Cloud computing creates unprecedented opportunities for CPA firms to do more chargeable work faster and with better client communications. But transitioning to the cloud and having confidential information accessible over the Internet raises implementation and security concerns that CPA firms must address.
To help CPAs better understand the benefits and challenges of the cloud, the JofA invited five CPAs to share their cloud experiences in a round-table discussion.
Participating in the conversation were:
- Steve Chaney , CPA, founder of Chaney & Associates, a small firm based in Roseville, Calif., that leverages a cloud-based delivery platform to provide outsourced controllership services to more than 300 not-for-profit religious organizations.
- Jennifer Katrulya , CPA, founder and CEO of Danbury, Conn.-based Business Management Resource Group LLC, a firm that uses cloud-based systems to provide outsourced accounting and advisory services to clients across the U.S. and internationally. She also trains other CPA firms in how to make the most of the cloud.
- Carol Kulencavich , CPA, tax principal at Brigante, Cameron, Watters & Strong LLP, a midsize California firm that uses a Web-based workflow tool to manage tax and other services. Her firm also uses a Web-based application that organizes, bookmarks and exports data directly to the tax software.
- Joseph P. Manzelli Jr. , CPA/CITP, director of operations for the Fuoco Group LLP, a New York-based midsize firm that uses a Web-based workflow tool to manage tax and other services .
- Michael Smith , CPA/CITP, managing director of RSM McGladrey’s consulting practice and a member of the AICPA’s IT Executive Committee.
Moderating the call was Jeff Drew, senior editor covering technology for the JofA.
The JofA is releasing an edited transcript of the conversation in two parts. The first part, in the February 2012 print issue of the JofA, focuses on the advantages, challenges and return on investment of cloud computing. The second part, in the March 2012 print issue of the JofA, focuses on different cloud business models and advice for firms considering a move to the cloud.
An expanded version of this discussion appears below. You can also listen to the dialogue in this podcast.
Drew: How has leveraging cloud-based accounting applications changed your capabilities and relationships with clients? I’d love for everyone to answer this. Michael, would you like to start us off?
Smith: Sure. Moving our accounting applications to the cloud has really allowed us to expand our capabilities in a lot of different ways. For starters, just leveraging the cloud we’ve been able to remove geographical barriers associated with both location of resources and the location of our clients.
Just as an example, we service U.S.-based startups that are owned by foreign companies, and the needs of this type of client are much different than, say, a locally owned restaurant franchise. As an example, the base reporting currency for a foreign-owned company is often different than the functional currency, which is in U.S. dollars. As a result, this requires our team that services this type of client to perform currency-conversion calculations as part of the month-end close process. Also, some of these engagements may require the books to be maintained in accordance with IFRS instead of (U.S.) GAAP, which may be more typical on other engagements.
So, thanks to the developments in cloud-based technologies, even though our client is located in California, in this example, and I’m in our office in Boston, we’re now able to assign international accounting specialists from our North Carolina office, which is over 2,000 miles away (from the client). So that’s really something that we couldn’t do before the advent of some of these cloud-based technologies, and that’s really had a significant impact in providing services and on engagements such as this.
So getting back to the other part of your question, in addition to the expanding capabilities, the cloud has also had a significant impact on our relationships with clients. If I had to sum it up in one word, it would be collaboration. I think the ability for a company to provide (its) CPA firm with shared access to (its) accounting applications creates all sorts of benefits (for) both the practitioner and the client.
Drew: Jennifer, would you like to take the next shot at this question?
Katrulya: Sure. Thanks very much. Essentially for us, especially as a small firm … I think the easiest way for me to put it is that … everything we used to want to do in terms of providing client accounting services used to be so complicated and cumbersome. We don’t do tax. We don’t do audit, so (with) client accounting, we’ve put ourselves out as being in the trenches with our clients wanting to be able to serve them remotely.
We’re based in Danbury, Conn., so the client base that we wanted to reach to be able to grow our firm in terms of profitability and size … we knew from the beginning was not going to be (only) in our local market.
… We handle ongoing work day to day with … clients, and we (had) to get information routed to us. They either dropped it off at our office or were FedExing packages to us. By the time we could get information back out to them, reports they needed, information they needed, and we’ve always been really diligent about approval processes, and so we’d be routing emails and spreadsheets back and forth to get approvals.
Every step in the process just took so long that, although our staff really worked to keep up with our clients, we also had to ask them to be kind of on call to receive that information. It was cumbersome for them. It was cumbersome for us, and there just wasn’t that sense that we really could operate [in] real time with them. Wherever their computers were located, we initially had to log in to their computers remotely to be able to get information that we needed, get to their software. Ultimately, we did require that they did log in to our server and access information on our server, but then we incurred thousands of dollars of programming costs and IT services and hardware.
