Accounting firm technology has evolved radically over the last decade with the development of cloud applications for almost everything. As highlighted in the Karbon Accounting Trends Report, most accounting firms are now using up to 40 applications to serve their clients and run their firms.
The most successful accounting firms that I have seen select 3-6 core applications for the vast majority of their processes. So what products do they use? And more importantly, how do they all come together?
Let’s dive into a modern accounting firm’s infrastructure from start to finish.
The Evolution of Firm Infrastructure
Traditionally, there are two major software groups that power firms:
- Client service apps, and
- Practice management apps.
As cloud accounting has grown and evolved, client service apps have moved completely to the cloud, led by cloud accounting (with tax applications lagging behind).
In response, practice management software is finally starting to evolve. With this movement to the cloud, two additional groups have appeared:
- Client management, and
These groups are mapped out below. Infrastructure components that are client-facing appear on the left, and those internally facing the firm are outlined on the right.
Defining Client Services
Client service apps simplify and accelerate revenue-driving services for your firm. Seven major service offerings exist for full-service accounting firms, comprised of audit, advisory, tax, accounting, bookkeeping, payroll, and IT consulting (financial wealth management is excluded).
The diagram below defines each of these in more detail. Depending on the size and focus of your firm, you may do some, but not all of the related services. Any technology exploration should begin by focusing on the service that is the most important to your firm based on profits, growth potential, or which offers the most opportunity for improvement.
The Best-of-Breed Approach
Up until recently, limited options have existed in the practice management space. Most practices, if they could afford it, have used a desktop, on-premise solution to satisfy their needs for CRM, project management, workflow, and more. Due to the high costs of these solutions, their lack of integration, and their desktop nature, firms have been forced to buy into the vendor’s private ecosystem.
One of the biggest benefits of the cloud is the opportunity to build your infrastructure using a best-of-breed approach — a set of smaller and cheaper products that you handpick to meet your firm’s specific needs. Your billing app can now be your General Ledger. Your document management can be a generic solution like Box or Dropbox. You can leverage a process-focused time-tracking app like TSheets, and your practice management solution for workflow, collaboration, and job management can be an industry-specific system such as Karbon. You can construct what is right for your firm and purchase only what you need.
Client Management & Communications
Client service apps and practice management apps have been bolstered by the emergence of two new categories of apps that link them together: client management and communications.
The client management app category reached full gear with the release of cloud accounting extensions like Intuit’s QuickBooks Online Accountant and Xero HQ. Both provide a dashboard of your clients and a view of the associated financial activities within each.
The communication category has also emerged with products like Slack, Yammer, and Google Groups, allowing staff to collaborate on work without being restricted to their inboxes. This was a core problem that Karbon, for instance, set out to solve in its beginning.
A firm’s infrastructure is the thoughtful construction of key applications that solve the core processes — both externally and internally — of a firm, while allowing all parties to work collaboratively. These systems are the core for every cloud accounting practice, and what you choose to adopt are some of the most important decisions your firm can make.