CPAs Needed on the Technology Frontline
Small and mid-sized businesses turn to their accountants for guidance in business software.
What do CPAs really want in accounting software?
by Rick Telberg
At Large
[This article has been cited by AS411.]
A new review of the market for accounting software reads in many ways like a manifesto for accountants to mobilize.
First and foremost, the report, authored by market researchers at the Yankee Group, found that when deciding which software application to buy, all sectors of the small and mid-sized business arena place greater value on the opinions of accountants than those of technology consultants. The accountants’ opinions are particularly more important at businesses with fewer than 100 employees.
The report also predicts that software vendors will move further into the accounting profession modus operandi of vertical industry specialization. It says accounting vendors will create more vertical industry editions of their products because “SMB users want to benefit from the best practices and in-depth knowledge of business processes adopted by their peers.”
Accounting software verticalization is hardly new. Most of the seven vendors identified in the report have been rolling out vertical specific editions since the late 1990s.
The report cites the following vendors with noteworthy vertical industry capabilities:
SAP — manufacturing and automotive.
Sage Software — nonprofits, distribution and construction.
NetSuite — software developers, distribution and professional services.
Intuit — retail, professional services, wholesale and nonprofits.
The report also predicts increased SMB demand for Web-based software-as-a-service applications to be driven by business professionals’ increasing use of mobile devices and demand for real-time data. The leaders in this field, according to the report, are Intuit, NetSuite, Sage and Intaact.
The Yankee Group study reaffirmed what a lot of the accounting profession already knows: Intuit with its QuickBooks line, is the dominant vendor among SMBs with fewer then 100 employees. And Microsoft, with Dynamics, leads among companies with 100 to 999 employees, followed by Oracle Corp. and Sage.
The report noted that SAP has gained a noteworthy chunk of the 100-to-999 employee segment with products that include Business One, an application it introduced through the technology division of American Express Tax and Business Services, which is now part of RSM McGladrey.
The Yankee report also noted that SAP’s high-end rival Oracle risks losing its share of the 100-to-999 space because end users do not understand what it will do with Peoplesoft and other vendors it has acquired in recent years.
Oracle’s SMB presence could also be thwarted by its lack of a traditional value-added reseller channel, similar to the ones used by Sage and Microsoft.
But CPAs hardly need reminding that SMBs need their help in upgrading technology systems to accommodate growth.
Or do they?
[First published by the AICPA]
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4 Responses to CPAs Needed on the Technology Frontline (Subscribe)
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http://http://www.accmanpro.com
Yes – but does the US profession really understand what’s needed for SMBs? At the base level, there’s no such thing as best practice debit and credit. You’ve either got it or you haven’t.
My sense (from 5K miles away) is that CPAs are stuck in ‘least line of resistance’ mode where the package suits them and not the client. that’s not a recipe for good advice.
Yankee fails in recognising that business needs business sytems, not accounts packages.
I’m surprised they’re not making a song and dance about the raft of new SaaS offerings from the likes of FreshBooks, Blinksale, Liferro, Twinfield, WinWeb and others.
It’s perfectly possible that rather than relying on traditional advisors, VSBs in particular will turn to the geek world to see what they’re using. But if they’re talking to CPAs, then are those same CPAs adequately equipped to present business choices?
An extremely uninsightful report. Sorry.
http://www.ghsmithcompany.com
Your article is interesting. I wish I had more time to think through how to respond, but here are a few comments after reading your article:
1. The study says that companies of fewer than 100 employees put a lot of stock in the opinion of their CPA regarding software. Smaller companies would likely deal with smaller CPA firms. My experience is that smaller CPA firms have little software expertise ? they do tax, audit and that?s about it. Many small CPA firms would do mostly tax. Even a couple larger local firms in the Atlanta area that I am aware of do not have any software expertise on board. (This is good for my business because what I do is software use and business process improvement and outsourced CFO work. Although I hold a CPA certificate, I do not operate as a CPA firm. The issue for me is how to market to CPA firms without appearing to be a threat; I do not do any tax work either.)
2. Regarding software expertise and smaller CPA firms, it is difficult for them to gain expertise because they tend not use any of the small business software products. Many are still using proprietary client write-up software and proprietary time billing products.
