I originally wrote this article for Accounting Today’s use in 2011. I’ve updated some of the numbers and clarified some of my comments but even with as much change as we’ve seen in technology in the past five years, these ten strategies are just as sound today as they were in 2011.
According to our most recent member survey, the average Boomer Technology Circle™ firm is continuing to spend less on technology when measured as a percentage of revenue – mostly because since 2011, growth in revenue has outpaced the increases in technology costs. Our technology category includes hardware, software, phone and data, scanners and copiers, labor and sourced services.
Does that surprise you? What is your firm spending? Are you getting the return on your investment you should be getting? Is your technology up to date? Are you focused on maintenance or innovation? The answers to these questions are often subjective in multiple-owner professional service firms. In other words, different people have different value systems and requirements.
For over 25 years I have said, “You don’t have to know how to build the watch but you had better be able to tell what time it is when it comes to technology.” Technology is rapidly changing and companies are looking at alternatives to maximize their return on investment and rapidly deploy innovative technology that improves client services and the related revenue stream. Consumer technology now drives business IT. Look at the impact of the Apple iPad and how “apps” have changed how people use technology and how software is developed and distributed. Technology has a huge impact on the value of your firm and your ability to create value for your clients.
Many firms have focused on reduction of expenses over the past few years and are at a critical point facing significant decisions regarding their IT strategy. Most firms are now operating some “Cloud” systems but there is still uncertainty about, and resistance to, the extent of what can and should be moved. I encourage you to embrace the following ten strategies to resolve the technical part of the equation through a proven process.
Operate with a plan and three-year budget
While this sounds basic, most firms still do not have IT plans and budgets. An IT plan does not take a great deal of time to develop if you have the right planning tools and process. Planning does require input from key people in the firm but primarily it is driven by firm leadership and the ability to identify priorities and focus resources on addressing these priorities. It is universally recommended to use someone outside the firm to facilitate this process, for several reasons: reduced politics; knowledge of peer firm best practices; reduced time requirements; increased commitment to the process; and improved focus on strategic rather than tactical issues.
Utilize an IT Committee
IT governance is critical and should involve end users. The mission of this committee should be to insure adequate planning occurs, priorities are established and that every project has a champion. Firms should focus on firm projects with end user champions. A mistake many firms make is to look at these projects as IT projects instead of firm projects.
We have found that the most effective IT Committees meet at least quarterly, with an agenda and that they limit discussion to strategic issues and integrating technology with the firm’s strategic plan. The committee should spend one or two days annually with a planning process that involves the managing partner or CEO.
Most IT leaders make the mistake of not communicating often and effectively, especially with regard to accomplishments. End users should be aware of all projects, expectations for implementation, training requirements and time lines. Focus on successes and deal with the reality that change is difficult for many people. Consistent and continual communication is required in a rapidly changing IT world. Experiences impact beliefs, beliefs drive actions and actions determine results. Outdated beliefs generally result in resistance, so communication is the only tool that can change bad experience into hope and belief.
Trust determines speed and cost
Firms that have a low level of trust pay a tax when it comes to IT, while firms with a high level of trust are rewarded with a dividend. In firms with high trust, more time is spend on implementation and training and less on justification and hand-holding. Many of the strategies listed in this article are designed to increase the trust within your firm.
Utilize business analysts
Business analysts have the unique ability of being able to understand both the technology and the firm’s processes. In other words, they bridge the gap between those that know what they want to accomplish and those that know how to leverage technology.
It is not unusual for partners and managers to lack knowledge as to what is possible. Likewise, programmers and engineers often do not understand the business requirements and processes. Business analysts are typically excellent communicators who understand both sides of the business, even if their expertise is not as great. All major projects should have a business analyst involved in the planning, process improvement, training and implementation phases.
Participate in peer communities
The “not invented here syndrome” does not work when it comes to technology. No firm owns the market on technology. The wisdom of crowds and the ability to network with leading peers is very valuable.
We’ve been conducting Boomer Technology Circles™ since the year 2000 with the goal of bringing together a Firm decision maker and IT professional three times a year to share strategies, results and concerns with peer firms. These meetings provide clarity, confidence and increased capacity. A core principle for all of our communities is that professionals who share best practices and lessons learned are best-prepared for the future and benefit the most from the rapid changes in business, especially those driven by technology. Most firms have core knowledge but it is the access to the tacit knowledge from other peers that differentiates the best from the rest.
Treat vendors as business partners
Technology should not be managed as overhead; it should be managed as a strategic asset.
Most firms can relate to multiple databases containing duplicate information that is often difficult to access for reporting purposes. Business intelligence and real-time data will allow firms to provide increased value to their clients. The primary vendors in the accounting industry have a wealth of resources they will gladly share with firms – if treated as a partner. This strategy is more important today than it has ever been due to the transformation to the Cloud and the integration of applications into systems that contain many processes.
Know your metrics
Key metrics are important in managing technology. Some of the most important metrics are revenue per full-time-equivalent (2,080 hours), amount spent on IT per FTE, % of revenue spend on IT, average hourly rate collected, and end users per IT support person (internal and external). Much like your golf score, these metrics should drive improvement. While peer metrics are, at least value, merely interesting, remember that average is where the best of the worst meet the worst of the best.
This may still be a new term to many CPAs but it is based upon the premise that it is often better to lease than to own. The Internet platform today allows firms to utilize external resources to insure the return on their IT investment and provide the necessary resources when needed.
Much like electricity, technology has evolved to the point it is often cheaper, easier, faster and better to use external resources than it is to control all resources and rely on limited internal expertise. Firms do not have their own power plants for electricity (other than for disaster recovery in some cases). Why should they own and maintain an expensive infrastructure when they can lease those resources? While this sounds fiscally advantageous to most business people, the reality is that the CPA profession is in a period of transition regarding client server based systems and Cloud based systems. Meshing provides flexibility – which may deliver a great advantage during transition.
Focus on innovation and growth
While the IT investment in most firms will probably remain at the 5-6% of net revenue level over the next few years, how your firm spends its IT budget will be critical to your ability to attract and retain clients.
Many firms today are investing the majority their resources on the maintenance of their existing systems rather than on innovation and the delivery of new services. Innovative services require a platform that is both scalable and accessible from any place at any time; a primary advantage offered by cloud based systems. The focus should be on capturing transactions at the source rather than on entering transactions and insuring correctness. Accountants can move up the value chain. With less effort spent on the capturing, recording and reporting of the transaction, more effort can be dedicated to higher valued advisory services.
Increased investments in platforms and capabilities that allow clients to have real time information also provides an opportunity for firms to evaluate their pricing and collection policies. How firms package, name, price and deliver these services will be critical to their success. The hourly method of billing is based entirely upon the expenditure of effort. In the majority of cases, your client only cares about your effort when you’re not providing a valuable service.
Think, Plan, Grow!™
While these 10 strategies are not intended to be all-inclusive, they do represent a thought process that will enable your firm to capture a return on investment, meet client requirements and increase the value of your firm.