What digital transformation looks like for today’s CPA firms
Digital transformation has been a near constant topic of conversation among accounting and CPA communities in 2018.
The trend can be defined as the shift from antiquated, manual processes to automatic, technology-driven ones. Think switching from mailing out paper invoices and collecting checks before driving them to the bank, to sending out electronic invoices with a “Pay Now” button that allows clients to pay online in a few clicks.
According to the 2018 Robert Half International Benchmarking Survey, 75 percent of U.S. finance and accounting leaders are currently either using or plan to soon be using cloud-based solutions to automate functions such as invoicing, data collection and report creation, compared to 62 percent in 2016.
Forward-thinking firms understand they need to modernize their processes in order to be competitive, and with payment collection touching every single client relationship, many firms choose to start their digital transformation there.
But with billable work taking up the majority of staff resources, how do these organizations make time to update outdated processes?
Of the estimated 42,000 accounting and CPA firms in the United States, 41,500 are smaller than 20 CPAs and $3 million in annual revenue. Smaller firms do not have the budget or bandwidth to bring on dedicated hires to facilitate their digital transformation, and 99 percent of firms doing less than $25 million in revenue annually do all their accounts payable and accounts receivable work in-house. Only 17 percent of accounting and CPA practices plan to expand their accounting and finance teams soon.
Here, we’ll explore what digital transformation could look like for today’s accounting firm, what’s standing in the way of tech adoption and what firms that don’t adapt could be risking.
The challenges of digital transformation
As a traditional industry still helmed by an older workforce, the accounting world faces both cultural and practical barriers to digital adoption. First, the tax industry is beholden to government regulations and a tax code which doesn’t change. Second, the accounting workforce is aging and struggling to attract younger talent.
From a practical standpoint, transitioning from manual processes to automated processes requires an upfront resource investment in:
• Identifying processes to be updated
• Researching ROI potential
• Evaluating service providers
• Implementing new systems and processes
• Onboarding staff
It’s difficult to justify squandering billable hours on processes that might not immediately produce revenue, and easy to put upgrades on the backburner in favor of doing things the way they’ve always been done. However, that initial upfront investment can pay out tenfold when executed correctly.
Digital transformation — why bother?
Thriving in the digital age requires taking a long-term approach to planning while staying nimble enough to weather changes. Yes, the move toward more efficient, automated operations requires an initial resource investment, but that investment will eventually net a hefty return.
What can firms who undergo a digital transformation expect? The most immediate and quantifiable impact of digital transformation will be saved time. By cutting down the time (and risk) associated with manual, human-driven processes, you put hours back in your day that can be spent on billable client work—including high-value activities like advanced financial analysis, predictive modeling, etc.—business development and deepening relationships within the community.
With fewer younger people entering the industry, more experienced professionals are forced to devote more hours to less profitable work. Digital transformation can solve this issue on several fronts: 1. Senior staff can focus on the work they should be doing by automating low-level work. 2. Digitally adapted firms will have an easier time attracting and retaining younger talent.
What a digital future can look like
Small and midsized CPA and accounting firms want to find ways to move from a commoditized market to a specialized market. They understand they need to move into high-value services to stand out and be more valuable to their clients. The more time they have open, the more time they can focus on bigger ticket services that bring in more cash flow.
If your people are always busy meeting deadlines for billable work and using what’s left for administrative tasks, there’s no room for growth. Taking part in the digital transformation by automating essential business practices such as payment collection can give you the space to take your firm to the next level.