3. Few CPA firms have as much business process experience as you imply in your article: internal control understanding is different than business process knowledge. Turning process knowledge into helping a client decide on software is yet another challenge.
4. In the old days (I have 30 years of accounting and software experience) part of an audit was a review of internal controls to determine the extent to which these controls could be relied on in planning the audit work. With smaller companies I think the smaller CPA firm quickly decides that the controls cannot be relied on and the audit then consists mostly of substantive tests of the accounting records. So the audit process does not include much of a review of business processes and internal controls, which would give the CPA firm important experience in recommending software products. (Of course Sarbanes-Oxley has changed all this for larger public companies and larger CPA firms.)
5. CPA firms have always ?audited around? a company?s software. They don?t learn much about a software product?s operations ? pros and cons ? from auditing a company.
6. CPAs can and do take CPE courses about ?top 10? business software products. Perhaps this is where their expertise comes from. I have always found such courses to be extremely useful.
7. Overall, I think CPAs should work to increase their knowledge of software and business processes, but the reality is there is not a lot of this knowledge resident in CPA firms today.
I had another thought about your article. I am not sure that the Yankee Group SMB breaking point between small and medium sized as far as software needs is concerned (1-99 employees for small businesses and 100 to 999 for medium-sized businesses) is appropriate. From experience, a company can easily require mid-range ERP systems before you get to 100 employees. It depends on industry type, special requirements, and how much outsourcing is done. I tend to think in terms of revenues with the cut-off being $5,000,000 to $10,000,000 and below for small businesses and small business software. The top of the medium sized businesses with mid-range enterprise system (ERP) software needs might be as high now as $250,000,000.
Gary Smith
President
G.H. Smith Company, Inc.
Accounting and Business Consultant
.
http://www.christophertechnology.com
Thought provoking article. I am one of those “technology consultants.”
I know how important CPA advice is to small businesses. (My clients range from one Fortune 500 firm to several small and even tiny (start up) businesses. Many non-profits.)
My experience confirms your report: “when deciding which software application to buy, all sectors of the small and mid-sized business arena place greater value on the opinions of accountants than those of technology consultants.”
However, one way CPAs could get up to speed would be to work with people like me. As a team, we would have the combined knowledge of accounting and business IT to provide a more robust analysis of what the client needs. My experience with partnering with CPA firms is not successful. I have pitched this idea of cooperation to several firms in Southeastern Virginia. My pitch is that my knowledge and experience in implementing IT in real businesses complements their accountant’s knowledge of financial systems and processes. Together we could analyze the client’s needs and propose solutions that make sense not only from the finance or accounting perspective, but also from the perspective of installing and supporting technology. For many small businesses, the required support and changes caused by new systems and technology are daunting. Underestimating these can lead to serious issues where the system ends up driving the business – never a good thing.
Another element of my practice is the importance of the people side of system change. Automating a mess leads to a faster mess. Improving that automation while ignoring the reality of how people react to change creates as many issues as it resolves.
I think some CPA’s fear the technology consultants as adversaries or competitors. I believe that cooperation of complementary skills will lead to better service to our clients. And isn’t that what it’s all about?
Paul Flanagan
Christopher Technology Consulting
Virginia beach, VA.
.
Indeed, I think it is difficult for software and process consultants to partner with CPA firms, but not impossible. It does take a long time to get to the point where CPAs trust you. For example, I have brought business to one CPA I have known for a long time and he has referred me to some of his clients. Another CPA has recommended me to a small business client. Yet another has started to call me for (free) advice on QuickBooks problems. I hope I can make further progress in this area.
I usually offer my customers ongoing CFO/controllership services after I have helped with software and surrounding internal controls and business processes and have been moderately successful with this approach. I have lately wondered if this approach helps me grow my business. Instead I may just try to work with customers without providing ongoing accounting service. I would then work with a CPA firm to provide ongoing accounting services or help the customer find outsourced services. (On the down side, if CPA firms provide an audit or review, they are concerned about providing any services that might compromise their independence.) If I were to provide my software and process consulting services without ongoing accounting services, then I would need to increase the number of consulting assignments; however, I think this is possible.
Best regards,
Gary
.