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Digital Transformation: Strategies for Small and Midsize Accounting Firms
Client expectations, talent recruitment and retention, and the imperative to stay competitive are just three forces driving the digital transformation in accounting firms. This feature delves into digitalization within small and midsize public accounting firms and explores strategies to help these firms successfully embrace the transformation.
by Brian Trout, CPA, DBA, CGMA, and Cory Ng, CPA, DBA, CITP
Jun 7, 2024, 10:50 AM
Small to medium-sized accounting firms face a multitude of challenges and opportunities as the business world undergoes a digital transformation. The driving forces for these firms are shaped by client expectations, talent recruitment and retention, and the imperative to stay competitive and compliant.
In this feature, we delve into the key factors influencing the digitalization of public accounting and explore strategies that firms can employ to successfully embrace this transformation.
Driving Forces for Digitalization
Client expectations – Client expectations in public accounting are evolving. There is a desire for the ability to access their financial information and connect with their accountants quickly. In addition to remote access, these demands require firms to be attentive to their online presence. For example, navigation on websites and other digital platforms must be intuitive, and consistency in design and functionality across devices helps contribute to this goal. Clients also are seeking supplemental resources that will help them better understand their financial data. Data visualization tools and the ability to generate customized reports add valuable insights.
Integration capabilities are also vital to reinforce the concept of firms as collaborative business partners. Clients value accounting platforms that seamlessly integrate with their other business tools and software, such as customer relationship management, project management, payment processing, expense management, and inventory management systems.
Strong data security measures are paramount to client trust. Maintaining data confidentiality is critical in the face of cyber-security threats. Clients expect secure communication channels, encryption protocols, and secure file-sharing platforms to mitigate risks and safeguard their data.
Recruiting and retaining talent – Finding and retaining talent is a top concern in the accounting industry.1 Firms aiming to maintain a competitive edge and broaden their talent pool must consider workforce preferences. Robert Half reports that a significant percentage of finance and accounting professionals plan to explore new job opportunities this year, with 47% expressing interest in fully remote positions and 63% in hybrid roles.2 PwC’s US Remote Work Survey echoes these findings, with over half of respondents favoring a hybrid structure, with younger workers being more favorable of remote work compared to older colleagues.3
Previous research suggests that accountants using remote options may face drawbacks in terms of career success, impacting promotions and salaries. These penalties (real or perceived) can discourage remote work and diminish job satisfaction, leading to a negative view of organizational support and increased turnover.4 As millennials become the majority of the workforce, they want employers who offer cutting-edge technology and enhanced workplace performance.5 On average, employers invest 2.7 hours weekly in professional development, but millennials aspire to dedicate a minimum of 4.5 hours each week.6 Deloitte’s survey shows that millennials satisfied with development opportunities are twice as likely to remain with a company, emphasizing the importance of continuously developing new skills, especially with cutting-edge technologies. This not only instills a sense of stability and personal fulfillment, but also reinforces their desire to align with a forward-thinking firm.
Staying competitive and compliant – Small and midsize firms operate differently from their larger counterparts,7 showing a positive relationship between firm size (revenue) and average net hourly rates. The value provided by accounting firms in traditional services faces erosion from various service providers and off-the-shelf software. Do-it-yourself software and non-public-accounting providers of tax and payroll work has led to increased demands for lower prices, squeezing profit margins. Rising operating expenses further impact profits and negatively affect profitability, intensifying pricing pressures.
To safeguard the bottom line, many firms are exploring technology to enhance productivity and cost efficiency. This not only reduces time spent on low-value tasks but also opens opportunities to pursue higher-margin revenue streams.
The AICPA’s 2023 National Management of an Accounting Practice Survey reports that out of 1,117 firms, 1,034 have net client fees of less than $10 million.8 Small firms, outnumbering large firms 91 to 1, predominantly generate their revenue from tax compliance services.9 As far as time spent on services, Accounting Today’s 2022 Year Ahead Survey found that firms spend most of their client time on compliance services, and the No. 1 issue cited as the firms’ biggest challenge was regulatory change.10
The constant change and increasing complexity of regulations pose interpretation, application, and productivity challenges. Failing to meet compliance and reporting guidelines can result in client and talent retention issues. Consequently, regulation considerations are driving digital transformation within firms.
