Tag: accountant value

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Accounting Professional Value is Insight and Advice, Not Just a Hosted Server

Accounting Professional Value is Insight and Advice, Not Just a Hosted Server

Back in the late 90’s, when the application service provider model was first established, a number of providers recognized how beneficial it would be for public accountants to use hosted applications to work more closely with their accounting and bookkeeping clients.  Seeking markets which would rapidly adopt a hosted application model, these providers focused on hosting small business accounting solutions such as Intuit QuickBooks desktop products, and then sought participation by the largest addressable communities of users working with those products – QuickBooks ProAdvisors, bookkeepers and accountants.  The idea was that the community of QuickBooks professionals would benefit by bringing their clients onto the hosting platform, and service providers could sell to one professional and gain a bunch of small business users.  It made sense, too, as it allowed the professional to have a single service and login that allowed them to access all their client QuickBooks company files.  The client could log in to the system, too, delivering remote access and managed service benefits to the client, as well.  But there was a catch, and it didn’t fully reveal itself until recently as cloud-based applications and true SaaS applications began to gain market adoption.

The problem actually started to reveal itself as more businesses elected to adopt hosting services.  There’s a saying amongst the QuickBooks hosting providers that “nobody uses just QuickBooks”.  Saying “nobody” uses just QuickBooks is a bit of a stretch, but the reality is that numerous businesses use other applications and software solutions in addition to their QuickBooks product.  Sometimes these products integrate with QuickBooks and sometimes they don’t, but it is not often that a business utilizes just the one software solution.  At minimum, there are likely email or productivity tools in use, too.  The point is that the QuickBooks hosting providers – those hosts focusing on providing service to QuickBooks accountants and small business clients – realized that the number and variety of applications desired by their customers would grow very quickly, as would the variety of needed implementation models.  The unfortunate solution of the time was to just put it all on the same environment.

The original selling message to the QuickBooks consultant and accountant markets was that they should get all their clients on to the hosting service, and then the accountant could benefit from an “economy of scale”, making the cost of the overall delivery lower.  Further, by grouping the firm and the clients into a single hosting environment, it would make application and data sharing easier.  Both of these messages are true, but putting the firm and its clients into a single environment – with the firm as the “sponsor” and front line promoter of the service – began to have impacts which were not clearly foreseen.

  1. Accounting professionals and consultants changed the nature of their relationship with the client, going from trusted advisors to technology and solution vendors.
  2. Client business technology needs were placed as secondary to “enabling” the working relationship between the accountant and the small business client.
  3. Attempts to fully satisfy client technology requirements overburdened and impacted the environment, reducing overall service quality and satisfaction and diminishing the value of the scale economy (as well as the clients’ perception of their accounting professional).
  4. Firms structured their processes to support a single technology and operating model, and found difficulties in adopting new strategies or solutions.

In concept, having accounting professionals and their clients all working seamlessly together in the same systems sounds great.  For some firms, a cloud server packed with all the firm and client applications and data enables an entirely new business and service model, which is very cool and it actually works (for some firms and their clients).  But the problem – a problem which may not be fully revealed in the short term – is that the various businesses involved, from the accounting practice to each and every client, has different business needs and operates as a unique organization.  While there may be fundamental similarities, “the devil is in the details” as they say, and a single platform or hosting solution is unlikely to really work well for all.  Even more potentially damaging, the perception of the trusted advisor who is now viewed as a vendor of IT services or software erodes the value of the client engagement and the potential for the firm to deliver greater benefit through their core offerings.  A business owner is more likely to change vendors of IT service than they are their trusted accounting or finance professional.   And they’re also more likely to change IT service providers if the provider cannot deliver exactly the application or service desired.  When the accounting professional is perceived to be the IT service provider, the lines are blurred and the client ends up attaching their loyalty to a software product or business solution instead of the accountant advisor OR the IT provider.

With SaaS and native web-based applications being broadly adopted by small businesses, the opportunity for firms to engage with clients in different ways and with different solutions started to break the one-size-fits-all hosting approach.  Professionals found that empowering their clients by supporting properly fitted solutions which work for the client business delivered the opportunity to become more operationally and strategically involved with the client business.  Deeper operational and strategic involvement with the client became the means to drive increased value in the engagement and services offered and delivered.  The client business was able to benefit from the involvement of their trusted advisor, regardless of what platforms or systems might be in place.

