With the scarcity of qualified and experienced staff, the importance of technology continues to grow in today's accounting firm.Firms simply must do more with fewer people, while raising production to offset increasing labor costs. In order to do so, they must either terminate less desirable clients or focus on improving their processes and technology. Perhaps your firm needs to do both?
This requires a significant change in thinking, especially in those partners who have not been involved in firm management over the past few years and tend to only think about client service. Are they really providing good client service, or simply maximizing cash flow as they burn themselves and staff members out trying to service clients that are marginally profitable?
Review of current processes and the status of the firm's technology may hold the answer to these questions. The answers to these questions are not easy, and sometimes are not the answers that partners want to hear.
In an attempt to answer the questions and clarify what partners need to know about technology, I have put together 10 rules of technology management. Partners do not need to know how to build the watch, but they do need to know how to tell time. Simply knowing these rules will not make a partner a technology guru, but it will enable them to participate in the development of a technology strategy for their firm, as well as provide good advice to clients.
1. Technology is a strategic asset. Many people, especially accountants, often try to manage technology as though it were overhead. This approach ensures frustration, due to the fact that expectations are always greater than the results based upon the resources committed. It makes more sense to manage technology strategically and allocate resources in accordance with priorities. Technology is an accelerator.
2. Professional technology skills are required. Don't expect to get extraordinary results if you are not willing to invest in professionally trained personnel, or to outsource. Many firms make the mistake of thinking they need to hire someone who knows accounting to manage their technology. Often they get a marginal accountant who has marginal technology skills.
Professional certifications and degrees in computer science are as important as a degree in accounting and passing the CPA exam. The breadth of technology has expanded until it is unrealistic to expect one person to have all of the technical skill sets, as well as the ability to communicate with management and end users. Sourcing of these services has increased over the past two years.
3. Technology is dynamic and the investments will be ongoing. Technology is changing more rapidly than it did in the 1990s. In order to keep up, firms must invest more in process improvement and training. Due to continued labor shortages and the advancement of technology, highly profitable firms will continue spending 6 percent to 7 percent of net revenues annually for technology and support, including labor.
You may think this is too high. Do you know what percentage of net revenue your firm is currently spending on technology? What would the incremental cost be to do it right and eliminate the frustration or enable your people to increase revenue per full-time equivalent? These are questions that can only be answered when a firm implements a consistent accounting system for technology and holds people accountable for training and adhering to firm policies and procedures.
4. Training is required for personnel of all levels. Training is the quickest way to increase your return on investment in technology and people. It is also a key to both attraction and retention of quality people. According to the Gartner Group, you save five hours for every hour of technology training. In other words, 20 hours of training will provide 100 hours of increased capacity. Metrics of Boomer Technology Circle member firms show that revenue per full-time equivalent increases considerably in firms with excellent training programs. The attitude and confidence level of firm members increase accordingly.
5. A network of peer firms will assist the firm in managing their own technology. You don't have to re-invent the wheel. Many firms tend to think that their technology people should have all of the answers. What is happening is that firms are re-inventing the wheel. Firms should be sharing resources and developing improved technology management systems. Technology personnel are often hesitant to look to the outside for fear that management will think they are inadequate. Developing a network of peers and utilizing that network is a professional strength and competitive advantage.
6. Firms need a management system for technology. Technology is the No. 2 expenditure in most firms following labor and fringe benefits. Many firms don't realize this because they utilize peanut butter accounting (spread it thin and no one knows what you are spending). It only makes sense to adopt sound management practices in order to ensure a return on the technology investment. There are several components to the management system that we utilize and teach. It basically comes down to people, planning and processes, with technology acting as the accelerator.
7. Someone from the owner group must be responsible for technology. Technology leadership and vision are an integral part of today's firm management team. The requirements for a chief information officer or tech partner are similar to those for a managing partner. The skills include: leadership, finance, marketing, human resources, business savvy, project management and finally technical skills.
Firms that have someone with these skills who is also an equity owner tend to be more successful than those that simply have an IT professional without all of these skills. Most partners don't know what they don't know when it comes to technology, and in many cases, IT professionals are not included in the development of the firm's strategic vision.
8. Operate from a written technology plan. Follow the advice you give clients. Firms should operate from a technology plan that integrates with the firm's strategic plan. If you don't have these plans in place, invest the resources and get them in place. Without a plan, it is easy for firms to get caught in the trap of investing time and resources in trends such as the latest PDA or phone, rather than substantive technology projects like integrated financial reporting and content management.
9. The Internet will play an increasing roll in your delivery system. The recent natural disasters have made firms re-think their business continuation plans. Bandwidth continues to increase, along with accessibility. Firms now are adopting Internet-based content management solutions as well as tax applications. Control of the application on firm servers is not as important as the security of the data and control over the processes.
Your firm should have an Internet strategy, including client portals. This strategy should include objectives, delivery strategy and a revenue model. Today, all of the major software vendors offer Web-based or Web-enabled solutions. It is all about improved client services, cost of ownership, increased productivity and improved management and security.
10. It's what you don't know that may cost you. Innovation prompts change and the tendency is to resist change. I suggest you read The World Is Flat by Thomas Friedman in order to promote global thinking and learn how technology is changing the world, as well as our profession. You will also learn that the current skilled labor shortage in the United States is not the case globally. The Internet has leveled the playing field. Are you in a competitive position, or is creative destruction biting at your heels?
Value is added when you provide leadership, relationships and creativity. Leadership provides direction, relationships provide confidence, and creativity provides new capabilities. All of these components are necessary in managing technology and your firm.
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