Change Readiness and Restraining Forces
Change readiness – Despite the forces propelling a digital transformation, successful implementation hinges on a firm’s readiness. Bryan Weiner, a researcher in implementation science, introduced the organizational readiness for change theory, asserting that greater organizational readiness leads to more successful implementation.11
Employees commit to change either because they genuinely want it, feel obligated, or are compelled, with intrinsic motivation yielding the highest commitment. To promote organizational readiness for change and overcome resistance, organizations must act before implementation begins. Readiness is linked to change commitment and change efficacy, representing the degree to which an organization’s members collectively value and assess factors related to implementing change.12
Employees value change when they understand its importance, its implications for the firm, and the personal benefits that may accrue. All this requires purposeful communication across the organization. When staff comprehend the “why,” it cultivates commitment and perseverance through resistance points. While an intellectual understanding is necessary, emotional factors also play a crucial role. Here are common restraining forces and some recommendations on navigating them.
Status quo bias – William Samuelson’s and Richard Zeckhauser’s work on status quo bias reveals a preference for maintaining the current state, even if change could be beneficial.13 The status quo has advantages in predictability, offering comfort that usually outweighs the anxiety linked to uncertainty. Uncertainty can breed fear of loss, as suggested by the concept of loss aversion, where individuals place a higher value on avoiding losses than achieving equal gains.14
Related to status quo bias are the expectations formed by employees about their roles and responsibilities. Change not only challenges familiarity, but it also conflicts with psychological contracts, the unspoken expectations and commitments that employees perceive to exist between them and their employers.15 A change initiative that redefines job roles, introduces new tasks, or alters reporting structures may be viewed as a violation to the contracts, producing resistance.
Management must communicate the reasons behind change as well as the potential benefits for both the firm and staff. The communication should be two-way, so encourage employees to share perspectives, ideas, and concerns. Leaders should view resistance as a resource rather than a threat, and complaints in the early stages can keep the digitalization initiative alive.16 Continually assessing how employees are adapting and acting on their feedback in a timely manner increases the chances of successful implementation and demonstrates to staff that management values their input.
An incremental digital transformation may combat resistance related to the status quo bias. Instead of implementing everything at once, a phased approach can reduce the perceived risk of uncertainty or loss, making the overall transformation less daunting.
Skills gaps – Many articles that discuss widening skills gaps concentrate on soft skills, but with the rapid pace of change, lagging technological aptitude is also a problem. In fact, the top skills gaps in finance relate to digital skills.17 Only 10% of CFOs believe their teams have the skills required to support their digitalization goals. Paradoxically, only 14% of transformation budgets are designated for skills training and development. To successfully navigate a digital transformation, firms need to be attentive to both the technology and those who implement and use it.
Skills deficiencies will certainly compromise implementation goals, but it may also compound the emotional factor. Feelings of incompetence can lead to fears of an inability to perform well in a new technological environment. This can lead to job security concerns and, consequently, a lack of buy-in. PwC’s latest Global Workforce Hopes and Fears Survey finds 60% of respondents are concerned that automation will negatively affect job security.18
At the organizational level, change efficacy relates to the shared belief of employees’ ability to implement change successfully. Employees intuitively assess the match between a project’s demands and the resources available to support implementation. Enhancing technical competencies through training not only serves the technical side of implementation but also shows staff that the organization is behind the effort, increasing their belief in the firm’s capabilities to pull it off.
Teams – An unfavorable team dynamic can erode trust among team members, making it difficult to collaborate and support each other during a digital transformation.
Leadership must foster a healthy and productive team culture. They must personally demonstrate collaborative behavior and prioritize it through the provision of resources. Team building activities can enhance relationships and improve cooperation. Corporate recognition of successful collaborations also reinforces the value placed on group efforts. Purposefully involving employees from different departments and various organizational levels in decision-making and implementation can foster ownership and bring together individuals with different skills, perspectives, and expertise. When their voices are heard, employee morale is positively affected and resistance to change can be reduced.
It may also be advantageous to reflect on past initiatives, especially instances where implementation efforts fell short. Avoiding similar mistakes depends on leaders analyzing what went wrong, understanding the root causes, and pinpointing areas for improvement. Valuable insights about an organization’s strengths and weaknesses can be developed through these uncomfortable examinations. Honest communication about past failures fosters a culture of trust, shared responsibility, and a healthy mindset related to risk taking and change.
Technology
The technologies your firm may be considering for your digital transformation will vary depending on your size, resources, and needs. Here are a few that are top-of-mind in many small and midsize firms.
Artificial intelligence – Systems that employ artificial intelligence (AI) uses algorithms, instructions, or rules to navigate tasks that would typically, and tediously, be done by staff. The more data that is analyzed over time, the more algorithms learn and the better the insights will be. Think of Netflix’s recommendations. The streaming service’s algorithm learns from your viewing history and data from other users with similar tastes to continually provide more personalized recommendations. This is “machine learning,” an area within AI that “learns” from its use of datasets rather than referring to rules.
Natural language processing (NLP) is a machine-learning technology that enables computers to understand the written or verbal language that we use to communicate with each other. This technology is working behind the scenes when we do a Google search, use spell or grammar checks, and engage with chatbots or virtual assistants. Virtual assistants are an example of a beneficial technology for smaller accounting firms to handle common client inquiries or to schedule appointments. Such assistance not only brings efficiency gains but also enables accountants to focus on more complex client needs while simultaneously meeting clients’ communication expectations.
The most prevalent application of AI in accounting relates to repetitive tasks, such as reconciliations, billings, and data recording and reporting. It can help firms reduce errors and increase the accuracy of financial reporting. The proliferation of accounting software and automated transactional and customer service tasks has enabled passive and continuous collection of more data than ever before. AI is helping to increase the utility of this data and add value to client services by providing meaningful insights and analyses that support clients’ strategic objectives.
In audit, predictive tools can pinpoint high-risk areas during planning. Workflow automation tools can automate task assignments and route documents. Compliance testing tools can help ensure adherence to regulations. Firms offering tax services can gain similar benefits. AI extracts information from documents, automates data entry, and categorizes documents. Algorithms can process tax codes and analyze client financial data for compliance. Predictive analytics help clients optimize tax positions and minimize liabilities.
Cloud-based technology – “The Cloud” provides computing services and storage over the internet, with data and applications residing on off-site servers managed by third-party providers. Software as a Service (SaaS) accounting applications, such as cloud-based accounting software, offer users the flexibility to access financial data and tools from anywhere with an internet connection. This is important for firms’ recruiting and retention efforts, as well as for accountants who need to access clients’ financial information while off-site or outside of typical business hours.
SaaS also streamlines collaboration between accountants through cloud-based tools that enable real-time changes and minimize version control problems. Most SaaS platforms also have built-in communication and project management tools to support collaborative efforts. In addition to enhancing communication and collaboration among accountants, SaaS enables online portals where clients can work on shared documents with their accountants and access their data in real-time.
The subscription model used by cloud-based services reduces up-front costs as well as maintenance costs when compared to investing in and maintaining on-site servers. Smaller firms can also enjoy security features through SaaS that would otherwise be out of reach. SaaS providers commonly assume responsibility for security threats and disaster recovery measures, increasing peace of mind and reducing the risk of data loss and downtime. Finally, SaaS applications are especially attractive for smaller firms as they are scalable, allowing subscriptions to be adjusted based on fluctuating business needs.
Conclusion
Small to medium-sized accounting firms are undergoing a digital transformation driven by evolving client expectations, talent recruitment challenges, and the need to stay competitive and compliant. The integration of technologies, such as AI and cloud-based solutions, is pivotal to meeting these challenges. Successful implementation relies on a firm’s readiness and necessitates addressing restraining forces such as the status quo bias, skill gaps, and team issues.
This transformative journey is not merely a response to external pressures; it is an opportunity for firms to enhance efficiency and position themselves as agile and client-focused.
1 Teri Saylor, “The Trends That Will Affect CPAs in 2023,” Journal of Accountancy (Dec. 1, 2022).
2 “Finance and Accounting: Hiring Trends, In-Demand Roles, and Workers’ Job Search Plans,” Robert Half.
3 “PwC’s US Remote Work Survey,” PwC (Jan. 12, 2021).
4 Derek Dalton, Jace B. Garrett, Nancy L. Harp, and Gregory P. McPhee, “An Analysis of Organizational Support for Telecommuting in Public Accounting Firms,” Behavioral Research in Accounting, 35(1), 1–20 (April 2023).
