Most have long been aware of the benefits cloud computing in the area of data storage. But are you familiar with the positive effect it can have on hiring and retention. To bring these aspects to light, close management software provider FloQast delivered Cloud Technology Advances the Accounting Profession: A Survey of Accounting and Finance Professionals. Mike Whitmire, in fact, discusses the report in the upcoming digital-only Pennsylvania CPA Journal special edition, Accounting and Technology: PICPA’s Guide to an Evolving Profession, which will be released May 1. In this podcast, Blake Oliver, director of product marketing for FloQast, goes deep into the HR benefits of cloud computing.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

Many organizations have transitioned to cloud computing due to its benefits in the area of data storage, but for the upcoming digital-only 2019 Pennsylvania CPA Journal special edition, Accounting and Technology: PICPA's Guide to an Evolving Profession, Mike Whitmire, cofounder and CEO of FloQast, wrote about a different benefit of the technology: its value in hiring and retention. To give us a preview of this thought-provoking feature, today we are joined by Mike's colleague, Blake Oliver, who is the director of product marketing for FloQast.

How important do you think a firm’s technological profile is in hiring and retaining the current generation's most talented performers?

[Oliver] Personally, as a tech focused CPA, I think it's critical. You don't have to take my word for it though. Our survey bore that out as well, but before we dig into that, I thought I would share a little bit about my own experience. I kind of had the reverse career path of a lot of CPAs in that I'm a career changer, was a music major originally, and graduated around the time of the financial crisis and very quickly realized the error of my ways. I was searching around looking for something to do where I could make a little bit more money than as a freelance cellist, which I played the cello. I happen to be good with numbers thankfully, so I picked up bookkeeping as a day job and I found that I really, really liked it, and that's how I ended up getting into accounting and going and getting my CPA.

While I was getting my CPA, I had my own small firm, and the benefit of being your own boss is that you get to decide what technology you want to use. I've always loved technology. I was into sound recording when I was in college, so I could pick all the latest tools, I could choose my own computer, I didn't have to settle for whatever the IT department gave me, and I loved that. It enabled me to build a very, very successful bookkeeping practice that I was able to sell. Then, after I did that, that was in 2015, I sold my practice. I went to work for a large firm as a manager because I felt I needed the experience of working in a large firm to actually learn what it's like.

In that large firm, it was a very progressive firm here in California, the largest in California. Armanino is the name of the firm. I found that even though they were on the forward side of the tech curve, I felt constrained by technology and that the decision-making was all done by IT up in San Ramon and headquarters. I was down in Los Angeles, so I was frustrated, right? As a tech CPA, somebody who wants to use the best, I couldn't. That frustrated me, and I know for a fact that it's far, far worse at many firms where they're not on cloud. I had the benefit of being on cloud tech. They're using desktop systems, can't do anything outside of the office, so you have to VPN in. For me personally, I know how frustrating it can be as a young CPA who wants to use the latest tech. If you look at surveys that have been done, there was a really interesting survey in the Wall Street Journal last year, this was a survey of business people, 55% of those respondents, they said their company's workplace tech factors into decisions by applicants to accept job offers or not. Slightly more than half of business people are saying that tech is now just making job decisions for people. That's a new thing. We haven't seen that before, but I think it sort of validates my own experience.

When we talk about how attracted today's latest generation of workers is to tech, what do you think it is about cloud computing itself that kind of can attract and retain young people and make their jobs more enjoyable?

[Oliver] Historically, there's been a lot of tedium associated with accounting, and I think that's what gives it the stereotype among the general public of being a boring thing, which it is clearly not anymore. It's very interesting. I don't know if it was ever really boring to begin with. I find it fascinating, and I feel like what's responsible for the change is cloud computing in that it's cutting out a lot of the data entry, right? Thank God we're not summing up ledgers anymore physically. There are people, many people alive today did that. That was how you started. We don't do that anymore. We got Excel, thankfully, and now we're moving beyond that, instead of having to key in transactions to systems, we're just connecting them in the cloud through APIs, which are in the cloud, basically connectors that allow different applications to talk to each other, and we're sending that data from one system to another. I started as a bookkeeper, and when I started I had to key in transactions from bank statements, right? That was like 80% of my job, and within five years, the ability to download a bank information into my accounting software, that became pretty robust and I was able to automate 80% of my job. That makes it a lot more interesting because I'm not doing that boring work anymore.

The other benefit is the ability to work from wherever you are. Even at the large firm, I basically could work from a backpack and I think that was sort of necessitated by all the audit work we were doing. The auditors had to be mobile so they built in the cloud solutions that allowed everybody else to be mobile as well. I could work from home, I could work from the office. That makes working long hours a lot more palatable because you can cut out at a normal time and then go have dinner with your family, and then log on later if you need to.

The piece Mike Whitmire did for the digital-only Pennsylvania CPA Journal revolves around the findings, and you had mentioned it earlier so we can just mention it directly, but it revolves around the findings of the FloQast report, Cloud Technology Advances the Accounting Profession: Survey of Accounting and Finance Professionals. What were one or two of the main takeaways your team got from that report in regard to how accounting and finance leaders view cloud computing, and rising CPA staff, how they view it as well?

