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Tech choices crucial in an accounting firm's early life

The process of starting a new firm can be an exciting time, but it’s also one with a lot of questions, many of which center around technology. Brian Tankersley, director of strategic relationships at K2 Enterprises, warned that a firm founder’s answers to these questions can determine the direction of the practice for years or even decades to come, which makes it especially important to make the right choices early. 

“If you’re starting your practice, you have a clean sheet of paper … . This is the only time in your firm’s history that you will be able to start unencumbered to do exactly what you want, so it’s critical you figure out what you want,” said Tankersley, adding, “It’s just like getting married. You better like the person, because you’ll be spending a lot of time with them, and if you pick the wrong one it creates so much misery.” 

Speaking at the AICPA Engage Conference in Las Vegas Thursday, Tankersley did not set out to tell people to get this cloud service or that ERP software but, rather, shared basic principles to be aware of when deciding a firm’s initial technology setup. 

To start, even if one has been in accounting for decades, the profession has undergone significant changes as a result of the pandemic, and that must be taken into account. For instance, he said, firms need to think even more about their employee experience than before because, due to the rapid rise of remote work, large firms are now directly competing for talent in areas where they never had before. Staff will likely be frustrated by a poor setup that, say, requires them to feed data through multiple applications kludged together like a Rube Goldberg device. This raises the risk that they will simply leave a local practice to go work virtually for one of the national- or international-scale firms that are no longer as bound by geography.

“Think about what the processes will look like and ask, ‘If I’m a new person out of college, will I think picking accounting was a great decision if I have to do this all day, every day?’ If you [don’t have a good setup] you’ll find it is not,” he said. 

AICPA Engage 2022 conference

Similarly, firm founders need to think about how technology will impact the client experience as well. If staff accountants won’t like a poor setup, clients will like it even less so.

“We may be able to — we shouldn’t, but we may be able to — make staff go through 15 applications to do their jobs. We can’t make our clients do that. Clients are becoming less and less tolerant of that. They say, ‘Look, my bank has a portal, my lawyer has a portal, my doctor has a portal, and you have another portal. I’m going to opt out of that.’ That is a very normal thing. It needs to be easy so they will actually use it,” he said. 

One thing firm founders can do to avoid this is try minimizing the number of applications they use, especially those relating to communications and document storage. He said too often there are situations where firms adopt large numbers of applications, none of which talk to each other, meaning that finding information can sometimes be akin to a scavenger hunt, with accountants trying to remember just where it was they received that client document. 

“The problem is we have all these ways of communicating: paper notes, work papers, mobile apps, portals, email, document exchanges. The problem is all these silos don’t want to talk to each other. If we don’t think about these things … we end up with five, six different places to search whenever we want to do something,” he said. “The trick here is to have everyone on the same platform.” 

This is why he recommended that firm founders invest in, rather than a set of best-of-breed applications, a suite of all-in-one solutions under one platform. If a firm is planning to do a lot of client advisory services, they should supplement those with solutions specific to the industry in which they plan to specialize. 

Founders, he said, need to do their due diligence on deciding which suite to use because each has their advantages and disadvantages and, further, some will be more appropriate for their specific context than others. This is a big decision, according to Tankersley, one that will likely affect others down the road and so is not to be taken lightly.

This includes actually reading the end-user license agreements and understanding what they mean versus just scrolling down and clicking “I accept.” Tankersley said what’s put in these licensing agreements can have major implications on things such as privacy of client data. He warned, “There are a lot of vendors coming for your data and client data” and expressed concern about the privacy policies of these large companies’ EULAs.

“I don’t know that anyone is doing anything illegal but I do know most of our stomachs would turn and retch if we knew what was in these privacy policies, especially around payroll. There is some real weird stuff going on from a privacy perspective where potentially employees or clients could have their data shared with outside folks, which is an unpleasant thing to think about,” he said.

He pointed out that private equity funds have been hungry for data lately and if they happen to buy a platform, “Folks need to make money off these legacy products and I don’t know if they will come after privacy, but if they do, you need to know about it before it happens and respond.”

Finally, Tankersley talked about the importance of using providers with specific experience serving the accounting profession. Take hosting companies for example: While a founder may be tempted to just go with their local provider — maybe one they’ve used for the last 10 years — they won’t have the knowledge and expertise to know what to do when, say, the tax software crashes. The people with this kind of knowledge, he said, tend to be large, national-scale companies with a wide user base.

On hosting companies, he added that another reason it is important to select one that specializes in accountants is because the applications that practitioners tend to run usually require a great deal of computing power, because many of them are inefficiently coded. He brought up the term “input-output-operations-per-second” — the average person needs around 50, but CPA firms' applications need at least 200. An accountant is typically running about 10 applications at once, and most of those have their own database running as well. This isn’t even counting things like Excel, PowerPoint, Outlook or a web browser.

“The thing is, if you’re running your stuff hosted, and your hosting provider is using hard drives instead of solid state drives, you may not have the performance to do what you need to do. Even though you think, ‘We’re doing math and the math we’re doing is adding and subtracting. How hard is that computationally?’ It's a lot harder than you might think,” he said. “What if we tried to build a modern electric car but only could use car parts from the 1970s? When you’re doing this, having someone who knows what they’re doing with accounting firms is a big deal.”