How well run is your practice? Do you know which of your clients owes you money? For what? And for how long? What’s your staff realization rate? Can it be improved? These questions and more are what a practice management system is meant to answer.

But what exactly is practice management? Initially, the term practice management was used almost interchangeably with time and billing. Today’s practice management systems still have billing at their core, but with added features and functions. We asked a half-dozen vendors of practice management software questions on the state of the application, how it’s being used, and how it’s evolving.

Jim McGinnis, executive vice president and general manager for medium and large firms at Wolters Kluwer Tax & Accounting North America, said, “A true practice management system is not just the given time & billing/AR that we’ve historically thought about. The policies, procedures and culture of the firm that surround the system will determine its success in the firm. Practice management is not a single piece of software. In addition, workflow should not be separated, or at least the system must allow for direct integration of the two products.”

A more detailed list was provided by Thomson Reuters’ product manager for firm workflow and administration, Christie Johnston, who said that she believes a comprehensive practice management system “needs to include all the information about their clientele and the services they are performing for them, so that staff have one location to be able to execute and deliver those services. This includes client information tracking such as complete address tracking, notes and interactions, key client grouping and staff assignments, and custom information key to the firm.” Johnston continued her analysis of practice management to add time and expense data, billing and receipts, project tracking, staff capacity and benefit tracking, and firm data analysis tools and reporting.

A practice management system should be “easy to set up. Easy to use. Practice management software needs to have a modern, intuitive design and out-of-the-box setup so that practitioners can be up and running on Day One,” according to Nate Barrett, vice president of product at Canopy. “It should offer built-in automation that allows practitioners to ditch repetitive tasks and leverage real-time analytics to advise clients on the best course of action. It should also have the ability to access and work from anywhere. … Finally, it has to be secure.”


Time is only one dimension

Most of the vendors we surveyed believe that the time of just time & billing has passed. “Think of time & billing as the X-axis and Y-axis on a graph,” said AbacusNext’s communications director, Timothy Parker. “If those are your only variables, then you’re only ever going to have a two-dimensional picture of your productivity. In a true PM system, where time & billing are complemented by CRM and workflow, your understanding of your business increases by orders of magnitude, allowing you to see a multifaceted view of your firm production.”

Jennifer Warawa, executive vice president of partners, accountants and alliances at Sage, agreed that a practice management system needs to encompass other capabilities, but also emphasizes the importance of T&B: “The ability to track time is an important part of running a practice, as it is only through monitoring time and tracking that you can set targets and monitor this. Therefore, a good practice management system needs to track time but should not necessarily be the driver of the fees on the project or job for the client.”

Ian Vacin, co-founder and vice president of education and partnerships for Karbon, went into a bit more detail: “Time & billing solutions are only a part of a practice management system. They fulfill a single requirement (albeit an important one) that partners need to manage their firms overall. However, when time & billing is matched up with workflow management, project/task management and contact management, a firm can do more interesting things like capacity planning, demand forecasting and practice intelligence that enable it to be better managed, increase productivity and ultimately be more profitable through better decision-making.”

One issue that all of the vendors agreed with is the value of value billing, and the need for a PMS to have the capability to use this method. According to McGinnis, “Hourly billing is a structure that can lead to commoditization of the profession, whereas value billing illustrates the cultural shift from technical accountants to trusted advisors. Value billing accelerates the rapid progression of the profession. Time entry is not simply about billing anymore, but opportunity for a firm to provide staff coaching and mentoring. This value-billing model signals a true partnership, with transparent guidelines documented in the contract for the benefit of the client and firm. Tools that automate the invoice process based on the amount and terms of a contract will be important to accelerate adoption of this model.”

Canopy’s Barrett also underlined the importance of a value-billing capability: “It’s more and more common for value-based billing to be used with highly transactional services because it removes so much uncertainty for clients. However, hourly billing will always have its place for services which are highly variable in terms of workload for the practitioner.”

Thomson Reuters’ Johnston noted that value billing isn’t the only type of billing a comprehensive PMS should offer. “Practice management systems need to have the ability to streamline the billing process, whether that is through fixed fee/value billing, billing of actual time and expenses, scheduled recurring billing or progress billing,” she said. “Value billing is often used in the same context as billing at a flat-fee amount based off the value of the work produced to the client, and this type of billing represents a good percentage of what firms are billing today, but it is still rare that this is the only type of billing firms complete. Overall, firms need a flexible system that allows them to bill clients in multiple ways depending on the services they receive and any ad hoc work requested.”

AbacusNext’s Parker warned, “Value billing, by its nature, depends on a thorough understanding of the steps and staff involved in producing a given deliverable for the client — so it’s a no-brainer that a PM system that incorporates workflow would also support value billing. But value billing should not be an excuse to do away with time tracking. If your PM system makes time tracking as simple and effortless as it should be, then you’ll have true measurements of productivity and profitability.”


Go with the workflow

Depending on your practice, other important components of practice management are workflow management and client relationship management. “Customer relationship and workflow management is so intrinsically linked that they must be part of one continuous system in order to drive automation and give accountants the very best tools to have closer and more forward-looking relationships with their clients,” according to Sage’s Warawa.

