By Jody Padar
The Radical CPA
For Radical CPAs, this is the next step in our business model innovation: Innovation at such a high level that our fathers (and mothers) won’t even recognize our companies as CPA firms.
MORE ON RADICALISM: The Radical Road to (Business) Transformation | Transitioning to a Radical Firm: Bringing a Legacy Customer Along | The Four Tenets of Radical Firms: A Brief Review | The Radical CPA: Always Changing
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This will become more apparent as artificial intelligence (AI) takes over and accounting is truly machine-driven. A CPA will use data completely differently than he or she does today; we don’t know what we don’t know yet.
The foundational structure of our firms needs to Radically change to allow for this new automation and innovation.
What we find in the New Firms is that technology is taking over the grunt work and, in many cases, the actual output or what we used to sell. We are advising on technology but embracing the automation and the removal of old data collection/entry jobs as well as the final deliverable. We are exploring and redefining what the CPA should do with the old report and typically the what-we-are-selling part looks nothing like it did.
The easiest example is the compilation, which has now become a real-time financial statement. The next level is then the forecast that lives online as well, with the “what ifs” being done in real time with the customer watching. There is no two-week lag time between a “what if” and a conversation. Using a forecasting tool such as Futrli brings vast new depth to real-time advisory. So, we are ready for it and aware of it as it happens and are nimble enough to capitalize on it.
We need to Radicalize practice management with accounting, tax and audit as the main ingredients and serve them with a side of data. Data is the catalyst for all change. The hardest part of data is making sure it’s the right data and that it’s complete. What is the right data? Where do we find it? How do we categorize it? It’s the data that makes up a financial statement, but it’s not the traditional ratios we create from them, as managerial accounting will need to be included.
Accountants also must remember that not all data is objective, and sometime the best data includes subjectivity. We must remind ourselves that our future sales will not be anything like they are today. They have already moved from an hour to a result. We must step up and learn how to shift our firms to produce new products that are market-driven and future-ready.
The good news is, we’re now on an upswing. We have greater CPA adoption of technology and more choices in the way we run our firms. And, we are getting better tools from vendors. According to CPA.com we are in the early majority of cloud adoption, but the numbers don’t lie: Fewer than 10 percent of all firms are 100 percent cloud-driven.
"Technology improves the breadth of services."
Source: Wolters Kluwer white paper “Game Plan for the Future: Are You and Your Clients in Sync?”
The Wolters Kluwer white paper “Game Plan for the Future: Are You and Your Clients in Sync?” addresses how firms can expand their offerings and branch out to include more high-value services for their clients. Technology can provide a path. According to the survey in the white paper, firms that use end-to-end integrated solutions can offer broader services, especially collaborative and consulting services, as well as other offerings. Firms with integrated solutions performed higher than firms with unintegrated solutions.
The easiest way to integrate is to have all your data live in the cloud. Lots of firms are catching on to this; however, often it’s only some customers or one department within the firm that are on board.
When data lives in the cloud, a whole new world of artificial intelligence will open up. The entire firm must change to reach the full return on investment.
Not surprisingly, we have startups to thank for this movement. Bench.io and inDinero are pushing the boundaries in this space. These startups are selling outsourced accounting to small businesses. They use Facebook advertising and other digital marketing tools to sell services. They have venture capital behind them. It’s been interesting to see how VC money has determined the opportunities in this space, while Top 100 firms have not yet figured out how to address their own market.
Client accounting services or outsourced bookkeeping are staples of many firms. Yet because of their fear of change, many firms haven’t been able to fully experience the benefits of newer technology and automation. If a firm is stuck in billing by the hour, there is no incentive to change or improve a process. The firm gets caught in the price of the technology and misses the savings in the cost of labor. The firm doesn’t realize that one team member can do exponentially more work with the new technology. In the billable hour model, improving the process with technology reduces your sale price. Therefore, there is no incentive to innovate.
These firms are like the Netflix model. If they don’t switch to video streaming soon and get rid of the DVD model, they will go the way of Blockbuster. They can cannibalize their own market. If they don’t move soon, someone else will. The opportunities to scale are becoming within reach, and firms are finally understanding what cloud capacity can accomplish.
One firm that has demonstrated that it understands the concept of business transformation is BDO. In 2016, it announced a partnership with Intuit to launch BDODrive, an integrated cloud-based financial management and accounting service.
At first this struck me as strange; the service seemed so out of its marketplace. However, the firm had a strategic reason up its sleeves.
“BDODrive fundamentally improves upon the traditional concept of business outsourcing. It gives clients the power of rich information, business intelligence and insight that enables them to operate more efficiently and effectively,” said Kelly Johnson, partner and national practice leader for business services and outsourcing at BDO USA.
Some of the key features delivered through the BDODrive service offering are accounting and financial management, online payments, auto bank feeds and reconciliation, business data analytics, secure document management and customized reporting of key performance indicators delivered in real time with 24/7 mobile access. KPIs are data snapshots in pictures. This is the first step to redefining how we deliver financial data.