With 2012 just around the corner, the JofA gathered the three technology keynote speakers from the AICPA’s 2011 Practitioners Symposium/TECH+ Conference to talk about tech trends heading into the new year. The nearly 90-minute conversation covered a wide range of technical issues critical to all CPAs.
Participating in the call were:
- David Cieslak, CPA/CITP, aka Inspector Gadget, a principal with Arxis Technology.
- Randy Johnston, executive vice president of both Network Management Group Inc. and K2 Enterprises.
- Rick Richardson, CPA/CITP, founder and CEO of Richardson Media & Technologies.
Moderating the call were:
- J. Carlton Collins, technology and accounting systems consultant and author of the JofA’s monthly Technology Q&A column.
- Jeff Drew, senior editor covering technology for the JofA.
The JofA is presenting the online version of the conversation in 10 installments released over a nearly two-month span. Each part focuses on one major topic and features audio clips from the conversation. Part five is an online exclusive that looks at ways CPA firms can leverage technology to create new revenue streams.
The complete schedule is available at the bottom of this article and at journalofaccountancy.com/tech.
Audio: Click here to listen as moderator Carlton Collins and Rick Richardson discuss potential new revenue streams for CPAs.
Collins: Let’s turn our attention to CPA firms specifically for a moment. Let’s talk about their revenue. Everywhere I look, it seems that others are encroaching on the CPA’s turf, or their traditional turf. For example, I see lawyers that offer tax planning services. I see tax preparation software solutions like TurboTax reducing the need for CPAs to prepare tax returns. I see products, entry-level accounting systems like QuickBooks, and they seem to be reducing the need for write-up services. And when I go into accounting software reseller conferences, I notice that less than 5% of the people in attendance are actually CPAs. So I’m wondering where the revenue is and where it’s coming from? Rick, can you give us some specific examples of where CPAs are growing their revenue now and where revenue might come from in the years to come?
Richardson: Well, I’ll tell you where I think they should be devoting their efforts. Not as many of them are there as I would like to see today. First and foremost, I think we should be assisting our clients with their implementation of technology. We know we’re the most trusted adviser, and when it comes to the issues that we’ve grappled with ourselves just within our firm, being able to share that with a client who may be a year or two back on the adoption cycle can be not only helpful in retaining the client and helping them, but also in increasing our revenue stream. Second –
Collins: Rick, Rick, I agree with you on that point. However, I would have thought 20 years ago that CPAs would have owned the implementation process for accounting systems, but they don’t. And so just broader implementation of technology seems like that’s even a bigger stretch for CPAs firms to get into. Are you aware of any CPAs firms that have jumped on this bandwagon and are big tech gurus that are going around and helping their clients stay abreast of the top technology?
Richardson: I’ve spoken with a couple of firms at the tech conference where they have actually been involved in fairly heavy work … within the firm, and that’s given (them) the credentials to go out and, in essence, market that service to their clients, whether it be the development of a portal (or) the implementation of mobile technology-specific (apps). For example, custom applications written just for the CPA firm.
And they’ve managed to do it. I wouldn’t say that we see a ton of them yet, but again, the formality of this, it may not be as huge a revenue generator as it is a client retention process, the ability to be able to get out and assist a client who’s grappling with some of the same business management issues that we did in the firm before we put in whatever technology it was we decided on certainly can’t hurt. And if we don’t have the answers, being able to be a facilitator to help them get to the right guys so that they do get a solution that works.
Secondly—and this is one that I think we’ve got to come back to again and again and again, and this is the remote concierge CFO services. I really think that there—just given the pressure on head count that most companies are dealing with, their ability to get the kind of CFO service they expect from hired personnel, the client base in small and medium business just isn’t going to be able to do it, and the CPA has a wonderful opportunity to bring out, almost like the insurance salesman does—you know, create the need and sell the service. So I would think that’s a second opportunity.
And third, vertical markets. A lot of CPA firms today concentrate themselves—either they may be doing franchise operations, they may be doing all manufacturing, light manufacturing. They could be in a number of different areas. But being able to help vertical market communities within their client base, I think, provides some additional opportunities for revenue growth we hadn’t seen before.
Audio: Click here to listen as Dave Cieslak and Randy Johnson discuss accounting software installation and technology implementation in CPA firms.
