Impact of Data Automation on the Accounting Profession

We are in the middle of a massive paradigm shift, where accounting firms are reinserting themselves into the middle of our clients’ bookkeeping processes. Technologies that streamline workflow and automate data entry are changing the game for accounting professionals, creating a paradigm shift that is reinvigorating the client accounting services model and putting control of the transaction level accounting data back into the hands of accounting professionals.

Bookkeeping: A Swinging Pendulum

Empowered by easy-to-use accounting solutions, many, if not most, small businesses have taken ownership of their bookkeeping process. Old news? Absolutely, but for the purposes of this article, it is important to take a quick look at this historical shift, and how small businesses have responded to our attempts, as accounting professionals, to bring this process back in-house.

A Simpler Time – Client Write Up

Before the PC became ubiquitous, accounting professionals were deeply involved in our clients’ bookkeeping processes through a service called Client Write Up.

Write Up was not the tip of the spear for most firms, but with the right mix of technology (remember micro-computers?) and managerial oversight, the process was consistently profitable. And, more importantly, Write Up provided control over the clients’ books, as well as access to the financial information accountants needed to perform other accounting services, including the preparation of income tax returns. As a result, our clients received accurate, reliable and accessible financial information any time they wanted it. Though not perfect, it was definitely a more comfortable time for our industry.

Then came the age of the PC.

The Age of the PC and the Death of Write Up

The age of the PC ushered in the age of small business accounting solutions, an environment in which QuickBooks® eventually became the dominant player.

It didn’t happen overnight, but it did happen. Empowered by easy-to-use accounting solutions, mixed with a touch of overconfidence, small business owners leveraged new technologies to reduce accounting fees, increase control and accessibility of their data, and arm themselves with real-time financial reports.

But, there are problems with this model…huge problems! Small businesses often spend more money by managing their bookkeeping themselves, without a proportional reduction in accounting fees. In addition, the in-house bookkeeping process has resulted in books that are less accurate and less reliable. A lack of confidence in the books – or worse, an overconfidence in inaccurate books – negates the strategic benefits of data accessibility and real-time financial reporting.

Since the late ‘90s, the accounting profession has been trying to turn the tide and take control of the accounting process without removing our clients’ access to real-time, accessible financial data.

Two of these responses have provided some measure of success:

Response 1: Outsourced Bookkeeping

Outsourced bookkeeping is effectively Write Up on steroids, where accounting professionals are once again in control of the accounting data. But, this time, accountants are leveraging cloud technologies that streamline bookkeeping processes and provide clients with real-time, accurate and accessible financial reports.

Sounds like the perfect model, and it might be, if it were more economically viable.

Since someone still has to keypunch the data into an accounting solution and the level of detail our clients demand is extremely high, firms have effectively shifted the human resource and technology costs associated with bookkeeping from our clients’ offices to our own offices. And, to make the service marketable, we created annual price points lower than what our clients were paying their in-house bookkeepers.

Many early adopters of the outsourced bookkeeping model assumed that, through efficiencies, we could make the model work, and somehow charge clients less than what they were paying their own bookkeepers, while absorbing that same human resource cost in house. Some made it work and a few made it work very well. However, most found the model lacked long-term economic viability.

Response 2: Creating Power Users of Small Business Accounting Technology

The accounting technology consulting model – QuickBooks ProAdvisor® services, for example – is currently the most viable and widely adopted response to the death of Write Up.  Since small businesses overwhelmingly decided to bring the bookkeeping process in house, accounting professionals responded with consulting services to guide their clients through the process. These services are designed to:

  • reduce data entry errors;
  • locate and fix data entry errors; and
  • complete the bookkeeping process for our clients by managing tricky transactions, entering period-end adjustments (tax adjustments, amortization entries and overhead burdens) and reconciling bank accounts.

This response is economically viable and strategically sound for accounting professionals, but it’s not the ultimate answer to the problem of real-time, accurate, reliable data for two reasons: the data is only accurate and reliable periodically, just after a visit from the professional, and the client is paying a premium to maintain this periodic reliability.

Response 3: The Hybrid of Outsourced Bookkeeping and QuickBooks Consulting

The hybrid model combines consulting services – those offered by QuickBooks ProAdvisors, for example – with limited outsourced bookkeeping services. In this model, the accounting professional shares bookkeeping responsibilities with the client, managing the more complex processes such as payroll, sales tax and month-end work.

The hybrid solution is extremely powerful and effective. If the client engages with the consultant on a semi-monthly or bi-weekly basis, usually coinciding with the company’s payroll cycle, the financial information is typically complete and accurate throughout the year. However, there are two problems with the hybrid model. First , although this is the closest to real-time of any model proposed so far in this article, it is not truly a real-time solution. Small business owners can fully rely on the accuracy of their information only 12 times per year (24 times per year at most). Second, the small business owner is absorbing the cost of producing the bookkeeping in house and paying consultant-level rates for an expert to fix data entry errors and complete the bookkeeping process, making the hybrid model the most expensive for most small businesses.

An Ultimate Answer

The pendulum is swinging back to accounting firms, where we will once again bring the management of our clients’ bookkeeping processes in house. But, unlike outsourced accounting, this new model that many firms call “Business Process Outsourcing” (BPO) is economically viable.

