CPA Firm Information Management

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Tom DavisCPA Firm Information Management - Moving Beyond Practice Management
Presented by Tom Davis
President of Knowledge Concepts and Managing Partner of Davis, Nichols & Associates LLP
Contact Tom at [email protected]

July 19, 2001

Visit the AccountingWEB Workshop Calendar for upcoming sessions.


You can read the complete transcript of the workshop.

Topics covered in the workshop include:

Issues in accounting firms

  • Excess Opportunities
  • Resource Shortage
  • Clients' changing perceptions of service value

Impact of Information Management on firms

  • Increased efficiency
  • Improved client relationship management
  • Transfer of knowledge

Components of Information Management

  • Business Management (the next level of Practice Management)
  • Document Management (less paper / paperless environment is getting closer)
    • Document storage and retrieval
    • Activity oriented storage of documents (people centric).
    • Workpaper container applications (ePace, Caseware, etc.)

Key Elements of IM Solutions

  • Accurate
  • High-velocity
  • Efficient accumulation of information


  • CRM (Client Relationship Management)
  • KM (Knowledge Management)
  • SFA (Sales Force Automation)
  • PSA (Professional Services Automation)

How to effect change when no one wants to

  • IM Planning Process
  • Training
  • Continuous evaluation and modification of information system

July 19, 2001 Session Sponsored by: Knowledge Concepts, Inc.

FirmWorks by Knowledge Concepts, Inc.

Workshop Transcript

Session Moderator: Welcome everyone, and thank you for joining us today! Our workshop presenter is Tom Davis, president of Knowledge Concepts and managing partner of Davis, Nichols & Associates LLP. Tom has an extensive background in technology consulting. His consulting practice has reached over 2,000 accounting firms in the last 16 years of practice.

Knowledge Concepts, Inc., founded in 1996, is the developer of the FirmWorks' software application. FirmWorks' software provides Customer Relationship Management, Professional Service Automation, and Sales Force Automation functionality for accounting and professional services firms. Tom currently serves on ASCAP's AAA National and Top Ten Technology Committees, as well as the Best Practices Task Force. He has served on the Georgia Society of CPA's Management of an Accounting Practice Committee, the GSCPA's Information Technology Committee, and on advisory boards for Harcourt Brace, Practitioner's Publishing Company, CCH Practice, and the Associated Regional Accounting Firms (ARAF). In 1998, he was named as one of the top ten computer technology experts in the accounting firm field by Accounting Technology magazine.

Tom has developed and presented training for CPA Systems, CCH, Network Systems, Futurus Team, Peer Software, Prentice Hall Professional Software, Microsoft, Symantec, and LAN Aces. Tom has made presentations for the American Institute of Certified Public Accountants and the Georgia, Florida, Louisiana, and Washington, D.C. Societies of CPA's. Tom is a regular speaker at various national technology conferences.
Session Moderator: I would also like to take a moment to thank Knowledge Concepts for sponsoring today's workshop. You can find out more about Knowledge Concepts at

Welcome, Tom!

Tom Davis: Welcome everyone. Thanks for attending this workshop on CPA practice information. The topic of Practice Information is one of special interest to me. As the managing partner of an accounting firm, I frequently (daily) encounter the need for better. As the president of Knowledge Concepts Inc., I am responsible for developing and deploying our FirmWorks application to meet the needs of accounting firms for better practice information.

I propose we discuss several topics today:

a) Issues generally facing accounting firms b) Impact of Information Management on firms c) Components of Information Management d) Key elements of an information management system e) Information management examples e) Information management tools f) How to effect change (when no one wants to)

I will present information about the topics and then will take questions and other comments and drill down further into the topic. Remember, to get the most from this workshop, ask questions and contribute. Lets get started by talking about the general issues that face accounting firms.