Thomson Reuters’ Johnston agreed: “When you separate workflow and CRM, it begins to create additional work due to needing to cross-reference and update multiple systems within the office. This introduces possible human error, where information is not updated consistently... Having these systems separated also means less flexibility in reporting important KPIs on your business.”

Equally positive about the relationship is AbacusNext’s Parker. “Workflow and CRM are essential pieces of a true PM system,” he said. “What’s the relationship between the number of client interactions (meetings/calls/emails) and the turnaround time for that client’s projects? How does project turnaround time affect timely collections or client retention rates? If your workflow and CRM aren’t fully integrated components of your PM system, it’ll take you all afternoon, maybe the rest of the week, to find out the answers to questions like these. In a comprehensive system, the answers are a few clicks away.”

Not all of the vendors are quite this positive. “The components of a practice management system depend on the firm’s size and customer base, it is not just about a single product,” Wolters Kluwer’s McGinnis said. “A specialized CRM system is necessary for firms with a professional sales staff who monitor sales funnels, lead generation and close time. Workflow should be tightly integrated with firm management systems and will often be a part of a single application. Regardless, a management system must allow for API/service-level integration to flow information from the workflow into the CRM.”


Mobility is a must

One area where vendors were somewhat ambivalent was in mobility. AbacusNext’s Parker pointed out one of the downsides: “Your software should be able to work however and wherever you do. That being said, the more access points you have to your system, the more potential vulnerabilities you face from a security perspective. If your staff can access the system from their personal smart phone, how much information is stored locally? Can you be assured all sensitive data will be purged if their employment ends? Device independence can be incredibly convenient, but be sure to work through the security implications before deploying company-wide.”

And Thomson Reuters’ Johnston added, “The majority of work being done in a PMS still occurs within the office environment today. There are many platforms where remote access is available, but work is still completed on a laptop or desktop device. So, while device independence is a driver for new systems, most firms today do not operate in world where this is a requirement today for most work. With that being said, we are a mobile world and work-life balance is very important for staff engagement, so having ways to access information when it is needed is increasing in importance today.”

Canopy’s Barrett was more positive about the subject: “Cloud-based products typically set the expectation that they will be available anytime and anywhere, which implies a mobile experience. If you are using a modern, cloud-based practice management solution, it should include effective mobile access.”


Plays well with others

Practice management systems have evolved in their ability to integrate with other applications. “It simply does not make sense in today’s world to have an isolated system at a firm,” said Wolters Kluwer’s McGinnis.

“Integration between applications and your practice management software is key for being able to trust your client contact information,” said Thomson Reuters’ Johnston. “This is an area of duplication of effort that can really add up over time.”

The evolution in practice management systems isn’t being driven solely by vendors — accountants know what they want.

According to Sage’s Warawa, “The key element our customers are asking for is connectivity. It’s not about one feature over another — it’s about having the holistic view of the practice and workflow in one place.”

And Thomson Reuters’ Johnston said, “Firms are looking for more automation of fixed-fee or value-billing features that not only allow you to quickly generate invoices as we do today, but to schedule both the invoice and payment based on the agreed-upon terms with the customer (biweekly, monthly, quarterly, etc.). We are also seeing more firms interested in tracking sales and prospect data, including proposal management and integrated client onboarding.”

“Our customers are also asking for actionable intelligence about their business: dashboards that show heat maps for staffing, peaks and valleys in cash flow, all at a glance,” said Wolters Kluwer’s McGinnis.


Not the same old same old

Firms are using practice management somewhat differently today than they did five years ago. Sage’s Warawa pointed out, “Accountants are seeing practice management as a way to build closer, more forward-looking relationships with their clients and shift time spent on admin to more value add. Five years ago this was all about features — give me time, fees, tasks, control, etc. Now it’s about ease of use. UX. Automation, but with full control. It’s shifted from feature-led to experience-led for both practices and clients.”

McGinnis added: “Firm management systems are often regarded as a single source of truth, but only recently have firms begun to live that. The single biggest change has been moving from entering data (time in, bills done, AR posted) to leveraging the data.”

“As firms evolve their services, practice management tools will need to incorporate connections and automation of information between applications while maintaining a seamless workflow experience for staff,” said Thomson Reuters’ Johnston. “As firms increase the amount of advisory and consulting services they provide, I anticipate there will be even greater adoption of value/fixed-fee billing and payment plan options.”

Wolters Kluwer’s McGinnis added, “We’re moving to an era where the management of the firm is just as crucial as the work the firm does. We’ll continue to see highly qualified experts demanding tools to do their job more effectively and efficiently.”

And while some vendors pointed out the developments in artificial intelligence and machine learning, AbacusNext’s Parker summed up the future need nicely: “PM systems have gotten really good at capturing data, from client turnover to average billings per project type and beyond. What they need to get better at is leveraging that data to help owners and partners make real-time decisions. Using the data you already have to help you make decisions about the future of your firm is the next big thing in practice management.”

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