So every single step in the process just really took a lot of time and effort. Our staff, we really felt like we had to employ from our local market, which was very limited in terms of expertise in this area, because we just had processes that still involved that paper and that workflow and needing to supervise each step in the process.
With the cloud technology solutions, that has absolutely all changed. We give our clients a process they can easily follow that allows them to remotely and in a number of ways get information to us so that it’s accessible by us really quickly—minutes, hours, no longer days or longer. We can route things to them digitally for approval easily, and they can access that information wherever they are. So for each new client now, we actually give them an iPad just for the purpose of making sure we can show them how easy it is to collaborate with us and get what they need and keep moving.
So that’s also allowed us, as far as staffing, to pick up staff wherever we find the best talent. It’s a great process when I go through conferences or other networking resources, and we find somebody who is using the solutions we’re using, who understands the technology we’ve implemented, to now be able to easily add them to our team and collaborate. (It) has been a huge benefit for us.
Drew: OK. Thanks, Jennifer. Carol, do you have anything to add?
Kulencavich: Our firm is fairly new to the cloud-based applications and, for us, it’s really how it fits more internally, the accessibility, which the other members have mentioned, and also with regard to our IT team. We use an (outside provider) for our IT work. Having them be able to focus more on our strategic moves and strategic plan, rather than doing the mundane services of just loading software or fixing various software problems, has helped a lot. Obviously, we want to use them to their full capabilities, and working on our strategic plan is much more beneficial to our firm.
Drew: OK. Thank you very much. Joe, do you have anything you’d like to add?
Manzelli: Yeah, thank you, Jeff. One of the things I wanted to mention is everybody says, “cloud-based accounting applications.” Carol said that she was relatively new to it. We are in regard to what people might consider SaaS products, which is software as a service. But over the past six or seven years, we’ve used a Citrix or Terminal Services type of product so that people in our other offices, because we’ve got offices in New York City, Long Island and Florida, and (are) looking to expand. One of the capabilities of cloud-based, meaning a hosted terminal service or hosted environment, allows us to be able to work remotely.
What it’s also done is we’ve also used some software-as-a-service-type products, but what it’s allowed us to do that Jennifer mentioned is be able to recruit people from other places so that they can work remotely. It’s forced us really to become totally digital. There is some paper. There is a lot of paper as I look around my office, and there is a lot of paper around here as well, but everything tries to be scanned or digitized.
It just makes it easier to work with each other. Actually, with having multiple offices, it allows us to be able to push work from one office to the other because there are times when one office is going to be a lot … busier than the other, and we’re able to move work around because it is digital.
One of the ways it has changed our relationships with clients is we’ve always been … proud of the fact that we’re always there for our clients. But now, it’s almost that we’re there 24/7. I like what Jennifer said in regards to giving a client an iPad. If you give them something like that, ultimately they know that they have access to you. You’re going to be able to collaborate. Again, you build a stronger relationship with your client.
Drew: Steve, would you like to wrap us up on this question?
Chaney: Sure. We sort of do and make sure both of what has just been mentioned. We actually have a Citrix-based server … where we run all of our office and everything through there. We do have multiple offices now, but I can be anywhere, like I was in Maui (Hawaii) for three weeks and could work on my office like I was sitting here in Roseville (Calif.). Then we utilize all of the software as a service like Intacct and Bill.com. What that has been able to do for us, though, is we’ve been able to get rid of all of our overnight deliveries for the most part and just really streamline it.
We’ve been able to cut our administrative burden because, predominantly, we’re just a bookkeeping firm. We offer controllerships for hire. What (the cloud) has allowed us to do from a delivery perspective to our clients is we spend more time actually being able to create the dashboards they want and the reports, and then they can go online and, in real time, have updated reports versus, in our old system, we would constantly have to run reports for them and get things kicked out.
So we’ve been able to increase our effective rates with not increasing our billable rates, and (we’ve) been making people more chargeable overall because of less administrative burden. That’s what it’s done.
MOVING TO THE CLOUD: THE CHALLENGES
Drew: What are some of the key challenges for firms to make the transition to a cloud-based service delivery platform? Joe, if you'd like to start us off, that would be great.
Manzelli: Thanks, Jeff. Some of the key challenges I think … for every firm is going to be really three things. One is change management. Any time you’re making any kind of change, it’s very difficult. What rolls right into that is buy-in. You need to get buy-in from the top. (The) management team needs to make sure that, “yes, this is what we’re doing and we’re going to go all in. We’re not going to kind of dip our toe in the water and then pull it out.”
You also need buy-in from the top … because, I think in most firms, you do have some older clients and you get partners that say, “Well, my older clients are definitely not going to want to do any of this cloud-based stuff,” which I’d be willing to bet you’ll find many of the older clients do access computers and do access cloud-based types of things. They just may do some things differently than the younger generation.