First, firms have plenty of opportunities to sell new business. These opportunities are available to us in both the traditional practice areas (compliance, planning, etc.) as well as in the form of new services such as wealth management, technology consulting, and other emerging practice areas (the AICPA has identified more than 40 new types of services that firms should consider in the future).

The problem here is that we have too many opportunities. Our existing clients are demanding more and more services and we also have marketing plans in place to acquire new business. What seems to be happening in many firms is that there is too much work and we are having difficulty performing high quality services for our clients.

What really makes this "excess opportunity" condition a negative issue is that we just cannot get the resources needed to do the work. Not as many youngsters are going into the accounting business, so it's getting increasingly difficult to get quality people and they are costing significantly more. This trend will not get any better any time soon. Another resource related issue is that we often do not have the right resource at the right time. A good example here is the problems firms are facing in getting into some of these new practice areas. If a firm is going to get into a new practice area by building from within, it will take substantial partner time to get into the new business. There are not a lot of examples of successes without this involvement. Unfortunately, partner resource is the most scarce on in most accounting firms.

The final issue is one of client perception of the value of many of the services offered by firms. There is a general perception that the traditional services are declining in value and the emerging "consulting" type services are much more profitable. This is a very complex issue. I have many examples of fee resistance by our clients, but I also have many examples of firms that are doing a great job of providing traditional services in a very profitable manner. For this presentation, lets go we the politically correct conventional wisdom that clients are valuing our services differently (adversely so), and that this is hurting firm profitability.

Is there anything else, issue-wise that we need to add to the pile? Of these various issues, which ones are hitting your firm the hardest?

Kevin Knack: Partner resources

Tom Davis: I agree Kevin. If things are going to happen in our firms, they have to be led from the top

Kevin Knack: We have the expertise, but cannot get loose from compliance

Tom Davis: One way around this dilemma is to use information more efficiently and effectively.

Tom Davis: Most accounting firms just do not do a good job with information about their practices. Despite years of using computer technology, most firms still employ the same information processes that they did 20 years ago. It always baffles me that a typical pizza delivery shop makes much more efficient use of information about their customers than almost any CPA firm. Accountants just do not get accurate practice information, delivered at the right time, in the right format.

Information management issues in accounting firms are pretty much summed up by one of Finagle's laws: the information you have is not what you want; the information you want is not what you need; the information you need is not available; the information that is available costs more than you want to pay.

Benefits from IM systems are enormous. Client satisfaction is improved, realization can increase by 6 - 12%, and firms operate more efficiently and effectively. Once firms identify what their information requirements are, they can begin the process of identification for solutions that meet their needs and provide the greatest economic returns.

Lets get some input from this group on what information you need to get in your practices.

Tom Davis: What information do you need?

Kevin Knack: Tom, tools are abundant. It more a time allocation problem

Kay Parker: We need to know who know what about each client.

Edmund Lau: Besides keeping up with the client's needs, keeping staff members involved with the client is a problem.

Tom Davis: In today's firms, many firm members provide services to the same client. An issue is getting the complete picture about the complete client. Here are some of the concepts that I include under the umbrella of accounting firm information management:

Relationship Management - As a professional service provider, we enjoy the trust of our client's like no other industry. Successful maintenance of these bonds requires concise communication of information on all client-related activities - including the performance of actual work. On the service side, relationship management systems allow the firm to track client calls, emails, etc., record, monitor service issues, and convey critical information on engagements. On the marketing side, the firm can mine, alter and use information based upon services performed, client demographics, etc. to produce successful targets for cross selling opportunities.

For example, relationship management allows you to immediately discuss client billing issues, convey the status of the audit you are about to perform, review prior discussions with staff on the problems with data received last week and access supporting workpapers and other documentation (scanned images, etc.) while the client is on the phone. The immediacy provides a greater professional image and a more informed client.

Harvard Business Review states "It Cost 6-7 Times More to Acquire a New Customer than to retain an Existing One."

How do your firms accumulate information about your clients now and what are your needs in this area?

