Alexandra DeFelice
Alexandra DeFelice

Tomorrow’s Technologies

Tools CPAs need to move into the future.

April 19, 2010
by Alexandra DeFelice

The personal computer and the Internet have proven to be the two technological advancements with the biggest impact on the CPA profession, according to Dana R. “Rick” Richardson, CPA.CITP, who has spoken on the topic of future technologies for 30 years.

Accountants have had to adjust to some major changes in the way they used PCs to help them run their business over the past three decades — some of the most noteworthy being VisiCalc, Lotus 1-2-3 and Excel.

As trends shift away from computers residing in the office toward mobile and Web-based software, how can CPAs ensure they are making smart investments today and into the future?

While some accountants may hesitate to purchase the hottest devices and software when they first come to market, others make the mistake of upgrading too frequently and spending too much money, said Richardson, a former national director of technology for Ernst & Young and current president of strategic technology consulting company Richardson Media & Technologies LLC.

“Practitioners who believe this is really important tend to get so involved in technology they forget they can get by with what they have and that they don’t have to upgrade every year,” he said. “They end up spending profit they could be rolling away in the bank using stuff they already have. Milk what you have much longer than you think you should.”

Reader Note: Don’t miss Rick Richardson’s presentation at the upcoming AICPA Tech+ Conference, June 7 – 9, Las Vegas, NV.

Investing Wisely

How can you tell when the time is right to upgrade? Richardson’s rule is never buy anything until the third version is introduced, allowing time for many of the kinks to be ironed out.

In general, CPA firms should invest five percent to 10 percent of gross revenues on technology, which incorporates hardware, software and training — and the percentage devoted to each likely will change over time, Richardson said.

Figuring out where to spend that money is the hard part. Richardson suggests selecting an internal employee to serve as a “technology ombudsman” and to stay current on the latest technology trends and brief others in the organization when new developments may impact the practice and/or its clients.

“You get much more out of your investment if someone is continually watching technology developments with an eye toward continued use or profitable upgrades,” he said. “Find somebody reasonably young, on the way up, who’s smart and bright and give them the chance to stay current. Devote five percent of their chargeable hours figuring out what’s happening — who’s doing what, going to conferences. Not enough firms do that. They think it’s a waste of time. It works.”

What to Watch

So, what are some things CPAs in particular should be watching today?

Cloud computing, client portals, mobile technologies and virtualization, all tie together under the over-arching theme of no longer needing to be tied to a physical office or PC, according to Richardson.

The basic architecture of personal computing — having the box resident and tying boxes together into a network — is moving to a new platform that resides in the “cloud” known as cyberspace.

“The cloud and mobility are the two areas I think will have the largest impact over the next few years. It’s absolutely clear that’s where things are going,” Richardson said.

To what degree accountants will take advantage of these Web-based applications has to do with how much they are willing to embrace change.

While many tend to focus on the security and attest issues of technologies that are related to client accounting, Richardson advocates going beyond the risks to focus on the opportunities — adopting the technologies in their own organizations to make more money, make employees more efficient or to increase the value of their company.

Client portals are an example of a technology that clients are seeking but that most accountants have yet to adopt.  Clients want a place to do work, get answers and communicate with professionals. Most firms don’t offer their clients a Web-based portal in which they can do this, yet there have been several study projects surrounding audit-and-attest and security issues related to client data residing in these portals, according to Richardson. A small number of firms are already using them to offer their clients added value and sometimes to earn additional revenue. (For examples, see Client Portals, A Secure Alternative to E-Mail and Paper, Portal, CD or E-mail?)

Virtualization is another hot trend and will continue to become an even bigger issue while operating systems will mean less and less, Richardson predicts.

A virtual machine sits inside a physical machine, and is constructed with software, not hardware, Richardson explained. So, if you had a fairly large microcomputer with eight to16 gigabytes (GB) of random-access memory (RAM), a set of four duo processors — eight processors — running a combined 12 or 13 gigahertz(GHz), that box can support more than one complete system.  Richardson’s laptop houses one real machine and three virtual machines. His real machine is a MacBook Pro. Running inside of that are Windows 7, Windows XP and Linux.

“With a single command, I can switch between those computers so if I need to run something in Windows, I can run the applications on that machine,” he said.

Why Should CPAs Care?

“Longer term, that’s how cloud computing is going to happen,” Richardson said. “You sign into a tax portal someplace and you want information about state taxes for Texas. All you know is you can access it from your machine or your phone or your tablet or whatever it may be and get the results you need.”

That’s quite different from the traditional way of doing things by sending paper-based research via traditional snail mail. Vendors already have begun to offer their services on the Web, but CPAs who are used to the paper method may be hesitant to switch. As Web-based tax research and other accounting functions become standard, the paper-based reference materials won’t be produced anymore, and CPAs will be forced to do online research, Richardson said.

Moving to Mobile

The extent to which mobile technology may impact CPAs is questionable at this stage, which Richardson equates to that time when accountants thought not everyone in the firm would need a PC, as he predicted they would 30 years ago.

“I am not sure people are willing to say a portable device that’s smaller than a computer could actually be the device used to do the majority of your work, but I think it will happen in the next five years,” he said.

A great deal of client information already can be accessed on mobile devices. While CPAs generally aren’t preparing entire tax returns on a Smartphone, partners who wish to do so have the ability to access the entire return from the phone and sit down with a client at lunch and bring up the return and talk about tax planning, Richardson suggested, though he noted that likely won’t happen for a couple of years.
In the future, he believes an increasing number of accountants will query large applications sitting in the cloud containing whatever reference materials those professionals may need — tax reference service, audit standards data, checklists, etc.

Mobile applications for tasks like timekeeping already are surfacing to allow CPAs to do their jobs on the road without a computer. (See CPAs on the Go Embrace Mobile Technology ).

As the use of mobile devices continues to proliferate, many organizations are at a crossroads and need to determine whether they should open their IT infrastructure to support the personal devices of their employees.

If companies want to expand their existing phone options to accommodate their employees, Richardson suggests picking three phone brands that run on three different networks to provide ample options without having to evaluate how well every available device suits their work environment.

Security issues need to be addressed, but many concerns executives have had about losing client data can be remedied since many phones have the ability for administrators to remotely erase data if the phone is lost, he said.

Developments will continue to happen at a rapid pace. Accountants will succeed when they figure out which of those developments to adopt right away and which ones to let brew before spending the investment.

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Alexandra DeFelice is a Journal of Accountancy senior editor and an AICPA CPA Insider™ columnist. To comment on this story or suggest future technology column ideas, e-mail her or call (212) 596-6122.