5 Michael Timmes, “Millennials and Gen Z: Now Is the Time to Reshape Businesses to Harness Their Power,” Forbes. (June 27, 2022).
6 William K. Bacic, “Quenching Millennials’ Thirst for Professional Development,” Deloitte (2016).
7 “2023 PCPS CPA.com National MAP Survey: National Summary,” AICPA and CIMA (2023).
8 Ibid.
9 Edward Mendlowitz, “Art of Accounting: Small Firms Outnumber Large Firms 91 to 1,” Accounting Today (Sept. 28, 2018).
10 Daniel Hood, “The Year Ahead: 2022 in Numbers,” Accounting Today (Dec. 2, 2021).
11 Bryan J. Weiner, “A Theory of Organizational Readiness for Change,” Implementation Science (Oct. 19, 2009).
12 Ibid.
13 William Samuelson and Richard Zeckhauser, “Status Quo Bias in Decision Making,” Journal of Risk and Uncertainty, 1(1), 7–59 (1988).
14 Amos Tversky and Daniel Kahneman, “Loss Aversion in Riskless Choice: A Reference-Dependent Model,” The Quarterly Journal of Economics, 106(4), 1039–1061 (1991).
15 Jia Li, Minghui Liu, and Xuan Liu, “Why Do Employees Resist Knowledge Management Systems? An Empirical Study from the Status Quo Bias and Inertia Perspectives,” Computers in Human Behavior, 65, 189–200 (2016).
16 Jeffrey D. Ford and Laurie W. Ford, “Decoding Resistance to Change,” Harvard Business Review (April 2009).
17 “Finance Transformation: The Human Perspective,” AICPA and CIMA (2023).
18 “Global Workforce Hopes and Fears Survey 2023,” PwC (June 19, 2023).
Brian Trout, CPA, DBA, CGMA, is an assistant professor of accounting and finance at Millersville University in Millersville. He can be reached at brian.trout@millersville.edu.
Cory Ng, CPA, DBA, CITP, is CFO and vice president of administration at the PICPA, an adjunct associate professor in accounting at the Fox School of Business at Temple University in Philadelphia, and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at cng@picpa.org.
Digital Transformation: Strategies for Small and Midsize Accounting Firms
Client expectations, talent recruitment and retention, and the imperative to stay competitive are just three forces driving the digital transformation in accounting firms. This feature delves into digitalization within small and midsize public accounting firms and explores strategies to help these firms successfully embrace the transformation.
by Brian Trout, CPA, DBA, CGMA, and Cory Ng, CPA, DBA, CITP
Jun 7, 2024, 10:50 AM
Small to medium-sized accounting firms face a multitude of challenges and opportunities as the business world undergoes a digital transformation. The driving forces for these firms are shaped by client expectations, talent recruitment and retention, and the imperative to stay competitive and compliant.
In this feature, we delve into the key factors influencing the digitalization of public accounting and explore strategies that firms can employ to successfully embrace this transformation.
Driving Forces for Digitalization
Client expectations – Client expectations in public accounting are evolving. There is a desire for the ability to access their financial information and connect with their accountants quickly. In addition to remote access, these demands require firms to be attentive to their online presence. For example, navigation on websites and other digital platforms must be intuitive, and consistency in design and functionality across devices helps contribute to this goal. Clients also are seeking supplemental resources that will help them better understand their financial data. Data visualization tools and the ability to generate customized reports add valuable insights.
Integration capabilities are also vital to reinforce the concept of firms as collaborative business partners. Clients value accounting platforms that seamlessly integrate with their other business tools and software, such as customer relationship management, project management, payment processing, expense management, and inventory management systems.
Strong data security measures are paramount to client trust. Maintaining data confidentiality is critical in the face of cyber-security threats. Clients expect secure communication channels, encryption protocols, and secure file-sharing platforms to mitigate risks and safeguard their data.
