The reason technology is letting them down is due to three things that the average CPA hasn’t generally considered.
It’s an exciting time in the accounting industry, as more and more CPAs and accounting firms are expanding from single operators to full-scale organizations achieving fantastic success. For many, the fastest way to grow is to acquire other accounting firms, while others are focused on boosting profits by adding to their current book of business.
These accounting leaders are exceptional at managing and growing their businesses and continuing to drive their companies forward. Unfortunately, there is one often-overlooked obstacle that leads to stress and lack of stakeholder support: The technology they’re employing is underutilized, inefficient, or incapable of sustaining growth. It’s a classic situation of the straw that breaks the camel’s back – as the business gets larger, the technology struggles to support it, until one day it all comes crashing down.
This is not the CPA’s fault; while they’re experts at numbers, technology can feel like a foreign language. It doesn’t need to be this way. The reason technology is letting you down is due to three things that the average CPA hasn’t generally considered. But when understood and addressed, you can turn these into huge drivers for competitive advantage.
The Expensive Oversight
In today’s world, every organization must consider themselves a digital company, and must understand the concept of IT-first business ownership. Accounting businesses focus on the growth of the firm in so many other ways, with wise planning and excellent results in a strong client list and stellar reputation. The problem is that the technology provider or in-house technologist is almost never involved in the firm’s overall growth strategy, which leads to a range of digital disasters that can impede or even halt growth. A few simple examples:
- Last-minute set-up of new staff hire decreases the productivity of new staff, sometimes for weeks
- Slow performance of network due to a significant increase in staff, with repercussions on efficiency and customer satisfaction, as well as the high financial cost of emergency infrastructure improvement
- A tidal wave of issues related to the acquisition of new firms: Scrambling to integrate different technology platforms, challenges of maintaing security while allowing new locations into the system, staff frustration, costs of up to hundreds of thousands in cases of licensing oversights
The research that bears this out. According to Forrester, the average employee loses 18 hours a month – 5 weeks per year – due to productivity losses from IT problems. The Aberdeen Group estimates that the average annual cost of IT downtime for SMBs is $1.55 million. And finally, a CFO survey indicates that technology integration is among the top impediments to getting full value from an acquisition.
We’re glad that John reached out to the CPA Lifeguards, so that we could take care of integrating the new systems, creating a security fortress, and setting up a client portal that complied with the law. We were able to achieve this within [time frame], rescuing John from his stress and putting his firm back on track for exponential growth. But while we were happy to help, we hate to see people landing in this scary and costly situation in the first place. The entire problem could have been avoided if John had known to bring his IT team on board from the beginning.
All of this can be avoided if the firm’s IT team is included in the growth plan from the beginning. Leadership needs to share the map of where they want to go and how they want to get there. Then, they need to work with a technology team that knows how to make that growth possible in a way that avoids disruption of day-to-day business, keeps staff engaged and productive, and eliminates surprise technology costs.
John, a very successful accountant with a 20-year track record, decided to take a big step in growth by purchasing a book of business, thinking it was all he needed to achieve next-level success. Steve was thrilled about the revenue the new client list would bring, until he found himself confronted with several unexpected IT problems: Software mismatches, a dangerous security issue with the acquired firm’s infrastructure, and an online document submission portal that didn’t comply with privacy standards.
John had performed comprehensive due diligence in everything else, but it didn’t occur to him to address the technology piece of the acquisition. And this oversight led to costly IT expenditures and wide-ranging ripple effects: Staff members on both sides of the acquisition experienced added frustration during an already-stressful time, customers were aggravated by suddenly broken systems, and standard business processes were slowed down or shut off entirely.
And on top of all that, John was terrified that the acquired firm’s security issue would lead to massive IRS fines, or even the forced closure of the business. He had always been so careful to make sure his business was fully compliant, but the acquisition left him liable. Now he worried that everything was at risk.
When John reached out to the CPA Lifeguards, we were able to integrate the new systems, create a security fortress, and set up a client portal that complied with the law. Of course, we were happy to help; however, we hate to see people landing in this scary and costly situation in the first place. The entire problem could have been avoided if Steve had known to bring his IT team on board from the beginning. We could even have helped him eliminate any liability issues by identifying them at the outset and requiring the seller to accept responsibility, not pass it along to John.
The “If It Ain’t Broke, Don’t Fix It” Contradiction
You can start to shift your technology focus from reactive to proactive by asking yourself a few simple questions, all of which are rooted in competitive advantage:
Most organizations are rightly forward-thinking about their sales and marketing strategy, their quarterly goals, their HR initiatives, and their overall growth plans. But unfortunately, when it comes to their technology, the attitude is generally, “If it ain’t broke, don’t fix it.”
This is pretty shocking if you think about it. No one has this mindset toward any other part of their business. But technology is usually regarded only as a cost, not as the crucial success factor that it is. So, it’s avoided, until something goes expensively and stressfully wrong.
The problem is magnified when businesses piece systems together over time. For example, accounting firms often scramble to adapt their technology when security and compliance rules change. This can result in a Frankenstein back-end of thrown-together systems that require double or triple data entry, hamper productivity, leave room for error, and open the door to malicious activity.
