Change is good

The following article is reprinted with permission from Boomer Consulting, Inc.

By L. Gary Boomer, CPA
Boomer Consulting, Inc.

Change is good — and doing something positive to deal with change is even better.

This is not as easy as it sounds. Most accounting firms have evolved in an environment devoid of broad and deep changes and therefore have not developed mechanisms to cope with change. Today, change is the normal state of affairs. Too often, partners in an accounting firm look at change as a traumatic event that can be endured until stabilization occurs and things get back to normal. They believe change is something that happens to clients and others.

One of the problems with this thinking is that change is recurring more regularly and the periods of stabilization are shorter. What should a firm do to protect itself and ensure it redirects the firm? It might be easier to list what not to do. Don't ignore change and don't expect the managing partner to be totally responsible. Everyone will be involved in change. And yes, leadership is an important issue, but it requires a leadership team that is not resistive to change. While most accountants dislike change, change typically is good for the profession, from an economic sense.

In today's uncertainty with Enron, pressures from the SEC and public scrutiny, many are concerned about how the profession will cope. I believe and am hopeful the changes will be for the better. I also believe our biggest fear is that politicians and the press don't damage the image of the profession to the point that bright, young people will no longer enter the profession. Accountants love to be in control, and today there are many things occurring that are beyond the control of most partners in local and regional firms.

One of the advantages of working with a large number of leading firms is that you witness how the best get better. There are plenty of changes occurring in our profession that you should get involved in that will improve client services and make your firm more efficient and profitable. Technology is playing an increasing role in providing solutions.

The following list includes some of the more important areas that firms are facing. The first area has been in a state of change for the past 10 years, while others have evolved recently or are currently evolving.

Integrated financial reporting

This is an issue that firms have been dealing with (and not very successfully) since the switch from DOS to Windows applications. Integrated financial reporting is nothing more than how data flows from the clients' systems into accounting work papers and on to the tax return and financial statements. In the majority of cases, the local firm is involved in the preparation of the financial statements as well as any type of assurance and tax return preparation. This is the core of most accounting firm's productivity, yet it is an area in which there is significant redundancy, inefficiency and lack of standards.

Some point the blame at the software vendors and many don't really have a good vision of how this could all be automated far more efficiently. Internationally, firms are ahead of where we are in the United States. In the United Kingdom, they call it "accounts production" and have developed integrated solutions. I believe the continued problem in the United States is partially due to the fact that a spreadsheet and word processor are two applications that most accountants and clerical personnel are comfortable with. Therefore, our profession has demanded (from the vendors) the capability to prepare financial statements from a spreadsheet and the footnotes from word processing. While this is a step forward from the days of a pencil, paper and typewriter, it is not the ultimate or desired solution.

Internationally, firms are using a database approach; therefore, everything is linked and automated. When notes to the financial statements change, it is updated automatically. The database approach is even more relevant to firms that offer assurance services. Monetary unit sampling and transaction testing are much easier in a database environment. CaseWare (with its IDEA product) is one of the leading solutions in the U.S. market. There is a learning curve, but those who spend the time learning the programs are satisfied the learning time is well worth the effort in the ability to automate the processes and offer additional assurance services that clients are willing to pay for.

Firms that have moved to applications that are Microsoft Excel- and Word-based have found that most of their employees need a significant amount of training in these applications to reach proficiency. They also have learned that there is a significant hardware requirement with the current versions of these programs. Go Audit (from RIA) and E-Pace (from CCH) are the leading programs firms are using to produce financial statements and footnotes using the Microsoft Office applications.

Client-centric software

The accounting profession has endured with application-based (rather than client-centric) software. Some leading firms are starting to implement client-based systems for billing, marketing, customer relationship management, process improvement and even internal accounting. These systems are databases in which the data is accessible from other applications, such as Microsoft Outlook. Information is accessible from a desktop or personal digital assistant. Other firms are trying to integrate their applications so they will talk to each other and data will flow bi-directionally. This can happen only with open architecture databases and well-designed applications.

