While re­ports of the tra­di­tional firm’s death are greatly ex­ag­ger­ated, change is still nec­es­sary

Accounting Today - - Front Page - By Dar­ren Root Dar­ren Root, CPA, CITP, CGMA is CEO of mem­ber­ship or­ga­ni­za­tion Root­works (www. root­ and founder of se­cure-shar­ing so­lu­tion Lis­cio (www.lis­ His “Bet­ter Ev­ery Day” pod­cast is avail­able at www.root­

As a tax and ac­count­ing pro­fes­sional, no mat­ter your level of in­volve­ment with in­dus­try con­fer­ences, state so­ci­eties, or trade ar­ti­cles, you can’t help but be in­un­dated with the same mes­sages over and over. In­dus­try thought lead­ers con­tinue to pon­tif­i­cate on the fu­ture of the pro­fes­sion and the need for firms to adapt. It’s likely you’ve heard one or all of the fol­low­ing state­ments more than once:

Tax prepa­ra­tion is on its way out, so get ready.

To re­main rel­e­vant, firms must adopt ad­vi­sory ser­vices.

Trans­ac­tional and com­pli­ance ser­vices are go­ing the way of au­to­ma­tion and ar­ti­fi­cial in­tel­li­gence, so shift your rev­enue sources now.

The tra­di­tional firm is dead.

Will th­ese pre­dic­tions and warn­ings come to fruition? And if so, when? The fact is that no­body re­ally knows … even those of us who have long been writ­ing about the slow demise of trans­ac­tional work, the need to adopt an ad­vi­sory ser­vices model, and the in­evitable end of the tra­di­tional firm. Grandiose state­ments like those above have been used so of­ten that they likely have lost some of their shock fac­tor. It’s quite pos­si­ble that a lot of ac­count­ing pro­fes­sion­als may no longer even be lis­ten­ing or are sim­ply ready for thought lead­er­ship that is more in­clu­sive of those who choose to main­tain a lit­tle tra­di­tion.

Bal­anc­ing tra­di­tional with trans­for­ma­tional

The time has come to take a step back from the grandiose and of­fer a re­al­is­tic look at what’s hap­pen­ing in the pro­fes­sion now and the changes to come:

Is tax prepa­ra­tion re­ally go­ing away

in the fore­see­able fu­ture? I don’t think so. Clients will al­ways need some­one to process their re­turns. How­ever, tax prepa­ra­tion will change for many firms at some level. This could mean com­plete elim­i­na­tion or more of a bal­ance be­tween tax prep and ad­vi­sory ser­vices.

Are ad­vi­sory ser­vices go­ing to rule the ac­count­ing world at some point? Prob­a­bly not, but they are still im­por­tant and will re­quire firms to have a strat­egy to de­liver.

Are trans­ac­tion/com­pli­ance-based ser­vices on the chop­ping block? Again, prob­a­bly not, but au­to­ma­tion will play a big part in stream­lin­ing th­ese ser­vices.

Is the tra­di­tional firm dead? Cer­tainly not! The tra­di­tional firm is busier than ever, and there is no short­age of work in sight. There’s also no rea­son why firms can’t bal­ance tra­di­tional work with high-value ad­vi­sory ser­vices at a level that’s com­fort­able.

The idea that you will wake up to­mor­row and ev­ery­thing that you know to be true about your prac­tice is sud­denly gone is a gross over­state­ment. The tra­di­tional ac­count­ing firm is alive and thriv­ing based on my con­ver­sa­tions with firms from across the coun­try. That said, how­ever, there is still a bal­ance that needs to be rec­og­nized. While the tra­di­tional firm still has its place, it can­not con­tinue to fully op­er­ate as it has for the past 25 years. Tech­nol­ogy ad­vance­ments and client ex­pec­ta­tions have had a ma­jor im­pact on both the types of ser­vices of­fered and how they are de­liv­ered.

Set­ting in­cre­men­tal goals

Be­cause tech­nol­ogy and client de­mands will con­tinue to push firms to adapt, we know that trans­for­ma­tion, at some level, is in­evitable. But trans­for­ma­tion doesn’t mean chang­ing ev­ery­thing about your firm overnight. Trans­for­ma­tion is the re­sult of set­ting in­cre­men­tal goals over time — goals based on the level of change you choose to take on. When you think of it this way, it’s far less over­whelm­ing.

