Cloud Accounting Practice Management

How to Turn Your Digital Plumbing Into a Competitive Advantage

Written by Mathew Heggem

Digital PlumbingMore and more of today’s business leaders have become privy to the value of mining the data produced by their companies. But when that information becomes too overwhelming to handle, they’re left unclogging the mess rather than capitalizing on the data’s profit-driving potential.

That’s where digital plumbing comes into play. By connecting areas of the business that amass crucial information, you can achieve #ZeroDataEntry, boosting your company’s productivity, intelligence, and bottom line.

To some, digital plumbing sounds more like a buzzword than an actionable and advantageous strategy. While the concept might still be in its infancy, those who clean up their accounting now will maximize companywide efficiency, uncover new opportunities, and reap the financial and intrinsic rewards of doing right by their clients.

As an accounting professional, you can become a more dynamic force in your industry through digital plumbing — proactively preparing for the future rather than playing an endless game of data entry catch-up. This also frees up more time to forge personal relationships with clients as opposed to mindlessly crunching numbers all day.

It’s almost like using dial-up versus Wi-Fi. Clearly, the latter is more flexible and liberating. But to leverage digital plumbing as a competitive advantage, you must first find your footing at this intersection of accounting and technology in order to gain an understanding of the value to both you and your clients.

Unlocking the Value of Digital Plumbing

Digital plumbing is more than a fad concept in the world of accounting. It’s a commitment to staying relevant in the future. By jumping headfirst into the expanding waters of accounting technology (what I like to call “AccTech”), you are future-proofing your business today for the businesses of tomorrow. But before taking the plunge, you must recognize its value to the business — and find a way to dip your toe in the water.

Here are a few steps that will help you discover your fiercest competitive advantage:

1) Do your homework. You need to know where to start — and that’s not always easy to figure out. I was introduced to digital plumbing during The Sleeter Group’s Accounting Solutions Conference in 2014. This was at the panel, “An Introduction to Digital Plumbing,” hosted by Brian F. Tankersley, CPA, CITP, who is an instructor for K2 Enterprises.

The concept caught my interest because it’s where technological innovation and the problems that accountants try to solve collide. But that was only the beginning. I’ve since spent the last year unpacking all I learned and cementing it into the foundation of my team.

As part of my process, I chose to take programming classes at General Assembly, a code school in New York, to learn about the way developers think, plan, and execute. This was so I could translate that framework into the work I do as an accounting services provider. Then I wrote about what I’d learned, and I strategized with my team on how we could apply this knowledge to the work we do for our clients.

2) Adopt a developer’s mindset. Most importantly, effective digital plumbers must think like developers. Developers see nearly every problem as solvable — it’s simply a matter of rolling up their sleeves and getting to work. You’ll learn what you don’t know later, or you’ll pull in the right resource at the right time. This mentality can serve as a competitive advantage for accounting firms to operate with greater flexibility and adaptability when working in the world of AccTech.

For me, learning about code through classes for nonprogrammers was critical to succeeding with digital plumbing. After immersing myself in front- and back-end languages like JavaScript, Python, and Ruby, I was able to carry over knowledge that’s helped me think more creatively and explore innovative solutions with clients.

For example, one of our SaaS (software as a service) clients was seeking a way to handle his accounting by integrating his software and the Xero API. He didn’t simply accept the status quo of working with CSV files — instead, he aimed for a more seamless integration of sales data from his platform in Xero, which would save him time and money.

His accounting can now be completed more efficiently because the data doesn’t need to be manually entered. And now that he has Xero integration, he can offer that to his customers, too!

I also recently learned about agile project management versus the traditional waterfall method. This idea of testing ideas, executing project fragments over time, and releasing small updates allows software companies to be more responsive to customer needs. If your firm forays into the world of digital plumbing, you’re also taking a more agile approach and achieving the level of responsiveness you need to effectively grow. The ideas translate seamlessly.

3) Be prepared to tackle adoption challenges. As with any new concept, adoption issues will inevitably arise. As you introduce digital plumbing, you’ll have to help people understand why you’re embracing it. It’s not simply a fad. It’s the way of the future — and your surest shot at staying relevant.

4) Learn the emerging language of business. Business thrives online. That’s why more company leaders have identified the need to examine how their companies exist online and adopted strategies based on optimizing customer interactions through tech, such as web applications. Tapping into a coder’s mindset will help you create a website that meets the standards of future clients.