Edmund Lau: It's mostly in the hands of the partners and communicated down when performing the engagement.

Tom Davis: Is your time and billing system useful for this?

Tom Davis: Lets go to another IM element. Knowledge Management - In its purest form, KM involves the transfer of intellectual capital from information creators to a centralized location for later re-use. Whether the firm stores instructions for tasks performed by managers or support and administrative staff, software/hardware error messages and resolutions, firm newsletter contributions, software registration numbers, or even the video of the managing partner's shank off the first tee at the firm's charity golf tourney, KM systems provide the means to building firm intelligence, efficiently.

Another issue related to Knowledge Management is the training and retention of staff. Firms with no KM systems often experience the expensive challenge in training new employees as former employees depart with the firm's intelligence still in their heads. By enforcing a policy of pervasive contributions, firms can increase transition time and decrease training time.

The greatest challenge facing firms implementing KM systems involves completing the buy-in by all firm members. Unfortunately, the people with the most to offer are frequently the ones who do not exploit the power of their computers, or are too busy or intimidated by technology to contribute to the firm's knowledge store. It is critical to the firm's success to get ALL firm members participating in adding intelligence to the system.

Are any of you creating electronic knowledge libraries accessible by all firm members? Please share your processes.

Arthur Cook: We have a folder on our network for all types of documents based upon categories.

Kevin Knack: We are trying to ensure all client data is exportable into one suite of tools (Microsoft)

Tom Davis: Okay Arthur. Have you had success getting contributions to this folder?

Arthur Cook: Somewhat...but it does not help when people are on the road and a VPN is too expensive.

Kevin Knack: For further manipulation down the road.

Tom Davis: Kevin, are you making this information available at the client / service level to firm members working outside the office?

Kevin Knack: We are, but we lack depth and time is our biggest enemy
Tom Davis: Arthur, as you move to more advanced tools, look for features that allow users to take the information with them to work when they are not attached.

Edmund Lau: Unfortunately, the partners do not rank the issue very highly.

Arthur Cook: Tom, what is most effective way that you have seen in getting data published and available to firm members? What are the tools? I agree Ed, it is more of an IT issue than a strategic issue.

Tom Davis: One way top get participation is to constantly evaluate the contributions by firm members and then work with those that are not contributing to make sure they adhere to the policies.

Tom Davis: Use the BB approach. Bribes and Beatings.

Arthur Cook: Motivation is pain or pleasure, right?

Tom Davis: The next aspect of IM is Resource Management. Resource Management? Resource Management involves the scheduling, managing and performance of all client services. Most firms do not practice any sort of "pervasive" resource management because of the large amount of maintenance involved in the process and because of the lack of good tools to implement a "total managed resource" system. There are two components of resource management: work inventorying, scheduling, and staffing.

Work inventorying focuses on the work that is to be performed. Many firms practice "partial" work inventorying using due date monitoring systems for tax returns. These systems provide information about all the tax returns that must be prepared, their statutory due dates, and staff having responsibility for performing the work. A total work inventory system would track all services and firm tasks, not just tax services.

To successfully implement a total work inventory system requires the use of the time and billing application (to track information about the resources spent providing the service), and other software tools to maintain and present information about work type, staff assignment, work status, and important target and statutory due dates. Work inventory applications require constant participation of all firm members in monitoring and maintaining information.

The scheduling and staffing aspect to resource management looks at work inventory and other data such as "personal" and other assignments (vacation, CPE, etc.) and matches it against the firm's resources to provide information about resource shortages or surpluses. This requires a firm culture where all members keep accurate calendars and where inventory information is maintained with a high degree of accuracy. It also requires collaboration and other software tools to combine these different information sources into a single view for managing the resources.

Tom Davis: This is a big topic. What are you doing in this area of work scheduling and resource management?