Recruiting and retaining talent – Finding and retaining talent is a top concern in the accounting industry.1 Firms aiming to maintain a competitive edge and broaden their talent pool must consider workforce preferences. Robert Half reports that a significant percentage of finance and accounting professionals plan to explore new job opportunities this year, with 47% expressing interest in fully remote positions and 63% in hybrid roles.2 PwC’s US Remote Work Survey echoes these findings, with over half of respondents favoring a hybrid structure, with younger workers being more favorable of remote work compared to older colleagues.3
Previous research suggests that accountants using remote options may face drawbacks in terms of career success, impacting promotions and salaries. These penalties (real or perceived) can discourage remote work and diminish job satisfaction, leading to a negative view of organizational support and increased turnover.4 As millennials become the majority of the workforce, they want employers who offer cutting-edge technology and enhanced workplace performance.5 On average, employers invest 2.7 hours weekly in professional development, but millennials aspire to dedicate a minimum of 4.5 hours each week.6 Deloitte’s survey shows that millennials satisfied with development opportunities are twice as likely to remain with a company, emphasizing the importance of continuously developing new skills, especially with cutting-edge technologies. This not only instills a sense of stability and personal fulfillment, but also reinforces their desire to align with a forward-thinking firm.
Staying competitive and compliant – Small and midsize firms operate differently from their larger counterparts,7 showing a positive relationship between firm size (revenue) and average net hourly rates. The value provided by accounting firms in traditional services faces erosion from various service providers and off-the-shelf software. Do-it-yourself software and non-public-accounting providers of tax and payroll work has led to increased demands for lower prices, squeezing profit margins. Rising operating expenses further impact profits and negatively affect profitability, intensifying pricing pressures.
To safeguard the bottom line, many firms are exploring technology to enhance productivity and cost efficiency. This not only reduces time spent on low-value tasks but also opens opportunities to pursue higher-margin revenue streams.
The AICPA’s 2023 National Management of an Accounting Practice Survey reports that out of 1,117 firms, 1,034 have net client fees of less than $10 million.8 Small firms, outnumbering large firms 91 to 1, predominantly generate their revenue from tax compliance services.9 As far as time spent on services, Accounting Today’s 2022 Year Ahead Survey found that firms spend most of their client time on compliance services, and the No. 1 issue cited as the firms’ biggest challenge was regulatory change.10
The constant change and increasing complexity of regulations pose interpretation, application, and productivity challenges. Failing to meet compliance and reporting guidelines can result in client and talent retention issues. Consequently, regulation considerations are driving digital transformation within firms.
Change Readiness and Restraining Forces
Change readiness – Despite the forces propelling a digital transformation, successful implementation hinges on a firm’s readiness. Bryan Weiner, a researcher in implementation science, introduced the organizational readiness for change theory, asserting that greater organizational readiness leads to more successful implementation.11
Employees commit to change either because they genuinely want it, feel obligated, or are compelled, with intrinsic motivation yielding the highest commitment. To promote organizational readiness for change and overcome resistance, organizations must act before implementation begins. Readiness is linked to change commitment and change efficacy, representing the degree to which an organization’s members collectively value and assess factors related to implementing change.12
Employees value change when they understand its importance, its implications for the firm, and the personal benefits that may accrue. All this requires purposeful communication across the organization. When staff comprehend the “why,” it cultivates commitment and perseverance through resistance points. While an intellectual understanding is necessary, emotional factors also play a crucial role. Here are common restraining forces and some recommendations on navigating them.
Status quo bias – William Samuelson’s and Richard Zeckhauser’s work on status quo bias reveals a preference for maintaining the current state, even if change could be beneficial.13 The status quo has advantages in predictability, offering comfort that usually outweighs the anxiety linked to uncertainty. Uncertainty can breed fear of loss, as suggested by the concept of loss aversion, where individuals place a higher value on avoiding losses than achieving equal gains.14
Related to status quo bias are the expectations formed by employees about their roles and responsibilities. Change not only challenges familiarity, but it also conflicts with psychological contracts, the unspoken expectations and commitments that employees perceive to exist between them and their employers.15 A change initiative that redefines job roles, introduces new tasks, or alters reporting structures may be viewed as a violation to the contracts, producing resistance.
Management must communicate the reasons behind change as well as the potential benefits for both the firm and staff. The communication should be two-way, so encourage employees to share perspectives, ideas, and concerns. Leaders should view resistance as a resource rather than a threat, and complaints in the early stages can keep the digitalization initiative alive.16 Continually assessing how employees are adapting and acting on their feedback in a timely manner increases the chances of successful implementation and demonstrates to staff that management values their input.
