The clearest trend to emerge from the 2017 Practice Excellence and Software Excellence Awards is the arrival of cloud systems in the practice mainstream. John Stokdyk offers some pointers to help recent converts find their legs.
The profession as a whole is going through an age of cloud innovation - but the big bang took place some time ago . Now that more and more firms are offering cloud services, it’s getting much harder to spot the differences between them.
Some of this levelling effect can be put down to what we’re now calling the MTD effect. In the face of such unprecedented compliance-driven change, firms are too stretched to innovate in other areas.
As our MTD effect article explained, we witnessed 50% growth in the use of cloud accounting among practitioners during the past year. The adoption of cloud add-on apps during the past two years has been driven to a huge extent by MTD-friendly mobile expenses capture apps like Receipt Bank, AutoEntry, Expensify, Concur and datamolino. As the second wave cloud population surged within our Practice Excellence community, the percentage of practices offering more sophisticated advisory cloud services has fallen.
The next generation
The most recent converts embraced cloud accounting primarily as a solution to the challenges of MTD. This tendency is reinforced by the number of entrants to this year’s Practice Excellence Awards who also implemented an expenses capture solution, but have yet to explore some of the added-value areas that these tools make possible, for example forward-looking forecasts and KPI dashboards.
Where many of the innovative “cloud pioneer” generation built their firms from the ground up around cloud tools during the past five or so years, some of the latest adopters are now having to overcome the challenges for the first time.
The phenomenon is familiar to Xero UK managing director Gary Turner. “There’s definitely a J-curve experience,” he told AccountingWEB. “They get their first few clients and it’s all amazing and they get a couple of people on. Then they hit a bit of a wall when the easy clients have all moved over and it’s the difficult ones [who are left].”
Xero responded to the situation by introducing a cloud migration certification programme to help new accelerate the transition. “The first phase of cloud adoption is like cycling up hill. It’s much slower than you imagined it would be. You’ve got to get your staff habituated to the new ways of working. You’ve got to choose an ecosystem – and there’s a bit of trial and error in that – you’ve got to manually convert or convince clients to move across – and there’s friction there,” Turner said.
Once new cloud firms reach a threshold, the migration does get easier as new habits take root and staff become more comfortable with the process.
“We gathered up all the findings of practices that have made a transition about conversions, workflows and how to do it. We bottled all that and turned it into a training course,” Turner continued. Since the programme was introduced, hundreds of firms have gone through it and given positive feedback. The most common response from first wave practitioners who had to learn the hardway was, “If only we had it 5-6 years ago.”
It’s not the tools that matter
With so much attention devoted to getting on the cloud, many newcomers may be overlooking more fundamental drivers of practice success. As part of the Practice Excellence programme this year, AccountingWEB worked with Xero to bring the focus back to the other fundamental drivers that underpin Practice Excellence in our What sets leading firms apart project.
This “second wave” syndrome cropped up in the Practice Excellence Awards innovation category, where the judges expressed frustration that a lot of firms still seemed to think that using online tools and calling yourself a cloud accounting firm and was innovative.
It is not the tools, but what you do with them that matters most. Technology is a key element of Practice Excellence, but accountants need to take a more strategic perspective and align what they are doing with tech to a specific purpose.
Once again, the data shows that most innovative firms have a few miles under their belts and have learnt a thing or two about what makes a successful accountancy practice. Those who have a conscious strategy in mind and commit to continuous improvement in a structured way perform better than average – typically growing by 42% a year compared to the PEA17 average of 31%.
True innovators within the Practice Excellence community fall into distinctive practice types – the compliance experts, cloud specialists or niche operators - rather than the traditional “caretaker” general practitioner model.
Demonstrating that cloud pioneers do care about client service, they are much more likely than newer adopters to build training into their service offering to ensure clients are well supported and productive with their online tools.
The early pathfinders stood out in other areas such as managing digital workflows and taking a structured, measured approach to communications and client relationship management. This group also offered evidence of “third wave” trends that may lay the foundations for further growth and excellence: taking an average of the growth acheieved by firms deploying these strategies the most effective initiatives included dedicated onboarding processes (41%), building client networks (46%) and online communities (66%).
In the months to come AccountingWEB will be talking to some of the innovators in these areas to find out more about the different approaches they are taking to specific aspects of practice development. But whether it’s a simple process improvement or cutting edge digital marketing strategy, the key principle that underpins effective innovation is to actively solicit feedback from clients and staff and act on what you learn.
Practice Excellence Pioneer nominee Will Farnell captured the essence of this approach in a companion Practice Excellence Live webcast last month.
“When we set up the practice 10 years ago, were pushing boundaries. Some people suggested when we adopted could in 2008 that it was a fad and was never going to take off,” he said.
“Nine years in, we’re still doing a huge amount of work around how we can [use technology to] enhance client experience. That’s a huge driver in our business. That’s the thing I see us continuing to do over the next 12 months.”
To find out more about how to implement these initiatives and make an effective transition to cloud accounting, view the What sets leading firms apart Practice Excellence Live webcast and download the accompanying paper guide.
About John Stokdyk
John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.