[Oliver] This is a really fun report. This was one of the first surveys I worked on when I joined FloQast, and the number one finding, it might not be surprising to a lot of folks. It's that technology is changing the profession dramatically. 81% of our respondents said that technology, data and systems skills are much more important than 10 years ago. That was by far the top skill that had increased in importance over even strategic thinking and personal skills. Everybody thinks that technology is having a positive impact on the accounting profession. Basically, everybody thinks that technology is going to change their job over the next 10 years, and this is the part that really surprised me is that 89%, the vast majority, said these changes are going to be good for their careers. That's encouraging. So that was finding number one: there's a big change happening.

The second finding that I wanted to highlight for you is related to hiring challenges. I think everybody feels that it's getting a little more difficult to hire accountants. There seems to be a shortage – especially of CPAs – of top accounting talent. 85% of our survey respondents said they are having challenges hiring and retaining talent. Interestingly, the number one way that managers are responding to this talent shortage is by investing in modern technology to make their staff more efficient. We didn't actually draw a line connecting that effort of investing in technology with the desire of staff to have modern tech, but I think we can kind of infer that connection, right? That young accountants want the latest tech, so the way that we attract them to our firms and to our accounting teams if we're in corporate is by giving them the tech they want to use.

The number that really got me there, and you gave very good ones, but 89% of people who think that it's going to improve their jobs. That's a great number because when these sorts of technologies come along, often times there's a fear that people think it might take away their jobs. To hear that people have that positive outlook is actually a very good thing.

Yes, and we're really lucky as a profession. Artificial intelligence, automation, these technologies that are going to wipe out a lot of professions or maybe not professions, but a lot of jobs…we're fortunate that accounting is high-level enough that nobody is going, at least in my somewhat educated opinion, nobody's going to build an AI in the next 10 or 20 years that can do what we do. We also have the benefit of there being a demographic shift where we just have a lot of baby boomers retiring and not enough millennials getting into the accounting profession or have made that choice.

So those of us that did are in a really good spot where, if we can use the tech, if we can ride that tech wave, then we've got all the opportunity in the world.

How would you say that cloud computing has traditionally been used by organizations and how has that usage evolved in recent years, is there different ways that it's being used now?

Cloud computing is interesting. It's a relatively novel concept in accounting and finance, but in the broader business world, we've been seeing this shift for 20 years now. Salesforce is 20 years old, I believe, as of this year. 19 or 20 years old. That's the famous CRM company – customer relationship management software. If you talk to any sales director in any organization in the world and ask him or her, could you do your job without CRM software? What would they say? No way. No chance. Right? That's a technology class that has simply become ubiquitous, and if you look at marketing organizations, these marketing automation platforms that send you all those emails that you get constantly asking you to buy stuff, those are also ubiquitous now. It's hard to imagine running a marketing organization without something like that. That's the front office, and that is where cloud computing really had the first big impact because that's where you could see the ROI right away.

Now that that's permeated, we're starting to see all of this technology applied to the back office. Stuff like accounting and finance, we're not typically revenue generators, we're cost centers, but now that tech has got to go somewhere and help us improve efficiency somehow, right?

That's what we're seeing. We're seeing cloud ERPs taking off something like close to I can't remember exactly what it is. 40 to 50% of organizations are on a cloud ERP or moving there right now.

We're hitting those early stage adopters, we're going to start getting into the late majority over the next few years, and then it's just all downhill, right?

Cloud accounting is taking off with small businesses. You've got QuickBooks online, you've got Xero just gaining millions of subscribers every year. Then you have whole new categories of software like closed management software, right? That's what we make at FloQast. Wasn't even possible without cloud computing to do it in an efficient, effective way for mid-size organizations that we serve. We're happy to be riding the cloud computing wave along with everybody else.

What did the report see as…we've sort of been going over some of the main benefits of cloud computing…were there any drawbacks discussed? Does anything like that come as part of the report?

Well, I'll talk about the benefits first because those are my favorites.

So 93% said it's easier to scale operations using cloud-based financial applications. That makes a lot of sense intuitively, right?

If you're a startup and you need to get going on financial management software, it used to be that you had to start on QuickBooks desktop, and then you'd reach a breaking point and you'd have to switch over to some big expensive ERP system. That was usually a horrific experience for everybody involved. Now, it's getting more and more likely that you will start your startup, and maybe you will spend a few years on an online accounting product, or you might just go straight to NetSuite or straight to Sage Intacct, and stay on those products really indefinitely. There are companies that are IPOing now on cloud ERP systems that are not having to switch over to an Oracle or SAP. Those systems scale really, really well because they're cloud-based and you can just add on functionality as you need it. You pay a subscription price as you go. It's pretty cool. That's one thing. The other thing relates to the people aspect of this whole equation, which is job satisfaction. 81% of people using cloud-based financial applications said that there's increased job satisfaction on their team. That's the other big benefit is nobody wants to be using those old clunky desktop server base ERP systems anymore. I think that's pretty much self evident, right? Nobody enjoys that. Those are the two big benefits.

