A CPA firm in San Francisco hires programmers! Do you?
You have a personality. People see some personality traits in you. For example: Accountable, Consistent, Dynamic, Efficient, Flexible, Honest, Integrity, Knowledgeable, Nurturing, Open-Minded, Practical, Reliable, Skillful, Trustworthy, Wise, Zealous, etc.
Your clients also see some “personality traits” in your firm. And for years some traits defined, success or otherwise, of accounting firms.
But would these same traits that helped your firm succeed in the past help in future too?
Several discussions across multiple thought leadership groups, industry experts and advisors have boiled down to the crux for the future i.e. what is needed by CPA firms to become sustainably successful in the future?
What are these traits “The (successful) Firm of The Future” must have?…
- A.Redefine ProfitabilityWhen 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 unsettles by technology, new generation thinking and sea change in regulations. Efficiency gave you optimal returns in your time. It won’t in 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. This paradigm shift in your business model thinking is going to be the foundation of your future.
Trait Needed: Price-Effective Intellectual Capital Delivered On-Demand
- B.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. More and more transparency, including why you charge what you charge, would be the base expectation.
Trait Needed: Connected, Responsive
- C.Take That Decision, Not Today; Now!According to a well-known accounting industry advisor with over 1000 CPA subscribers, adding a partner adds about 18 months to the firm’s decision-making process!
Compare that to any other industry you know of. Business needs decisions faster than ever before.
“Managing Partners” will need to be rechristened to “Managing Leaders”, with CEO authorities, responsibilities and of course, accountabilities, to move ahead, quicker.
The review focus will move from “who or what is responsible for what happened” to “who or what is responsible for something that should have happened but did not happen”.
Trait Needed: Decisive Agility
- D.Your Price = Value Perceived by Clients. Is it Really So?It would be interesting to see the results if someone conducted a survey with 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”).
Peter Drucker defined this in 1964:“An entrepreneur searches for change, responds to it and exploits opportunities. Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource.”
Trait Needed: Creative Entrepreneurship
- E.How Can CPA Firms Innovate?A firm in CA 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”.
Joseph Schumpeter’s definition: “Entrepreneurs are innovators who use a process of shattering the status quo of the existing products and services, to set up new products, new services.”
Trait Needed: Innovative Entrepreneurship
- F.Horrible Restaurant! NO, Great Restaurant!!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 restaurant and spoke to manager. Voila!! The reason: They had two different cooks. One of them made a great dish. Other didn’t.
Don’t most multi-partner 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 “experience” when they deal with the firm (actually they still deal with some partner, not really with the firm).
Competing tasks managed by 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
- G.I Tell Clients What They Should Focus On. Period.Are you really passionate about clients’ businesses?
How about a CPA strategically analyzing the “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. Its 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 emerge from balance sheet figures.
Clients may not tell you but in their hearts they are yelling for help .“Last year is gone. What am I supposed to do next month? Next year?”
Trait Needed: Future Focused
- H.And of course, Technology, Not as You Know it Though!Flash back to year 2002.
Just ten 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 is laying down foundation for artificial intelligence to take over.
If you continue to do what a computer can do or should do, you will soon out-compete yourself from the marketplace. Technology will be the leverage to free up your intellectual capital, to make it available to clients on demand, at the price they feel reasonable.
Trait Needed: Risk-taking Mindset to Embrace New Technologies
- I._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _It’s YOUR space.
What do you envision as that one more trait you will need for future? Would you like to share it with others? Please leave a comment below.
See you in the future!