Heads in the cloud: Part 2

CPAs discuss advantages, challenges.

The rapid growth of cloud computing is whipping up a storm of change and challenges, opportunities and obstacles for CPA firms. While many firms have embraced the Internet as a place to conduct business more efficiently and effectively, others are holding back, often due to concerns about the security of confidential data and the transition from on-premise computing to applications in the cloud.


To help CPAs better understand cloud computing, the JofA invited five CPAs to share their cloud experiences in a roundtable 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 employs 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, partner of McGladrey & Pullen LLP’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 different cloud business models and advice for firms considering a move to the cloud. Part 1 of the article, which ran in the JofA’s February 2012 issue (page 20), featured a discussion about the advantages, challenges and return on investment of cloud computing. For an expanded version of the entire transcript and two podcasts of the discussion, go to journalofaccountancy.com/tech.




Drew: Steve, could you describe your business and what role the cloud has played in building it?


Chaney: 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’ve been able to go from about 50 clients to well over 300. We do write-up services, full bookkeeping services, all the payroll.


Before, it was very cumbersome getting all the live checks to people. Now, all of our clients can print their checks off remotely if they want live checks, or it’s just direct deposit. From 2009 to 2010, we were able to grow our (revenue by almost 90%).


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: The biggest impact that we’ve seen is, first, the ability to practice what we preach as far as internal controls and segregation of duties. We work with a number of smaller businesses who may have one or two primary people who handle most of the day-to-day transactions. We can now function as (an) oversight to provide an approval function.


We’ve spent a lot of time focusing on industry verticals, focusing on what their needs are in those particular industries and how we can integrate cloud solutions to do a good job in that space. Leveraging that client to client—and (creating) the templates to do that time and again—has allowed us to increase our effective billing rates. Where we were seeing maybe $45 to $175 an hour when we opened our doors, 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 because we’ve just been able to refine so dramatically what we do.


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.


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. 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.


Drew: The next question is for Carol and Joe. Both of your firms leverage a Web-based workflow tool. 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 (XCM) 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.


So as far as getting our database into the system, (XCM) 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. We’ve benefitted so much from it, 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.


Manzelli: (Our) software company does a survey, and it (asks): How much time per person during busy season are you saving? I would say that in our firm, we probably (save) a minimum of 30 minutes per day per person.


Kulencavich: As far as saving time, we used to have an administrator who ran our old due date monitoring system, the PPC tracker, which was not a real-time software. During busy season, (the cloud cut) her overtime (by) probably between 100 and 150 hours. So it definitely saved real time for her and, obviously, (there was) less overtime for the bottom line.


Drew: 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: Over the past few years, we’ve had a significant amount of demand for client accounting services. Cloud-based technologies have allowed us to standardize more on process and also utilize a team that’s dedicated to providing client accounting services. So things have changed (to) 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, get the right pricing and make the right level of profit margins.




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.” But it’s a lot more than that, obviously. Maybe seek out some other CPA firms that have done it and sit down 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. On the realistic outcomes, just to set some goals for yourself and then try to exceed them.


Katrulya: (Communicate) 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. We spent a lot of time selecting best-of-breed applications. 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.


The other thing is you’re asking your team to go through a 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, because you’re going to be asking them to step up in a big way.


Manzelli: (Make) 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 you question the software companies as to what type of bandwidth they recommend. Whatever they recommend, get more.


Smith: You’re dealing with client relationships, and you don’t want to damage those relationships. Try to identify some clients that may be low-risk so that you can have a little bit of a testing ground. 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 (and) 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 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.





  Cloud applications have allowed one firm to cut administrative costs 75% because its staff needs far less time to do mundane tasks. At another firm, the cloud helped cut one employee’s overtime by more than 100 hours during busy season.


  Firms should make sure they have enough bandwidth to handle the increased traffic of cloud-based systems. Whatever the software companies suggest for bandwidth, buy more.


  It’s crucial to have a strong business case and strategy to support a move to the cloud. Don’t just move to the cloud because other firms are doing it.


  Organizations making the leap to the cloud should seek a mentor. Others that already have made the cloud move can provide valuable advice to firms making that transition.


  Clients for which CPA firms handle mostly back-end operations are excellent candidates to have their data transitioned to the cloud first.


Jeff Drew is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact him at jdrew@aicpa.org or 919-402-4056.





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