AICPA Trusted Business Advisor Solutions
SM
Brought to you by
Accounting Services
Harness the Power of the Cloud
A white paper based on research conducted by Dr. Geoffrey Moore
– best-selling author, noted speaker and business strategist
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
TABLE OF CONTENTS
Setting the Context: Three Mega-Trends that Matter.................................3
The New Landscape of Client Accounting Services....................................5
The Evolution of Client Accounting Services...............................................6
Technology Investments to Drive Practice Evolution.................................13
Technology Adoption and Change Management......................................16
Conclusion.................................................................................................18
About Geoffrey Moore..............................................................................19
About CPA2Biz..........................................................................................19
Additional Resources ................................................................................20
Accounting Services: Harness the Power of the Cloud
2
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
[
T
he purpose of this white paper is to help accounting firms take advantage of
new opportunities in Accounting Services brought on by the advent of digital
technologies.
[
Our fundamental premise is that, in the past, major barriers to productivity made
Accounting Services a low-margin activity that was unattractive to pursue. In today’s
online digital era, we believe these barriers can be removed, and the practice can be
reengineered into a high growth, high profitability line of business.
In the white paper that follows we make the case for this point of view and outline a
series of actions firms can take to transform their practices.
SETTING THE CONTEXT:
THREE MEGA-TRENDS THAT MATTER
MEGA-TREND #1
FROM PAPER TO DIGITAL
In the second decade of the 21st century, there are three
fundamental trends that are changing the future of client
accounting services in the U.S., each of which can be traced
to the profound impact that computing and networking is
having on human culture globally.
MEGA-TREND #1: DIGITALIZATION
MEGA-TREND #2
FROM PHYSICAL
PRESENCE TO
DIGITAL PRESENCE
The Future
of Client
Accounting
Services
MEGA-TREND #3
FROM
GENERALIZATION
TO SPECIALIZATION
The first of our trends is the migration of text documents
from paper to digital formats. This has been long in coming
and will continue to transition for a long time to come. That
said, we have reached an inflection point at which, for the
first time, the default format for the majority of documents
is now digital, and the expectation of the community, and
particularly of the younger members of the community, is
that there will be no need to print it. To be sure, there are
still plenty of exceptions to this rule, and that makes for a
hybrid workflow that imposes greater overhead on accounting than either method alone would in isolation.
This has profound implications for client accounting services (or CAS as we will call it
from here on out ). On the one hand, the accounting profession can see a future that is
far more friction-free than current practice, and the early adopters in the community are
embracing that future today. On the other hand, the majority of the profession is still
shackled to a legacy of paper that is not easily shed and that traps clients and service
providers alike in high-cost, low-value procedures. This is a no-win situation, and every
firm needs a strategy for how it will address this challenge.
Accounting Services: Harness the Power of the Cloud
3
AICPA Trusted Business Advisor Solutions
SM
THE CHALLENGES OF A
HYBRID PRACTICE
Late-Adopting
Clientele
Practitioner
Forward
Thinking
Clientele
Brought to you by
MEGA-TREND #2: VIRTUALIZATION
The second mega-trend we are living through is a migration from
business affairs being conducted in person and at a specific
location to being conducted online from whatever location is most
convenient. This is a more nuanced transition than the one from
paper to digital, for the ultimate goal is not to displace physical
presence entirely. Instead, it is to reserve being physically present
for situations that warrant such effort, that in some way are core to
our well-being, and to have the option to be virtually present or
digitally represented in situations that are not. For example, if one
were dealing with a crisis in cash flow, or worse, a problem with
fraud, then physical presence might be critical to help sort through
not only the facts but the emotions of the situation. By contrast,
routine work or run-of-the-mill trouble-shooting are better done
digitally for less cost, greater convenience, and faster time to
closure.
Again, this has profound implications for the profession. For our more forward-thinking
clientele, not providing a digital option is increasingly being perceived as imposing an
unwarranted inconvenience upon them. So we must invest to support these new
workflows. For late-adopting clients, on the other hand, it is just the opposite: having to
provide documentation or interact digitally is what is perceived as an inconvenience. So
we have to continue to invest here as well. Having to support a hybrid practice across
both modes creates duplicated costs that undermine the viability of any client
accounting services practice, so once again every firm needs a strategy for how it will
address this challenge.
MEGA-TREND #3: TRANSFORMATION
Finally, a third mega-trend that follows from the ongoing digitization of human culture
is a transition in business organization from large integrated corporations that staff up
internally to meet all their requirements to a hybrid global model in which core
functions are still done internally but context functions are outsourced to specialist
providers. This has lowered the barriers to entry for specialized small business
entrepreneurs and led to an explosion of small to medium sized businesses in almost
every sector of the economy. That in turn has increased both the number of clients
available for CAS practices to serve—clients, incidentally, who by the very nature of
their own businesses are predisposed to embrace outsourced solutions—and, for a
similar set of reasons, the number of CAS firms that can effectively compete for that
business.
Accounting Services: Harness the Power of the Cloud
4
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
THE NEW LANDSCAPE OF
CLIENT ACCOUNTING SERVICES
This new economic landscape is characterized by dynamic, confusing regulatory regimes,
both locally and globally, increasing the demand for industry-specific domain expertise.
Never was there a better time for the accounting profession
to play a value-adding trusted advisor role.
But to do that, it must free itself from low-margin, non-value-add write-up and
bookkeeping-type services that in a prior era made up the backbone of the CAS
workload. That challenge can and will be met by next-generation technology and
next-generation CAS practice leadership.
With respect to technology, there are three key areas of investment that will pay big
returns in the current decade.
3 KEY AREAS OF INVESTMENT
q Migrate small business Systems of Record from the PC to the Cloud. The business logic need not change. Indeed, in many instances, the application itself need not change. But the venue must. Once systems of record are in the cloud, everyone who touches them has immediate access, 24/7, eliminating a series of time-consuming data exchanges. And because there is one and only one version of the data, there is a single source of the truth, dramatically reducing another time sink—error-tracking
fire drills.
w Adopt Systems of Engagement to conduct business interactions online. The proliferation of low-cost broadband connectivity enables many online communications alternatives—email, instant messaging, video and web conferencing, and the like—
which dramatically cut down the number of situations where one must be physically present to be effective. These solutions are all going through a technology adoption life cycle, so not every community will be ready for them immediately. But there is little excuse to put off using them internally if you can thereby gain productivity for staff members working remotely or interacting with clients who are already on the new infrastructure.
e
Adapt enterprise Business Intelligence approaches to address SMB client needs. In the new Software-as-a-Service world, sophisticated reporting and analytics are available at a fraction of prior cost. And with systems of record migrating to the cloud, it is easy to apply them to your client’s business data. And finally, with the advent of iPads and the like, presenting data to clients in readily understood formats has also never been easier. The key to capitalizing on this new set of opportunities is to free up professional time to devote to such analytics, to use that time to determine the key performance indicators for your client’s business, and to work with the Business Intelligence software to develop simple dashboards that make performance factors readily visible.
Accounting Services: Harness the Power of the Cloud
5
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
With respect to the role of the CAS practice leader in orchestrating this technological
change of pace, the path ahead is marked out by three key strategic decisions, each of
which will be addressed in detail in the remainder of this white paper.
3 KEY STRATEGIC DECISIONS
q Determine the current and desired future state of your CAS practice. To do this you will need a model outlining the evolution of a CAS practice through a series of stages, any one of which may be the current state of your practice, any one of which may be the desired future state. This model is presented below under the section entitled “The Evolution of Client Accounting Services.”
w Identify technology investments appropriate to stages of transition underway. The evolution model is constructed around four stages. The transition from any one stage to the next is facilitated by a specific set of technology investments. What is entailed at each point of change is presented later in this paper under the section entitled “Technology Investments.”
e Organize change management around specific business practice transformations and technology deployments. Every community develops its own approach to adopting new technology which it undertakes at its own pace. As a leader you must orchestrate change initiatives in a style that minimizes wasted efforts and maximizes lasting improvements. This paper comes to a close with some guidelines to support this effort, presented in the section entitled “Leading Technology Adoption.”
Digitization
Virtualization
Transformation
UALIZATION
RT
VI
Necessary
Evil
Expanding
the Practice
G I T I Z AT I O N
Accounting Services: Harness the Power of the Cloud
RA
Deepening
the Practice
T
DI
1 2 3 4
Establishing
the Practice
NS
N
THE FOUR STAGES
THE EVOLUTION OF CLIENT
ACCOUNTING SERVICES
F O R M AT
IO
6
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
Client Accounting Services historically has been perceived as a low-value, low-margin
service, especially in contrast to tax and audit services. Stage One of our CAS Maturity
Model, therefore, initiates the evolution of the practice from that starting point. That
said, the mega-trends surveyed in the introduction to this white paper have unleashed
forces that are redefining the business landscape and reshaping both the value and the
margin opportunities of CAS. The impact of these forces is traced through three
subsequent stages of evolution in the practice, each of which has seen some adoption
in recent years.