The key differentiator between business process outsourcing and outsourced bookkeeping is data automation technology. This game-changing technology is significantly streamlining many bookkeeping processes and totally eliminating others. Data automation is, at the core, a data integration play, where front-end systems talk to the back office without the need to enter transactions. This concept is not new. Integration between the front and back office has been a core component of the technology industry for decades. The way the integration happens is the game changer.

Cloud solutions such as QuickBooks Online offer a powerful level of integration not available on the desktop, where data is shifted from the confines of separate, disconnected hard drives to robust, highly accessible servers, maintained or managed by the developers of the cloud solutions. With unbridled access to data, developers can pre-integrate systems across multiple cloud environments, removing the problematic and time-consuming IT component for the small business user.

However, tighter integration with ease of adoption is only the beginning. Solutions like QuickBooks Online are becoming as much a “platform” as an accounting solution – an integration hub around which small businesses can create seamlessly integrated technology stacks. These “stacks” function much like modules, where solutions developed by third parties can operate as efficiently as if they were built into a single program by a single developer.

Bank feeds are a great example of in-product data automation, and with Intuit’s® acquisition of Mint (and its highly sophisticated import algorithms), the Bank Feeds feature is much more powerful than its predecessor, Online Banking.

Even though there are tools within QuickBooks, most of the data automation options are coming from independent developers of solutions that integrate with QuickBooks by using the Intuit Partner Platform (IPP).

For a flagship example of data automation offered by a third party, take a look at ReceiptMatchSM with QuickBooks® a benefit offered on all Business Cards from American Express OPEN. This powerful automation technology moves data (and optionally, an image of the paper receipt) from the retail counter to the back office without the need to enter the transaction data into QuickBooks directly. It does this in three simple steps:

  1. Snap – Take a picture of the Business Card receipt using the ReceiptMatch Mobile App on your mobile device, and ReceiptMatch will match and attach it to your Card transaction (in your American Express online statement).
  2. Tag – Label the transaction with your own QuickBooks category, right from your American Express online statement or ReceiptMatch Mobile App.
  3. Review and send the transaction data with a link to the receipt image directly to your QuickBooks company file.

ReceiptMatch with QuickBooks is just one of many solutions available in the space. With the right technology stack, small businesses can outsource back office processes to accounting firms, freeing their company to put all of its energy and human resources into the front office, into customer and vendor facing activities, and operation level logistics like warehouse management, shipping/receiving and order fulfillment. The accounting professional can once again own the precious accounting data, but this time, it has a process that does not involve inflated human resource costs or an ongoing scramble to obtain source documents from clients.

The Value Component for Accounting Professionals and Their Clients

Through BPO that leverages data automation technologies, accounting professionals can obtain the ever-elusive “holy grail” of our industry: real-time, accurate, highly detailed financial reporting.

Now the real fun begins! Armed with solid financial information, accounting professionals can provide value-added, strategic services to their clients, elevating their role from historian (which encompasses both reporting and compliance work) to forward-thinking small business advisors. Examples include qualifying, maintaining and growing the technology stack, completing and organizing the data set (created through automation), validating and verifying the data set (created through automation), interpreting the data, and ultimately, contributing to small business success.

To make this happen, accounting professionals need to stay on the technological cutting edge, embracing accounting solutions, like QuickBooks Online, that function as technology platforms and accounting products. Next, accounting professionals need to build technology stacks that incorporate the right mix of data automation, including Bank Feeds and ReceiptMatch with QuickBooks, and business intelligence solutions such as EssentialCFO, LivePlan, Insperity Reveal and PlanGuru.

At Woodard Consulting, we adopted a new vision statement around this incredible opportunity: “To radically and positively impact the way small businesses operate.” Our purpose statement, the statement that defines the “why” behind every task we perform, is: “We generate success for our clients.” We believe a business process outsourcing model that leverages QuickBooks Online, combined with the right stack of integrated technologies, is the key to pursuing our vision and fulfilling our purpose.

The future of our industry is bright – and the shift is taking us to a place where we are heavily empowered to support our clients. But, as with all shifts, we must adapt as an industry, adopt new technologies and educate our clients on the need to make changes. In essence, we must embrace the future!

Editor’s Note: Joe Woodard will deliver a live presentation based on this article during the upcoming QuickBooks Connect conference in San Jose, Oct. 22, 2014. He will also present a special pre-conference program with Doug Sleeter on Oct. 21. Learn more about this presentation, and everything Intuit will offer during this exciting event, at www.QuickBooksConnect.com.

About the Author

Joe Woodard

Joe Woodard

Joe Woodard is the CEO of Woodard Companies. He is an author, consultant business coach and national speaker who has trained over 75,000 accounting and business professionals in areas of practice development, changing technology trends, strategic consulting and how to maximize the use of accounting software in their practices. In 2012, 2014 and 2015, he was recognized by Accounting Today as one of the Top 100 Influential People within the accounting profession. In 2008, Joe he recognized by CPA Practice Advisor as one of the Top 40 Up and Coming Thought Leaders under the age of 40. He regularly publishes articles for Intuit publications and for Insightful Accountant, and has been featured repeatedly in Accounting Today and AccountingWEB, both in articles and in video interviews.

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