Today's Trends and Tomorrow's Shifts

We live in a rapidly changing world. To stay ahead, you not only need to recognize the barriers you face today, but also understand the seas of change both in the present and on the horizon.  Collected from 5K+ firms, we'll take a look at the top 10 barriers firms face, the 5 industry trends you need to take into account, and the 3 major shifts that loom on the horizon.

 

Today's webinar, brought to you by QuickBooks. I'm from Karbon. Definitely check out QuickBooks online. Again, if you're interested, check out Karbon as well. Today's webinar, what are we going to be talking about today? Because it's the new year, welcome to 2017. Now we are in the fourth week of it. We're gonna talk about today's trends but also tomorrow's shifts. What I've done is I've broken this webinar down into three parts. One looking at where the barriers and what historically over the last year or so many of you might be facing. Then looking at what the current trends are of 2016, 2017. Then we're gonna take a forward look out 1 year, 5 years, and even beyond that in terms of what's coming so you can understand where the puck is moving to and then be there where it is.

If you are on your QuickBooks training journey, this is what it looks like. There's Firm of the Future, which I got done with. I was on the road for all of the fall. Fundamentals training for those of you brand new to QuickBooks online. Certification for those of you that are familiar with QuickBooks online and looking to get certified. Then advanced certification for those of you already certified and looking to be experts on the advanced techniques and so forth of QuickBooks online. You can go to QuickBookstrainingevents.com to be able to sign up to any of those. There's a lot of online classes available, especially as we get into the season.

Before we get started, just a little bit of housekeeping overall. If you need to go to webinar, you can expand and control the panel with that little orange button. I will try to answer questions as we go through the webinar, so feel free to post them there. I am a little bit ... It's hard for me to multitask, but I will do my best. Again, you might want to close any applications like Skype and the like that might slow your connection down. Who am I? My name is Ian Vacin. I'm the co founder and vice president of product marketing at Karbon. My email's up there. By the way, if you want to email me afterwards, you've got any questions regarding the content or things in general. I've been the industry for 15+ years and technology for 25+. I did work at Intuit for almost 10 years, and I did lead the QuickBooks Pro Advisor program and have worked across all the different flavors of QuickBooks. I do come from a similar background and knowledge pool, so if you have any questions feel free to email me or check out Karbon.

If you're looking for more content information, not only what we do here for Intuit, but you can got karbonhq.com/editions and learn more. We're not gonna be talking about Karbon, but it is the practice growth engine for accountants. You can find more at the karbonhq.com address. I'm just gonna go through a little bit of the screenshots. There you go. Let's move on to the content. For those of you that are looking for CPE credit today, there is one CPE credit up for grabs. We're gonna be doing polling questions today, not challenge questions. I'm gonna launch the first one. We are ... Just changed my background. Which Firm of the Future topic are you most interested in learning about? Is it practice growth, process improvement, firm management, technology, strategy and vision? The team wants to know which category you want to go on, because they're bolstering and putting more content up each and every day. Go ahead and put that up there. The faster you enter those in, the quicker we can move on. Again, there is one CPE credit up for grabs. We will be doing four polling questions throughout today's webinar.

I'm gonna give a couple more seconds. Again, practice growth, process improvement, firm management, technology, strategy and vision setting. Okay? We're gonna close the poll down. Three, two, one. Just go up in here and share some results for you guys. Practice growth takes the lead, technology number two, process improvement and strategy and so forth. Let's go ahead and hide that and let's get my screen back here. We should be able to see that. There we go.

Let's get to the content today. Today's trends and tomorrow's shifts overall. Like I said before, we're gonna go through three sections. The top 10 barriers to firms, those of you that, again, for the learning objectives for today. We're gonna look at what those top 10 are. I'll talk about them briefly. We're then gonna move into the five industry trends impacting firms, and specifically we're gonna be talking about ... We did a lot of research in conjunction with Intuit regarding what are the five main trends. We actually have a trends report that you can download later. I'll give you the high level of what that is. What are the five major things that are happening today, now, that you need to be aware of and that you need to be across with your firm. Then, I want to go into the three major shifts that are on the horizon. Again, this is not only looking at short term or medium term, but also looking at long term. What are these major shocks that are on their way and coming.

Let's go to the first one. Section one, top 10 barriers to firms. When we actually collected this, we collected this from several thousand accounting professionals. I actually met with them when doing round tables over the last several years where we would meet with them in groups of 20 or so. Then we actually did some polling on top of that. The barriers broke down into seven major category types that are listed here. The top two were practice management and human resource management with time and strategy and so forth being there. While the buckets of this actually provides a little bit of color and detail. It's really the top 10 that really provide the most detail. For those of you out there, again I'll put a polling question up here in a second, but number one thing that we see across the country and actually across the globe is really around talent acquisition. The issue there is not only acquiring, but it's also retaining talent. There's been a shift that's been occurring in terms of the expectations and the situation of entrepreneurship. The classic roles that people might do to get into industry might go before you in your university. Go work at one of the big four or big five, [inaudible 00:06:22] time frame wise, and then be able to migrate into smaller practices and the like.

