Article Submitted by Receipt Bank
Taking control of your clients accounting presents enormous opportunities for firms in public accounting. First and foremost, the more services you can provide to your clients, the stickier they become. More importantly this regular contact will help you identify additional ways you can help them - cash flow forecasting, retirement and succession planning, opportunities to “play above the line” as Gary Boomer puts it. And think about your own firm, CAS can help smooth out the traditional capacity and cash flow challenges associated with the seasonal nature of public accounting.
From your client’s perspective they are always looking at ways to remain competitive in a challenging business environment. For example in an effort to lower their cost structure, many businesses are seeing the benefits of outsourcing their non-core activities to experts in that field (see endnote 1).
As Chris Frederiksen, Chairman of the 2020 Group observes:
“...in the last 2-3 years, we have seen a new and seismic shift away from paper-based systems to automated electronic data systems and enhanced OCR which are precursors of a world without data keying. This seismic shift is allowing accountants to reclaim their role of “keeping the books” and interpreting the results.”
This perfect storm creates a huge opportunity for public accounting firms to offer their core activities to businesses large and small. So how do you make the most of it?
Identify Key Processes
Every business has activities common to the accounting function. For example every business has expenses. Some will be paid for with cash or credit card and a receipt will be issued. Others will be paid on payment terms requiring a robust payables function.
So with this in mind, what’s the current process for handling expenses in your CAS division?
- How do you collect source documents from your clients?
- When do they get them to you?
- Do you code off the month end credit card statement (and hope the client has good record keeping)?
- Is there a lot of data entry AKA key bashing?
- Is there a lot of back and forth with the client?
In many accounting firms the answer to any (and all) of the above questions is “It depends”. It depends on the client, and often it depends on the team member handling the work. Many firms are supporting multiple general ledgers and multiple payroll providers for example. When it comes to the data collection and processing, multiple similar but different processes become obvious. Herein lies the challenge of building a scalable CAS division; supporting multiple accounting processes.
Re-engineering Your Firm
First step is to decide who you want to serve and what you want to provide them. Industry specialization is a great differentiator in the market place. Your clients not only want an expert in accounting, but they also want (and are willing to pay a premium for) an expert in accounting in their industry.
Next, identify the key processes in that industry’s accounting function; expenses, time tracking, bill payment, payroll, inventory, logistics, the list can go on. With the core functions identified, you need to ask what technology can do the heavy lifting. Is there an app for that? For example, Receipt Bank to collect and extract data off the source documents, Bill.com to pay the bills and maybe T Sheets to track time. The three applications feed the information directly into QuickBooks Online eliminating data entry and allowing an almost real time flow of data. For example, Receipt Bank to QuickBooks Online saw an almost 2.5 minute saving per payable, when compared to the traditional desktop manual entry. If you’re processing 250 payables for your client, as one Receipt Bank Partner does, efficiency and productivity gains are there for the taking. Obviously this doesn’t happen overnight, but after continued refinement of the process and client training, the time savings will start to add up. Receipt Bank now forms an integral component of the CAS workflow. It’s not an option for client to use or not use, it’s mandatory. The efficiency and productivity gains are so significant that this firm has taken it a step further and will NOT take on a new client unless they’re willing to adopt their web based accounting platform.
You should also rethink your next recruit. Rather than a bookkeeper it might be what we call a Technologist. The Technologist is responsible for the implementation of the technology and the training of your clients and team. They are your client’s first port of call in the first 3 months, freeing up your bookkeepers to focus on getting the bookkeeping done. The Technologist is also responsible for keeping up to date on the latest technology and make recommendations to the team where appropriate. The ideal team follows what we call the Tripod Model. The client sits at the top of the tripod and is supported by a Technologist, a Bookkeeper, and a qualified Accountant. Each has their role to play in providing the client with a quality service.
In July, Receipt Bank processed 900K+ source documents in 4.5 hours or less. 90% of those transactions were published to the general ledger without bookkeeper intervention. Changes made were categorizing new suppliers. The potential for automation of the bookkeeping function is huge! And greater automation means improved margins.
Guard Your Margins
So what’s next? If technology is doing the bulk of the heavy lifting, what’s going to happen to the chargeable hours racked up on the timesheet? They will disappear. And this has obvious implications for your business model. Fixed fees and value pricing are the future of the industry. Clients want a predictable price based on what level of service they expect.
Key to fixing your fees is knowing your costs. Good discovery is essential and many firms charge for it. Discovery can range from half a day to 2-3 days depending on the size of the client. The goal of discovery is to reduce the number of unknowns. In the traditional hourly billing environment, good discovery wasn’t critical as you were charging (maybe not collecting) the time anyway. Get into your prospective clients businesses; study their bank accounts and transaction volume; analyze their general ledger; review last year’s tax return; this will give you a lot of good information.
Next make sure you ask quality questions:
- Why do you do it that way?
- How long is that taking you?
- How many people have to touch this?
- What internal controls are in place?
- What do you want from your accountant?
Be in Agreement
Make sure you agree to the level of service. Be explicit in your Service Level Agreement (SLA). What are your responsibilities, the clients? What will you do? Maybe include an example list of services outside of the scope of the agreement. Are there ramifications if either party fails in delivering on their obligations? And be sure to include a renewal date.
Client accounting services has the potential to be not only a great pipeline to value-added advisory and consulting services, but a great profit center in its own right. Profitability starts with process and leveraging technology. The rapid advancement in technology in recent years means that the applications are available today to do much of the heavy lifting to automate many of the processes. Put the pieces of the technology puzzle together based on the accounting requirements. Streamline it, then scale it. You can’t be everything to everybody, so choose your targets, that is, niches, wisely.
- For more about outsourcing non-core functions, see http://business.asiaone.com/news/merits-outsourcing-non-core-functions.