Probably the biggest thing is documenting your processes. You may find that, even if you decide not to go cloud-based, you want to keep it paper internally. If you start looking at what your process is and your workflow, you’re going to see where there are a lot of redundancies. That’s when you go to a cloud-based (system), and it will be slightly different if it’s cloud-based, but you’ll see that there are a lot of different ways where you can save time. When you’re saving time, you’re saving money. If you’re not saving the money, at least you’re saving yourself that time to be able to go out, get new business, or be able to just enjoy yourself a little bit more.
I guess the challenges are change management, buy-in and then process documentation.
Drew: OK. Thank you, Joe. Michael, do you have anything to add?
Smith: I think (one) of the other challenges, in addition to the points Joe made, that we’ve dealt with on a client level is … the model is different. Just looking at something like pricing, I think what happens is, when you’re working with clients and they start to look at pricing and you’re paying an ongoing monthly subscription fee instead of an upfront license cost, oftentimes it’s perceived as more expensive initially. Part of that is just an education, because the conclusion that they come to is typically inaccurate because it’s not an apples-to-apples comparison.
Really, when you go to analyze the costs associated with moving to the cloud, it’s critical to look at total cost of ownership. What we’re finding is that we need to educate our clients and our partners internally on some of these things. Just as an example, some of the costs associated with an on-premise solution might be that you need to purchase a server and you need to maintain that server going forward. Whereas when you’re moving to the cloud, you’re eliminating those costs.
So although the monthly subscription fees when compared to a traditional one-time software license cost may appear higher, when you start to factor into the equation all of these other costs, it really changes things quite a bit. The other thing is just the idea that we’re moving a lot of things to a paperless environment and we’re eliminating physical storage space. That could be a significant cost that’s often overlooked.
I find that pricing is one of the challenges. The other is security. I think that there is this feeling and concern that moving things to the cloud and moving it off-site takes things out of one’s control and (creates) a higher likelihood of a security breach. What we’re finding is that the irony here is that, in a lot of cases, our client’s data is more secure on the cloud than it is on the premises just because of some of the measures that are taken by some of the cloud-based vendors that we work with. Some of these vendors have Tier 1 data centers that are staffed 24 hours a day. They’ve got guaranteed up times of over 99%. There’s disaster recovery plans. There’s data redundancy on the East Coast and West Coast. And some of our smaller clients could never afford to have some of these safeguards in place.
The other thing is just the whole idea of security and that moving things to the cloud is not as secure, and I think that that’s oftentimes not the case. So those are probably two of the bigger areas where we’re challenged just in terms of moving both folks internally in our office to the notion of moving things to the cloud and at a client level.
Drew: OK. Jennifer, have you seen any other challenges that haven’t been mentioned?
Katrulya: I think that there have been a lot of great points mentioned. Just one that I’ll mention is that as we do have staff and more collaboration with our clients in a number of settings, a couple of quick things. First, our own thought about connecting to the Internet and being able to get to the cloud applications. We’ve spent all the time looking at the redundancy of our own access to the Internet, of battery backup, of things like that to keep us connected in the event of a power outage or in the event that cable goes down. I happen to be working remotely today, and I have three different ways to get to the Internet. If one goes down, am I going to be able to get there a second or a third way?
So we just went through a hurricane recently and that actually was a really important thing for us to have in place. That is something with all of our staff, whether it’s from the office or whether they’re working remotely, that we look at making sure we have a second and third way that they’re going to be able to get to the information they need. We recommend the same for our clients.
Training and development, these solutions in the cloud are evolving so quickly, and there are so many releases that come out. It used to be you’d buy your annual software package, and you might get some patches or you might get some updates, but the actual applications themselves (now) can change overnight. So … we have a monthly staff training in our office prescheduled just so that we can go through cross-training on all the updates that do come out in the software solutions. So keeping up with the changes and the enhancements I think is super important.
Then having a process in place for firms, I see them implement solutions and then run with them and not necessarily measure results. What are you getting out of it? What are the increased efficiencies? Where are some problems cropping up that you may want to tweak in order to feel that you are actually getting all the advantages of the solution? I think those are the big ones. Really it’s just again thinking about how you need to tweak your own IT infrastructure and making sure you’re looking for the end result and how you’re going to continue to improve the process.
Drew: OK. Thank you. Carol, do you have any other challenges you’d like to mention?
Kulencavich: I think most of them were covered, but I just want to add that it’s important to remember that every firm is unique. So what Joe mentioned about reviewing your processes and doing your homework, listing out your pros and cons, security control issues that Michael mentioned. That’s also important and, for us, it’s really about testing the different applications and changes that you want to make and not just assume it’s going to work because it worked for another firm.