STAGE ONE: CAS – A NECESSARY EVIL
At rock bottom, client accounting services are perceived as a “write-up” business,
providing commodity services at market price billed by the hour. Firms seeing CAS
through this lens do not treat it as a true practice, but rather as an accommodation to
clients who also subscribe to higher margin services.
Like most commodity businesses, there is little to no reward for doing a superior job,
but there are definitely downside consequences to making errors. It is little wonder
firms are not attracted to this work. Moreover, despite the relief that online digital
technology can bring to this situation, there is typically insufficient incentive to allocate
the capital and work through the technology adoption issues to garner these gains.
Management time, talent, and attention are simply focused elsewhere.
Faced with a changing business landscape in which CAS is becoming more prominent
as part of the overall accounting services mix, firms in this state have at least three
options:
q`Live with the status quo a little longer. This comes under the heading of “If it ain’t broke, don’t fix it.” For firms with largely established clientele and low turnover, this option may prove viable for some time to come.
w Seek out a partner firm to subcontract CAS services to. Partner firms are clearly incented to invest in the digital systems to make CAS productive. The risks here are, on the one hand, they may irritate your clients by imposing digital procedures on their back offices, or on the other, they may become so well perceived as to displace your firm as the client’s accountancy of record.
e Proactively establish a dedicated CAS practice with the charter to become a high-
growth, attractively profitable line of business. This is the option that is explored through the following stages in this model.
Accounting Services: Harness the Power of the Cloud
7
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
STAGE TWO: CAS ESTABLISHING THE PRACTICE
For most accounting firms there is only one
practical way to establish a high-growth,
attractively profitable CAS practice: Target
a tightly defined target segment of
underserved customers and address their
needs with a specialized and differentiated
set of services.
Domain
Expertise
Word
of Mouth
Endorsement
There are two key benefits that come from target market initiatives, both of which increase
as your practice expands. The first is that you gain domain expertise which over time
differentiates your services, giving them higher value and enabling you to earn higher
margins. The second is that you gain word-of-mouth endorsement within the target
community, becoming the natural firm to refer whenever an accounting need is discussed.
Neither of these benefits comes with the first five clients from the segment, both start to
come with the next five, and by the time you have twenty or so, they put you in another
league.
TARGET
SEGMENT
Big enough
to matter
Small
enough
to lead
A good fit
with your
crown jewels
In selecting a target segment, there are three principles to follow. The segments should be:
 Big enough to matter. The number of potential clients in the target segment should
represent enough opportunity to build a practice several times larger than the one
you have in mind. This gives you headroom to grow.
 Small enough to lead. The segment should be small enough that if you do build a
practice of the size you intend, it would be the leading practice in the segment. At
minimum this would be 20 to 25% of the segment for your market. This gives you a
small enough pond to ensure you are the big fish.
 A good fit with your crown jewels. Clients in the segment you target face specific
challenges that interest you and your colleagues and that require expertise to
address that either you have or want to acquire. This creates a natural bias for you
to serve them and them to seek out you.
Accounting Services: Harness the Power of the Cloud
8
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
Target market specialization does call for some investment, particularly at the outset,
which is often a time when investing is most challenging as your practice has yet to
have developed surplus cash flow. To move forward you must extract resources from
somewhere else in the practice in order to deepen your capabilities in your area of core
focus. Again, the key justification here is that a new client from within your target
market will have much greater lifetime value to the firm than one from elsewhere, both
by contributing to your differentiating domain expertise and by reinforcing your
word-of-mouth reputation as the go-to-firm.
The key investment to fund is a technology transition focused on aggressively
displacing the use of paper and on-premise PC hosting in favor of digital workflows
hosted in the cloud. Paper is the anchor that keeps CAS practice margins at
unacceptably low levels, so driving it out of the system is fundamental to building a
sustainable business. The specific technologies that enable this transition will be
discussed later in this paper. What is most important for now is exhibiting the
leadership required to drive it.
No one likes change for change’s sake, least of all potential new clients. The one time
they are open for change is at the outset of a new relationship, for they know that all
things new require some set-up investment. This is the time, and arguably the only
time, to address the paper challenge. The simplest way to do this is to make digital
workflow a prerequisite for providing the service. That is, you use willingness to adapt a
digital cloud-enabled workflow to qualify the client opportunity, and you turn down
new business that does not qualify.
To win such business, you must offer new clients something they are willing to make some
sacrifices to get. Typically this will be exceptional attention to a segment-specific problem
area that shapes their accounting concerns. As a CAS practice leader, it is your job to
communicate this differentiating value proposition and to personally commit to see that it
is fulfilled.
