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CPAs Need An Industrial Revolution

I liked the cover story in this week's Accounting Today - See Ya CD's, Software as a Service is Finally Catching On - by Liz Gold. She is on to something.

Her premise is that by using Software as a Service applications, a CPA firm can deploy their business in a geographically disperse way. She hits on two aspects of this - that as a CPA firm you can use SaaS to serve clients outside of your geography more easily, and that you can can use SaaS to tap into a broader labor pool by shifting work to geographically less expensive areas and thus employ lower cost employees. The fancy Silicon Valley term for this is "place shifting: - using the Internet to make the physical place you happen to be located in irrelevant.

In reading her article, I would add a third idea to this- the ability to use SaaS to specialize labor, to develop repeatable business practices and to deploy reusable IP across many clients. And of course that all of this is really about being able to provide better and higher value services to clients, often at a lower cost.

I am thinking about the traditional CPA model, where in the bulk of the industry one individual is paired up with at most a handful of clients and thus needs to be a jack of all trades - in the same day this could mean doing bookkeeping, data entry, AR and AP work, treasury and cash management, tax and if there is time left over perhaps doing some controller or CFO level strategic thinking.

I've heard from plenty of CPA's that they would like to get out of the repetitive and low level tasks and spend more time adding value at a higher level. And as CPA's get more senior and their billing rates go up, it becomes a waste of their clients money (or an under utilization of their time given their skills) for them to be doing the more mundane or repetitive tasks. This is also the mantra over at the AICPA and at CPA2BIZ - how can CPA's become value added advisors for their clients to provide more value and better service.

Today's state reminds me a bit like manufacturing before the industrial revolution, where one craftsman built an entire unit of production themselves. Look what happened to the manufacturing industry when we began to specialize - the industry became vastly more efficient, costs dropped dramatically, productivity rose and career paths became much richer too. And service levels and quality rose and clients became a lot happier.

So when you take these ideas together - market expansion and labor arbitrage through place shifting like Liz wrote about and labor specialization and best practices development via an industrial revolution-like transformation - I think you start to get something really exciting that can have radical and positive impacts on the CPA industry as a whole.

Imagine if you will a world where a CPA firm can develop repeatable, predictable and best practices processes that can be used across many clients. You would be able to develop value added templates and best practices techniques and deploy them over over and over again for repeatable processes. You could shift labor for repetitive tasks to lower cost portions of the country, and specialize not just one but a set of employees, at the proper skill level, in these processes, so any one of them could work on any client when needed.

Since your processes and practices are well defined, and employees can be anywhere, you could tap into even more interesting labor pools like stay at home moms and part timers. And in the same way, you can expand your business by taking on new clients regardless of where they are.

Costs would go down because you are leveraging less expensive labor, and deploying it more effectively, and value to the client would go up since specialization allows for best practices would be built in to the whole process. Employees would be happier since they would have documented career paths, starting out doing repetitive tasks and moving up the chain to more and more skilled and value added work. Your whole business would become more efficient, productive and profitable since you could track how well your now repeatable processes were improving over time. And this would surely enable growth, since a business based on repeatable processes can scale.

Where I ultimately see this going is true financial outsourcing. SaaS enabling the finance function to happen from anywhere, and with a combination of inhouse and outside resources doing the work. We have many clients with offices in expensive parts of the country, like New York or Boston or Silicon Valley or Hawaii where trained financial professionals are both expensive and hard to find. I think it would be a compelling value proposition for a CFO to be able to work with a firm that outsourced some or all of the functions of his or her department using SaaS and outsourced labor- I would expect that using the labor place shifting and business process specialization that a financial outsourcing partner could do this far more cost effectively and better any finance department could do in house themselves. Better, more predictable and higher-value service for less money, that's what got me thinking about the industrial revolution.

So to me this is the big idea going one step beyond what Liz wrote about - a whole new financial outsourcing market enabled by SaaS, tapping into a skilled, trained labor pool that can live and work anywhere, and fueled by a move toward business process specialization and best practices.

I am already starting to see innovative firms like LarsonAllen, Corefino and Citigroup quickly moving down this path.

Now that's starting to sound like a revolution...

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