Art of Accounting: Small firms were the first, but are they now the last?
It’s a widely-held belief that small firms are the last to adopt new technology, but I disagree.
Small accounting firms were the first to adopt and adapt new technology, and by far, are not lagging in this area. In 1980, when VisiCalc was developed, small firm accountants found out about the early spreadsheet program and jumped on it. In 1982, when affordable personal computers started to become available, they jumped on that. Ditto in 1984 when the IBM clones, WordPerfect and Lotus 1-2-3 became affordable. By the end of the 1980s, most small firms were preparing 1040s in house, ahead of the curve for many larger firms. And of course, they all got email addresses, switched to Microsoft Word and Excel, adopted QuickBooks, got websites, PDAs and then smartphones, secure portals and e-filed returns. Many market their services through social media and some get astounding amounts of new business that way; many are paperless to a large degree, though not completely.
However, what many small firms did not do was get smart scanners, switch away from QuickBooks as soon as a jazzy-sounding alternative came out, use workflow and practice management software, be 100 percent paperless and become fanatical about the cloud. And because of this, they are now considered “behind” the times. This is not so. They are as up to date with technology as they need to be.
If a three-person firm is compared to a 200-person firm, they will not come close. Neither will the wardrobe of a typical managing partner of an accounting firm compared to that of a Fortune 25 CFO. However, each is as suitable and appropriate as they need to be.
Here is what I see with the smaller firms: Almost every small firm that does client payroll and bookkeeping does them online. They all send and receive client data and information through their portals. They all store client returns and most documents digitally. They all do whatever is good enough for them, but most do not do anything excessive.
What happened this past tax/COVID-19 season was that they all functioned very well. They might have missed a few beats starting up and adapting to the shutdowns or closed offices, but they quickly were getting the client work done that needed to get done the way it needed to get done and when it needed to be done. I spoke to many people at accounting firms of all sizes and they were all working very well. Maybe not as well as they would have preferred, but they were operating with minimal disruptions and added costs. They all rose to the occasion.
At this point I know many will reconfigure what they do to the new reality and will make some investments in updating and formalizing some of their Band-Aid processes. This will get done in a routine manner around the regular services they need to perform, as they do everything. It will get done, maybe not as well as the 200-person firm, but as well as they need it to be so they will be ready for the next shutdown.
Each firm will work as well as it needs to, because that is how they have always done it, and that will work great for them. They are certainly not the last to adopt new things. They just do it when it needs to be done in their practice.
Do not hesitate to contact me at firstname.lastname@example.org with your practice management questions.
Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. Ed is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 743-4582 or email@example.com.