STAGE THREE: EXPANDING THE PRACTICE
As your CAS practice expands within your target market, there comes a time when you
start receiving unsolicited inbound calls requesting your services. This is a signal that
the combination of your domain expertise and concentration of reference clients has
caused your target segment to identify you as its go-to firm. It is also a signal to you
that it is time to expand the practice, take on a new level of investment, and potentially
raise prices in order to do so.
If the goal of the first transition was to free your practice from the anchor of paper and
on-premise systems, the goal of this one is nothing less than to escape the constraints
of space and time. More concretely, in the era of digital workflows, the need to
collocate with colleagues and the need to be within driving distance of clients no
longer apply. There is indeed a virtual world, and it functions remarkably like the
physical one we are used to, and it is time to get your firm on board with it.
Accounting Services: Harness the Power of the Cloud
9
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
This in an inherently technology-enabled transition, about which we will have much to
say in an upcoming section. But it is also a management transition that you as a CAS
practice leader must guide. In particular, there are four principles to observe as you
lead this change.
4 KEY PRINCIPLES
q Streamline your workflow processes to be location-independent – all online, all digital. This is more of a journey than a destination as there will inevitably be exception conditions. The path is to do a Pareto analysis in which you examine your workflows with the goal of identifying the 20% of your process work that is creating the 80% of low-value, resource-trapping busy work, and then to focus digital tools directly at those processes. This can be a great team building exercise, along the lines of what quality circles accomplished in manufacturing, but only if you actually follow through with the investments to make the called-for changes.
w Reengineer your internal communications and collaboration practices to support a virtual organization. This, to be sure, is generational, so if you are part of the “older generation,” it behooves you to assign this effort to a younger team leader. Then comes the hard part: actually going along with that team’s recommendations and getting down to work. The gains are transformative—people working from home or from the road as easily and effectively as if they were in the office; cycle time on key turn-around projects being dramatically reduced as people can get together anywhere, anytime for a quick exchange; and instant access to a quick answer that lets people get on with their projects sans further delay. A web-based workflow system seems to be key to
success here.
ESCAPE VELOCITY DIAGNOSTIC
Is Your Organization Trapped in the Pull of the Past?
PULL OF THE PAST
THE CALL OF THE FUTURE
• Paper Checks
• Online Bill Payment
• Mailing Lists
• Twitter
• Phone Trees
• Facetime, Skype
• Phone Calls
• Texting
• Email
• Presence Detection
• Voicemail
• Cloud Sharing
• Attached Files
• Images, Video
• Text
• YouTube
• PowerPoint
• Apps
• Spreadsheet
• Tablets
• Desktops
• Social Graphics
• Org Charts
• Content Shared
• Published Reports
• Events
• Conferences
Accounting Services: Harness the Power of the Cloud
10
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
e Engage your clients through digital channels and migrate your interactions online. Client relationships in service businesses are inherently collaborative, and the better the communications channels in place, the higher the hit rate on client satisfaction. Different clients will adopt the new communications methods at different rates, but for those who are ready, bringing them into your digital collaborative fabric makes for better outcomes at lower cost, something everyone can relate to.
r
Extend your target market’s geographical boundaries while maintaining your focus on target industry and core differentiation. In the old CAS world, the first boundary of any target segment was geography, because word-of-mouth referencing was largely local. Not so in the new digital world. In this era, a faith-based institution in Birmingham has more in common with a sister organization in Boston than with a restaurant franchisee just down the street. Digital communication and online marketing dispense with the need to operate within tight geographical boundaries, provided there are other links to compensate. So keep your target segment tightly in focus, but leverage digital methods to range far afield to engage it.
STAGE FOUR: DEEPENING THE PRACTICE
As you and your colleagues spend more and more time working with clients inside your
target segment, you will inevitably become expert in the issues that matter most to
their business success. This in turn positions you to become their trusted advisor, a
status which makes you more like a strategic partner and less like a technician. All
business owners need someone to turn to for advice, and when you become that
person, your connection to that client is cemented for a long time to come.
More importantly, you are now positioned to offer much higher value added services to
your core clientele. These will likely take the form of special projects to address clientspecific challenges that do not fall squarely into the accounting services bucket. These
are high-margin affairs if for no other reason than people feel uncomfortable shopping
for discounts when they are looking for a heart surgeon. In times of risk, people want
the best, and you have spent the last few years establishing yourself and your firm as
just that.
To take full advantage of this opportunity, you will want to engage in the following
“best practices”:
• Migrate the focus of your client dialogs from compliance to business improvement. This can begin as simply as proposing an annual business strategy check review with as many of your major clients as you can serve effectively. That, in turn, often leads to strategic initiatives, many of which you may be able to facilitate with value-adding services. Most importantly, it reorients your relationship from being based on your expertise—compliance with accounting regulations—to being focused on your client’s business—their success, what they want to spend time and money against.