A lot of folks might do accounting and bookkeeping and they're part time, and then move into a full time route. Well that's relatively changed. It's been a very dynamic and a hard market. There's companies like Google and so forth that create the expectations, while false, for a lot of the millennials in terms of what to expect when going to firms and the type of composition they should have and the culture that they're looking for. Because of the addition, the changing of the times where we came out of the great recession, and now we're in this situation where a lot of businesses have learned that their finances are crucially important, and they're working to outsource much of that capability. There's just been business to go around such that to fill the gaps in folks' firms as they're growing, has been harder and harder.

Talent acquisition has been number one. For those of you out there that have got great talent in your organization and your practice, you should hold onto that dearly. Write a thank-you card. Show them that you love them. Make sure that you keep them, because, again, it is so hard to find people these days. It may take you three to six months to fill in a gap. The second one that comes up time and time again was work/life/time management. The iPhone when it came out basically revolutionized how we work and expectations around that. Clients expect to get a hold of you 24 hours a day. You've got to manage those expectations, and if you don't you're gonna find yourself getting phone calls, texts, and emails all sorts of times of the day. We talk to a lot of folks and really being able to manage their personal life has been quite hard. There are different things to do, but, again, it pops up as number 2, because, again, if you don't do that, you're ultimately just gonna be working nonstop.

Technology can help you. We'll talk about that in a little bit in terms of why you need to work remotely and so forth, but, again, you got to know how to manage it overall. The third one was really around marketing. The marketing one that came up, it was really around how to do things like referral marketing, how to ultimately create the right presence and market, search engine optimization and so forth. There's a lot of really really good marketing content, I've participated in some of it, that are on thefirmofthefuture.com site where you can go ahead and understand how to do SCO, how to do referral marketing, how to do inbound outbound, those types of things. The fourth one that came up was practice management. Ultimately, that was understanding how to get visibility across the work that's being done, transparency, and who's doing what, collaboration around that. We're gonna talk about collaboration a little bit later, too, because that is one of the emerging areas. Ultimately being able to see everything from a prospect ultimately to an existing client, and all the work that surrounds that.

Part of that same category, the [inaudible 00:09:25] thought is around standardized processes. Again, when we were at the road shows this year and I'd ask folks who had standardized processes, generally we'd only get 10%-15% of people raising their hands. It's critical. For practice efficiency to exist and be able to make the most of what you have, you've got to standardize your processes overall. The sixth one is value pricing and bundling. Again, there's a lot of great resources from Ron Baker, things up on firmofthefuture.com, to help you down that process. It is not something that happens over night. It takes time to do it. Then, again, you see on the bottom ones here we've got onboarding, growth of the business, technology. We saw technology pop up as one of the big categories of interest. Then being able to expand with new clients. Typically, when we ask folks we'll say "What are your top 3?", and most likely the top one, two, or three is gonna be one of your top 3, and then the rest should probably sit here as well.

This is part of a list of 50 or so. If you're interested in more details around these, there actually is a overcoming barriers on firmofthefuture.com. I can also point you to something as well. With that being said, if you want more regarding the barriers and so forth, you can go check out some articles. I put up this. You can download, by the way, this entire presentation off of the GoToWebinar. You can actually go watch this particular topic in more detail both in a webinar fashion, or in articles from firmofthefuture.com or from Karbon as well. If you want to learn more, go there. I want to keep us moving, because I want to get to the top industry trends now and moving forward. We're gonna do our next actual poll here. What is the top barrier to your firm? Go ahead and launch the scan. Not sure why my keynote keeps doing that, but that's okay. Is it talent acquisition, work/life/time management, marketing, practice management, or, if you're daring, go into the other. It only allows me to give five on the GoToWebinar, so I put those four up there plus the other. The faster you answer, the faster I can move on. Let's get those votes in.

Is your top barrier talent, work/life/time management, marketing, practice management, or other? Okay. We're gonna close this out here in five, four, three, two, one. Top bidding was work/life/time management with 56% of the vote. That is where you guys are at today. Let's go back to the presentation. Now, section two, the five industry trends impacting firms overall. This all comes from the Karbon Accounting Trends report. We collected all this information from roughly about three thousand firms. It's a collection of what we had done at the round tables, what we had done at the firmofthefuture road shows, as well as some polls. It turns out you in the audience and those other three thousand members, you were part of a larger ecosystem of 500 thousand firms, roughly two million accounting professionals here in North America, and ultimately facing these particular five trends. I'm gonna jump into each one, and they're gonna also relate to what we're looking at longterm and some of the shifts that we're gonna be seeing there as well.

Number one trend that we see going on currently is that number crunching takes a back seat. What I mean by that is technology that we talked about briefly beforehand is changing quite rapidly, and ultimately where machines do well is on repetitive tasks, things that require manual data entry and interconnectedness of systems and the like. There are seven different major services that you might be offering, and eight if you're doing individual wealth management. The seven are audit, accounting, tax advisory services, IT, consulting, book keeping, and payroll.  Amongst those seven, the two that are hit the most in terms of, again, this bit of automation that's occurring, would be compliance and bookkeeping. Compliance, it's a situation that obviously we don't know what's gonna happen with the new administration. There's been a lot of talk on simplification, changing of particular group polls and so forth that might occur, but nobody really knows. In reality, when you're talking about compliance, while it does get a little bit more difficult every year, it is something that's well understood. It's defined and so forth and therefore continues to be automated by different various products. Again, you have that with the [inaudible 00:14:05] pro series Intuit tax online and the like.