Right now, we’re in the process. We’ve been on Terminal Services for probably about eight years, and we’re switching over to Citrix, and everybody told us that it’s seamless and it’s going to work fine. Well, it’s not as seamless as we were told, and it’s not that it’s a problem—we’re still going to move forward with the changes—but it’s really important to test out any change that you’re going to make and do your homework.
Drew: Sure. OK. Steve, have you run into any challenges that haven’t been mentioned?
Chaney: Not really. The only one that I would mention is that real quick (is) I didn’t establish a champion at first. I tried to do that myself, and I just didn’t have the time as the owner and CPA driving everything to do that. So it’s good to have a person on-site that champions it, the full transition, so it goes well.
CLOUD COMPUTING: THE RETURN ON INVESTMENT
Drew: Have you seen a return on investment with your cloud-computing efforts?
Manzelli: Well, Jeff, (to) reiterate, basically, using some of the cloud-based applications and basically digitizing our workflow, it saved at least a half-hour a day. The one thing that people have always said, and I kind of challenge it now, is that accountants have nothing to sell but their time. Well, I think it’s really now we have time to sell our knowledge, but (the cloud is) allowing us to spend more time during the day doing more research and learning. That’s really what the cloud-based applications are doing. It’s basically having everything at your fingertips—again, saving the time to be able to increase that knowledge. Then again, all you’re doing is lending to a greater experience for the client and the relationship.
Drew: Thanks, Joe. Go ahead, Jennifer.
Katrulya: I think partially to reiterate but really just to emphasize: first, the ability for us to shift our clients and in the work that we provide and the way we’re able to bill our clients and manage our jobs. The fact that we’re now able to essentially realize three to four times the revenue and profitability than we were able to realize before allows us to work three or four times less hard for that same money, increase our client base but also invest so much more heavily in our staff and in development and in being a firm that they want to work for.
I think that’s a tremendous change from always worrying about that billable hour, that billable minute, and can we offset that with really providing the level of client service that we want to provide? Our admin costs are down 75% because we just really don’t have as many administrative tasks. (For) entry-level tasks, we use the automated entry process available on Bill.com for our entry of transactions. We use the workflow processes, so we’ve been able to greatly add to our client base without having to add head count.
For our CRM (customer relationship management) system, our clients can actually add their service requests and their questions right into our CRM by logging in themselves. So our email is down by hundreds of emails a week. Our phone calls, those five-minute phone calls, are dramatically down because (clients) can log in right from their iPads and enter their questions. It’s great for them. They love it. As a manager or partner, I can say for myself, 95% of my time now is spent on business development, on growth of our firm and our practice, because I don’t need to be so hands-on in every single thing in our disconnected workflow working the way we hope it will.
We now can have those practices and procedures that are automated and cloud-based. Next year, actually, we’ll be as of June, we won’t keep our brick-and-mortar office anymore when our lease wraps up. Everybody’s telecommuting, so that’s several thousand dollars a month that we’ll keep in our hands to invest in new things.
Drew: OK. Wow, that’s a pretty big move, Jennifer.
Katrulya: We’re pretty excited. But it is, and we couldn’t do that in any other environment.
Drew: OK. Anyone else?
Smith: This is Mike here. I just echo what Jennifer and Joe said. I think that just to add to that, it’s hard to measure, but the whole work/life balance for our staff is greatly improved. The ability to take your kids to school on the first day and not have to physically be in the office and (to) be able to work from home … it’s little things like that that go a long way. It’s hard to measure, but … certainly one of the things that’s real important to us, and I’m sure all of us on this call, is retaining great people. It’s hard to measure that in dollars, but it’s something that’s real important. I think using the cloud has allowed us to give people a lot more flexibility in managing not only their work lives, but their personal lives, which goes a long way.
Drew: OK. Thank you.
Kulencavich: This is Carol, and I would agree with that. Again, as I mentioned, our administrators spend about 100 to 150 hours less overtime just maintaining an old system, and it was because it wasn’t a real-time system. With our managers and staff, again, I think it’s, as the other participants have mentioned, being able to spend quality time on clients, and it’s less of an administrative task. Things are just more accessible, and they can be flexible with our clients as well as with the firm, which is really important to them.
Drew: OK. Thank you, Carol. Steve, did you have anything to add?
Chaney: No, I think they’ve covered it all. I mean, I would agree with what Jennifer said being able to have multiplication factors of the revenue generated because of (the cloud). We’ve just been, ever since we went to Intacct and Bill.com specifically, those two … we’ve not been able to keep up with the growth. It’s just been so exponential because everybody wants to see it on the Web. That’s just the hot thing. So it’s been able to free us up to have more discussion, and (for) the revenue, the time invested now to actually deliver has been more than cut in half based upon what we used to do.
CLOUD COMPUTING: BUSINESS IMPACTS
Drew: Steve, your business’s model is kind of unique, and I was wondering if you could describe your business and what role the cloud has played in building it.