An incremental digital transformation may combat resistance related to the status quo bias. Instead of implementing everything at once, a phased approach can reduce the perceived risk of uncertainty or loss, making the overall transformation less daunting.
Skills gaps – Many articles that discuss widening skills gaps concentrate on soft skills, but with the rapid pace of change, lagging technological aptitude is also a problem. In fact, the top skills gaps in finance relate to digital skills.17 Only 10% of CFOs believe their teams have the skills required to support their digitalization goals. Paradoxically, only 14% of transformation budgets are designated for skills training and development. To successfully navigate a digital transformation, firms need to be attentive to both the technology and those who implement and use it.
Skills deficiencies will certainly compromise implementation goals, but it may also compound the emotional factor. Feelings of incompetence can lead to fears of an inability to perform well in a new technological environment. This can lead to job security concerns and, consequently, a lack of buy-in. PwC’s latest Global Workforce Hopes and Fears Survey finds 60% of respondents are concerned that automation will negatively affect job security.18
At the organizational level, change efficacy relates to the shared belief of employees’ ability to implement change successfully. Employees intuitively assess the match between a project’s demands and the resources available to support implementation. Enhancing technical competencies through training not only serves the technical side of implementation but also shows staff that the organization is behind the effort, increasing their belief in the firm’s capabilities to pull it off.
Teams – An unfavorable team dynamic can erode trust among team members, making it difficult to collaborate and support each other during a digital transformation.
Leadership must foster a healthy and productive team culture. They must personally demonstrate collaborative behavior and prioritize it through the provision of resources. Team building activities can enhance relationships and improve cooperation. Corporate recognition of successful collaborations also reinforces the value placed on group efforts. Purposefully involving employees from different departments and various organizational levels in decision-making and implementation can foster ownership and bring together individuals with different skills, perspectives, and expertise. When their voices are heard, employee morale is positively affected and resistance to change can be reduced.
It may also be advantageous to reflect on past initiatives, especially instances where implementation efforts fell short. Avoiding similar mistakes depends on leaders analyzing what went wrong, understanding the root causes, and pinpointing areas for improvement. Valuable insights about an organization’s strengths and weaknesses can be developed through these uncomfortable examinations. Honest communication about past failures fosters a culture of trust, shared responsibility, and a healthy mindset related to risk taking and change.
Technology
The technologies your firm may be considering for your digital transformation will vary depending on your size, resources, and needs. Here are a few that are top-of-mind in many small and midsize firms.
Artificial intelligence – Systems that employ artificial intelligence (AI) uses algorithms, instructions, or rules to navigate tasks that would typically, and tediously, be done by staff. The more data that is analyzed over time, the more algorithms learn and the better the insights will be. Think of Netflix’s recommendations. The streaming service’s algorithm learns from your viewing history and data from other users with similar tastes to continually provide more personalized recommendations. This is “machine learning,” an area within AI that “learns” from its use of datasets rather than referring to rules.
Natural language processing (NLP) is a machine-learning technology that enables computers to understand the written or verbal language that we use to communicate with each other. This technology is working behind the scenes when we do a Google search, use spell or grammar checks, and engage with chatbots or virtual assistants. Virtual assistants are an example of a beneficial technology for smaller accounting firms to handle common client inquiries or to schedule appointments. Such assistance not only brings efficiency gains but also enables accountants to focus on more complex client needs while simultaneously meeting clients’ communication expectations.
The most prevalent application of AI in accounting relates to repetitive tasks, such as reconciliations, billings, and data recording and reporting. It can help firms reduce errors and increase the accuracy of financial reporting. The proliferation of accounting software and automated transactional and customer service tasks has enabled passive and continuous collection of more data than ever before. AI is helping to increase the utility of this data and add value to client services by providing meaningful insights and analyses that support clients’ strategic objectives.
In audit, predictive tools can pinpoint high-risk areas during planning. Workflow automation tools can automate task assignments and route documents. Compliance testing tools can help ensure adherence to regulations. Firms offering tax services can gain similar benefits. AI extracts information from documents, automates data entry, and categorizes documents. Algorithms can process tax codes and analyze client financial data for compliance. Predictive analytics help clients optimize tax positions and minimize liabilities.
