The Five Costs of Reactive Technology Management in Accounting Firms

For accounting firms that plan to remain independent and grow organically, the costs of reactive IT management affect profits, productivity and retention.

Technology systems are a key valuation metric, and independent firms that take a wait and see approach to technology management will accept a weaker competitive position. Here are five of the main costs of reactive IT management and how to move to a proactive strategy that supports your firm’s vision.

Cost 1: Paying Per Technology Problem

Paying for each independent technology problem adds up. It is like avoiding regular car maintenance. You lose control over budgeted IT spend from month to month.

On top of that, trying to find trusted help for one-off jobs can be difficult when service providers are busy with regular clients. The hours can tick by as you try to get someone on the phone with emergency availability, and your technology situation can get worse.

Even if you have an in-house IT team, partnering with a reputable IT firm that understands your business sets your firm up for proactive management. The right provider will advise on strategy and anticipate updates, maintenance and new solutions to keep your team operating effectively and focused on your clients — not on technology that may break down on a deadline.

Choosing a comprehensive IT management firm may seem like a new budget item up front, but long-term your IT budget will be more predictable and less costly.

Cost 2: Professional Liability

When assessing a CPA firm’s new or emerging technology needs, we come across CPAs and non-CPAs who have become the firm’s “resident IT expert.” This role creates a lot of pressure on this individual, but also liability if the employee is not a trained IT professional.

Thankfully, employees can go back to doing the job for which they were hired once the company partners with an IT management firm. Look for a firm that answers all the “dumb” and “bad” questions you can think of. Make sure that their own processes and security are compliant with the requirements for a CPA firm to protect sensitive, private client data.

Cost 3: Lost Trust and Reputations

The danger of a self-service technology set-up (or pay-per-problem strategy) can lead to potential worst-case scenarios for CPA firms. The increasing requirements for data security — and increased risk — make these options almost sure to lead to incidents in which trust and reputations can be lost.

Even if a CPA firm is covered by cyber liability insurance to cover any data breach or negligence claims, the potential costs of lost data and securing data can reach thousands of dollars according to average cyber claims in the U.S.

Cost 4: Lost Productivity

Billing rates are still a key operating metric of most CPA firms. The billing rates per partner are also something that larger firms will look at for any acquisition target. What if those billing rates are lower not because of pricing, but because the partners are doing tasks that could be automated?

An automated process, an app or other solution could reap tremendous benefits for partners that are looking to increase billing rates without adding staff. The initial investment and willingness to adapt to new technology can lead to enhanced productivity, better profit margins and visibility as a higher value firm.

Cost 5: Business Intelligence Gaps

Although cybersecurity and productivity are two of the main reasons that firms seek outside guidance and consulting for IT management, another is the need for faster and current business intelligence. As clients look for proactive consulting beyond compliance data, a CPA firm’s technology must be able to analyze and produce forward-looking data that makes a difference.

Firm leaders don’t always know where to assess the gaps in their current systems and processes to produce better or faster reports, particularly if they engage in CFO services or comprehensive accounting services. Partnering with an IT management firm that understands how to get the most efficiency out of financial platforms and solutions — including the firm’s existing systems — is a competitive advantage in the long run.

As your CPA firm looks ahead to technology investments for the coming year, consider these potential costs to reactive IT management. Prioritize which of these areas to tackle first for higher profits, enhanced productivity and market visibility — not to mention team satisfaction and client trust.

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Micah Thor is Vice President of Operations for Tech Guru, a provider of technology consultation, IT roadmaps, implementation, monitoring and management services for CPA firms nationwide. https://www.techguruit.com/services/