Ultimately what that does is allows for capacity be increased. Whether or not it be on the bookkeeping side or on the compliance side, by being able to do a lot of that manual work, repetitive work, it ultimately frees up time. That's where a shift hasn't occurred with that around value pricing, because, again, if you're going ahead and charging the same amount that you were before and you're able to do things faster, you're ultimately going to be making less. That shift of value pricing is in response to the fact of this continual push on automation overall. In addition with that, the relationship with clients has changed. This has come across a lot from the great recession and from technology that exists in people's pockets, but a lot of folks learn that when they went through the great recession that, again, if they didn't have their finances in order, a lot of folks lost everything. Ultimately, that required folks from coming out of it to know that the best people to be working with are their trusted advisors. One of those, and one of the most critical ones, is all of you there in the audience today, accountants and accounting professionals.

Ultimately, you can help them understand what their books are. They can focus on making their widgets or their services, whatever it might be, quicker, faster, cheaper, and better. They have had more demands. That's what's impacted a little bit on that talent side that we saw in the barriers, because they're looking for more and more. They're looking for not just bookkeeping, not just payroll, not just accounting services, but advisory services, advice, planning, things of that nature. Because those communication touch points have changed overall, it's about moving it to another level. I've put up a quote here. I've got a few interspersed throughout the presentation today. Because of the compression that's occurring on those two sides on compliance and on bookkeeping, it's about leveraging that to be able to drive to more to more advisory services overall. There's been a lot of talk about it, so I don't necessarily bore you with a point. Again, with that freed up capacity, you've got to be able to move to those higher-profit, higher-value services not only for yourself, but for your clients are wanting as well.

The action items out of this particular topic, out of this particular trend, is that you've got to change the conversation. The conversation is not just about when someone walks in the door, and they say "Look, I just need to be able to get my taxes done", it's about being able to have that value conversation and understanding what lies beneath that. What can we do beyond just being able to get that filing done? What can we do to ultimately help you get to wherever your desired goal is, Mr. Business owner? Part of that's gonna be then moving into business advisory services. Technology, again, in this case, it's ultimately driving that change, but it's also allowing you to free up that capacity. It's about embracing it and then leveraging its strengths. Now, I've put up here the creating a social media strategy. The reason for that is you can understand a lot about your clients and what they're facing by looking at what they've said online in their social media presence. That's about here on the marketing side. It's more about understanding what's happening with them so that when you have those conversations, you get a glimpse into what's going on so you can be empathetic. You might be able to get a sense of what they're struggling with and be able to bridge that conversation when it happens.

That is trend number one. Trend number two. I feel like this is a bit of a buzzword these days, but it has reasons, it has applicability. It's really around what's your specialty. The reason for telling you about your specialty is if a small business was going to go and and they're going to get ... Again, we're talking about this time of seasons around tax. Let's say I wanted to get my 1120 done. I went from firm to firm and I asked "Hey, I need to get an 1120 done, what's it gonna cost?" Ultimately the small business owner is gonna be racing to the bottom to be able to find who's gonna offer the cheapest. It's those folks that can actually be able to have that value conversation and be able to differentiate themselves, explain why "Look, yes you might need that done, but the reality is you're this type of business and we know how to be able to drive more value for you. Not only in terms of getting the money back or lowering your liabilities, but also we can look at your business and change and help assist you to in getting to where you want to go."

By specialization allows you to be able to charge more for the expertise, the advice, and what you do. Again, that is one side of the equation on specialty, which is being paid for what you know and how you'd be able to talk about that with them. The second one, and the more important part of this, is in terms of that marketing barrier that we talked about before. Having a targeted strategy. If you want to waste a lot of money, then you want to have a broad marketing strategy going after all small businesses in general, because the reality is you're going to have very few that are actually going to pick you up on your marketing and then take the next step to actually entertain a conversation. That's because folks want to be able to work with somebody that understands their business inside and out and provides them the advise they need to get them to that next step. When they have a generic sales message, marketing message, it ultimately doesn't have as much ... It's not gonna resonate as strongly, and your ROI and your marketing gonna drop [inaudible 00:19:41].

There's a bunch of different talks, again, I have it on the end here for some links about how to actually go about determining your particular niche, how to be able to take the next step on niche marketing. The key here is, if you want to lower your costs on the marketing side, you want to increase your fees on your services side. It's really about having a focus on who best you serve and how to serve them. We talked to folks around. Again, the narrower you go, the better. We had one person who really only worked with folks that worked with ... It was farmers, but the farming was specific to horses and so forth in terms of raising and managing horses. That is a very well defined niche. The questions were then that that's large enough for them, but it was. This particular example, they've defined the medical industry with the revenue target that they typically work within. We're in the new year. We're in the heavy season, or the busy season, per se, but this is one of the areas where you want to make sure that you stay focused to make sure you've got the right clients, not just a whole mixed bag of clients in your book of business.

