by L. Gary Boomer
CPAs, firms and the entire accounting profession face a period of transformation. It will be easiest for individual CPAs to transform, then firms and, finally, the entire profession.
A transformation - or breakthrough - typically occurs when a person, business or industry is faced with a severe obstacle or the introduction of new technology. The accounting profession is currently faced with plenty of obstacles, and the time is right for transformation.
Most members of the profession have witnessed the advance of technology during their careers, but few have experienced the number of obstacles that are currently facing accounting. There are two basic choices: focus on analyzing what went wrong and fix the blame, or the more positive approach of entering the process of transformation as individuals, firms and as a profession.
To discuss the transformation as it applies to a typical firm, let’s look at some of the more relevant obstacles:
- Shortage of qualified accountants;
- Increased regulations in the assurance services area;
- Increased demand for capital on firms;
- Commoditization of traditional services;
- Need for improved management;
- Increased technology requirements; and,
- Need for learning and training.
While some of these obstacles have been around for several years, others have appeared during the past 12 months and are now going to force firms to deal with the issues. It is somewhat of a compounding effect due to the fact that many firms are governed as partnerships rather than corporations with a powerful chief executive.Some firms have ignored the issues thinking that they were immune because of the services that they offered and the size of their clients. The recent legislation and perhaps the potential legislation at the state level will leave no firm unscathed.
Therefore, I believe that it is extremely important that firms have a plan, and communicate the plan to staff and clients during this period of transformation. Those who are calm and remain confident will succeed. Those who ignore the issues or choose to focus on fixing the blame will be at risk.
In developing a plan, start with your clients’ needs. Let it be client driven. What do your clients want? Ask them - don’t assume.
Next, look at your own firm’s dangers, opportunities and strengths. Your strengths will allow you to confront the new dangers. Your opportunities will provide strength, and your dangers can become opportunities if you are proactive.
Let’s look as some of the important steps in the transformation process. These are not the only steps, but some of the most important ones that will reduce your risks and strengthen your firm.
• Strategic plan. If your firm doesn’t have a strategic plan, take the time to develop one. If you do have one, make certain that it meets today’s requirements. Continually communicate the plan to your staff and clients.
• Competent management team. Don’t expect to continue running your firm by committee or as a partnership. Those days are over. Run it with a strong chief executive and support staff. In most firms, this is more than a full-time job. Leaders must work on the business rather than in the business. Consider hiring a professional chief executive who is not a CPA if you don’t have a qualified or interested owner.
• Unique processes. Define all of the service areas and the unique processes that your firm uses. Look for ways to increase revenue and drive out unnecessary costs. Use someone outside of the process if you expect to improve the process.
• Strategic technology plan and budget. Look for ways in which technology can improve performance in production, firm management, marketing and sales. Ensure that your technology plan is in alignment with your strategic plan.
• Training program. Once you have identified your unique processes, you should train to your best practices. Learning and training are both important at all levels within the firm. Seniority is no excuse for not transforming on a personal level.
• Pricing. The pricing model must change. The market expects price increases and now is an ideal time to move from pricing by the hour to value billing. If you ignore the pricing issue your firm will be faced with increased pressures on profitability. This will require thinking outside the box for many partners.
• Compensation. The compensation model is also going to change in most firms. There will be significantly greater differentials among partners. You can expect starting staff salaries to increase significantly over the next three years. The compensation model must reward people for contributing to the strategic plan, not just for hoarding a book of business.
• Marketing and sales. This is an area that requires certain unique abilities that are generally not found in highly technical personnel. The compensation model will have to reward these people much as in other industries. And good ones are not cheap!
• Integrated systems. Firms must move to reduce the number of databases and redundant data. Too much time is being spent entering and reconciling duplicate data. This will require the use of open architecture and client-centric systems.
It will also require people with advanced skills in technology and a vision in order to move from the existing systems. It is what you don’t know you don’t know that will hurt you.
Strong leadership is required to lead your firm through the transformation process. It will not be easy, but it can be both profitable and rewarding.
Consistent and frequent communications with staff and clients will be required. It is important that your firm maintains a high degree of confidence during the transformation period. This can be done by continually focusing on your successes and sticking with your strategic plan.
The old saying, "Plan your work, work your plan and your plan will work," will hold true during this period. The transformation will provide your firm with greater direction, greater confidence and greater capability. These obstacles did not appear overnight and will not quickly disappear.
Commit for the long term.
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