security: The increase in spam, denial-of-service attacks and outsourcing to India have increased the attention paid to security. Many firms are finding that their systems are not secure and that they do not have adequate policies and procedures in place to protect themselves internally.

Most firms allow all employees access to all data files. Do you have policies and procedures in place to insure the confidentiality of client data within your firm?

●   End-user training: The leverage in the entire training area is huge, yet many firms ignore training and learning. The ability to attract and retain top quality people is directly related to the firm’s training and learning capabilities.

Training/learning must be the responsibility of someone who has the required skills to coordinate adult education. Small firms should be creative and establish relationships with larger firms or create joint ventures in the training and learning area.

●   Integration: Firms have too many applications and databases, which means that many are entering redundant data multiple times and then spending inordinate time ensuring that the data is correct in all applications. These issues can only be resolved through planning, consolidation of databases and working with your primary vendors.

●   Infrastructure: Your serv­ers, switches and cabling may be similar to the plumbing in your home. You only think about them when they don’t work or seem slow. The trend is toward multiple servers with load balancing.

It is also important to maintain the current version of operating systems and install software patches in a timely fash­ion. Delegate or outsource these tasks to qualified IT professionals. Don’t be cheap; spend the money to do it right and keep the infrastructure up to date.

●   Document management: The paperless trend will continue. Choice of hardware and software is not as important as processes, policies, procedures and discipline. Know your objectives going into a paperless project. As Jack Welch said, “It is not efficient to maintain both paper and digital systems.” Remember the fax machine? You didn’t know exactly how you would use it until you installed it. The same is true with document management. According to our research, each employee in an accounting firm uses four reams of paper per month. Paper is expensive to file, store and retrieve. Our model shows it costs $75 to $150 per client, per year to manage a paper system.

●   Workflow: Think of Federal Express and UPS. They track their workflow and packages electronically, utilizing wireless communications and the Internet. One of the strategic byproducts from outsourcing to India has been the development of Web-based workflow systems and document management. The files and documents are tracked throughout the process, indexed, and can be searched using a Web browser. Files are available anytime from any place where you have a Web browser. Storing the files in a secure location and insuring that they are backed up on a daily, if not real-time, basis are also important.

●   Client services: Creativity, relationships and leadership provide clients with value. The ability to transfer information and client data over the Web may seem unimportant at first. But what if each of your clients could have a secure private client site where you could publish documents, such as tax returns, financial statements, wills, trusts and important documents? Clients could also add documents and communicate with you and your staff.

These documents are available from any location that has a Web connection. Think of this as an electronic safe deposit box and you are the banker receiving the annual rental fee. If you don’t do it, clients’ attorneys or bankers soon will. Other services, such as strategic planning and executive coaching, are also being requested by clients.

●   Connectivity and bandwidth: Continue to monitor the developments in wireless and broadband capabilities. The ability to remain connected will only increase over the next year. If history is any indication, the capabilities will increase substantially as the price remains constant. Also look to redundant solutions where you can combine the capabilities through switching.

●   Scanners and copiers: As you replace copiers, look to digital copier/scanners. Your copy costs should go down in a paperless environment while scanning increases (at least until you get existing ­paper digitized). Involve your IT professionals in the copier/scanner decisions. Don’t over-buy if you are serious about less paper. A few firms have started to monitor scanning and have billed clients much like they did for copiers. I am not sure I agree with the billing philosophy, but if it works for you — go for it.

●   Web strategies: This is one where the old saying, “You don’t know what you don’t know” applies. Improved integration with Windows 2003 Server, Exchange 2003 and Office 2003 are going to provide new Web capabilities. This will allow you to publish newsletters and improve communications with clients. Do you have current policies and procedures in this area? Private client sites, document management and the data being stored in secure remote locations are all possibilities you should consider.

●   Outsourcing: Outsourcing refers to all IT-related capabilities and not just to the preparation of tax returns in India. It is an emotional topic, but a strat­egy that firms consider as they develop goals for the future. Ask questions like:

1. Where will client files be stored in three years?

2. Do we want to run applications remotely from home, client offices and even hotels?

3. Do we want to employ the necessary IT skills or outsource them?

4. Are the firm’s file and server rooms secure?

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