Action items in here. Things to do. Your starting point for really on creating nice or understand niche is to look at who you currently serve today, who you're passionate about, which ones provide you the best revenue streams, the best profit, and then be able to understand who you love and why you love them, because that usually is your starting point of maybe where you want to gravitate towards. Another way to look at this is is that particular group ... Again, are they gonna provide ... Is there enough value there? Is there enough bodies there? Maybe you're geographically constrained and if so, maybe that niche isn't gonna work. Maybe, again, you're working virtual, and, again, you have the ability to be able to be really focused but be able to transcend different geographies. Then, ultimately, you need to drive that particular focus down to your marketing strategy overall. That is trend number 2. Trend number three. Integrated, intuitive technology. Again, when we talked to people on the road, I hear the word that I'm app'ed out. There's to many apps out there. It's just too confusing. The reality is is that the honeymoon period for apps is over.

Now it's a situation of being able to use best of breed and using applications that ultimately do more than just one thing. When we surveyed folks around, we would see a span of anywhere from five applications to ultimately run their practices and serve their clients to upwards of 40. 40 applications is way to many. There's different user interfaces. There's different workflows. Data scattered everywhere. Should not be using that many. What we're seeing now is that the applications have evolved, developed, and now they're able to do more than just one thing that they were hyper focused on. Somewhere to what we just talked about in terms of specialty and niche, many of these applications focused on something very granular or very singular to be able to ultimately do it really well. Now they've finally come to a point of branching out. Examples might be ... You've got TSheets. A lot of folks love TSheets. TSheets used to just do time tracking. Well now they're doing scheduling. If you look at something like Expensify. Expensify used to be just doing expense management. Now they're doing a lot of stuff. They're branching out to some of the travel related components.

Bill.com started off doing AP management and now does AP and AR. You're seeing that these applications have matured, and you want to be able to find applications that solve the key problem and pain that you have and then ultimately drive additional problems that are out of your firm. It's looking at the ones that solve that and then evaluating those to see whether or not you can kill two birds with one stone, for lack of better words. On this, by the way, I've got three articles coming out on how to narrow down the choices, how to pick the right technology and how to stay across the changing technology landscape. That's coming out on the firmofthefuture site. The first article I think was posted last week. If you go to firmofthefuture.com and look for my name on there, you'll see those articles coming out.

There is a place that you can go. If you go to Accountex, they have a map that shows you the 500 applications that you can choose from. What I would suggest that you do is you take a look at that and you look at the problem spaces that you want to solve, and then go look at Intuit's apps.com, because any application that you want to use better be tied to your general ledger of choice. That's QuickBooks, because, if not, you're gonna be having to deal with data in two different places. It will be a nightmare and headache. Those are two places I would go. I think this is a really really really great quote and hits it home. It's not about more apps, it's about doing more with less. You should be taking a look at what you're using today and figuring out "Well, how can I consolidate this picture? What makes sense for what I have? What can I get rid of?" Even if you choose an application that's working for you great today, you should be evaluating that over time to figure out whether or not there's a better option out there, because, again, you want to be able to move the ones that are mature, solve your problems, and possibly consolidate the different processes that you want to have.

Some action items here. Before you go and pick up new technology, your technology better be solving a key pain point. Your processes are the most important thing, not the technology. If you're gonna go to improving your efficiency, you really need to understand what are your core processes and make sure that you improve those processes first and then find the technology that marries best for that. Look for apps that incorporate one or more of those processes, and do not take in apps that are siloed with their data, because you're gonna have to be doing all that management between them. The fourth trend, age. Age does matter. I'm gonna put some stats up here. The average age today of practitioners is roughly 50 and 50 and above. Of those folks, 50% of them have not adopted the cloud. Interesting. Okay. If we take a look at that a little bit differently, the average age of those who have adopted the cloud is 36, while the average of not adopting the cloud is 40.

This is a major statistical difference between these two. That is a large number gap between the two, and it basically shows you that there is a huge separation between the younger generation and the older generation. We're using the cloud adoptive measure here to show that. When you're talking about what that means, it means that firms are generally, again, are top-heavy with folks that are resisting the change. Again, when we talk about talent and millennials and those coming in, they're looking for firms that have modernized and have not just cloud technology, but they're working in modern fashion. Ultimately, again, when you're looking at it from a talent perspective, it becomes harder and harder to hire and to retain people if the firm isn't evolving as much as technology in the general sense is evolving. Again, millennials, again, that's defined as folks in their twenties and earlier thirties. They grew up using social media. They grew up in a world of only email. They grew up with text message being the primary mode of communication back and forth, not a phone call. They're looking for places that are able to work the way they do. They expect that they can ultimately see everything in the palm of their hand.