Accounting Services: Harness the Power of the Cloud
11
AICPA Trusted Business Advisor Solutions
CONNECTEDNESS
SM
Brought to you by
WISDOM
understanding principles
KNOWLEDGEE
understanding patterns
INFORMATION
ON
understanding relations
DATA
UNDERSTANDING
• Develop dashboards of key performance indicators that enlighten your clients as to the status and trends in their business. Larger enterprises have long benefitted from applying Business Intelligence reporting and analytics to their transaction data. But these tools have traditionally been expensive to purchase and complex to implement. In today’s digital era of Software-as-a-Service, the barriers to entry are much lower, and you have an opportunity to bring your clients insights into their business they never had before.
• Proactively educate yourself and your team about the issues driving business changes in your target market. Each one of your clients could be expected to know their business better than you, but because you are now serving dozens of clients from the same segment, you actually are in the best position to become expert in overall industry trends. The more you reinforce that expertise, the more valuable your firm becomes to your target segment. Moreover, the more your team gets deeply engaged in these issues, the greater the satisfaction it will find in client service interactions, and the more loyal it becomes to your practice.
• Participate in the industry forums of your target market, establishing yourself and your colleagues as trusted advisors. It was not that long ago that it was illegal to market accounting services in the United States. Although those restrictions are now gone, there is still a residual reluctance among many accounting firms to proactively market their services. And as it turns out, no one really wants to get an ad or spam email from an accounting firm. But what clients do appreciate is when a firm participates in their industry’s trade association, pitching in to make events work, and adding value as an advisor, a panelist, or even a keynote. Again, because your firm sees many client situations in the same segment, it is uniquely positioned to give business owners in that segment a perspective on the trends impacting their business success. (See Additonal Resources at the end of the document.)
Accounting Services: Harness the Power of the Cloud
12
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
TECHNOLOGY INVESTMENTS TO DRIVE
PRACTICE EVOLUTION
In this section we are going to identify the types of technology that enable transitioning
from one stage of the CAS Evolution Model to another -- to Establish, Expand and
Deepen your practice. The material here is based on a series of interviews conducted
with industry insiders and leading CAS practitioners.
Each firm’s culture and each target segment’s specific needs will impose additional
requirements on the underlying CAS systems, and it behooves you to do the research
and get a broad spectrum of advice before making any specific commitments.
TECHNOLOGIES TO HELP ESTABLISH
THE PRACTICE
As you will recall, the key goal here is to aggressively displace
paper and on-premise PC-hosted systems with digital data
exchange enabled by systems hosted in the cloud. Here are the
key areas on which to focus:
Online system of Record. Relocating to a cloud-hosted, centralized
accounting system, available to both clients and your staff on a
24/7 basis, is the centerpiece in a firm’s move to establish a CAS
practice. It is therefore the single most important objective for this
transition. Internally, this represents the transition from
bookkeeping, a data processing function, to accounting as a
management information system. As discussed earlier, the concept
of “one version of the truth”, coupled with the power of
concurrent usage, is a powerful combination in the fight to eliminate low-value work
while concentrating on the more high-value tasks. Virtually every interviewee spoke of
this as being core to their success in their journey.
Digital document exchanges. This is the second most important reform to institute, the
goal being to get document couriers out of the loop. There are a number of generalpurpose cloud-hosted utilities for digital document exchange. And for higher end
clients, the portal function of the firm’s document management system or other hosted
system often becomes a natural point of exchange.
Additional Value-Adding Options. For firms that have already migrated to a cloudhosted system of record and digital document exchange, there are a number of
additional online capabilities to consider adding to the mix. Those mentioned most
often in our interviews as directly impacting productivity include Digital Signatures, Bill
Payment Management, Workflow, Reporting and Analysis, and Audit Confirmations.
Accounting Services: Harness the Power of the Cloud
13
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
Firms will find that as they move from “Paper to Digital”, and from “Physical Presence
to Digital Presence” their professional technologies as well as their general business
operations technologies must keep pace. CAS practice managers are advised to be
aware of metrics that indicate the impact these new technologies have on productivity.
Watch for changes in the number of “paperless” clients, the number of standardized
workflow exceptions, usage of your digital signature service, and even file space usage.
Taken as a whole these things can be great early indicators of success in navigating
these mega-trends.
TECHNOLOGIES TO EXPAND THE PRACTICE
The goal here is for CAS firms to embrace next-generation communication and
collaboration technologies as a means to dramatically improve their efficiency and
extend their reach.