I also imagine a future where more customers will seek ways to make their general ledger software speak to their website. This is especially true for our SaaS clients, who house their customer data in systems that could be integrated with platforms like Xero via APIs.

Speaking the same language delivers a twofold advantage. It equips you to interact with customers online in a more dynamic way, first by integrating your service experience with through online encounters, and second by adding value through sharing your intelligence around how other aspects of their business coincide with accounting.

5) Ruminate on the business goals. When it comes to digital plumbing, you can’t speak intelligently about the flow of data from one point to another without understanding the various platforms in that ecosystem — what data lives there and where the bottlenecks lie. But you also need to know what the business owner is trying to achieve and the value of that data relative to the decisions he must make.

You will provide the most value by offering insight into how business owners can improve their accounting systems to make more informed decisions faster. To be a successful digital plumber, you must be willing to talk about sales, marketing, customer service, operations, and HR just as much as about finance and accounting. Future-proofing you and your clients’ businesses requires you to see the forest and the trees.

6) Take the long view. Adopting digital plumbing won’t be a competitive advantage for those looking to sell their firm in the short term. However, if exiting is part of your strategy as an accountant, you do still need to consider what your future customer will be looking for. Considering the needs of the accountant of the future will help you take steps now to enhance the salability of your book of business when the time comes to sell.

In the business world, accounting isn’t an industry synonymous with innovation — a misconception that has stifled too many companies from reaching their full potential. But the future is now. Take a role in shaping more proactive and profitable accounting practices, or resign yourself to following the lead of others who will. Your clients, the future workforce, and the well-being of accounting professionals across the world depend on it.


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About the author

Mathew Heggem

Dancer-turned-accountant Mathew Heggem is the CEO and co-founder of SUM Innovation, a New York-based accounting management and consulting firm that assesses, designs, implements, and manages accounting solutions for fast-growth startups, international businesses, established and growing businesses, and nonprofits across the U.S. Mathew is also the founder of the #SUMTech Summit and the #AccTech Cooperative meetup group in New York City, which explores the intersection between accounting, technology, and entrepreneurship. In his formative years, Mathew was hugely fascinated by interdisciplinary religious studies and is currently working toward becoming a Certified Feldenkrais Practioner.

14 Comments

  • Hi Mathew,

    Enjoyable read. It is fun to read a fresh perspective on an old (yes, not so new) concept.

    The concepts of “digital plumbing” overlap generations and are resurgent at every technological cycle or boom. Some IT cycles have implied methods of design, such as Agile or Dev Ops, etc.

    Here are two books which might interest you and other readers, regarding Digital Plumbing.

    The Velocity Manifesto: Harnessing Technology, Vision, and Culture to Future-Proof your Organization by Scott Klososky, 2011, ISBN: 978-1-60832-085-1, Greenleaf Book Group Press.

    Empowering Users through Design: Interdisciplinary Studies and Combined Approaches for
    Technological Products and Services, edited by David Bihanic, 2015, ISBN: 978-3-319-13017-0 or 978-3-319-13018-7(eBook), Springer International Publishing, Switzerland.

    These books take differing approaches to this conversation. The first is more specifically related. The latter book is more technical, while discussing Design, Form, Objects, and Concepts.

    The latter also illustrates the many design approaches and events over the years, in which artists, designers, engineers, and business planners, i.e. accountants, etc. discussed design issues and practices. It is more a compilation of essays by groups of technical thinkers.

    Hope these books add value to those interested in this topic, or at least continue the exploration into how digital plumbing, or it’s knowledge, can deliver a competitive edge.

    Thanks again Mathew for sharing your insights. Hope others will share their thoughts too.

    Sincerely,

    Tamra

    Tamra Groff, Senior Consultant, GASC/GHFG

    • Tamra, thank you for your insight and feedback! I’m so honored that you took the time to read through this article as I am very passionate about exploring this topic for our industry. I am off to Amazon to buy those books and hopefully I can include some of those ideas in my next article too. Unfortunately, I won’t be able to read those before this coming months article goes live (already submitted for review); but, you can expect a shout out and a few references in articles to come!