The businesses that you're working with, the clients, they expect the similar sort of thing, again, when you look at that age demographic. To hire them and to retain them requires a different way and a different culture overall. We see this time and time again. Older partners are holding off on change, and it creates a lot of friction. Literally, I was talking to a firm a couple weeks back, and one partner wanted to make the change and change the technology that was driving underneath and the way the company was being run, and the other partner did not. What happens is when you have a situation where there's a lot of tension like that, nothing changes. Ultimately what happens and what has been happening is they're losing staff and they're losing clients. You have to look at the situation at full-face value in where you want to be. We see firms who haven't modernized their firms and looking to sell their book of business. They will get anywhere between .6 and 1.1 times next years revenue. For those who have modernized their firm, and that can be a combination of their processes, their technology, their client base, they get anywhere between 1.5 and 3 times next year's revenue.

In terms of the marketability of your practice, if it's your nest day, if you're all one of those folks that's looking to go in retirement, what is your succession plan? You need to think about that, but ultimately should you make the change? The change doesn't happen over night and takes time. One of the things that's interesting this quote brings up is time and time again we talk to firms, and you're doing everything that's right for your clients, you're killing yourself to make sure they're taken care of, you're helping them with planning, but you're not taking a step back on your own firm. Again, it's the beginning of the year. New Year's resolutions. You need to look at where your firm is headed and where you want it to be. A succession plan will take three to five years to put in place. Business planning needs to happen. At least have a one year lookout, because you want to take that business plan and drive it into what you're gonna be doing each quarter. You, as an individual, but also your staff can drive to the singular goal that you want to drive, and make sure you're accomplishing it.

You help the clients do that, but you got to do it for yourself. The action items here are thinking about ... In terms of longterm, where do you want to be? Do you want to hand this off in the family? Do you want to sell the business off? Are you looking to merge or acquire? Are you looking to grow aggressively and grow from boutique firm to a medium size firm? I don't know, but you need to have those conversations. You need to think of what that succession plan will be. You may have to have difficult conversations with the other partners in terms of maybe you have to transition the firm. Maybe you [inaudible 00:31:14] transition partners, I don't know. It doesn't happen overnight. It can take three to five years. It's something you need to be across and working on sooner rather than later. The last trend, going global. We, again, with the phone, with everything else, business has no borders. The first time I gave part of this talk previously, [inaudible 00:31:39] happened. The entire world markets went sideways on that announcement. We're just seeing, again, the entire U.S. election cycle. Again, you saw world markets just change based upon the news of the day.

We live in a global economy. It's interwoven together. Not only ... The borders have dropped, there's a lot of ... The dollar is so strong these days. There's a lot of businesses that are looking to sell their products and their services here in the states. It's all interconnected. In addition, because of things like the iPhone and other things ... I'm holding my phone here. Work and our life boundaries have blurred which is why we talked about the barriers beforehand on work/life/time management. Again, a lot of it has come together, and a lot of that impacts company culture and the workplace. We're seeing a lot of firms working completely remote. Absolutely no infrastructure whatsoever, except for the technology that weaves those people together. This is not just a single person firms, I'm talking firms in 30, 40, 50 people in size. The culture makes a big difference. We see firms that are working with partners internationally that have had to change their firm to be completely paperless, to not have cubicle walls but to have open work spaces so they can reflect the type of clients that they like to work with. Clients also want to see firms that reflect their own sensibilities and their own company cultures.

Again, you have to think about the fact of how you're company culture is gonna play in not only hiring, not only retaining talent, but also how to work with clients and so forth. No longer do you need to have an office space. Again, what we're seeing is a lot of folks partnering with different firms internationally. Again, the two biggest assets that we have here in the states is we have one of the most complicated tax codes on the planet which people don't understand. We have a lot of compliance issues with payroll and ultimately gap accounting rules and the like. For firms outside the states that are working with clients doing international trade, they've got to work with one of you here. We see a lot of firms that have partnered with other accounting firms internationally. We used the Pro Advisor program. Find a pro advisor network. They're able to expand their practice. Again, I put this quote here. It's great in terms of there's no reason to be contained in little boxes. Think about what those boundaries are and how you can break them down and how they're important to your growth overall.

My action items for this section are take notice of what's going on around you. Social channels help you keep abreast and things like that. Webinars like this. People are using LinkedIn and posting their thoughts up there. Make sure you notice what's changing both here and now, but also in the future. It really is gonna be ... One of the big changes is gonna be really around culture and firm culture, and that's really on retention of talent and attraction thereof. It's something you've got to embrace. Then, where it makes sense, network internationally. Network beyond the boundaries of your own city or state. A lot of firms are expanding virtually to be able to pull in additional resources, whether bookkeeping or accounting resources, from other states. One for costs, two for the talent that they're able to get, and leveraging their tools of choice like QuickBooks online to do that.

Again, I wanted to talk today the first bit about what are the trends currently in motion. The number crunching, we talked about that. Understanding the situation there around what's happening with the compliance side and the bookkeeping side. Your specialty being focused. Drop your cost, increase your revenue, [inaudible 00:35:38] per client. How technology is playing a factor in that. How to consolidate. Age, the age gap that exists. Be cognizant of it, because it has implications in terms of your planning but also on your expansion. Then going global and the impacts around it. If you want to learn more, you can get the trends report or generations report. There's the URL's to pull them from. Again, if you download the PDF, it's clickable. You can get to it. You can check those out. It has all this in much more detail. I want to get to our next polling question here. What trend category is your priority for 2017?