Chaney: Yeah, so in a nutshell, what my firm is is we offer bookkeeping services for nonprofits, and ultimately, within that function … we’re an outsourced controllership. Some of our entities will also hire us to be the CFO of the organization. We’ll do everything from all the payroll, everything except for depositing the funds. But then, after they deposit, we take it from there and run with it. We sort of do all the financial services A to Z with the budgeting and all of that.
Again, we’ve always had a Citrix space type of remote desktop connection for our clients because I used to have that at Arthur Andersen before I started my company in 2002. I always knew that could exist, and I made sure I had that. (All of our clients used to be within 50 miles of Sacramento). … By using the cloud-based system, now we have clients from Phoenix, Ariz., to Oregon, from Winnemucca, Nev., to San Diego.
We’ve been able to go from about 50 clients to, now, well over 300. We do this type of service for every month: write-up services, full bookkeeping services, all the payroll. Before, it was very cumbersome getting all the live checks to people, things of this sort. Now, all of our clients can print their checks off remotely if they want live checks, or it’s just direct deposit. We give all that for free. It’s all included in the price.
We’ve been able to expand, and from 2009 to 2010, we were able to grow (our revenue almost 90%). At this point now, it’s just becoming a real cash cow because our processes are so tight. … the biggest (obstacle) we have with our clients is the transition. It’s sort of the paradigm shift that they have of having a bookkeeper on-site and leadership on-site, versus I get them to buy into the factor of well, you would dial your bookkeeper’s extension; now you just dial my phone and we’re over the Internet. We still collaborate.
Once they get over that, that’s fine. What’s helped us to get over that is having a major investment and setting up our own personalized templates and going forward for that. Intacct has allowed our transition cost and our setup cost to be … the economies of scale have been reduced greatly. The effective rate has gone up. That’s really what we do with it. We do not issue any reports for our companies. With internal bookkeeping, we present it that way. That’s it in a nutshell … what we do.
Drew: Jennifer, you’ve moved to an almost entirely cloud-based service delivery platform for client accounting services. Why did you make this move, and what effect has it had on your business?
Katrulya: I think the biggest impact that we’ve seen in a number of areas is, first, the ability to practice what we preach as far as internal controls and segregation of duties, collaboration with our clients. We work with a number of smaller businesses who may have one or two primary people in their office who handle most of the day-to-day transactions. We can now function as kind of that controller and oversight to provide an approval function, to provide a second set of eyes on what’s going on in the company.
For nonprofits, they often have volunteer staff at a number of locations or even members of the finance committee. Their boards, and the ability to collaborate in the cloud with us as part of their team, makes it all feel very seamless across the board but allows everybody to be compliant, allows for fraud protections, allows for so much increase in terms of audit trail and other things that go along with most of these applications.
Whereas before that, all of that was poor at best. We really made a crack at it, but certainly nothing like we’re able to provide now. I think some other areas (where the cloud has helped) really are in terms of our ability to provide packaged menus of solutions. Really, we’ve spent a lot of time focusing on industry verticals that we work with, focusing on what their needs are in those particular industries, and how we can combine and integrate cloud solutions to do a really good job in that space.
What that’s done for us is by leveraging that from client to client—and, Steve mentioned this a little bit a moment ago … the ability to replicate that to create the templates to do that time and again—has allowed us to actually increase our effective billing rates. And this will talk a little bit to ROI (return on investment) but where we were seeing maybe $45 to $175 an hour before when we opened our doors—and that $175 an hour we were super excited about—to where now we’re able to see rates of $125 an hour to, in a couple of real specific niche industries, up to about $800 an hour by the time we’re done, because we’ve just been able to refine so dramatically what we do and where clients have been and what they’ve been paying for equivalent or far less service. We’re able to really wow them, really provide them with a tremendous level of expertise and a product.
So they love that. Our cost of equipment is minimal. We’ve just been able to retire for us our small business server, our terminal server. We don’t have that upkeep. We don’t have the IT maintenance cost anymore. So when we look at replacing machines, now we’re looking at replacing laptops, getting docking stations, smartphones, and we’re focusing … on the ability of our staff to be mobile, their iPads, their ability to connect mobile. And I think one of the things that we, an unintentional thing that we found, but probably one of the biggest things in our firm, is by being able to make our staff more mobile, they can now attend with us some of the industry conferences or some of the conferences in the industries that we serve.
When we do designate a specialty for CFO services or for advanced services, we can now give our staff, and we incorporate this into our pay for performance, but the opportunity for them to go and kind of really see what we’re so excited about and why and meet their peers and interact in the industry and not be so isolated. In terms of retention and staff involvement and their excitement about us and their buy-in, that is probably one of the biggest shifts we’ve seen is actually by creating cloud and virtual environment(s) for our firm, we’ve actually been able to get our staff out the door for things that matter most and really help make us a winning relationship for them and so for retention.