Collins: OK, thank you, Rick. Dave, you’re a CPA and one of the top accounting systems installers in the country, so you’re actually one of the best people to ask this question. What do you think about why CPAs haven’t dominated the accounting software installation market, and what do you think about what Rick said about CPAs jumping in to become technology implementers as well?
Cieslak: Well, and that’s a great question, Carlton, and I appreciate what Rick had to share. It’s a space we’ve lived in for, gosh, at least the last 15 to 18 years, and it’s been in our passion all along to kind of combine our debit and credit expertise, along with our passion for technology, and trying to turn that into good business value for our clients. Clearly, it’s not an easy thing. In terms of the cost of entry, how to get good at this as a business, it does take some notable investment on the part of a firm to say, “You know what? We want to be a technology resource for our clients.”
But I think the real value add, the golden nugget in all of this, is really helping the client from a business process perspective in taking our expertise with internal control. So it’s not necessarily setting up servers and doing what I’ll call some of the more commoditized or more the break-and-fix-type stuff. It really is to say, how can we leverage this and in turn create more value for the organization?
And I do think a CPA’s uniquely positioned in that regard because of our accounting background, because of our business process and internal control experience and knowledge. And so I think it’s important for everyone to kind of look at it and say, let’s not try to compete with the stuff that’s being commoditized. Let’s look to help our client further their business, and let’s use technology as that lever. So I think the opportunities are as terrific today as they’ve ever been, but I think you need to make sure you’re looking at it with the right pair of eyeglasses.
Collins: I think you’re right, Dave. Thank you. Randy, here’s kind of a loaded question for you. Do you see products like QuickBooks and TurboTax—which are great products, by the way—do you see them making some CPA services less relevant to the general population?
Johnston: Well, Carlton, both of those products have obviously been on the market for 10-plus years, and for some simple, low-value services, they reduce the need for some of the CPA firm’s services. Now, that’s not to say the users of TurboTax or QuickBooks won’t make mistakes in using those products, but I think the bigger threat, frankly, is from more sophisticated electronic delivery of this type of information, allowing for more sophisticated tax processing to be done.
So if I could have our listeners think with me for a minute, just project out four and five and six years, I think less and less of the low-end tax market will really wind up being a tax return that most CPAs will want to take. I think the automation will make it easier, more accurate and so forth, and that will reduce the profitability in that area. So in other words, I think this part of the … the compliance part of our business right here is likely to be reduced.
Now, on the other hand, I think that there are entry-level products that will become more collaborative over time, and certainly Intuit has been trying to do that with QuickBooks. But there are also additional competitors out there, ones that are in the market today, like Xero or AccountantsWorld, that are collaborative, CPA firm-based products, and others that I know under development could allow us to, even in very small businesses, do collaborative write-up bookkeeping services and, frankly, make those services far more valuable. So at the risk of sounding like “me too,” I second that with Rick’s comment.
Doing low-level, outsourced CFO type of work becomes financially doable, and these clients can produce revenue streams of $12,000, $24,000 and $36,000 a year and more. And we’re doing a great job for the client, and we’re really now dealing with the heart of their business. It’s where they make their dollars. So instead of being, “Oh, yeah, I’ve got to file a tax return. I need to do that. Oh, yeah, I’ve got to do this audit, and I hate doing that, because it’s all compliance type of money,” as opposed to, “Let me show you where I think you have an opportunity to grow this business, how to make the cash flow better,” and you can have much more intelligent conversations with the different businesses. And if you have a vertical expertise—let’s say, in health care or veterinary medicine or whatever your specialty is—you can leverage that even further through the cloud. So I think that winds up making it even more relevant, if we’ll take the opportunity.
- Part 1: Key Technology Issues for 2012, Oct. 5, 2011
- Part 2: Favorite New Technology, Oct. 12, 2011
- Part 3: Cloud Computing, Oct. 19, 2011
- Part 4: Mobile Technologies: Tablets and Smartphones, Oct. 26, 2011
- Part 6: Social Media, Nov. 9, 2011
- Part 7: Software Trends for 2012, Nov. 16, 2011
- Part 8: Security Issues, Nov. 23, 2011
- Part 9: Hardware Trends for 2012, Nov. 30, 2011
- Part 10: Video, Dec. 7, 2011