In terms of drawbacks, the problem is that we've got all this tech now, but the schools for accounting and the CPA exam haven't really caught up because there's been such massive change in the last five or 10 years. It's kind of unreasonable actually to expect them to keep up with that pace of change, so it's really hard to find the right mix of talent, to find people who already understand the concept of a cloud accounting ecosystem or how to use cloud ERPs or what APIs are. That's something that accountants have to teach themselves, so a lot of managers are finding, they have to educate or they have to work with the vendors to send their staff to courses to teach them. It's a big, big challenge.

It's interesting because another piece that is going to be appearing in this special edition of the Pennsylvania CPA Journal is a piece on how accounting educators and colleges and universities need to shift in order to be able to keep up with the education in some of these areas. And, as you say, it's very difficult, but it's a challenge that they definitely have in front of them.

Just to give you an example, I did my accounting coursework at UCLA less than 10 years ago.

When I did my certificate, it was, let's see, the technology component was one elective and it was optional, and they offered it one time per year, so hardly anybody took it.

Everything else I did, I did on pen and paper in class. I was really fortunate in that, since I was building a bookkeeping business at the same time, I was able to take all the things I was learning in class and apply them to real-world situations in a cloud environment. Actually, I'd create a dummy company and do all of my debits and credits in there and see how that affected the financial statements, and I really wish that more educators would take that approach. Don't just have people do the T-charts or the T-accounts on paper and do their statement of cash flows on paper. Have them actually try and make it work in an accounting software.

What did your respondents say were some of the main ways organizations were changing to attract and retain staff? I imagine that everyone said they were changing in some way. Where does cloud computing fit into that?

So we asked our survey respondents, what is the number one thing, or we actually give them a list, right? We asked them to rank these things and tell us what you're doing to overcome the talent shortage. The number one response, it was over half of respondents, said that they are adopting modern technology to enable their staff to be more efficient. That was the number one response that we got to fight the talent shortage. Cloud computing is directly related to hiring and retaining. The second response was enabling remote work through technology, and the third response was offering flexible hours, which is also related to having cloud technology that allows your people to work from anywhere.

With the baby boomer generation retiring, as you've mentioned already, the pool of available replacements is finite. How's cloud technology equipped to help hiring and retention challenges?

We have to figure out as a profession how to do more with fewer people. We can't just throw people at the problem anymore, right? It's not like an audit situation where you can say, "Oh, just bring me a dozen more auditors and we'll figure out how to test everything,” right? Instead we have to perhaps purchase an AI audit tool that will allow us to do a lot of the testing automatically, which I think everybody wants. It's great for the partners because then they have more margin on their engagements, and it's great for the client because then they don't have to deal with as many junior auditors who have no idea what they're doing.

Everybody's happier in that situation. I think that's what we have to do. That's an audit example. Let's look at the financial accounting situation in corporate America. Most corporate accounting departments and teams are way overstaffed versus what they actually need if they implemented modern technology. I don't have it in front of me, but I saw a recent metric of the month chart by APQC in CFO Magazine. I love those charts that they do, and it was showing top performers versus mid performers versus bottom performers in terms of the number of staff that they need to staff accounting and finance function. The top performers required, on average, 30 something staff per, I want to say $1 billion in revenue.

Whereas a bottom performer required a 140-something staff, and most of those people in that bottom performing organization are doing stuff like manually entering data, taking invoices and keying in those invoices into an ERP system. Not complicated stuff, but it ends up being very expensive. If you use the tech, you can OCR those documents. You don't need a person to enter them, you just scan them in and, poof, magic. You've got data, right? If you've got cloud ERP systems, you can connect your ERP to your accounts payable processing platform and you don't have to re-key everything. Stuff like that is really powerful. It exists right now. It's available. You don't have to wait. I think that as the talent shortage gets worse, that's what's going to drive organizations to change. It's just going to get too expensive to do things the old way.

So far from our discussion, it seems like people are pretty optimistic. What did the overall responses in the report say about how cloud computing and other technologies are going to change the accounting professional’s role in the future, whether it's immediate, near, or distant?

Overall, people are very positive. Over 80% view the changes as positive for their own careers and the younger they are the more positive they are when it comes to technology changes. Something like 86% of millennials, for instance, think that the changes that are happening are going to make their jobs more interesting, and more interesting is good.

When it comes to the accounting professional’s role in the future, we’re looking at a future – and this isn't something that we specifically addressed in the survey, this is my own takeaway from it – we're looking at a future in which accountants are storytellers, right? We have to get better at looking at data and figuring out what is the story about the business in that financial data, and then figuring out how to tell that story to people who are not familiar with looking at financial statements and don't understand them.

That's one possible role. The other possible role is that of the information systems manager, the person who's going to keep all of these systems integrated and keep the data flowing and make sure that plumbing doesn't break. There’s a lot of opportunity to both be a tech-focused accountant or to be more of an external financial storyteller. I think it's great because those are opportunities that appeal to two very different personality types, so everybody will have opportunity.