Accountants and bookkeepers are recognizing that the previous model of aligning the practice with a particular software product or delivery system may not be the best approach to building and retaining the customer base.  With new business accounting and bookkeeping solutions emerging regularly – and gaining broad market adoption – and as more and more varied cloud based services and solutions are applied to various business problems – professionals will further recognize that their value is not tied to a cloud server, a single small business accounting solution, or to any particular technology.  The value of the accounting professional is not in the software they support or the server it runs on.  The value of the accounting professional is in the insight gathered and advice provided – services offered which help support better business management, growth and profitability.

Make Sense?

J

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Sleeter Peeps and New Technology in Las Vegas

Sleeter Peeps and New Technology in Las Vegas

Marshmallowpeeps.com bunnies Peeps

The Sleeter Group is preparing for its 10th annual Accounting Solutions Conference, which is in Las Vegas next month (Nov 3-6) at Caesars Palace.  The conference is THE annual event where Sleeter Group Consultant Network members and other accounting, bookkeeping and business professionals get together to learn about new technologies, see and explore a wide variety of solutions and services, and to meet and network with their peers and peeps.

The venue this year, Caesars Palace in Las Vegas, is likely to be even more fun than last year and is far easier to get to than Orlando, Florida (for those of us on the West coast, anyway).  And, unlike in Florida, we’re probably not going to see all those little lizards everywhere around the hotel grounds.  Well, unless there’s a lizard convention going on in LV, which wouldn’t surprise me.  Actually, the good old days of attending the conference at the Tuscany Suites are what I miss – when the venue was a little more intimate and you could really have a good conversation without all of the typical Vegas distractions.

The “Sleeter Conference” used to be a purely QuickBooks-oriented conference, but has expanded to embrace the larger realm of products and services emerging which serve various small business accounting or process automation needs.  While there remains a very large focus on the QuickBooks products and service lines, it is not unusual to see sponsors and speakers representing other accounting solutions and business technology products.  The benefit for the audience is exposure to emerging technologies and trends, and discussion on how these trends are impacting business in so many ways.

Among the technologies and trends to explore at the conference are application hosting and software licensing and delivery, and how those models are changing the way people obtain and use their business applications.  We introduced the application hosting models and cloud-based QuickBooks models years ago, and those hosting solutions proved the value of anytime, anywhere access to conventional desktop applications.  Now, we’re introducing other application delivery models which address a variety of needs, and which go beyond the Remote Desktop concept.  It’s pretty cool stuff, and this conference is where you can learn more about it. [*Note: visit Skyline Cloud Services by Uni-Data at the conference; they’ll know where to find me.]

Meet me in Las Vegas next month, and we’ll chat more about technology, the evolution of the accounting industry and profession, and how these elements are combining to create new challenges and opportunities at all levels of business.  Sleeter peeps – I’ll see you there!

J

 

  • Read more about how accountants need business intelligence, too
  • Read more about how there’s no fear and loathing in accounting
  • Read more about the pressure on accountants to deliver more value and intelligence to their clients
  • Read more about Data Warriors: accounting in the cloud
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Lease Accounting Rules, Small Business Financing and the Cloud

Lease Accounting Rules, Small Business Financing and the Cloud

Cloud Service FinancingThere are changes in lease accounting rules that may have broader implications than expected.  Lease accounting, or accounting in general, isn’t exactly an exciting topic and generally doesn’t come up in conversation.  But the changes to how business equipment and other leases are accounted for and reported could become additional fuel for cloud adoption by businesses – small business looking for financing, in particular (= lots).

First, what does accounting for leases have to do with small business financing?  Quite a bit, actually.  The balance sheet is one of the things a lender will look at when considering a small business for a loan, and if lease obligations and leased assets are on the balance sheet, they’re going to want to talk about them.  They’ll also possibly look at asset turnover – trying to understand exactly how much in assets it takes for the business to make “x” amount of money.  Banks and other lenders like to know they’re loaning money to a business that is going to pay it back, and in a reasonable amount of time.  They will limit their risk potential as much as possible, and they do it by looking through the financials and related information.

