Emerging technologies are greatly enhancing tax practices. While automation and Artificial Intelligence (AI) represent a quantum technological leap, accounting firms of all sizes can foster rapid growth by leveraging strategic changes in technology and management philosophy.
Millennials today occupy a major portion of the workforce, and they have vastly different expectations as employees and buyers. Recent reports predict that by 2021, over 9.2 million Americans will be part of the gig economy workforce. Millennials have been monumental in shaping accounting firm culture in areas such as virtual work and flexible work arrangements. Their expectations and demands have transformed customer experiences in the B2C space, and now, in the accounting firm and professional services space as they begin taking on key leadership roles.
Navigating your way through the current marketplace requires firms to pay attention to emerging technologies and a next-gen attitude. One of the best ways to do this is to understand the questions that drive your accounting firm.
1. What legacy metrics are we holding on to that are slowing us down?
The Key Performance Indicators (KPIs) used by your firm today reveal what your teams are working towards. When were these KPIs formed and during what time? Are they relevant today?
Most CPA firms today use KPIs that were formulated several years back during a period of sustained economic growth. For instance, the profit-and-loss KPIs, such as gross margin or net profit, and balance-sheet KPIs served well for their time. However, do they complement or conflict the new behaviors your firm requires to evolve?
Data is always important, but the quality and kind of datasets we need to measure, more so. CPA firms need to figure out new metrics and dashboards that help in meeting evolving expectations through rapid retooling. These KPIs should keep in mind the current expectations and future plans. Revenue KPIs help in tracking the fee level and balance of your clients and services which branch out into Average Revenue Per Customer and Value-Add Service Mix.
2. Is the impact and quality of services reflected in our pricing?
Recent reports show that while accounting firms usually maintain a good profit margin, the trend is on a downhill slope. If the profit margins drop too much, accounting firms will be short of resources while taking on more work than they can handle.
For the CPA firm to be a high-performing organization the pricing has to be assessed regularly for maximized return on investments, risks, costs, and rewards.
3. Will your firm’s present business model endure aggressive change by competitors?
Corporate giants like Google, Amazon, Netflix, and Facebook have been at the forefront of technological disruption. They are constantly evolving to meet and exceed customer expectations. Netflix, for instance, has transformed the video-rental industry.
No industry is immune to this type of disruption. There are an increasing number of firms delivering services in highly creative ways. For instance, the move from manual ledgers to paperless accounting was a massive change. In addition, online document management portals allow clients and collaborators to promptly exchange and organize documents. Automation is the newest thing with RPA reducing manual errors, improving processing times, and freeing labor for value-added inputs and strategic decision making.
With fierce competition in the accounting industry, how much of a stronghold does your firm have to survive aggressive competition and disruption in the industry? Being innovative is a strategic imperative in today’s accounting world.
4. What would have to be true for your firm to change direction?
This question should be used to revisit your decisions and directions. Decisions are often predicated on certain assumptions, whether they may be true or false. This allows recognizing the assumptions that drive your decisions and forces your firm to test those assumptions.
For instance, how your firm goes about a client proposal is often predicated on an assumption. This might be that they require a step-by-step approach or a presentation that talks about the technical aspects. Winning that bid depends on how in-tune you are to your [prospective] client.
The CPA firm’s approach should be geared towards understanding how current decisions came to be. Performance, efficiency, ROI, and customer satisfaction are directly impacted by this single question.
These four questions help CPA firms evaluate their current position and evolve as the situation demands. Are you looking for help in transforming your accounting firm? Please reach out to us today for your free consultation.