At the heart of this change is migrating the workforce to a broadband network of one
kind or another, be that DSL, cable, or even 4G wireless. These networks support voice,
data, and video traffic streams, and are the fundamental message carriers of the digital
workplace. Until you have provisioned your team accordingly, it is not advisable to
pursue the applications referenced here.
• Unified Messaging. This service allows the integration of all electronic communications technologies (email, SMS, Fax, voicemail, video messaging, etc.) into a single interface, accessible from any device, anytime, anywhere. This is accomplished through VOIP (Voice Over Internet Protocol)
• Web Conferencing. This combination of a conference call with a PC session—
effectively a private version of a webinar—has proved particularly useful in two recurrent situations. The first is walking a client through a complicated or complex piece of documentation.The second is training a new associate on some firm-specific technology or procedure. In both cases, the ability to stop or even edit during the session helps dispel confusion.
• Video Conferencing with PC Webcams. For firms with a digital bent, this has proved surprisingly useful and become the de facto way team members connect with one another whenever they are not collocated. Virtually all laptops today come webcam-
equipped, and many web conferencing solutions support a digital video presence.
• Mobile: Finally, it would be impossible to leave his topic without referencing mobile. The challenge here is that mobile has come to span a broad swath of capability from cell phone to smart phone to tablet, each of which puts its own twist on collaboration. While there appear to be no specific applications that stand out in terms of productivity gains—many directly impact client communications, as we discuss in the following section.
Accounting Services: Harness the Power of the Cloud
14
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
TECHNOLOGIES TO DEEPEN THE PRACTICE
For large corporations seeking trusted advice, there are companies like McKinsey for
strategy, Accenture for management information systems, and any one of the Big Four
for accounting. For small businesses, there is You. How can you possibly fill such big
shoes?
DEEPEN YOUR PRACTICE
FOCUS
TECHNOLOGY
ANALYTICS
The answer we advocate is to:
q
w
e
FOCUS your practice on a single target market
segment, allowing you to become expert in its needs,
APPLY communications and collaboration technology
to lower your costs and expand your reach,
EMBRACE reporting, analytics, and presentation
technologies to migrate your customer dialog from
transactional to business advisory issues.
This migration actually begins during the new client acquisition stage, where you have a
chance to set customer expectations before the engagement begins, and to qualify
which accounts are worth pursuing, and which not. By engaging prospects in a strategic
dialog during this stage, you position yourself and your firm as value-adding agents,
differentiating yourselves from more transaction-oriented competitors and reducing
thereby the pressure to discount your fees.
Of course, once the relationship is up and running, you then need to deliver against this
raised set of expectations. Here the goal is to transform your accounting service
orientation from data processing to management information. It is the same data, but it
looks a whole lot different when it is put in service to management decision-making as
opposed to regulatory compliance. It is your job to engineer that transformation.
In talking with firms who have successfully made this transition, we asked them what
technologies best supported deepening their client relationships. This time around we
got very clear direction, as follows:
• Target Marketing. To gain access to a target market and to develop a going-in point of view about the business challenges your target clients are likely to be facing, there is nothing like the Web. Most companies now have web sites, and most industry associations communicate heavily via their portals. One specific site often mentioned was LinkedIn, the social network for business users.
• Consultative Selling. In face-to-face situations, no technology is often the best technology, but for remote interactions, as well as for detailed or complex messages, a computer presentation delivered in high resolution can have a very big impact. In person, the iPad was the device mentioned most often in this context; over the Web it was web conferencing with PowerPoint. One key point here is simply creating a business-oriented presentation helps create the mindset in you to focus on the client’s interests first.
Accounting Services: Harness the Power of the Cloud
15
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
• Trusted Advice. This was by far the most emphasized area. It begins with the CAS representative reviewing the financial documents from a business and investor point of view. This inevitably involves some slicing and dicing, ultimately leading to one or more graphics to bring the point home. The more successful firms in this area stressed the importance of “repeatability” here, explaining that tools selected must provide automatic (or at least semi-automatic) generation of presentation graphics. While no particular technologies were advocated, everything discussed is well within the purview of most query, analysis, and reporting packages, whether they come with the database of record or are fed extracts from it. And the frosting on the cake comes when you have a target market practice sufficiently built out, in part enabled by consolidating all your clients onto a single system of record, that you can actually provide comparative benchmark data to help each of your clients gauge how they are performing relative to their peers.