Arthur Cook: Tom, we have struggled with the concept of due date tracking and scheduling for quite some time...we have tax dates tracked in Pro fx and other assurance type dates in excel...there is just too much information. How do you recommend fixing this issue?

Tom Davis: Use the time and billing system as part of this approach. I refer to it as a project approach to practice. Every client service is a project.

Arthur Cook: How will projects help us?

Tom Davis: Each project can be assigned to a firm member for responsibility and can have a due date and status associated with it.

Edmund Lau: Our approach is very low tech, a weekly meeting and a wipe board.

Tom Davis: I have a white paper on this on our web site.

Tom Davis: Edmund, this approach works fine until the day after the meeting.

Arthur Cook: Can you quantify the impact that projects have vs. our "archaic" approach?

Edmund Lau: I know...trying to find a better way, but no one seems interested.

Tom Davis: Arthur, I have seen project generate between 6% and 12% increase in realized fees on a very consistent basis.

Arthur Cook: How does your firm handle scheduling of resources, Tom? In addition, have you experienced those increased realizations?

Tom Davis: this improvement is due to improved information about what the service is as well as improved ability to manage the services.

Kevin Knack: Our firm is changing to the CCH billing system, do you have some tips to maximize its use?

Tom Davis: in our firm, every service is a project and is tracked. This makes it much easier to determine work over loads and to anticipate late services and missed dead lines.

Kevin, use the CCH Practice projects features for all services. Use tasks for budgeting detailed engagements such as audits.

Arthur Cook: Which time and billing system are you using? How do you set up all the projects in it? Seems very cumbersome to me. However, the concept makes sense. Not sure how to get it done.

Tom Davis: We use CCH Practice, but we have also used this approach with firms using Go system, CSI Practice and CPAS VPM.

Tom Davis: Lest talk about Document Management.

Tom Davis: Document Management - Document Management (paperless office) is currently very interesting to accountants. The quest for a "paperless office" has been underway since the advent of personal computers in 1981.

Many document management systems exist today within the CPA firm. The critical issue is understanding the true creation, storage and retrieval and editing procedures. Historical document management systems fail to consider how we interact with our clients. Paper document management systems have a high price tag and do not promote the re-use of information.

Some critical elements in an electronic document system are easy accessibility, organization, safeguarding and control of documents, and searchability .

How many of you have gone to a paperless office environment or are considering this move?

Arthur Cook: We thought about it. But the cost is too high.

Tom Davis: Arthur, consider moving to a less paper environment first.

Edmund Lau: Considering, I agree with Arthur. How can you bring it down to a level where the partners will buy into the idea?

Arthur Cook: explain

Tom Davis: Concentrate on those documents you have complete control over. Tax returns word and excel documents, etc.

Arthur Cook: We image our pro fx does that pertain to less paper aside from the obvious. What are the dollar benefits to paperless?

Edmund Lau: Many of the seniors and partners are very visual reviewers.

Tom Davis: Take a paper file and divide it into a pile of documents produced by the firm and a pile provided by the client. The firm's pile will be the largest.

Tom Davis: The dollar benefit of paperless is easy access to information. When a client calls, I have access to info about the client and the documents to support the services.

Arthur Cook: Do you store all of your documents electronically?

Tom Davis: Another benefit is the reusability of information. Build it once and use it many times. Not all but most.

Arthur Cook: Do you have some person scanning in documents all day long?

Tom Davis: We have just started the process of imaging the documents provided by the client. Scanning is more of a work flow approach. As the work is done, the document is scanned and stored.

Arthur Cook: Do you have an idea as to how much your paper costs have been reduced?

Tom Davis: Reviewing is done on screen as far as the completed work is concerned but the source paper is still used. We have not measured the paper cost savings, but our file room has the same amount of paper it had 5 years ago, despite an increasing client base.

Edmund Lau: How do you break older staff members away from the review on paper scenario?

Tom Davis: Training and setting of firm standards. Another important piece is having a system that makes it easy to store and find information electronically. Here are some of the tools used to build practice information systems.