While the in­flu­encers will con­tinue to pre­dict trends and push firms to think dif­fer­ently, most firm lead­ers sim­ply want straight­for­ward ad­vice on what they should do. At the high­est level, the best ad­vice is to set in­cre­men­tal goals as you work to trans­form your firm (what­ever “trans­form” means to you). It’s a mat­ter of set­ting your sights on get­ting just a lit­tle bit bet­ter ev­ery day … not rein­vent­ing the wheel.

To give you a lit­tle in­sight, in my own firm, RootAd­vi­sors, we’ve worked to trans­form our busi­ness over the past decade. To­day, we still of­fer tax prep and plan­ning, but have scaled back and au­to­mated our tax work­flow. This has al­lowed us to grow our client ac­count­ing and pay­roll busi­ness — both strong rev­enue streams. We’ve also im­ple­mented busi­ness ad­vi­sory ser­vices, which con­tinue to be the fastest grow­ing seg­ment of the firm. In­cre­men­tal change — that’s been the key.

An im­por­tant thing to note here is that, by def­i­ni­tion, the ma­jor­ity of ser­vices my firm of­fers are clas­si­fied as “tra­di­tional.” True trans­for­ma­tion was the re­sult of how we ex­e­cuted ser­vices at ev­ery level of firm op­er­a­tions. To clar­ify, con­sider the fol­low­ing ex­am­ples:

Work sched­ule ex­pec­ta­tions.

Tra­di­tion­ally, ex­pec­ta­tions dur­ing tax sea­sons are that staff work 60 to 80 hours per week. By bal­anc­ing our ser­vice of­fer­ings and au­tomat­ing our tax work­flow, staff now work a “nor­mal” 45 to 50 hours per week.

Work lo­ca­tion ex­pec­ta­tions. Tra­di­tion­ally, staff was re­quired to be in the of­fice five days a week, and hours clocked was a key in­di­ca­tor of pro­duc­tiv­ity. To­day, we sup­port flex­i­ble work sched­ules and fo­cus on out­put (billings and client sat­is­fac­tion) over in­puts (hours worked).

Tax plan­ning and prepa­ra­tion.

Tra­di­tion­ally, we sent tax or­ga­niz­ers to clients, which were 35 pages in length and re­quired ink sig­na­tures. We were also too busy to pro­vide proac­tive ad­vi­sory ser­vices. To­day, we con­sider the client ex­pe­ri­ence first — that is, how can we of­fer ser­vices with lit­tle to no fric­tion? We

now only send client or­ga­niz­ers on re­quest, cap­ture sig­na­tures dig­i­tally, read­ily of­fer high-value tax plan­ning, and value-price tax re­turn prep work.

Ad­vi­sory ser­vices. Tra­di­tion­ally, client ad­vi­sory work was of­fered on re­quest only, was unique to each in­di­vid­ual client, and billed hourly. To­day, we have de­fined ad­vi­sory prod­ucts that al­low us to be proac­tive and re­peat ad­vi­sory ser­vices across clients with a set of “off-the-shelf” prod­ucts. We are also able to value-price th­ese ser­vices.

Client ac­count­ing and pay­roll. Tra­di­tion­ally, we did

not have a de­fined busi­ness model around th­ese ser­vices. There was no clar­ity around the prod­ucts we were sell­ing, the clients we wanted to sell to (se­lect niches), and the way we would de­liver ser­vices (tech­nolo­gies used). This cre­ated in­ef­fi­cien­cies and in­ef­fec­tive­ness in de­liv­er­ing ser­vices. To­day, we have a clear model in place and use the lat­est cloud-based tech­nolo­gies to col­lab­o­rate with our ideal clients and de­liver ser­vices in real time.

Get­ting to trans­for­ma­tion at your own pace

Bal­anc­ing the tra­di­tions of the past with mod­ern tech­nolo­gies and strate­gies is how firms should con­tinue to evolve. And make no mis­take, evo­lu­tion is in­evitable. It’s how you get there that’s unique to your firm. Tak­ing change in small, di­gestible chunks al­lows firms to prop­erly plan and roll out new ser­vices and prac­tices that are ef­fec­tive and suc­cess­ful.

Too of­ten, as in­flu­encers, we can get ahead of our­selves — preach­ing that the time is now and that fail­ure to adapt leads to demise. While change is in­deed rapid in our pro­fes­sion, it’s im­por­tant to set in­di­vid­ual goals in or­der to achieve (down the road) true trans­for­ma­tion.

If you are work­ing ev­ery day to get a lit­tle bet­ter … to im­prove tech­nolo­gies, to re­fine your busi­ness model, to evolve your client base … then you are on the right track. The goal should al­ways be in­cre­men­tal im­prove­ment. The end re­sult is trans­for­ma­tion. AT

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