In conclusion, we hope that the foregoing has set forth a vision of the possibilities for
Client Accounting Services firms as we move through the second decade of this new
century. The combination of macro trends, the increasing emphasis on small to medium
business as engines of growth, and the ubiquity of online technologies has opened up
the opportunities for a next-generation approach to client service. We hope you will be
able to take advantage of this situation to your and your clients’ benefit.
That said, there is one more topic left for us to address—how should you approach
transitioning yourself and your firm into this new, and for some quite unfamiliar, world?
TECHNOLOGY ADOPTION AND
CHANGE MANAGEMENT
For the past several decades, the high-tech sector has focused on the dynamics of
technology adoption and how they can best be accommodated through change
management programs. The key lesson here is that there are three very different
strategies one can adopt, the choice depending on your tolerance for risk, your
appetite for reward, and your level of acceptance or frustration with the status quo.
There are no absolutes here. Each strategy will be the best one for certain situations
and certain types of firms. It is your job to figure out which one best fits you.
High tech has modeled the dynamics of technology adoption in a life cycle model
illustrated here:
Accounting Services: Harness the Power of the Cloud
ards
Lagg
Late M
a
(Conse jority
rvative
s)
Early
(Vision Adopters
aries)
Inno
vato
rs
Three ways to Deal with
Disruptive Innovation
Early
M
(Pragm ajority
atists)
CHASM
TECHNOLOGY ADOPTION
STRATEGIES
16
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
At the core of this model are three strategies, each of which has proven to be of value:
• Visionary. This is a high-risk, high-reward strategy that is particularly well suited for people who are ambitious for growth and comfortable with new technologies. Its key tenets include:
vAdopt ahead of the industry to gain competitive advantage
v Focus on technology that accentuates your differentiation
v Pay up to get the extra support necessary for early adopters
v Showcase your systems with your clients for leadership positioning
The high reward here is a highly differentiated practice that is readily scaled with good
operating margins. The risk is that you get too far out in front of your clients, spook
them with all your next-generation technology, and end up with too small a practice to
pay back the investments you have made.
If you are the sole principal in your firm, and if this fits your style, you are well
positioned to adopt this strategy. By contrast, if you are a partner in a larger firm, or
operating at one or two levels down from top management, it is much harder to make
this strategy work.
• Pragmatist. This is a medium risk, medium reward strategy that is best suited for firms who are reasonably happy with their business overall but significantly unhappy with some aspect of their operation. The goal is to adopt technology not for competitive advantage but to address these specific sort points that have proved hard to budge otherwise. This is well suited to firms who are ambivalent about adopting new technology in general but who value operational excellence. The key tenets of this approach include:
v Adopt in conjunction with the rest of the industry to reduce risk
v Focus on technology that keeps pace with market expectations
v Pay up to go with the market leader to further reduce risk
v Integrate your systems with your established business processes for
productivity gains
A classic target for this strategy would be to take on the productivity sink of too much
paper in the workflow, and all the non-value-adding work and cost that entails. This
would be a highly focused activity, the goal being to insert new technology where it can
make a big difference while minimizing the disruption to operations elsewhere.
Such projects are relatively straightforward when they are internal. They become more
challenging when they address client-facing interactions. Once the client gets exposed
to online digital interaction, their level of impatience with non-digital responses goes
way up. So if you take on processes in this domain, be prepared to move faster and to
take them farther then you may have originally planned.
Accounting Services: Harness the Power of the Cloud
17
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
• Conservative. This is a low-risk, low-reward approach to next-generation technology disruptions. It correlates directly with the “If it ain’t broke, don’t fix it!” approach and is the natural strategy both for people who are technology averse and for firms that put a high value on frugality. The goal here is to adopt technology only when you can see direct, hard dollar cost reductions as a direct result—and even then keep one hand always on your wallet. Key tenets of this approach include:
v Adopt later in the life cycle to defer capital investment and reduce cost
v Focus on technology that catches you up to market expectations
v Go with a low-price solution from an established commodity vendor
v Displace prior systems to reduce overall operating expenses.
Firms most likely to win with this strategy have long-established relationships with
like-minded clients, in which much of the work is conducted face to face with a
premium being placed on reliability and trustworthiness. The practice is likely to be
geographically defined, and the work itself is likely to be less strategic and transactionbased. The role of trusted advisor still comes into play, but less in terms of any directly
compensated offering, more in terms of an ongoing social relationship. In situations like
these, the disruption of introducing new technology is simply not sufficiently
compensated for.
CONCLUSION
We have stated that the digital revolution has created a new platform for client
accounting services, one that transforms it from a necessary evil to an attractive
business opportunity. We have outlined a progression of business model changes that
would allow a practice to evolve to higher margin services, first through eliminating
paper-based processes, then through building out practices in target market segments,
and finally in migrating the orientation of the service from compliance to consultation.