Business value is generating sustainable cash flow.  If you run a highly efficient business, the more top-line growth you deliver, the more cash flow you enjoy.  For capital-intensive businesses (either through the need for capital equipment or working capital), growth can actually lower your cash flow and diminish your business value.   To understand which side of the equation your business resides, accounting professionals will often look at the return on total assets calculated over time, dividing the operating income for each period from the P&L by the appropriate period values of total assets from the balance sheet.  The resulting metric describes how efficiently assets are applied to creating earnings.

https://coopermann.com/2013/01/22/why-is-asset-management-important-to-a-business/

This can be a difficult conversation with the banker for new businesses, as they have little to go on in terms of historic data to show the bank.  The P&L (profit & loss, or Income Statement) only reflects current business performance, not what it can do in a few months or years.  By putting leases on the balance sheet, businesses are now reflecting a more realistic view of things, but are also introducing additional items for scrutiny and question by the lender; things which are often described more in terms of business strategy than in proveable numbers.  That makes getting the loan just that much tougher.

Previous rules relating to business leases didn’t necessarily require that the business recognize operating leases (leased items and lease obligations) as assets and liabilities on the balance sheet.  This is among the reasons why businesses lease equipment – they are able to obtain the item without having to record a single large capital expenditure.

The FASB changes demand that accounting for leases should be standardized, forcing the lesees to report all leases on the balance sheet, reflecting both the benefit (asset) and the cost (liability) associated with the lease.  Stated in a press release on the subject: “The new guidance responds to requests from investors and other financial statement users for a more faithful representation of an organization’s leasing activities,” stated FASB Chair Russell G. Golden. “It ends what the U.S. Securities and Exchange Commission and other stakeholders have identified as one of the largest forms of off-balance sheet accounting, while requiring more disclosures related to leasing transactions.”

“a capital lease creates a tangible right where you own the equipment; the liability in a capital lease is true debt…”

http://www3.cfo.com/article/2013/9/gaap-ifrs_lease-accounting-elfa-fasb-iasb-global-convergence

By understanding how these changes in accounting for leases impact businesses, cloud solutions providers now have an additional lever to use with prospective customers: leasing equipment isn’t necessarily the way to keep capex off the balance sheet any longer.

One of the big value propositions offered by many cloud solution providers is that their service is paid for as a monthly business expense rather than a large up-front capital expenditure and investment.  Businesses are able to use the solution and benefit from it without actually “buying” anything, it’s just subscribed instead.  All of this is really a fancy way of saying “renting but not owning”, but the result to financial reporting is the same: it’s not on the balance sheet, it’s on the P&L in chewy chunks.  This used to be a preferred treatment for leases, too, allowing businesses to reflect the usage and payment in little parts rather than a big one.  It was “gentler” on the balance sheet.  But leasing equipment and software for on-premises use won’t be competing with the cloud and subscription service any longer, closing off the “impact to the balance sheet” conversation entirely and making cloud IT just that much more important to small businesses who need cash to fuel business growth.

Make Sense?

Joanie Mann Bunny FeetJ

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The Cloud for Your Firm: 3 Initial Considerations for Cloud Enabling Accounting and Bookkeeping Firms Working With Small Businesses

The Cloud for Your Firm

3 Initial Considerations for Cloud Enabling Accounting and Bookkeeping Firms Working With Small Businesses

dscn0903.jpgThe potential benefits of a real-time, lean collaborative working model are too great to argue with.  Accounting professionals, bookkeepers and their small business clients are all hearing about the value of working together in the cloud, and how cloud technologies and solutions can reduce cost and improve efficiency.  There is a great deal of truth in these statements, just as there was a truth in the value of implementing computers, networks and other technologies in business.  What is not clear is exactly what businesses need “in the cloud”, and how they should approach this shift from local IT to outsourced managed service.  Initially, there are 3 issues which warrant consideration, if not deep discussion, prior to making any significant move to relocate internal IT and shift business applications to the cloud: internal use systems, client interaction, and operational support for both.