However, as long as systems are “working” – that is, computers are up and running – leadership generally assumes that they can forget about tech until something actually goes down. But think about the true costs of settling for poor technology, day in and day out.
When systems are running sub-optimally – when they’re slow, when processes are inefficient, when the software is full of bugs – your employees are far less productive than they could be, no matter how hard they’re currently working.
If you have a 10-person firm, for example, and your technology is causing even a 10% slowdown in productivity, that means you have to hire an extra person just to keep the business running. According to the Society for Human Resources Management, the average cost of hiring a new employee is over $4000 – and that doesn’t even account for associated admin hours, lost productivity during training, risk of early turnover, the cost of new equipment and licenses, and of course a whopping salary.
What if your technology is causing a 20% slowdown in productivity? 30%? What are the repercussions as your workforce continues to grow? As we’ve seen above, the costs can easily exceed half a million dollars a year.
It’s also important to consider the cost of security and compliance risks when your technology doesn’t fully safeguard you from attacks and data breaches. Lawsuits, IRS fines, and bad press are just a few of the unfortunate outcomes of shoddy security. And the really scary part is, because firms often don’t have a pulse on the true status of their technology, they don’t even know they’re at risk.
Finally, quite apart from these hidden costs of inefficient systems, you also face huge hard costs when the inevitable day comes that sub-par technology goes down. IT providers know they can charge an arm and a leg in an emergency, when businesses are desperate to get back online.
In short, an “ain’t broke, don’t fix it” mindset is expensive. Let me give you an example.
Jenny from Thompson Accounting had always focused on a “cost-saving,” reactive approach to technology, believing that as long as her team members could log in to their computers and generally accomplish their tasks, that all was well. It wasn’t until a string of expensive IT failures caused her to step back and consider whether there was a better way.
When we started working with Jenny, we discovered that she had actually paid her IT company more over a 12-month period by fixing everything as it broke, instead of addressing technology upfront. We further helped her understand the technology upgrades that would gain efficiencies, keep her in IRS compliance, maximize team productivity, and drastically reduce her stress. And we showed her that this approach costs a lot less than the ongoing emergency fees she paid her IT company every time something went wrong.
Jenny’s new technology systems have improved staff productivity by 80%, and the team is no longer coming to her with one urgent technology issue after another. The average client closure rate is now 3x faster. Her team is now billing more per hour and closing more clients, without hiring a single new staff member. The net gain to her business was over $300,000 in 12 months.
Missing the Forest for the Trees
Becoming proactive with technology is a huge step in the right direction – but it’s even more important to implement the right technologies in the right ways when you move forward. There are so many options and platforms available, it can be tough to know which to choose, and how to make sure everything is integrated across systems and staff.
Becoming proactive with technology and optimizing your systems is a huge first step, but there’s a much larger opportunity there. The next step is to understand all the ways technology can be further leveraged for competitive advantage, and choose the ones best suited to your needs and goals.
Just as you stay up-to-date on best practices and developments in accounting, you must also be aware of evolving technology that, when implemented, puts you head and shoulders above the competition.
Of course, you’re busy running your accounting firm, and can’t be expected to stay abreast of every single technology development, especially given the dizzying pace of change. But you can start to view technology through the lens of competitive advantage by asking a few simple questions:
- How can we use technology to better manage our clients and their security?
- How can we use technology to message our customers more effectively?
- How can we use technology to boost team productivity and efficiency?
- How can we help clients – and ourselves – make better, faster, smarter decisions?
Our client Patrick is a great example of what a few simple technology implementations can achieve. Once his systems were upgraded and optimized, we took the bird’s-eye-view of his firm to determine exactly which digital solutions would give him added competitive edge, increase efficiency, and add to his bottom line.
Like many traditional accounting firms, Patrick was using a paper-based system for his prospects – printing out things like contracts and engagement letters and sending them through the mail. He was spending thousands of dollars a year on postage and supplies, and there was an even larger hidden cost: It often took ages for clients to sign the documents, which required regular follow up, and even raised the risk they’d go elsewhere.
Instead of this inefficient process, the simple implementation of an electronic contracting system allows Patrick’s clients to just click a link inside an email, open the electronic document, and close the deal in a matter of minutes.
Further, a client management system for Patrick’s firm serves as a centralized database for all client information. All forms and documents for each client are housed in one place, with email integration for easy reference on when they last spoke and what was discussed. Time and billing is also entered in this client hub. All of this means that Patrick and his employees (even brand new employees) will instantly see everything they need to know about a client instead of searching through email, asking colleagues, or digging around in files and folders.
Further, the system lets the team to easily communicate special offers, changes in legislation, and new product offerings. These changes allow Patrick to close more deals, provide a new level of customer service, increase staff retention, and boost the productivity of his entire team. In fact, our ROI analysis shows that these changes will grow Patrick’s annual revenue by 20% – 30%.
While there are many success factors involved in a thriving business, the role of technology is too often overlooked, when in fact it can be of the most crucial. Not only does it protect all of your hard work, it sets you up for supercharged growth and puts you miles ahead of the competition.
We’ve created a free, simple technology audit form you can use in your accounting practice, to determine your current level of technology-forward thinking, and where you might improve. You can download that here.