Is it number crunching, specialty, technology, age, or go global? Again, this is the third of the four CP questions we've got today. What trend category is your priority for 2017? Is it number crunching, specialty, IT, age, or going global? A few more seconds before I close the poll. Three, two, one. Closing the poll. Show the results real quick. We've got specialty by in far ahead. IT second, and then a tie there for the last. Hide the results. Let's get back to the presentation. Okay. Now we're in the last section here. Three major shifts on the horizon. I broke this down into three sections spanning from what's currently that you're gonna be facing, not only right here right now, but going into that median term. That's what we're gonna talk about in terms of collaboration. I'll expand on that in a second. The next one that goes from, again, all the way from medium to longterm, is really around automation. We're gonna talk about that. There was actually some ... For those of you that attended QuickBooks connect, and I'll highlight some of those, that automations already coming to you literally as of last October, but also coming out inside of QuickBooks online and the two products as this year unfolds.

The last one which is another topic that's been coming up recently more and more, not a lot of familiarity with. I'm gonna talk about it at a high level, but then show why it's a big shock to the system. Then this is much longterm, much further out there is block chain. What the definition of that is and what it really means and how it's going to be a disruptive component to what we do and how do it in terms of financial management. I put this ... We're gonna talk about collaboration first, and I put this quote up here from Tom Hood. You might be familiar with him. He's from the Maryland CPA society, also head of the Business Learning Institute. He says "The collaboration curve is quickly replacing the experience curve. Who you know is replacing what you know." What he means by this is they're finding more and more that when folks are coming out of college or you've got certain training, your knowledge of what that is expires relatively quickly. It's got maybe a shelf-life of three years or so. Because of the dynamic component that we live in and how we need to serve our clients, it's less about what you know but more about how you can interface with others and crowd source the answers to the problems that you have.

Tax is a good example. You may not know the intricacies across all the tax code, but do you know somebody that does have the answers and can you bridge out and reach and get that information to be able to serve your clients? It's your interconnectedness with others and be able to do that in multiple different layers. To be able to satisfy those changing needs, because we are in a very dynamically changing environment these days. I wanted to talk about the three different levels. There's an external component to it, there's a staff component, and there's a client component to collaboration. On the external side, we're seeing firms more and more these days outsourcing different things that they don't do. We see, for instance, classical CPA firms, full service firms, that no longer are gonna be doing the tax work. They're actually gonna partner with smaller, single-person CPA's to be able to do it and handle the taxes for the clients that they have on an individual level. They're stepping out of that whole service stack itself. They're focusing on the advisory components moreso. We see folks that are getting [inaudible 00:40:21] specialty tax or maybe it's payroll, again, working with others and then requiring that sort of external collaboration back and forth.

On the staff side, we're gonna look at ones in particular on how to be able to collaborate on the work that's been going on in real time, to be able to make sure it's done. How do we get out of our inboxes and ultimately work collaboratively to complete something, even though somebody might own a beginning project, but then how do you ultimately get the answers from the collective staff [inaudible 00:40:53]? Then, the last one is really how do we work with clients in terms of how do we be able to get what we need from them? Onboarding is a good example. Without having to go through all the phone calls, how do we bridge that to make it more collaborative so that, again, we're all part of one collective team, even though it's two different organizations? I put this up here. Here's a diagram of what a full service accountancy technology staff would look like. The classic definition only had the two sections on the far left and the far right. Client services, we have products like QuickBooks online, Intuit tax online, QuickBooks online payroll, or Intuit online payroll.

Those are probably two you would use to service your clients on the left. That may handle all those different services levels. On the right is your classic practice management. Your CRM, your billing might be through QuickBooks. You might be using Spreadsheets and what not to track projects and so forth or smart sheets and so forth and time tracking with TSheets. Whatever it might be. That middle section, the client management communication, that is the area of innovation that's occurring today that you're gonna see also a lot of impact and change over the next three years. It started off with the client dashboard, and that is QuickBooks online accountant, and now it's branching to collaboration with your client. I'm actually gonna show you some things there. Get you understanding how that's gonna work in the future. Also, collaborating and communicating back and forth between folks ultimately get work done. One product that people have talked a lot about and, again, talking about team collaboration are products like Slack, spelled S-L-A-C-K. Slack. This is a view of what slack looks like. I built one for the firmofthefuture that we were using on the road shows. What this is is a way to collaborate from an internal team perspective.