With all the discussion about cloud computing and remote access, it would seem that all the applications and solutions businesses need are now available online and paid for in low monthly subscription fees.  Anyone working with small businesses, however, comes to understand that the vast majority of these businesses are still using more traditional modes of information management and computing.   For the most part, these businesses are using PCs and local networks, possibly with a little hosted email thrown in.  Almost certainly they have a website and maybe even a fairly sophisticated e-commerce system that allows them to sell products online.  But when it comes to general office functions, and particularly back-office functions like bookkeeping and accounting, the software and the data generally reside on the office PC and server.

Accounting and bookkeeping professionals who work with small businesses are often in the same position as their business clients when it comes to information technology.  Since so much of the work involved requires the same programs and data formats as those used by the client, service providers find that they spend as much in management of software licensing and systems to support working with client data as they do on systems intended for internal use only – sometimes more.  Many of these service providers are also small businesses, and it becomes challenging to find a way to handle internal IT needs while at the same time trying to address those of the client. Where e-commerce solutions are readily available to handle operational aspects of product based businesses, the best tool set for a professional accounting firm or bookkeeping business working with small business clients may not be so easily defined.

The solution for many providers has been revealed through cloud computing and hosted application models.  With Cloud Servers, Remote Desktops, and Virtual Desktop Infrastructure now widely available as affordable alternatives to capital-intensive implementations of locally installed products, businesses are finding new abilities to manage applications and data, provide mobility and enhance collaboration.  The additional benefit is in how accounting service providers may engage with their clients in more efficient and effective ways, without the burdens of replicating data or trying to share access to a single machine or application resource.

There are a number of elements to consider before taking the file server to the parking lot and running it over with a truck.  Moving to the cloud is not a one-step process, and it is important to do a little research and collect some important information before making the final decision on how to proceed.

Internal Use Systems

Among the first of the questions to ask when considering a change in IT management approaches is “which software do we need”?  Implementing an outsourced IT arrangement, which is really what “cloud” is about”, does not necessarily mean throwing away all the existing software and starting with new.  The software in use within the firm may be exactly what it needs right now and adding full IT management, fault tolerance, and remote or mobile access could be the main scope of the requirement.  Moving from locally installed solutions to hosted solutions provides quite a number of benefits while removing many of the direct costs and frustrations of IT management and administration. The greatest benefit of this type of approach is the ability to preserve the “body of knowledge” existing in the business, knowledge invested in the people and processes already developed.

On the other hand, there may be new tools or services only available as “cloud” service, and it makes sense to explore how they may benefit the business more than the in-use applications.  The important element is to remember that the solution must address real business problems, and whether it runs in the cloud or not isn’t the first or most important thing to ask.  For example, a discussion about whether QuickBooks Online might be a better choice than QuickBooks Pro, Premier or Enterprise should be focused on the functionality provided by the applications and not which servers they are running on.  With application hosting for QuickBooks now being an available option, there is a managed IT and remote access capability for both solutions, rendering the fact that QBO is a SaaS solution almost irrelevant in terms of being a differentiator.

Client Interaction

An important aspect of adopting new technologies or working models is the consideration of how the firm and the client businesses will work together, and whether or not there is (or could be) a standardized approach that might work for most clients.  Certainly, it makes sense to standardize as much as possible.  Treating every issue or engagement as a singular event – a one-off – is the least efficient way to do business.  The key to profitability is in the firm’s ability to produce high quality work consistently and in a timely fashion.  This requires that the business be well-structured in terms of the standard processes and methods which will be used to work with client information.  When the firm and the client can work seamlessly together as and when required, and when each is responsible for their own systems and data, it is a best-case scenario. The questions relating to client interactions focus on how the firm works with clients and which tools or solutions are required to improve that situation.

It is likely that the firm will need to be able to address working relationships with various client and engagement types – where clients do some of the work, where the bookkeeper does the work, or where the participants work collaboratively together in the same systems.  While it may seem that the best way to create a dependency on your services with the client is to keep them out of the systems, empowering the client is really the key to a close and long-standing engagement.  This means that the client needs to have their own solutions and approach to cloud-enabled IT, and the accounting or bookkeeping service provider should be able to access and work within that environment.