Cloud-based technology – “The Cloud” provides computing services and storage over the internet, with data and applications residing on off-site servers managed by third-party providers. Software as a Service (SaaS) accounting applications, such as cloud-based accounting software, offer users the flexibility to access financial data and tools from anywhere with an internet connection. This is important for firms’ recruiting and retention efforts, as well as for accountants who need to access clients’ financial information while off-site or outside of typical business hours.
SaaS also streamlines collaboration between accountants through cloud-based tools that enable real-time changes and minimize version control problems. Most SaaS platforms also have built-in communication and project management tools to support collaborative efforts. In addition to enhancing communication and collaboration among accountants, SaaS enables online portals where clients can work on shared documents with their accountants and access their data in real-time.
The subscription model used by cloud-based services reduces up-front costs as well as maintenance costs when compared to investing in and maintaining on-site servers. Smaller firms can also enjoy security features through SaaS that would otherwise be out of reach. SaaS providers commonly assume responsibility for security threats and disaster recovery measures, increasing peace of mind and reducing the risk of data loss and downtime. Finally, SaaS applications are especially attractive for smaller firms as they are scalable, allowing subscriptions to be adjusted based on fluctuating business needs.
Conclusion
Small to medium-sized accounting firms are undergoing a digital transformation driven by evolving client expectations, talent recruitment challenges, and the need to stay competitive and compliant. The integration of technologies, such as AI and cloud-based solutions, is pivotal to meeting these challenges. Successful implementation relies on a firm’s readiness and necessitates addressing restraining forces such as the status quo bias, skill gaps, and team issues.
This transformative journey is not merely a response to external pressures; it is an opportunity for firms to enhance efficiency and position themselves as agile and client-focused.
1 Teri Saylor, “The Trends That Will Affect CPAs in 2023,” Journal of Accountancy (Dec. 1, 2022).
2 “Finance and Accounting: Hiring Trends, In-Demand Roles, and Workers’ Job Search Plans,” Robert Half.
3 “PwC’s US Remote Work Survey,” PwC (Jan. 12, 2021).
4 Derek Dalton, Jace B. Garrett, Nancy L. Harp, and Gregory P. McPhee, “An Analysis of Organizational Support for Telecommuting in Public Accounting Firms,” Behavioral Research in Accounting, 35(1), 1–20 (April 2023).
5 Michael Timmes, “Millennials and Gen Z: Now Is the Time to Reshape Businesses to Harness Their Power,” Forbes. (June 27, 2022).
6 William K. Bacic, “Quenching Millennials’ Thirst for Professional Development,” Deloitte (2016).
7 “2023 PCPS CPA.com National MAP Survey: National Summary,” AICPA and CIMA (2023).
8 Ibid.
9 Edward Mendlowitz, “Art of Accounting: Small Firms Outnumber Large Firms 91 to 1,” Accounting Today (Sept. 28, 2018).
10 Daniel Hood, “The Year Ahead: 2022 in Numbers,” Accounting Today (Dec. 2, 2021).
11 Bryan J. Weiner, “A Theory of Organizational Readiness for Change,” Implementation Science (Oct. 19, 2009).
12 Ibid.
13 William Samuelson and Richard Zeckhauser, “Status Quo Bias in Decision Making,” Journal of Risk and Uncertainty, 1(1), 7–59 (1988).
14 Amos Tversky and Daniel Kahneman, “Loss Aversion in Riskless Choice: A Reference-Dependent Model,” The Quarterly Journal of Economics, 106(4), 1039–1061 (1991).
15 Jia Li, Minghui Liu, and Xuan Liu, “Why Do Employees Resist Knowledge Management Systems? An Empirical Study from the Status Quo Bias and Inertia Perspectives,” Computers in Human Behavior, 65, 189–200 (2016).
16 Jeffrey D. Ford and Laurie W. Ford, “Decoding Resistance to Change,” Harvard Business Review (April 2009).
17 “Finance Transformation: The Human Perspective,” AICPA and CIMA (2023).
18 “Global Workforce Hopes and Fears Survey 2023,” PwC (June 19, 2023).
Brian Trout, CPA, DBA, CGMA, is an assistant professor of accounting and finance at Millersville University in Millersville. He can be reached at brian.trout@millersville.edu.
Cory Ng, CPA, DBA, CITP, is CFO and vice president of administration at the PICPA, an adjunct associate professor in accounting at the Fox School of Business at Temple University in Philadelphia, and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at cng@picpa.org.
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