Flexible work schedules. We have clients now that are in multiple states and multiple countries. So if we have staff that wants to work at 4 in the morning or at midnight, great, because that actually helps us, helps them, and our clients love it as well. We can measure performance in a number of ways we couldn’t measure it before. So that does allow us to reward top performers and those who really have seen it through with the process and helped us move things forward.
On the reverse side, it’s helped us really manage performance that maybe before wasn’t on our radar—individuals that showed up for work every day, that didn’t call in sick. Things that used to seem like the baseline requirements that we were happy with, we can now also much more successfully measure productivity and end result.
As a small firm, we can compete much more effectively with large firms. It would have been to me unheard of many years ago for me to be on this call with larger firms being able to leverage the same technology solutions, similar equipment. We couldn’t have made the same capital investments. So being able to play in the same space allows us to collaborate. We work now with a lot of large firms in an alliance-type relationship and, again, we simply couldn’t have done that before.
So I think, overall, we just feel like we’re really able to grow, to be competitive, to serve our clients in the best possible way, and we just don’t feel like there are nearly as many limits to what we’re able to do anymore.
Drew: The next question is for both Carol and Joe. Both of your firms leverage a Web-based workflow tool. I know you use it on taxes and for other services. Can you describe how you implemented your cloud system and how long it took and then describe what services this workflow tool handles?
Kulencavich: The workflow system that we use and workflow software, which is a cloud-based application, we have all of our services on there. So it’s not just tax, it’s accounting. You can even put human resources on there, like annual evaluations or quarterly evaluations. The transition was fairly seamless. The company that we used made it very clear that they wanted to keep it as seamless as possible.
So as far as getting our database into the system, they did all of that. We didn’t have to do anything. We just put in an Excel file (with client data, users, affiliated client data, type of filings and tasks such as tax, bookkeeping, etc.), and they did the transition for us. So it was a very seamless process, and we’ve benefitted so much from it just saving time at the administrative level and at the managers’ level. There’s a lot less micromanaging going on, a lot less follow-up. The staff loves it because they can take ownership with the clients that they are responsible for, and they can be proactive in contacting the clients.
We’re able to perform better client service, too. … Because it is cloud-based, we’re able to see information 24/7. Waking up in the middle of the night worried about a status of anything, we can just log right on and see what the status is. Everything is in real time, and I think that’s the key to making this workflow important for us.
Drew: OK, thank you. Joe, it’s your turn.
Manzelli: Sure. If Carol wants to add a couple things (she can interject) because we do both use the same cloud-based software, XCM. As Carol said, to implement, all it took was us getting our database in an Excel format with at least one person who was responsible for the client. And literally for us, it was pretty simple. We had a time and billing program and also our tax program where we merged some databases and got it to them. And I want to say almost from day one, we were basically up and running.
The software, as Carol said, it really makes me more effective because I go from multiple offices back and forth. … I can check my mobile phone to find out where a return is … (If) a client gives me a call, I don’t have to go, “Well, hey, let me give you a call back. I’ve got to check with some people.” If they call in the office (or) they call remotely, I can find out exactly where that return is.
Again, (when) we started out, the software was initially designed for tax preparation. They designed the software for offshore tax preparation. Immediately, and before they actually started to change their software and their model around a little bit, I looked at it and said, “Geez, well, why can’t we use this for everything else that we do?” …
In, I believe, the last two years, and Carol can confirm that … they changed it so even the auditing and attestation work and write-up is built into the product as well, so that whatever workflow that you have, you can utilize this software. It’s, again, cloud-based. You can access it anywhere.
One of the benefits that we’ve seen: The software company (does) a survey, and it says: How much time per person during busy season are you saving? They’ve got upward of 90 minutes per person per day. But I would legitimately say that, in our firm, we probably have at least a minimum, this is my opinion here, of 30 minutes per day per person where someone is not looking for something, where it’s at, where is it … in the process. Someone running down the hallway to find something. The admin staff knows exactly what’s supposed to be mailed out, if it needs to be mailed out, if it needs to be electronically filed.
As Carol said, too, we have actually happier employees. Jennifer mentioned it: When you have these processes in place, you have employees that can take ownership of their job. As a matter of fact, it’s funny, (here’s) a little anecdote. We’ve actually forced everyone to use this software initially. Again, like I said before, it’s a buy-in from the top with most of these things. We had employees that refused to do work unless it got sent to them through the software.
A partner would come up to them and say, “I need you to prepare this return.” And they’d say, “Well, it’s not in my inbox.” So it really put a lot of controls in for us. We looked at it (as), how do you document all this stuff, and we did document it. Now, it’s built within the software for us because the software has become adaptable to be able to—you know, each firm is a little bit different. … If we do a tax return, it’s kind of the same process beginning to end, but it differs a little bit. So the software is also very adaptable, which is very important.
