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 nonprofit 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.
Following are edited excerpts of the conversation focused on the advantages, challenges and return on investment of cloud computing. Part 2 of the conversation will appear in the March issue and explore different cloud business models and advice for firms considering a move to the cloud. For an expanded version of the Part 1 transcript, go to journalofaccountancy.com/tech. 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?
Smith: We’ve been able to remove geographical barriers associated with (the) location of resources and location of our clients. 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 specialists from our North Carolina office, which is over 2,000 miles away (from the client).
Katrulya: We’re based in Danbury, Conn., so the client base that we wanted to reach was not going to be (only) in our local market. We (had) to get information routed to us. They either dropped it off at our office or were FedExing packages to us. There just wasn’t that sense that we could operate (in) real time with (clients). We initially had to log in to their computers remotely to be able to get information that we needed. Ultimately, we did require that they log in to our server and access information, but then we incurred thousands of dollars of programming costs and IT services and hardware.
With cloud technology, that has 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. 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.
(The cloud also has) allowed us, as far as staffing, to pick up staff wherever we find the best talent.
Kulencavich: Our firm is fairly new to the cloud-based applications and, for us, it’s really how it fits more internally. We use an (outside provider) for our IT work. Having them be able to focus more on our strategic plan, rather than doing the mundane services of loading software or fixing various software problems, has helped a lot.
Manzelli: It just makes it easier to work with each other. With having multiple offices (New York City, Long Island, Florida), 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.
Chaney: 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. So we’ve been able to increase our effective rates while not increasing our billable rates.
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?
Manzelli: 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.
Probably the biggest thing is documenting your processes. 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 where, when you go to a cloud-based (system), 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.
Smith: What we’re finding is that we need to educate our clients and our partners. 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.
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 (savings) that’s often overlooked.
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 takes things out of one’s control, and (there) is a higher likelihood of a security breach. What we’re finding is that, in a lot of cases, our clients’ data is more secure on the cloud than it is on the premises because of some of the measures taken by some of the cloud-based vendors 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 (are) 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.
Katrulya: 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 have three different ways to get to the Internet.
These solutions in the cloud are evolving so quickly. The actual applications themselves can change overnight. So, we have 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.
Kulencavich: It’s important to remember that every firm is unique. 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.
Chaney: 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 the full transition.
CLOUD COMPUTING: THE ROI
Drew: Have you seen a return on investment with your cloud-computing efforts?
Katrulya: The fact that we’re now able to essentially realize three to four times the revenue and profitability that we were able to realize before allows us to work three or four times less hard for that same money (and) increase our client base but also invest so much more heavily in our staff and in being a firm they want to work for. I think that’s a tremendous change from always worrying about that billable hour. Our admin costs are down 75% because we don’t have as many administrative tasks. For our CRM (customer relationship management) system, our clients can actually add their service requests and their questions 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.
As of June, we won’t keep our brick-and-mortar office 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.
Smith: 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 (to) be able to work from home, little things like that go a long way.
Chaney: Ever since we went to Intacct and Bill.com, we’ve not been able to keep up with the growth. The time invested now to actually deliver has been more than cut in half based upon what we used to do.
Cloud computing removes geographical barriers and allows CPA firms to service clients from virtually anywhere, even thousands of miles away.
The cloud allows CPA firms to interact with clients in real time in ways not possible before.
Because the cloud vendor is responsible for hardware and software, CPA firms may not have to purchase expensive equipment such as servers or pay directly for computer or application upgrades. Firms also can save money because they no longer need space to house servers and other IT equipment.
The efficiencies of the cloud allow firms to raise their effective rates without having to hike their billing rates.
Because of the virtual office environment created by the cloud, one firm is planning on moving out of its brick-and-mortar office when the lease expires, saving thousands of dollars per month.
Firms should have multiple ways to connect to the Internet. Firms that lose the connection to essential cloud applications can’t function.
Jeff Drew is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact him at firstname.lastname@example.org or 919-402-4056.
- “Cloud Computing: What Accountants Need to Know,” Oct. 2010, page 50
Use journalofaccountancy.com to find past articles. In the search box, click “Open Advanced Search” and then search by title.
Service Organization Control Reports: What Companies and Customers Need to Know (#780279)
- Practitioners Symposium and TECH+ Conference in partnership with the Association for Accounting Marketing Summit, June 11–13, Las Vegas
- Not-for-Profit Industry Conference, June 21–22, Washington
For more information or to make a purchase or register, go to cpa2biz.com or call the Institute at 888-777-7077.
IT Division and CITP credential
The AICPA Information Technology (IT) Division serves members of the IT Membership Section (ITMS), CPAs who hold the Certified Information Technology Professional (CITP) credential, other AICPA members, and others who want to maximize information technology to provide risk, fraud, internal control, audit, and/or information management services within their firms or for their employers. The division aims to support members and credential holders who leverage technology to provide assurance or business insight about financial-related information (direct and indirect financial data, processes or reporting) to support their clients and/or employers. To learn about the IT Division, visit aicpa.org/infotech.
More from the JofA: