Firm leaders often talk about changing their business model to be ready for the future, but there are usually few specifics. They may talk about value billing, new service lines and technology, but only rarely do they connect the dots. All too often, firms get caught in the trap of thinking they have already done or tried everything. Or they tell themselves, “But our profits are at all-time levels.”

We often refer to future capabilities in three distinct categories: mindsets, tool sets and skill sets. The most difficult changes generally relate to mindsets, but let’s address five important approaches to the next-generation operating model focusing mostly on process:

1. Digitization of processes;

2. Advanced analytics;

3. Intelligent process automation;

4. Business process outsourcing; and,

5. Lean process design.

Digitization is the process of using technology to improve and automate workflow. The right digital tools have the power to improve client service by creating the potential for self-service. Digitization can also reduce transactional and manual tasks, especially those with little or no value. Look at your firm’s internal operations and identify the manual steps in your processes.

Advanced analytics is the continuous processing of data using sophisticated tools for insights and recommendations. Accountants have done this in the past, but the tools are becoming more sophisticated and real-time. The focus is on future performance and strategic initiatives, not history and compliance. This change elevates the entire value proposition and requires a different mindset and skill set. We call this playing above the line.

Intelligent process automation is a new set of emerging technologies that combines robotic processes and machine learning. IPA can replace human effort, especially in those processes that require aggregating data from multiple sources and systems. Data can even be scanned and automatically entered without human intervention. Accuracy increases with machine learning. This approach allows the virtual human workforce to execute higher-value tasks and services. Some firms are currently doing this with scan-and-populate programs in tax return preparation. Auditors are changing their approach from sampling to examining every transaction, with advanced analytics and data management tools eliminating most manual processes. Just this year, we see new technology to aggregate tax data into a mobile app that enhances the client experience and automates many steps in the preparation process for the firm.

Business process outsourcing leverages external resources to complete specific tasks and projects. This often involves labor arbitrage to improve efficiency and is used where many processes are manual. Back office processing of documents and accounts payable are good examples. Some firms tried this approach with tax return preparation starting back in the early 2000s. Then, thanks to improved bandwidth and workflow software, firms moved most tax return preparation back in-house. Code Section 7216 about disclosure of outsourcing was mostly self-imposed by the profession and made it difficult for many firms to comply. Some firms have gotten into the BPO business, but the model is difficult to sustain without increased automation of compliance services and the addition of higher-value advisory services.

Lean process design streamlines processes, eliminates waste and fosters a culture of continuous improvement. Lean applies to internal as well as client-facing processes. The return on investment is high and it reduces labor costs while improving cycle time and client service.


TRY, TRY AGAIN

Your initial reaction may be that your firm has tried most of these approaches and not seen the anticipated return. This may be correct for a variety of reasons, most of which center around a lack of leadership (change management) and the fact that earlier versions of the technology were not as capable. Increased processing power, improved bandwidth and low-cost storage have changed and will continue to change the playing field. Many new, innovative vendors have moved into the accounting profession, and more will continue to do so as the expansion of the cloud occurs. Integration (internal and external) is much better with cloud-based applications than with desktop or network software. Some vendors want firms to believe they are cloud-based, but they are only storing the data in the cloud. We refer to these aged desktop solutions as operating in the fog.

How you think about the problem determines the solution and results. In the past, too many firms have had a siloed approach, rather than an enterprise (holistic) approach. They have tried pilot projects and lacked the total commitment to change. Fortunately, the accounting profession has been profitable. Therefore, there hasn’t been a great deal of pressure to improve and automate processes. Disruptive technology, an aging workforce and the competition for talent are coming together and have created a significantly different market.

There are guidelines for implementation that will increase your return on investment. Implementation is the key, with leadership being the one constant in determining success. Great leaders are vigilant, challenge their people, and resist the easy answers like “We are already doing that” or “We tried that before.” Great leaders also allow experimentation and failure if it occurs fast and they fail forward. Companies like Google, Intuit and GE have processes for innovation. CPA firms benefit from the innovative processes used by larger companies such as the Sprint method by Google and Design for Delight by Intuit.

Think of these five approaches as levers that need to be utilized to the maximum effect. The sequence is important, but varies depending upon your firm’s legacy systems. We often refer to this as technical debt. Has your firm deferred system upgrades? Does it operate on old versions of software and would benefit from additional training? Do you allow the use of inconsistent processes? If the answer is yes, you have technical debt that must be repaid to leverage the five approaches. Therefore, it is necessary to evaluate your current situation and prioritize options. Interaction is crucial for creating a multiplier effect. Firms find their investments in lean processes and workflow in tax can carry over into assurance services as well as billing and collections. The potential is a positive snowball effect. Some of the anticipated benefits are:

  • Improved cycle times;
  • Improved client satisfaction;
  • Reduced errors and time to rework;
  • Increased capacity;
  • Improved margins and profits;
  • Reduced time on projects; and,
  • Increased cash flow.

The keys to success are leadership and holistic thinking. Confidence is critical in obtaining buy-in and the speed of learning. Is your culture open to the next-generation business model? Remember, all progress starts with the truth.