Quite honestly, it’s very, very simple to use. If anybody can type, can read and send an email, it’s a very simple piece of software to utilize.
Drew: Thank you.
Kulencavich: I would agree with Joe with regards to the staff really putting the burden back on the partner where they’ve been told to use it and then the partners aren’t using it. They’re holding the partners accountable. So it does work both ways. As far as saving time, we used to have an administrator who ran our old, what we called a due date monitoring system, which is the PPC tracker, which was not, obviously, a real-time software. During busy season, her overtime hours were cut (by) probably between 100 and 150 hours just because she wouldn’t have to run any reports, she wouldn’t have to update this PPC tracker with statuses. So it definitely saved real time for her and, obviously, (there was) less overtime for the bottom line.
Drew: Thanks, Carol. Michael, you manage the client accounting area for McGladrey. What has been the impact of cloud-based applications on your area of the firm?
Smith: Thanks, Jeff. What’s interesting (about) my background is (that) McGladrey is a pretty large firm, (a) full-service operation where we provide audit, tax and consulting services. In the past, I was in more of the traditional areas of the firm, which would be audit and tax. Over the past few years, we’ve had a significant amount of demand for client accounting services. Now, I think not unlike many CPA firms, client accounting services for us were always delivered; they just weren’t a lead service offering. These services, they tended to have lower profit margins. They were more transactional in nature, and they were often referred to as something else, so they’d be referred to as maybe bookkeeping or write-up. They just weren’t lead services. They were ancillary to other lead services, such as audit or tax.
What happened is this caused a lot of inconsistencies in terms of both staffing engagements and the approach(es) that were taken in those engagements. With cloud-based technologies, it has allowed us to standardize more on process and also utilize a team that’s dedicated to providing client accounting services versus just having the relationship—whether it would be an audit partner or tax partner, consulting partner—drive who services the client, which may not be the right solution for the client.
So things have changed where this is now more of a lead service offering within our firm. The cloud has played a significant role in allowing us to do that because, before, it was difficult to deliver those services efficiently and get the right pricing and make the right level of profit margins. But now with the cloud, for a lot of the reasons stated by many others on the call, we’re able to drive efficiency and do things in a much more seamless fashion.
I think one of the big things for us has been the ability to integrate different applications. I think the ability to integrate in a cloud environment is much different than it is in an environment where you’re using on-premise solutions. So, just to give you an example, we use Intacct and Bill.com to service certain clients. Having those two applications talk to one another, and pass data in a seamless fashion, really allows us to eliminate some of the day-to-day transaction processing and redeploy the time and resources toward the more value-added services. Those services might be more along the lines of controllership-type services such as analysis, such as reporting, and just providing business advice to our clients—whereas before, we’d be spending a lot of time doing double data entry and focusing on transaction processing and write-up and bookkeeping. There wasn’t time or room in the budget to be able to deliver those services.
So that’s sort of it in a nutshell. I think the one other thing I would say that’s had a significant impact is the scalability. So we have at McGladrey … several offices throughout the country, and the ability for us to easily onboard other staff onto an engagement that may not be physically within our office is huge.
It really makes a big difference so that we don’t have to make big technology investments. If we need to add one of the team members that’s outside of our office onto an engagement, it’s very seamless and it can be done very quickly. And there’s no software that needs to be installed on a computer, and that individual can work virtually from everywhere once they’re provisioned to a particular application. So that’s had a very significant impact as well.
Ultimately, I think it’s really about providing more value to our clients. That’s where we’re always driving toward. And I think using the cloud has allowed us to deliver more value because it’s just created all sorts of efficiency and time savings, and we’re able to redeploy that and share that with the client in other areas that add more value and are more strategic to their businesses.
WHAT TO CONSIDER IN MULLING MOVE TO THE CLOUD
Drew: What advice would you have for CPA firms that are not on the cloud right now but are considering that move? What factors should they weigh in making that decision? (What are realistic outcomes for them to expect?)
Chaney: I would just say, “Do it. Just do it.” But it’s a lot more than that, obviously. Maybe seek out some other CPA firms that have done it and sit down with them and ask them if they would be willing to help give some guidance as to what to consider, because there are a lot of pitfalls. As glamorous as it is to have things Web-based and as slick as Intacct and Bill.com are, there are things about how to work out when the programs don’t do what you want them to do.
Getting into the actual workflow and the documentation about how things are going to go, that’s important. But just to sort of have a mentor or another firm help walk you through that would be a lot (of help). It would definitely help the transition time in that regard. Then, what I would say is on the realistic outcomes, just to set some goals for yourself and then try to exceed them, obviously.
