Decades ago, accountants needed practical knowledge of using some of the killer applications such as VisiCalc and Lotus 1-2-3, which were very popular in the late 70s and early 80s. This makes us wonder how old the usage of technology in accounting is. Later, MS Excel took over a big part of the market, but today, accounting firms have a series of technological options to use while offering and/or delivering client accounting services. Now the growing number of accounting applications makes us wonder what the future could be.
Coming back to the present, technology is not limited to be applied to accounting operations – it’s the way to improve the entire CAS business model. Yes, today, technology is essential as it is driving client demands & expectations along with the way firms interact with their clients.
In this age of disruptive technology, missing out on technological opportunities can cost you more to catch up with the leaders.
CAS as a Big Source of Revenue
For CPA firms, CAS has become one such business aspect that can generate a considerable value of revenue. Moreover, today’s technical advancements (merged into accounting) are empowering CPAs to handle repetitive, time-taking and expensive-to-manage operations such as bookkeeping services, write up, after the fact reporting, invoice generation, bill payments, etc. And must-to-mention cloud solutions have provided multiple advantages to even uncountable small size firms.
“According to the AICPA’s 2016 National Management of an Accounting Practice (MAP) Survey, the percentage of net client fees provided by client accounting services more than doubled for firms with revenue of at least $10 million, from 3.9% in 2014 to 9% in 2016. Client accounting services also produced double-digit percentage gains for firms with annual revenues from $1.5 million up to $10 million.”
However, many firms offering CAS often face multiple challenges as they have to provide services that clients can afford while earning profits for themselves.
Common Challenges that Arise While Providing Client Accounting Services
1. Manual & time-consuming jobs
It requires a staff dedicated to performing tedious data entry jobs, which include checking and examining receipts, reconciling them with bank and credit card statements, and entering the entire data into spreadsheets. All these are repetitive yet highly essential tasks, and it is challenging to find professionals interested in doing such tiresome work.
2. Following Up on Client’s Documents
It is one of the most common challenges faced by any accounting professional. Asking and reminding clients to send more information, receipts, take a lot of time, and long phone calls are additional. The entire follow up process is absolutely troublesome.
3. Loads & Loads of Work
Accountants receive bank statements, paycheck stubs, and additional financial information from clients at the month-end in a batch, to proceed further. Due to this, they have to wait until they receive everything in hand and then rush to complete the required accounting procedures promptly.
4. It is often Expensive
CAS often becomes a little costly to handle in-house, and firms walk toward outsourcing service providers to manage repetitive and time-consuming tasks such as bookkeeping. Moreover, this sometimes becomes risky as client data goes to an outsourced firm. This may also result in delays as final reports will undergo multiple quality tests.
Other than these challenges, lack of transparency in firms, interdependencies between departments, and market competition are some additional challenges.
Let’s now get further to some of the technologies that can help firms to tackle most challenges and everyday accounting problems.
1. Automation Technology
Under CAS, clients expect accountants to provide helpful and practical guidance and advice to enhance their financial health. By automating most accounting tasks, accountants can spare enough time to work on advisory aspects. Additionally, it brings value to firms as well as clients. Firms help clients to automate most processes so that to make their lives a lot easier.
Clients can upload receipts of expenses from anywhere at any time using smartphones. They can scan financial information from invoices using OCR; thus, they can record the data without manually doing it. Moreover, frequently done transactions under the same category or with the same amount can automatically be updated to the accounting software they use.
2. Cloud Accounting
The cloud solutions are becoming extensively popular in the accounting industry. Cloud accounting applications are capable of handling payroll, invoice processing, tax preparation, and payment processing. All the information related to expenses and income gets updated as soon as the changes are made. All these changes can also be monitored from the dashboard by anyone having the user authority. Switching to the cloud also frees up the IT team from the burden of data transfer from one software to another.
3. Blockchain Technology
Commonly, a transaction involving multiple parties tend to have different records for each party. Thus, it is difficult to reconcile these records; moreover, reconciliation takes a lot of time. But, blockchain technology has made the verification job easier. It is a complete and automated audit process that audits each transaction in no time. These are the reasons why blockchain technology is expected to boost accounting procedures and transform the entire industry in years to come.
How Will Clients Get Benefits from These Technologies?
- Disaster-proof data storage
Strong passwords on data storage devices or desktops can protect the information from hackers but not natural calamities. Cloud storage solutions keep the data secured online, which clients can get back into their desktops, even after recovering from a disaster.
- Quick transfer of information
Firm-client interactions are usually frequent; in fact, the number increases at the time of issuing financial statements, tax preparation, and financial close. Automation and cloud technology has resolved almost all the issues responsible for delays in sending and receiving urgently required confidential information.
- Becoming audit-ready
It’s common for accountants to remind their clients for collecting and keeping receipts at a safe place. But, today, clients can store scanned copies of receipts to prevent getting into the cluttered piles of paperwork at the time of an audit.