Predecessor products to this might be Yammer and so forth. Karbon does this as well, but, again, I'm showing Slack here. What it is is it uses channels. It uses threads of conversation with context to allow for an ongoing conversation to occur. If you have more than three [inaudible 00:43:10], I would highly encourage you to take a look at something like this, because what it does is allows you, in real time feel, to have those water cooler conversations and the necessary back and forth outside of email so that you can reduce your email by 60% and ultimately be able to give yourself a ton of time back actually servicing the client and not having to hunt and peck for things. Again, on the team collaboration side, there's a lot of innovations happening on that. One of those players, again, is Slack. Client collaboration, I wanted to give you a sense of this. Again, client collaboration, what you're gonna be seeing coming out in the near future, and, again, I'm using Karbon as an example of this, but, again, there's other things that you see coming out as well as time unfolds is the ability to take your workflow, put in checklists, and then be able to spawn those out and collaborate it on real time with your client.

In this example, it shows a checklist that exists with different tasks labeled there in black for client. Again, these things can then be setup to be able to be sent to a client. The autonag. You can autonag the particular client on what you need them to do, send them the actual tasks, those tasks then go out typically they'll be going out in email overall, and then allowing for people to go into lightweight portals that require no login whatsoever that are personalized and white labeled ultimately for people to get things done. The future of this is that clients no longer have to be ... You have to go back on a phone call. No longer you have to go back on email, but leveraging a system that does that for you automatically so that you can take your onboarding time down from 60 to 90 days to ultimately a matter of weeks. Again, technology is gonna help drive that overall. That's an example of the client task.

That was section one of what's coming up in the future. Section two is around automation. This is a bit scary for folks, but again, it's about how to leverage and how to manage it and ultimately be able to leverage it to free up capacity using value pricing and then driving towards more advisory services. There's three different levels of this that we're gonna talk about. Automated processes, artificial intelligence, and predictive insights. That's the three main buckets overall. We talked about this before. This is the seven major service offerings I mentioned earlier in the talk. What automation and where it's impacting ... Again, I mentioned before that number crunching takes a backseat. You can see the tax and the bookkeeping and even some of the payroll currently is being impacted by automation. Coming up sooner in the coming years will also be accounting. Again, that leads to where leveraging that, value pricing on that, and then, again, the movement to advisory services overall. Again, this is in the PDF. You can see the definitions of what each one of those categories is. I'm not gonna spend a bunch of time on it, but on the automation side, it comes into what I've label as three different waves going forward.

Phase one is what we're currently in today. Some of this was launched at QuickBooks connect and is coming out in the products very soon. I would say in the 2017, 2018 years. First on here, I give an example, is auto-configuration. What I mean by this is this is the ability for someone to essentially sign up to QuickBooks online, be able to identify what bank accounts they might use, might identify what type of business they are, and the product will auto-configure itself. Chart of accounts, ultimately be able to connect to those banks and [inaudible 00:46:55] to start putting the bank feeds into the product. That still requires, again, alteration of the [inaudible 00:47:05] accounts based on what the accounting professional or the account that's servicing them, but, again, there working more and more to be able to deliver that. The next one is auto-reconciliation. This is the ability to use machine learning to see how others out there currently are taking, let's say, a power bill and then allocating that across which account types and then being able to auto-reconcile, so being able to unlock [inaudible 00:47:33] to the right codes overall. It's more of not the completion of that confirming, but ultimately selecting that for the small business.

Again, it can be derived even from what you're doing across multiple clients to be able to create the same pattern that you want that small business client to be able to do. The next one is what I call really around SPC control charts. That's a really technical term for industrial engineers. What this is is alerts. It's using what's called controlled charts that you wouldn't necessarily, but what's happening in the background. Basically, it's allowing the products to understand what is going in and out of what should be very ... Proper variants between when things should be crossing the thresholds. If something goes complete out of whack ... Let's say a bank account goes too low, a purchase is too large in size and it doesn't fit the standard behavior of that particular firm, it alerts the accounting professional in the moment to be able to have a conversation about what's changing in that firm. It's providing insights based upon when things are in or out of spec. The next one is really transaction completion assist. This is the ability that when an invoice is created, be able to collect on an invoice on the backs of that.

When something has happened in the books, being able to take that to delivery at the end. It's spawning and alerting that something needs to be addressed to be able to continue that from, again, maybe an invoice being raised to the actual receiving payment at the end. Benchmarking is another one. Again, using the large data sets that exist to be able to let folks know how they compare to others. We've seen bits of pieces that, for instance in QuickBooks back in the desktop days, but actually being able to listen realtime with a lot more granularity. That's what the data ultimately provides underneath. The last is matchmaking. This is a really exciting that Intuit was talking about at QuickBooks connect, which was when a small business comes in, a lot of them aren't getting assigned to or suggested to be able to working with an accounting professional. In my days, we would see that there is the 200% improvement or, in terms of their likelihood to succeed, if they're working with an accounting professional. It's making sure that those that aren't are getting allocated to and working close to an accounting professional. That's phase one.