It’s just where we’re going with everything. They could expect to see a lot more than probably what they’re anticipating in the beginning because there definitely is—it’s just the way things are going because people want to cut costs. Outsourcing business functions and business processes is the way to go. So it’s sort of a hot topic.
On this cloud-based accounting, just get a mentor, even if it’s a person at Intacct or Bill.com. They’re great about that—assigning you people. I think if I had utilized that more at the beginning, I would have not had a couple hiccups that we had. But just working through it.
Drew: OK. Thanks, Steve. Jennifer, do you have anything to add?
Katrulya: Thanks. Just a few points that I will quickly make. To me, the single biggest thing I love is the fact that we actually get to work with other firms who are implementing cloud solutions. The biggest thing time and again I see go wrong, I would say, is (you need) to have a business plan for this, a client accounting services business plan that talks about where you’re trying to go as if this is a brand-new business venture—because it is, in a number of ways. Decide where it is you’re trying to go and how you’re going to get there and what is going on in the marketplace. Education first and blueprinting out what you’re hoping to achieve, how you’re going to get there and how you’re going to measure whether or not it’s successful, that’s the biggest way to have your game plan in place so that you can present it to other partners and the staff and the firm and get the buy-in that you need to make this successful.
I did this: I came back from a conference and jumped into all this, started to implement things left and right, and there would have been a much, much better way to approach this. So through hindsight, hopefully, I can save some other people that struggle. Communicating early and frequently with clients about this move, making sure that you keep them in the loop about how you’re going to transition, when you’re going to transition. We didn’t make it a choice for our clients to transition, but we made it as clear as possible for them about how we were going to get there and what we needed from them to make that successful, and most importantly, what the benefits were going to be for them when we got there.
We spent a lot of time selecting best-of-breed applications, and several of them have been mentioned on this call. But you can’t emphasize that enough. Right now, in this space, there are so many applications that will be on the map tomorrow and gone in a week or a month. So (it’s important to find) applications that are going to be around, that really do have the right levels of security, redundancy, etc., in place that are going to stick with us and that have the right support team in their office and their company to work with you.
The other thing I would just really say is you’re asking your staff and your team to go through a big, big transition and this is … that moment where we’ve always said we want to have people on our team who come to work for more than a paycheck. This is that time for pay for performance because you’re going to be asking them to step up in a big way. So integrating that as part of this process becomes a lot easier and becomes so important because we are all going to succeed by putting in these applications and moving forward. The firms we’re seeing be most successful include the staff in that process.
Manzelli: The bottom line (is) have a plan, have benchmarks, goals so that you can measure against that plan. One of the things that I don’t think has been mentioned here, but it’s very important—we talked about hardware or the lack thereof—is one of the things that we jumped into is making sure you have the proper bandwidth, both upload and download, because some applications don’t take a lot of bandwidth to get the data back and forth. Others take a tremendous amount.
(Make) sure that whatever other Internet-based things you’re doing, whether it be research or whatever, bandwidth is one of those things you make sure you look at and make sure that you do question the software companies as to what type of bandwidth they recommend. Whatever they recommend, get more. (Those) would be my strongest words of advice. Whatever it is or whatever they’re saying is the minimum, get more and make sure you have it both upload and download so that you’re able to work as if you’re sitting right at your desk and not (at) the old dial-up-type speeds. I’ve seen that even with high-speed Internet—some applications come to a crawl because they’re pushing data back and forth. Again, one of those things is to just look at that.
Drew: OK. Thanks, Joe. Michael, do you have anything to add?
Smith: The only thing I’d probably add is sometimes it’s hard to make the move, and it’s a big change, and it’s risky. You’re dealing with client relationships, and you don’t want to damage those relationships, so be strategic about how you go about taking next steps. Try to identify some clients that may be low-risk so that you can have a little bit of a testing ground. Sometimes you’ve just got to jump in and go for it and do it. The planning is important, don’t get me wrong, but don’t overplan. What I mean by that is don’t plan so much that you don’t get out of the gate for a year because you’re trying to make sure that it goes without a hitch. You’re going to run into issues, you’re going to run into problems, and that’s why, if you pick some low-risk clients, maybe clients that, like in our case, we do client accounting services in some situations where it’s not necessarily client facing, it’s more behind the scenes. So we’re doing all the accounting on the back end, and the client is not necessarily interacting with the systems. Those are great situations to test the new software, to get comfortable with the new software, to get the staff trained.
I think the other thing to keep in mind is don’t assume that simply buying new technology is going to fix a problem or improve a process. It’s really important, and I think Joe hit on this earlier, … to think through the current process and how it’s going to be handled after it’s shifted to a cloud-based application. Oftentimes, it’s less about buying the technology, and it’s more about how you actually apply the technology. So really think through how that process will work when you go from the old to the new.