It is rare that a small business can effectively operate without computers and software to manage information and support operations, so it makes sense that the business should have its own accounting and financial systems, too.  For the accounting service provider, it is essential that a level of understanding be gained around the use of today’s available remote and mobile access technologies, as it is with these solutions and tools that participation in client systems will be enabled.  When the client accounting solution sits on their office PC, there are limited options for working together in any real collaborative form.  Connecting to their PC via remote control is a widely recognized means of gaining access to client systems, but if the bookkeeper is on the system when there is a problem of some sort, all eyes go directly to that remote user as the likely cause of the problem.

The considerations relating to remote access to client systems focus not just on enabling a collaborative working environment, but also on mitigating risk and improving client perception.  The risk issue comes in when the accounting service provider is exposed to systems and information not relevant to their task, and the perception issue becomes material when the accounting professional becomes the software or IT service provider.  It makes sense for the accounting professional to make recommendations or suggestions about software and IT service which might benefit the business, but not to necessarily be the reseller or direct provider of the product or service.  The moment the accounting professional attempts to sell the client a software product or IT service, the relationship is changed and the client is more likely to view their accounting pro as another vendor rather than a trusted advisor.  It’s also not necessarily a great move to start a new client engagement by telling the client they have to switch accounting products to allow the accountant to work closer.  Rather, professionals need to help their clients position those products for more efficient use, which may include enabling remote or mobile access granted via deployment in the cloud.

Operational Support

When businesses outsource their IT management and administration, there is often an initial belief that all responsibilities in these areas will be handled by the IT service provider.  What is often overlooked is the reality that the firm still needs to have people attending to IT related tasks, just doing different levels of work with the technology. It is important to recognize that someone in the firm will end up dealing with various IT and process support issues, and it still makes sense to have personnel dedicated to these tasks (*Note: here’s where I suggest that the cloud changes the focus of internal IT personnel, but it doesn’t eliminate the need for them).  The service provider and solution evaluation and selection process, as well as the actual deployment and administration of services, will take valuable time away from actually performing client accounting or bookkeeping work, and there should be people attending to these issues while the business continues operating.

Where an internal IT department or contract technicians may once have supported internal systems, an operational role within the business is still required to manage outsourced IT activities, including and particularly those where clients are involved with the firm systems.  Delivering new benefits with a minimum of business disruption is the goal, and can be achieved through proper planning and coordination with team members and clients alike.

Closing Thoughts

“The Cloud” is just another way to run software and implement computing resources.  It still takes servers and software, it uses processors and storage and networking, just like more “traditional” computing models.  The difference is in how these resources are purchased and provisioned, and the impact is a change in how businesses of all types can benefit from technologies which enable collaboration, lean process, and mobility.  The Cloud for Your Firm addresses your internal business requirements, lends itself to client collaboration, and has internal operational support to ensure the firm is fully leveraging the available benefits to improve business performance and profitability.

Make sense?

J

Read more about Accountants and Bookkeepers Working With QuickBooks Clients: App Hosting Approaches That Work

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The Language of Accounting: Disconnect between Accountants and Bookkeepers

The Language of Accounting: Disconnect between Accountants and Bookkeepers

There are a tremendous number of bookkeeper training programs developed over the years which propose to deliver the essential bookkeeping knowledge (e.g., double entry accounting) required in order to properly service business bookkeeping requirements.  Particularly as the CPA profession stepped away from traditional bookkeeping in favor of performing “higher level” and more profitable work, there was and continues to be a great need for skilled and experienced bookkeepers.  While it seems that accountants and bookkeepers would be a natural fit for partnering to serve small business client needs, there is often a disconnect between the two which causes the working relationship to not always prove as beneficial as it could.  What is the cause of this disconnect?  In many cases, it is due to the fact that the bookkeeper training educated the operator on the use of a software product, and not on the fundamentals of accounting and bookkeeping.