Phase two. Transaction completion assist moves to auto-completion. This goes from when you raise ... Let's say you raise an invoice or you add a payment in, it will automatically run its course without interaction needing to be required. Again, following the patter that's been allocating there and only flagging when issues arise across that workflow. The second one is auto-identifying. Finding errors that exist from clients' work within the books, and then promoting the ability of what should be done to solve that. Providing some ideas of what may be the right way to solve it based on what's been done in the past. Scenario assistance, this is being able to look at what is occurring in a particular type of client based on patterns that have existed elsewhere and seeing when things might be out of control or out of the loop, being able to flag and be able to highlight where those issues occur and some ideas of where maybe to go down. This is stuff we're talking about 3-5 years out. Loan facilitation. This really goes in terms of somebody is ... They're having financial difficulty being able to find, pick, secure, and ultimately move cash instantly to be able to provide on my own and debt assistance for what they need.

Then it's the emergency ... It's being labeled as the financial web. This is the interconnectedness of the banks, financial institutions with the actual books themselves so that you don't have to manually move data back and forth and being able to have everything at your finger tips across all the different institutions for a small business client. The last one is phase three. This is much further out there. This is where ... Again, this is more futuristic, this is way out there, but activities that happen, it's really confirmation-based. The system relatively knows what's happening and what needs to occur and shifts confirming with you, the accounting professional, that that's indeed what needs to happen with that pattern. Predictive insights. This is creating dashboards, visualizations, analysis to have advisory conversations automatically created and tailored and twisted and changed based upon the nuances of the business at the given moment and over smaller periods of time. That leads to scenario stuff, and the last one is what I call Workflow objects. This is the ability to have you workflow and have it auto-perform across many different vendors. You may have an AR workflow that's gonna involve three different technologies that come off of QuickBooks online and that workflow process can automatically carry itself without any intervention across those.

Again, phase three is much further out there. The last topic that we're gonna spend a short amount of time on is Block chain. Block chain, for those of you that are familiar with things like Bitcoin and so forth, is the fact of having, in cyberspace, a digital ledger where transactions are made and they're done independently off of multiple servers where the transactions build off one another. There is a transparent history that is inerasable over time and is chronologically and made publicly. That's the definition of what a block chain is. Why it is important and why this is something to take note of is over the very very long time, which I'm talking in 20 years, it'll redefine how companies, governments, and businesses inter-operate. Interesting for them. It's the movement of what we do take in terms in terms today of double entry accounting, moving it to what we call triple entry accounting. That's because you're gonna be having basically contracts existing between parties that are agreed upon. That's bonds transactions that then occur that are interlinked. It ultimately allows for the elimination of tax evasion and fraud.

I pulled these two visuals from Devcon 1. It's a very futuristic group. This is done by the balance three guys. What it shows here is this is a classic entry of double entry accounting. All it is is basically the understanding that you've got two account. Again, when you're doing something once [inaudible 00:54:18] you're having to make two entries. Again, when you're doing commerce or your doing business between two parties, each person has their own set of books with double entry, but no interconnectedness except for what's been stated on their books. If somebody was to lie and cheat to say that indeed they didn't collect this much money, and they were to change that, it doesn't get reflected in the other books, so it's actually disjointed. What triple entry accounting is is the inter-linkage of that using what's called smart contracts. That is so that when a transaction occurs, both parties are getting links to those that are sitting on independent third-party servers and so forth that then have the history of what was sold, what was bought, who did what and then ultimately pairing that to set accounting standards like XBRL and so forth.

Triple entry accounting is the merger of that across the independent platform that links not only ... It takes the double entry accounting of the two different parties, but interlinks them together so that you ultimately have one truth that can be adhered to. There is little movement on this today. This is very futuristic, but it will accelerate over time based on governments' interest to fight fraud and so forth. You can actually see this. It's actually started in China. They are now doing invoices printed on government paper stock. They're gonna digitize what they're doing in 2018. What this ultimately means that accounting will change to become intertwined and interconnected. It will unpack things like audit because, again, everything is understood, available, and, again, from a computation side, easy to compute. What governments might move to in the long term is that it's not about doing the taxes, but it's about confirming what has been done in the past and ultimately know what your liability was. Again, very very futuristic stuff.

That goes to our last polling question of the day. Of the three trends I talked about, or the three major shifts over the longterm, collaboration, automation, block chain, which of these most interests you or is most interesting, both in the positive and the negative? Again, I tried to give you a sense today of where we started, what's going on currently in moment, and some really really far-in stuff as well. Again, I'm gonna close this poll down in just a few seconds. Three, two, one. Automation takes the cake there. It's over 50% with block chains second at a third. Thank you so much. This brings up our wrap up for today. We talked about the top 10 barriers were to firms, the five industry trends, again, that was really around number crunch takes a backseat. We talked about technology, niche marketing or the niche focus, we talked about age and also lastly then we talked about going global. Three major shifts, we talked about collaboration in the short term, medium term. Talked about automation, how that plays out over time and then that futuristic one with block chain.

If you want more education, tips, tricks, ... Again, some of the stuff we talked about today in more depth, you can find articles written up there on firmofthefuture.com. Again, talking about certification and so forth, if you haven't got certified, it's time to do it. Then, this is the journey. Go to qbtrainingevents.com. If you're looking for more details, again, you can also go to Karbon at karbonhq.com/editions or learn more about Karbon at karbonhq.com. Brought to you today, myself with Karbon, but also from Intuit QuickBooks, and what I want to do now is feel a few questions overall.