Accounting Firms in 2018?

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The January/February 2009 issue of the Ohio Society of CPA’s magazine, Catalyst.

The title is provocative, ”2018: A world of global accounting and virtual business.” Written by Kimberly Scher, vice president communications for The Ohio Society, with insights and suggestions from Jeff Tucker, shareholder of Top 100 firm Rea & Associates Inc., with which we have been discussing various issues surrounding effectiveness vs. efficiency, Lean Six Sigma, Value Pricing, getting rid of timesheets, etc. Rea just might be the second Top 100 firm that trashes timesheets.

Jackie is the article’s fictitious protagonist, a CPA who works in her parent’s furniture company. A recounting of her day gives you a glimpse of how accounting will be different by 2018, including XBRL, international accounting standards, doing business in China, technological innovations, an international CPA certification credential, among other topics.

From our standpoint at VeraSage, here’s the most fascinating prediction in the article. During a lunch with a colleague, Michael, who works in public accounting, Jackie asks, “How’s business at the firm?” Here’s Michael’s response:

“Business has been great since we eliminated timesheets and hourly rate billing. We now price every piece of work up front based on the value of the services we provide. Our clients love it. They get a client service plan tailored specifically for them. We negotiate a fixed price agreement, called an FPA, for implementation of the entire plan. The FPA comes with unlimited access to us.”

“No more bills for a six-minute phone call!” Jackie says with a laugh. “As a client, I can see why that would be popular. What if a client’s needs change?” Jackie asked.

“Then we revise the plan, document the modifications and renegotiate the FPA with the client,” Michael said.

“Why the change to FPA?” Jackie asked.

“When we billed by the hour, we had to work more hours to earn more. Focusing on billable hours impacted our staff’s work/life balance. We realized that with hourly billing there was little or no relationship between the payment we received and the value of the services we provided. With the FPA approach, we determine what services our clients want from us and develop a compensation structure based on the value of those services.”

Here’s my question: Do we really think this will happen in a majority of CPA firms by 2018?

Critical mass takes approximately 20% of a population adopting an idea before it diffuses among the majority of the remainder. VeraSage’s best conjecture is 7-10% of the approximate 90,000 firms in the English-speaking world have implemented Value Pricing and Change Orders as we teach these concepts. Less than 1% have trashed timesheets.

My bet is we won’t be at a “tipping point” by 2018. I hope I’m wrong, and articles like this are encouraging since we now believe that Value Pricing and trashing timesheets are finally on the offense, not defense.

What is your bet?

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