The 8 Traits Creating the Firm of the Future Today

Future informationA CPA firm in San Francisco hires programmers! Do you?

By Hitendra Patil
Pransform

Several discussions across multiple thought leadership groups, industry experts and advisors have boiled down to the crux of the question for the future, i.e.: What is needed by CPA firms to become sustainably successful? What are these traits “The Firm of The Future” must have? I think there are eight:

1.     Redefine profitability

When partners and talented accountants perform routine tasks such as scanning documents and data input, the leverage on intellectual capital reduces. That impacts profitability. And the well-settled definitions of profitability are getting unsettled by technology, new generation thinking and sea change in regulations. Efficiency gave you optimal returns in your time. It won’t in the future. Your profits will be driven by the effectiveness of your combined intellectual capital (knowledge, wisdom) and your infrastructure (systems, software, communication channels). You will create measurable value for your clients and this value will drive your profits. It is all hinting to a complete overhaul of your pricing strategies, ground up.

Trait needed: Effectively priced intellectual capital on demand

2.     Two different worlds

The way CPA firms have been "managed" in the past and the way CPA firms will need to be "led" are going to be two different worlds. The new generation (born and brought up on instant technologies) of clients and employees are totally different than in the past – in terms of the way they will consume services, their expectations and their behaviors. Other than "domain knowledge competencies" and “technical expertise,” nothing will be common in old firms and new firms.

Trait needed: Ctrl+Alt+Del : Rebirth in new era with fresh thinking

3.     Make that decision now!

According to a well-known accounting industry advisor, adding a partner adds about 18 months to the firm’s decision-making process! Compare that to any other industry – business needs decisions faster than ever before. "Managing partners" will need to be rechristened to "managing leaders," with CEO authorities and responsibilities to move ahead, quicker.

Trait needed: Decisive agility

4.     Your price = value perceived. Really?

It would be interesting to see the results if someone conducted a survey with a reasonably sized sample of CPA firm clients and asked them about the perceived value of the services given by their CPAs. Several laws and regulations keep "compliance" as the main driver of CPA business (e.g. file income tax returns by a particular date), but not necessarily of value. The KPI of the "managing leader" will be very challenging in new age firms i.e. "creating sustainable value" for all stakeholders, including clients (most important word to note is "creating").

Trait needed: Creativity

5.     How can CPA firms innovate?

A firm in California hires programmers! Do you?  "Lynne Born, the chief operating officer of Seiler LLP, a San Francisco and Silicon Valley-based CPA firm, hires programmers to customize existing accounting productivity tools to Seiler’s requirements. By doing so, 'We were able to take a report that used to take hours to generate that we can now produce in five minutes, she said. It involves looking at the progress of client tax return preparation to give a global view of how the firm is doing during tax season. The underlying lesson is the importance of 'looking at reports you run over and over and look for ways to automate the process, she said. 'You get the best ROI on technology when you look for more than incremental efficiency improvements, she suggested." (Source: Accounting Today Special Report: The Firm of The Future.)

Innovation is a serious requirement for the future firms. Are there any firms that have created a "patented technology" for, say, client service or something else? Innovation always comes from technology companies and CPA firms continue to remain users. In no time, yesterday's technology innovation becomes today's commodity, because tech companies sell in tens and thousands. The leadership of a firm, therefore, needs to be recognized in the market as "thought leaders," as “creators.”

Trait needed: Innovation

6.     Who's in the kitchen?

Once after a team meeting, we went to a nice cozy restaurant. Long story short – after dinner, one of our teammates said rather intensely “horrible restaurant” and one other teammate expressed equally intensely “Are you kidding? It was a great restaurant.” We went back to the restaurant and spoke to the manager. Voila! The reason: They had two different cooks. One of them made a great dish. The other didn’t.

Don't most multipartner firms today have separate books of business owned by each partner? The only common thing is the shared infrastructure and brand. It is a reasonable reality that different clients of the same firm get different experiences when they deal with the firm (actually they still deal with some partner, not really with the firm).  Competing tasks managed by the same resource always leads to prioritizing and often, conflicts. The net result is dip in quality and efficiency, and the consequential reduction in net income per resource. Economies of scale is a well known value creator in many industries.

Trait needed: Cohesive consistency

7.     I tell clients what they should focus on. Period.

Are you really passionate about clients' businesses? How about a CPA analyzing the "strategic strengths and weaknesses" of clients' businesses? Inputs like "You are good at marketing, so focus on investing more in expanding your sales team and let the production be managed by competent sources." Or, "You create excellent quality products. It's obvious because you hardly paid anything through the year in replacements. So focus on creating new products. Your customers will love them." These observations can, indeed, emerge from balance sheet figures.

Trait needed: Visionary understanding of client businesses

8.    And of course, technology. Not as you know it though!           

Flash back to the year 2002. Just 12 years ago, did you imagine accounting data to be literally in the hands of clients? Today, smartphones, tablets and cloud combined have made consumption of accounting data into an instant noodles experience. Sharing of data across different software products is on the rise, e.g. bank statements auto-pulled into accounting database with accurate account coding is already happening. Automation and integration are laying down the foundation for artificial intelligence to take over. If you continue to do what a computer can do, you will soon outcompete yourself from the marketplace. Technology will be the leverage to free up your intellectual capital, to make it available to clients on demand.

Trait needed: Risk-taking mindset to embrace new technologies

 

 

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