Our industry has forever been fueled by debits and credits, hourly billing, and coffee.
Want to build a successful firm? You need people who understand the principles of accounting, understand how to charge for their time, and can energize themselves to do it for hours at a time.
The playbook of old is getting tossed out. I’m sorry. For those of you who have been working at accounting firms for decades, everything is getting turned upside down—and it’s not just AI; it’s the nature of our work. This is very different from when the calculator, computers, or even when the internet came onto the scene. The new generation of accountants and accounting firms are seeking to solve different problems with new tools with more connectivity to their work and their clients.
This article isn’t about the playbook, but it may highlight an opportunity for you to step into in order to be prepared for the next wave of firm building.
Technical data debt is a problem
Over the last decade of vast technological improvements, there has slowly been a degradation of cohesive decision making. Here’s what I mean. Business owners across the world are using an average of 58 unique software programs to run their companies. However, the problem is that the data derived from the software is often operating in disparate silos; the average firm owner does not have the time, resources, or know-how to aggregate the data intelligently. As a result, companies analyze these data points independently, which yields inadequate decision making.
As accountants, we are native in the language of data. We take transactional activity or “raw data,” and cleanse, organize, and then visualize that data through the process of financial reporting. We natively understand the core concept of how to leverage data well. The core dilemma is that the majority of our tech stacks are not connected in a way that yields high-quality decision making.
As we look forward amidst a world of disparate data sources, we must become bilingual in data infrastructures in order to drive profitability for our firms and our clients.
First, look in the mirror
Today, most accounting firms rely on a set of KPIs or financial data that drive decision making for what’s next. These include gross margin, margin per client, revenue per employee, utilization, number of clients, and other areas. These aren’t bad metrics to track, but they are neither predictive nor prescriptive. The objective should be to assemble your data—both financial and operational—in a single database that allows you to create relationships between your KPIs.
Here’s an example:
You have Net Promoter Score (NPS) or customer feedback data you receive from your clients on a monthly or quarterly basis. You have data from your team in the form of hours worked and satisfaction in working on specific clients. The goal is to assess whether there are correlations between your client’s satisfaction, your team’s satisfaction, and your client's financial performance.
Traditionally, a classically trained accountant would be inclined to export all of this information into Excel and pivot table the data into oblivion. It would be a tedious process and would need to be manually updated with fresh data every so often.
If a firm has established a solid data infrastructure, all of that data is piped into a single database on a real-time basis, allowing you to create relationships between the data once and maintain consistent monitoring over time. For a small firm, that infrastructure may be as simple as Google Cloud, Big Query, and Looker or Azure, Synapse, and Power BI.
With that infrastructure in place, you now have the ability to see that when a company’s financial performance begins to deteriorate, their NPS scores tend to decrease and your team satisfaction levels move in tandem. Seeing this in real time may allow you to take predictive action to assist earlier on in the company’s journey to avoid catastrophe. Pairing the data with automatic triggers in Zapier or Make will allow you to operate proactively to grow your practice.
Now, look at your clients
When an internal muscle is built and prioritization is made around the importance of data, you will begin to observe patterns in issues faced on the client service front, including monotonous data downloads, challenging exports, constant data reformatting, and complex reconciling data from a variety of sources. When you observe these patterns that are causing your team to slow down, you begin to ask yourself if you can use your data-driven perspective to create better outcomes for your clients—and in tandem, your teams serving those clients.
Your clients often operate in similar environments where data is siloed, KPIs are scattered, and often, the financial records may not fully agree with what’s in the CRM or in their operational systems. By creating an internal understanding of quality data hygiene, strategy, and delivery, you may set yourself up to serve these clients more holistically. We’re now moving beyond the debits and credits and into a more operationally-minded world that allows their business to get unstuck. This is where I believe the future of our profession needs to be looking.
If you only do one thing ….
Getting started can feel daunting. How many accountants really understand the ins and outs of data science? APIs? Data security? The truth is that it does take a high degree of expertise to build an entire data strategy and offering. That said, if you can begin to play with data in Excel or Google Sheets, you can begin to create a framework for the type of value you’re looking to derive from a broader data approach. The classically trained accountant should feel well prepared to navigate data sets in a sheet-based environment.
Start with the value. Start with what problem you want to solve and then identify what data sets would be required to support the analysis. Start with several data exports and begin to build those pivot tables, build those lookups, and see what comes out. By going through that exercise and beginning to think about your firm’s data in a new light, you will begin to formulate a mental framework for the opportunities that lie with your data.
Once complete, when you are ready, you will be well positioned to have a great conversation with a data expert to support your data journey and build an asset for your company to carry into the future.
Last word
Sometimes, it’s difficult to know where to get started or know what questions to ask. There is a creativity element to data discovery and analysis that just hasn’t been second nature to accountants in the past. I believe it will be a necessary skill set in the future of our profession. I would encourage you to spend time participating in the conversation on social media, in communities, or one-on-one with your peers. There are so many amazing folks that are willing to share thoughts on how to accelerate your learning. Don’t hesitate to reach out to me or Intuit.