Practice management applications (time and billing) (this will be the topic of an Accounting Web Workshop on September 18)

Groupware applications (Lotus Notes, Microsoft Exchange, Novell GroupWise) (used for communications, scheduling, remote access, etc)

Contact managers (ACT! And Goldmine)

Report writers and database applications (used for providing access to information in specific formats)

Workpaper containers (ePace!, CaseWare, PPC Engagement Manager) (used for trial balance engagements that result in financial statements tax returns, and other specialized documents)

Document management applications.

Are any of you making changes to any of these types of software? If so, why and which ones?

Arthur Cook: Tom, coming back full circle, how does your group link the document system with the knowledge system? Can one support the other, even on the Net.

Tom Davis: It looks like workpaper containers will be very important this year.

Tom Davis: Arthur, we use several tools for this. The knowledge system (FirmWorks) links to ePace and Caseware It also links to the server folder structure. I can open a client, click on a button and then be in the file folders that support the client's work or the epace and caseware binders. This information is accessible over the net through our Citrix application. We are also making use of the Windows 2000 "off line" capabilities for taking information into the field. When we talk about remote access, what do you need in your firms? Is access over the net enough, or do you need to take the information with you?

Arthur Cook: Information available from anywhere - documents, workpapers, and client information. The ability to record time from a far.

Tom Davis: The time entry piece is easy. All the applications have features for this and they are getting better.

Arthur Cook: Often, we have the need for a file that we forgot. We have people in the office email it to us. What applications have remote time entry?

Tom Davis: That works fine. I feel that workpaper container and similar applications will make it easier to take all the info with us.

John Goad: It depends on the client, really. We have a Citrix server, though a client's environment may not lend itself to our staff accessing the server readily. In these instances, they need to have portable data.

Tom Davis: Remote time entry is available from CCH, Creative Solutions, and CPA Software and from FirmWorks.

Arthur Cook: Is FirmWorks a time and billing system?

Tom Davis: The complexity of getting a connection from the field to the internet is getting easier. make sure staff are trained in doing this.

Arthur Cook: We have looked at the other three but are still in Unilink for DOS.

Tom Davis: FirmWorks is not a time and billing system, but it has features that link to time and billing applications for time entry. I do not know when UniLink will have it's Windows tiementry available. I just wrote an article on it, bit do not remember this as a new feature.

Tom Davis: Back to connecting in the field. Write up the procedures and make sure firm members consider this need before going out. Here are some recommendations for implementing a practice information systems (also known as herding cats).

Planning is critically important. The planning process should start with an extensive analysis of use of information as well as the types of information needed. This planning will result in a set of detailed standards of how your firm use the IM system. Make sure all firm members, especially the decision making group, are involved in this process. The firm's practice information system will be a "pervasive application." All firm members must make use the practice information system for it to be the most beneficial

The next step after planning is to train firm members on the standards for using the system as well as its features. It is amazing how well any application will work when members understand the firm's requirements for using the application.

Finally, you start the processes of planning and training all over again. This is a never-ending cycle because the firm's information needs will change frequently, new capabilities will become available from vendors, and the firm's staff will change over time.

What do you see as the biggest impediment in implementing an IM system?

Arthur Cook: Getting our partners to change

Tom Davis: It is important that you present the partners with the economic reasons for the change

Arthur Cook: How do you quantify the economic reasons? We have been through this for years. even back to the date of doing tax returns on screen...always a struggle.

Tom Davis: If a 30 person firm saves an hour a week per person, the annual savings will be more than $150,000 if the average billing rate is $100 per hour. Here I am talking about a sellable hour.

I agree that it may take many "drips and drabs" of time to add up to an hour.

Arthur Cook: How many partners are in your firm? How do you get them to change?

Tom Davis: Do a benefits analysis. Get firm members to specifically identify the information they need to do their work more efficiently and then calculate a benefit. There are three partners in the firm. We get change by making a clear business case for the change.