Over the past few years, I have had the opportunity to look through a lot of bookkeeper training programs, and the thing that stands out is that many of these programs aren’t really training bookkeepers on accounting principles.  More frequently, the training is focused on teaching users how to use software (usually QuickBooks).  With the number of users of the QuickBooks product, it is obvious that there is a need to educate users on the solution because people need to know how to use their software properly.  But it happened at some point in time that a majority of the industry came to believe that learning QuickBooks (or Xero or Freshbooks or Kashoo or whatever) was somehow synonymous with learning bookkeeping.

When I first started working with my father in his accounting practice, I had to use a manual general ledger, check register, etc.  It was all manual – computers didn’t come along for a while (yes, I am that old).  It was time-consuming, but it taught me the fundamentals.  I know what a subledger is.  In consumer-friendly software like QuickBooks, you don’t work in the AR subledger; you push the button that says “customers” or maybe “invoices”.   QuickBooks, in many ways, doesn’t speak accounting.  It speaks record keeping.  And this is where the disconnect begins.

An old school accountant will recall the green eye shade days and working with book ledgers and 13-column pads, but even “new” school accounting professionals know that the fundamentals of accounting aren’t available for re-invention.  A debit is still a debit and a credit is a credit.  Yes, there are intimacies involved which speak to specific treatment of items for reporting and tax purposes, etc., but the essentials of double entry and other basic accounting principles are consistent and unchanging.

The “language of accounting” includes certain precise terms with specific meaning, and this precision in the use of terms simply doesn’t exist in many bookkeeper training programs. Rather than focusing on the fundamental accounting training bookkeepers truly need in order to be of maximum value to the business, these programs focus on helping users become experts in using the software product, or even to become experts at teaching others how to use the solution.  While this software expertise may be beneficial in terms of helping accountants work with their clients who use the software, it doesn’t add enough value to the relationship to warrant partnering.  What accounting professionals need are bookkeepers who understand bookkeeping and who can apply basic accounting principles to the task.  Which software they operate is secondary to that purpose.

Professional bookkeepers, accountants, and the business client are all in a position to benefit tremendously when the service providers team up to provide comprehensive service.  The key to making these connections lies with the professional bookkeeper who must not only understand basic accounting principles, but must also be able to speak to the accounting professional in their native language.

Make Sense?

J

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Opinion:   I think that every QuickBooks training program should include taking the sample data file in QuickBooks, and translating that to a manual accounting system of book ledgers and reports.  Then, have the student process a years’ worth of transactions manually and from paper-based source materials (and also make them create and use a manual paper filing system for all that information, and come up with a means to travel to obtain all the documents necessary which aren’t mailed via USPS).  The requirement would include generating the bank reconciliations from printed bank statements and cancelled check copies, creating a trial balance from the general ledger and then creating the P&L and Balance Sheet.  I’ll bet you end up with a group of bookkeepers who better understand the fundamentals of the accounting process.  The other benefit is that these folks will have a much better understanding of the problems in the outsourced accounting model which can be directly addressed and solved by today’s cloud and connected solutions.

 

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The Small Business Borrower | Biz2Credit

In order for regulation and legislation to work in favor of small businesses, it becomes essential that accurate and complete information be available for analysis. Too often there are details not recognized in the information used by various agencies to help guide policy and action, and particularly in the world of privately held small business, the quality of data is often in question. This is where structured accounting software and the public accountant come in to play, and where a difference can be made not only with the individual client, but at a higher level by facilitating more accurate data production to support various research initiatives, such as those sponsored through the SBA and the Fed.

Overall, these research studies highlight two things: the important role that financial institutions play in lending to small business owners, and the value of quality data sets in ascertaining financing issues faced by small businesses and their owners.

Charles Ou, Ph.D. | Senior Economist | Office of Advocacy | July 2009

With the availability of highly useful tools for monitoring various key performance indicators and metrics in the business (with analysis of cash flow being an essential part), business owners and their accounting professionals alike are able to use real business data to reveal not simply the trends in business performance, but to identify areas where direct action could improve results in one aspect or another. By paying closer attention to managing business finances and analyzing key aspects of business performance, the “discouraged” or “denied” business borrower may become a successful or (even more valuable) a non-borrower.

via The Small Business Borrower at Biz2Credit.com.