We have then outlined the kinds of technology transformations that would enable each
of these transitions. There are many viable options today that are in our view game
changing. Now, with this final discussion of technology adoption strategies, we put you
in the driver’s seat. You get to pick the fast lane, the middle lane, or the slow lane—
whichever one fits your market and your organization best. Whichever one it is, travel
safe and prosper.
Accounting Services: Harness the Power of the Cloud
18
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
ABOUT GEOFFREY MOORE
Geoffrey Moore is an author, speaker and advisor as well as
a venture partner at Mohr Davidow Ventures (MDV).
Recognized as a leading business advisor, Geoffrey divides
his time between consulting on strategy and transformation
challenges with senior executives and on developing mental
models to support his advisory practice. With this intent in
mind, he has written his newest book published by
HarperCollins in September of 2011: Escape Velocity: Free
Your Company’s Future from the Pull of the Past, the result of his years of experience
working with large enterprises in his former role as a Managing Director at TCG
Advisors. Recognized as well for his expertise in market development and business and
investment strategies, as a Venture Partner at Mohr Davidow Ventures he also serves as
an advisor to MDV portfolio companies by drawing upon best practices derived from
his extensive experience working with technology startups over the last two decades.
Geoffrey has made the understanding and effective exploitation of disruptive
technologies the core of his life’s work. His books, Crossing the Chasm, Inside the
Tornado, The Gorilla Game, Living on the Fault Line and Dealing with Darwin are best
sellers and required reading at leading business schools. Highly regarded as a dynamic
public speaker, he integrates a speaking practice with his advisory work.
He is a founder of both The Chasm Group and TCG Advisors. Earlier in his career, he
was a principal and partner at Regis McKenna, Inc., a leading high tech marketing
strategy and communications company, and for the decade prior, a sales and marketing
executive in the software industry. He holds a bachelor’s degree in literature from
Stanford University and a doctorate in literature from the University of Washington.
ABOUT CPA2Biz
Changing the Way CPAs Do Business
Technology is reshaping the playing field for accounting firms, and it’s never been more
important to find the right partners and products. CPA2Biz can help. We’re a subsidiary
of the American Institute of Certified Public Accountants (AICPA), the world’s largest
member organization representing the accounting profession, and we know what it
takes to make practices grow.
Cloud Computing - CPA2Biz has assembled a unified lineup of web-based solutions
that can put your firm on the same footing as large practices when it comes to payroll
services, billing management, tax and practice management workflow applications, and
electronic audit confirmations, among other services. With the help of some of the best
partners in the business, we can give your firm the resources to perform real-time
financial forecasts, high-margin analytics and even “virtual CFO and controller” services.
Accounting Services: Harness the Power of the Cloud
19
AICPA Trusted Business Advisor Solutions
SM
Brought to you by
Mobile Capabilities - An ability to tap client data and complete tasks on the go is
critical for today’s busy financial advisors. Tablets and smartphones make CPAs more
productive, and whether it’s mobile applications, eBooks or on-demand libraries for
continuing professional education, we’re committed to fielding an expanding array of
digital products that serve the profession.
Digital Branding - Practices need a strong online presence to thrive. From CPA-branded
email and web sites to advice on social media tools and the right technology choices,
CPA2Biz can help your firm maximize its potential.
Information Security - Data protection is a top concern for firms, and CPA2Biz can
provide key insights into risk and oversight issues. We help you take the guesswork-and worry--out of dealing with outsourcers and vendors.
ADDITIONAL RESOURCES
New Mobile Apps – Coming Soon!
Download the following new mobile apps from iTunes App Store
Crossing the Chasm Asessment Tool – designed to assist businesses in
determining their “technology adoption style” as described in this white
paper and in Geoffrey Moore’s best seller “Crossing the Chasm”.
CPA Practice Assessment Tool– designed to assist CPA firms in
determining their client accounting practice “maturity stage” as described in
this white paper.
Resources to build a successful cloud-based accounting service line
Through our AICPA Trusted Business AdvisorTM Solutions Program, we offer a wealth of
resources to help progressive firms create new profit centers and build out their
cloud-based accounting services line. Visit CPA.com for webinars, case studies, white
papers and more. Be sure to download our CPA firm case study showing how a small
CA-based firm grew its not-for-profit niche accounting services practice and doubled its
revenue within two years of moving its practice to a cloud-based accounting platform.
Also download our case study on how a CPA firm’s recommendation to implement a
cloud-based business process outsourcing solution helped its restaurant client
significantly grow their business.
Accounting Services: Harness the Power of the Cloud
20