- Getting financial reports on time
Again the automation features of accounting applications help firms to complete a significant part of the accounting at the end of the month. Thus, clients can get financial reports on time, as timely & accurate reports are vital for financial forecasting.
Why is technology important for you?
By using automation-powered accounting applications, firms can improve their overall efficiency and reduce the turnaround time by automating the repetitive and time-taking accounting processes. This way, you can convert CAS into a profitable business aspect.
Generally, the fee you take from your clients is based on the time your firm takes to fulfill their accounting requirements. Using technology to improve your firm’s productivity, you can easily manage to handle more clients than you currently have.
By automating most of the data entry and transactional work, you can serve 40-50 clients per month with a revenue of around $360,000 per year. Thus, improved efficiency leads to enhanced productivity, which further leads to profitability in CAS.
Experts’ Thoughts about Modern Client Accounting Services
However, still, many CPAs and firms are not sure about what CAS includes, and what benefits does it deliver to them? Therefore, to help them understand it better, we asked accounting experts about their views on technology-driven CAS. Let’s read what they say!
1. Atiya S. Brown, CPA,CA CFEI, Owner ofThe Savvy Accountant firm
I believe that the modern accounting firm is able to provide top-notch accounting and tax for its clients no matter where they are. So much of business is virtual today, and as accountants, we have to be able to meet our clients where they are.
Being paperless and working remotely, I am able to maximize my hours and thus able to supply outstanding customer service to my clients. I have more capacity to serve the needs that my clients have as well as the bandwidth to help them grow by finding areas that they don’t realize they need help in and getting them the help needed.
2. Tim Adams, CPA
As artificial intelligence threatens to take over more and more of the day-to-day accounting functions, accountants need to be more proactive instead of reactive. Looking in the rear-view mirror at what happened last month or last year isn’t differentiating us from what automation is starting to do.
The accountants who thrive going forward will be the ones who identify and help businesses focus on what I call leverage points. These are the fulcrum points inside a business where small incremental improvements can have a snowball effect on bottom-line profitability.
3. George Birrell, CPA
The accounting industry is going through an incredible change due to technology in the past ten years. The minutia of a task that accountants had to do in the past are being eliminated by automated processes. This allows for Accountants to utilize their skills more efficiently and provide more value to clients. For instance, the rise of virtual bookkeeping and tax prep firms such as Tax Hub has made it easier and more efficient for both clients and providers to communicate and share documents. Office visits are no longer necessary, which has decreased the cost of providing services.
4. Jake Riniker, CPA
Modern client accounting is evolving in three distinct areas, shared responsibilities, interconnected systems, and increased analysis & consulting from an accountant. Cloud accounting systems have made today’s accounting much more efficient between organizations and their accounting partner and allow for better connected back-office processes.
Our firm Johnson Block & Company assists small to mid-sized firms with their accounting needs. I have worked primarily with business owners that are understaffed and looking to automate their back office. I’m not only well versed in accounting but also human capital management.
The term shared responsibilities can be defined as the divided accounting duties between an organization and its accounting firm. Cloud accounting technology has made it more efficient to share duties, cater to each other’s strengths, and assemble financial statements. A common division results in the organization taking care of entering the account payables and receivables. If questions arise as to how to code an item, it is easy for the accountant assigned to their account to view the general ledger and adjust. The accountant is responsible for adjusting entries, bank reconciliations, and closing the books at month-end. If setup and train properly, the client reduces staff labor hours, has cleaner data, and the service provider is only billing for time spent on value add items versus the collection of data.
Interconnecting the vast amount of back-office systems is also easier with cloud accounting technology. Having a platform that allows app integration will streamline numerous areas of an organization. Companies can integrate time and attendance, payroll, invoicing, credit card processing, banking, and more. This allows staff to focus on value-adding areas and reduce administrative time. It is our job as accountants to help our clients streamline their processes and implement the best system and technology structure.
With the ability to automate and streamline processes, our role as accountants has shifted towards consulting. Accountants are relied on, not only to compile financials but also aid in the meaning of numbers. Accountants use benchmarking, ratio analysis, cash flow management, and create key performance indicators (KPIs) to better assist in their client’s decision making. More than ever, an accountant has increased its role as a strategic advisor.
After considering all the wonders that technological advancements can do for CPAs, it would be fair to say that merging technology with accounting while providing client accounting services can result in overall business growth and better control over accounting operations. Additionally, it will provide firms with a clear view of projects that are pending, completed, or requiring review. In this way, technology-driven client accounting services are reshaping the entire accounting industry.
Author Bio: Stacey Howard has 6 years of experience in accounting & bookkeeping. She has been working as an accountant with reputable firm Cogneesol– accounting and bookkeeping service provider. Due to her passion, she has contributed significantly through her write-ups about multiple accounting industries. You can reach Stacey at LinkedIn.