In light of the evolving economy's effects on our industry, technology's role is becoming even more vital in today’s accounting firm. Firms simply must do more with fewer people while raising production to offset increasing costs. In order to do so, they must either terminate less desirable clients or focus on improving processes and technology. Perhaps your firm needs to do both?
This requires a significant change in thinking, especially for partners who have been uninvolved in firm management and focus only on client service. Are they providing good client service or simply maximizing cash flow while burning out themselves and staff members while trying to service clients who are marginally profitable?
Process reviews and an evaluation of your firm’s current implementation of technology may hold answers, but these are not always easy to confront.
Partners do not need to know how to build the watch, but they should be able to tell time. Simply understanding the rules I outline below will not make anyone a technology guru, but it will help partners be better equipped to participate in developing a technology plan along with providing good advice to clients.
1. Technology is a strategic asset
Many people, especially accountants, try to manage technology as though it is overhead. This approach ensures frustration, because little investment means results invariably fall short of expectations. It makes more sense to manage technology as a strategic asset and allocate the necessary resources to it. Technology is an accelerator for performance and profitability.
2. Professional technology skills are required
Don’t expect extraordinary results if you are unwilling to invest in professional training for your firm's personnel. Many firms make the mistake of hiring someone who mostly knows accounting to manage technology, and the result is a marginal accountant with marginal technology skills. Professional certifications and degrees in computer science are as important as a degree in accounting and passing the CPA exam.
3. Technology is dynamic and investments should be ongoing
The definition of technology continues to expand in most firms and now includes phone systems, bandwidth, scanners and copiers. In order to keep up with growing expectations placed upon IT personnel, firms must invest in process improvements as well as training.
Because of labor shortages and the advancement of technology, highly profitable firms spend 6-7% of net revenues annually for technology and support, including labor. You may think this is too high, but do you know what percent of net revenue your firm currently spends on technology? How much does it cost to implement technology right and eliminate redundancy and frustration, so that revenue per full time equivalent goes up?
These questions can only be answered when a firm accounts properly for its technology investments and holds staff accountable to adhere to firm policies and procedures.
4. Training is required for personnel of all levels
Training is the quickest way to increase your return on investment in technology and people. It is also a key to attraction and retention of quality people.
According to the Gartner Group, a firm will bank five hours of work for every one hour invested in technology training. In other words, 20 hours of training provides 100 hours of increased capacity. Metrics compiled from Boomer Technology Circle™ firms reveal that revenue per full-time equivalent increases considerably in firms with excellent training programs. The confidence level of firm employees also increases accordingly.
5. A network of peer firms will assist the firm in managing its own technology
Many firms believe IT professionals should simply understand everything there is to know about technology. Sharing resources and solutions with other firms, however, eliminates the need to "reinvent the wheel." IT professionals in firms are often hesitant to look outside for help, believing that management will think they are inadequate. Developing a network of peer firms and learning from them offers a competitive advantage that cannot be supplemented with internal research only.
6. Firms need a management system for technology
Technology is the number two expenditure in most firms (following labor and fringe benefits). Many firms don’t realize this, because they utilize peanut butter accounting…spread it thin and no one knows what you are spending. It only makes sense to adopt sound management practices to ensure a return on technology investments. It basically comes down to people, planning and processes—with technology acting as the accelerator.
7. Someone from the owner group must be responsible for technology
Technology leadership and vision are an integral part of today’s firm management team. The requirements for a CIO or Technology Partner are similar to those of a Managing Partner. The skills include leadership, finance, marketing, human resources, business savvy, project management and finally technical skills.
Firms that employ someone with these skills (who is also an equity owner) are usually more successful than those who simply employ an IT professional. Most partners don’t know what they don’t know when it comes to technology, and in many cases IT professionals are not included in the development of the firm’s strategic vision.
8. Operate from a documented technology plan
Follow the advice you give clients. Firms should operate from a technology plan that integrates with the firm’s strategic plan. If you don’t have these plans in place, invest the resources and get them in place. Without a plan it is easy to get caught in the trap of investing time and resources in trends such as the latest PDA/phone rather than substantive technology projects like integrated financial reporting and content management.
9. The Internet will play an increasing roll in your delivery system
Firms are adopting online content management solutions as well as tax applications. Control of the application from firm servers is not as important as the security of the data and control over processes.
Your firm should document an Internet strategy—including client portals—that outlines objectives, delivery strategy and a revenue model. All major software vendors offer web-based or web-enabled solutions. Client services, cost of ownership, increased productivity and improved management and security are all benefits of online solutions.
10. It's what you don't know that may cost you
Innovation prompts change, but many resist it. I suggest you read The World is Flat, 3.0 by Thomas Friedman, which was recently updated and re-released. It will help you understand global thinking and discover how technology is changing the world as well as our profession in far-reaching ways. While reading, consider this thought: Are you in a competitive position, or is creative destruction biting at your heels?
Leadership, relationships and creativity produce value
Leadership provides direction, relationships provide confidence and creativity provides new capabilities. News about the economy may not always be bright, but this principle along with these ten observations offer a foundation for your firm to solidify its strategic investments in technology and continue to prosper in uncertain times.