  • Mathew, this actually made my brain just spin this morning, then I read again with coffee, it is an exciting time to be a Small Business Accountant and Most Trusted Advisor, there is so much opportunity to provide innovation to the business owner, who is most times so focused on what they do to see the global processes that and be put in place to actually enhance their business.

    And Tamra, I really like your additions to the topic and the references..

    Thank you so much for this

    • Thanks, Pat! I hope that’s spinning in a good way 😉 This topic is a bit funky to write about sometimes, so I am always looking for ways to tighten up my presentation of the ideas. As this topic continues to evolve on the Sleeter blog, I make sure to refine my message so that you can digest regardless of the need for that cup o’ joe! You are right, though: This is an amazing time to be an accounting pro — we have such an opportunity to help our clients achieve great success! We can empower them with the data they need to make smarter decisions and help to drive this economy forward by creating more jobs. I’m so committed to the idea that accountants will be the force behind a transformed US economy — and it starts with all these small businesses making better decisions.

  • Thank you Matthew for an insightful article. In my opinion one of the most important points is to tie the flow of data to the business owners goals with the aim of better information for informed decisions.

    And I agree with Pat, Tamra’s references add more for us to think about.

    • Linda, thank you for reading the article. I agree. I will find an opportunity in one of my upcoming articles to dig into some of the nuances around making better decisions are a result of this flow of data. I am currently conducting research to develop a few case studies — and looking at reporting app integration through these iPaaS systems will be a part of that. Keep reading — and keep giving feedback. I’m writing this for you!

  • Digital plumbing is just another business practice norm that needs to be embraced by the historically backward-looking accounting industry in order to thrive in the future. Those who ignore the digital age of business are begging to lose the value add services provided by CPAs and become relegated to mere tax preparers. Nothing wrong with that- just dinosaurs versus cheetahs.

    • We’ve been talking about “Digital Plumbing” for some time here, Keith, although sometimes we use different terms. Not a fad, it is something that we’ve been doing for ages, in a way. Do you ever use Transaction Pro Importer/Exporter to move data into or out of QB Desktop? That is a form of Digital Plumbing, really. It is just that now we have better tools for the online world.

    • Hey Keith! Thanks for your note. It’s funny you should say that, because I find myself to be a skeptic too when it comes to technology in this industry. I say so, because I am very protective of my employees’ time when learning new tools/techniques, etc. (time is limited and we need to stay laser-focused).

      But, I can tell you that our own customers are coming to us asking about how data is flowing in/out of their accounting systems. And, they expect us to play an active role in the conversation. The entry point here is this idea of ‘digital plumbing’ and how a well-designed system can lend itself towards better decision making.

      So, fad or not, it is my responsibility as a firm owner to embrace this stuff…. That said, I think Charlie’s comment below is spot on. Now, I’m new to this world… I’m only 31 after all and became the CEO of my firm about 5 years ago… And, I know that there’s a ton I don’t know about the recent-history of technology within this industry (please feel free to school me!!!). But, I deeply respect Charlie, and many others on this platform who have so much insight to share, and in doing my own research have realized that the term itself, ‘digital plumbing’, may be buzzy/faddish… But, the concept of technology systems communicating with each other is not.

      And, to Charlie’s point, we have a new set of tools to work with and great technologists innovating in the accounting space making it possible for even non-developers to participate in the process. It’s super cool stuff! So, now’s the time to take this conversation off the ‘fad’ list and move it to the, ‘Gosh, they’re serious and I better get on board or else…’ list.

      I say this, because my generation is demanding change. And, it’s my personal mission to claim this phrase whole-heartedly and make it an integral concept understood by accountants far and wide.

      In fact, I recently wrote an article for a chamber of commerce in NYC (focused on startups and entrepreneurs) on the one question you can ask of an accountant to determine whether or not s/he is on their AccTech game. That question was, ‘What is digital plumbing and how will it impact my business?’

      So, if you don’t have a serious answer for that question and you are not prepared to respond as an accounting professional, then you may get left behind. I seriously believe that any accounting professional incapable of communicating effectively (at some level) on the topic of accounting technology is doing a dis-service to themselves, their clients and the economy.

      I will educate every business owner I know on this topic of digital plumbing. I will push that idea far and wide. And, the accounting industry will change. So, I hope you will join me on this journey as I do look forward to your future insights.

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