This is an area in which most firms should play from the hand they currently hold. They can't afford (nor should they attempt) to start from scratch. Therefore, review of the existing situation is very important in developing a plan and strategy to move toward a client-centric system with less redundancy. This is the only solution to the age-old problem of having to update multiple databases when simple client information such as an address change occurs. Many firms were led to believe by major vendors that their own applications would share common data. To date, this has not happened to the degree most had hoped. Most firms have applications from multiple vendors such as CCH, RIA, CaseWare, Intuit, CSI and Microsoft, just to name a few of the leading vendors.

Just-in-time learning

The profession is hearing some new terms from the professionals responsible for training and lifelong learning. The semantics are not as important as understanding the requirements and the return on investment from training and learning. The return is evident in firms with well-designed, implemented and managed learning programs. Most firms give lip service to training but haven't invested the resources necessary for a successful program. The Gartner Group says you will gain five hours of increased capacity for each hour of training. For an industry that still bills primarily by the hour, this is a significant return.

Some questions you may want to ask yourself include the following:

Are you giving your staff and partners the right training?
Are you providing enough training?
Do you have defined processes to train?
Is your training program performance-based?
Who in your firm is responsible for training?
Is the responsible party a professional educator rather than an accountant?
Do you integrate technical, technology and soft skills training?

From our experience working with leading firms in the training area, I can say the two factors that impact a training program the most are leadership from the managing partner and having a professional educator in charge of the training program.

Real-time knowledge

The accounting profession has been known for its historical perspective and many of the existing systems within firms were designed for batch processing or periodic posting. Some refer to these as "rearview mirror" systems. Real-time client-centric information is a must for firms wanting to provide quality client service. An area of practice management that has evolved over the past 10 years is the daily entry of time. Sadly, even today this is still not being done in many firms. Without current information about clients, staff and projects, they are all difficult to manage. Many partners manage by intuition rather than with real-time knowledge.

Real-time auditing also will get more attention over the next few months as facts about Enron become available. The systems and tools are close ton being able to audit transactions in a real-time environment.

Are today's auditors ready? I don't think so. There is going to have to be a great deal of un-training and then retraining for this to take place.

Teamwork

Many in the accounting profession pride themselves on the fact they are rugged individuals as well as generalists — even in light of the trend toward specialization for most accountants. In either case, teamwork is necessary today for continued success.

Teams generally require a gameplan and coach in order to experience consistent success. With standards, policies and processes, ordinary people can produce extraordinary results. Without standards, policies and procedures, it requires extraordinary people to perform on a consistent basis. The accounting and financial services industries are rapidly accepting what General Electric and many manufacturing companies have done over the past decade. They now are defining processes, setting high standards and training people.

Some of the more popular and basic areas that firms are assessing and developing standards and processes in are:

charge time policies and procedures;
tax return processing, including electronic filing of the majority of returns;
financial reporting;
remote access;
Internet usage;
document management;
hardware and software usage.

Without standards, policies and procedures, it is almost impossible to conduct valuable training. Partners typically are the most difficult group to get to change and play as a team. Typical compensation packages have not rewarded them for teamwork, developing processing and training; rather, they have focused only on production. While a production focus is good, it is not the only attribute that contributes to a quality firm.

We frequently see examples in which firms have set software standards such as Excel, but one or more partners insist they must have Lotus 123 on their machines or even the network due to the fact they have an old spreadsheet they must use on an existing client. This sends the wrong message to the entire firm. With a few hours of training, the partner will enhance his or her skills and probably be able to improve the spreadsheet and services offered to the client. While this is a simple example, it is one that occurs far too often in firms that are trying to improve efficiency and teamwork.

Conclusion

Attitude has a great deal to do with how effectively people and firms deal with change. Firms that have great leadership and training programs welcome change and operate at a high level of confidence that they will succeed under any circumstances. Did I just define your firm or do you have some work to do?

This content has not yet been Rated.

To Rate content, please Login.