Tom Davis: After we had some success, it got easier to change faster.

Arthur Cook: Does your firm operate by committee or do you have some magical sword in your back pocket?

Tom Davis: Nothing magical about the sword. It is just your basic axe. Your committee question is a good one. If you are a "contentious firm", it is very difficult to get things done. I have no problem with the group reaching a decision. I would like to do it quickly, Once a decision has been made, everyone must play by the new rules.

Arthur Cook: sounds simple...but we have had little luck in making it happen.

Tom Davis: Remember that with IM applications, the partners will benefit the most.

John Goad: You're just not swinging your axe hard enough or at the right heads...

Arthur Cook: gotcha..haha

Tom Davis: You will find that we are in an information desert and it will not be necessary to make the horses drink. They are very thirsty.

Arthur Cook: This is great information, but it seems like an awful lot of stuff. How do you break it down into manageable pieces?

Tom Davis: You have many applications in your firms that are under utilized Take a single information need and then back into the tools needed to satisfy it. Involve many firm members. it is hard to make a decision on a department basis.

Session Moderator: We have just a couple of minutes left - any last minute questions?

Arthur Cook: Thank you for your time and information, Tom. It was quite beneficial.

Tom Davis: Thanks everyone for participating in this workshop. If I can be of any other assistance to you, please contact me at 229.247.9801, at [email protected], or visit our web site at

John Goad: Thank you, Tom.

Session Moderator: Thank you so much Tom for a great workshop! And thanks to everyone for attending today.

Session Moderator: Thank you also to Knowledge Concepts for sponsoring today's workshop!

Kevin Knack: Thank you!


Tom C. Davis, president of Knowledge Concepts and managing partner of Davis, Nichols & Associates LLP, has an extensive background in technology consulting. His consulting practice has reached over 2,000 accounting firms in the last 16 years of practice.

Knowledge Concepts, Inc., founded in 1996, is the developer of the FirmWorks™ software application. FirmWorks™ software provides Customer Relationship Management, Professional Service Automation, and Sales Force Automation functionality for accounting and professional services firms. FirmWorks™ links to legacy accounting time and billing applications, office automation software, and groupware tools to provide ”single view” information approach to professional data use. Knowledge Concepts, Inc. has taken untraditional steps in the deployment of the FirmWorks™ practice information application.

Tom's specialty in consulting with accounting firms on the implementation of computer technology has led to a national presence that includes regular contributions for Accounting Today and Accounting Technology magazines. He also serves on the Editorial Advisory Board for the CPA Technology Internet Advisor. Tom has written various articles on practice management, tax preparation and planning, workpaper software, accounting firm write-up software, the Internet, and other technology topics. He currently serves on AICPA's AAA National and Top Ten Technology Committees, as well as the Best Practices Task Force. He has served on the Georgia Society of CPA's Management of an Accounting Practice Committee, the GSCPA's Information Technology Committee, and on advisory boards for Harcourt Brace, Practitioner's Publishing Company, CCH Practice, and the Associated Regional Accounting Firms (ARAF). In 1998 he was named as one of the top ten computer technology experts in the accounting firm field by Accounting Technology magazine.

Tom's work has gone beyond the grass-roots level to the accounting software and hardware vendors. He has developed and presented training for CPA Systems, CCH, Network Systems, Futurus Team, Peer Software, Prentice Hall Professional Software, Microsoft, Symantec, and LAN Aces. On a consultation level, Tom has worked with various software vendors including PACS, Network Systems, CCH, Intuit, Navision, and CYMA in bringing product to market bearing tools that are necessary for technology gains.

Tom has made presentations for the American Institute of Certified Public Accountants and the Georgia, Florida, Louisiana, and Washington, D.C. Societies of CPA's. Tom is a regular speaker at various national technology conferences.

E-mail: [email protected]
Web site:

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