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Technology Weakness

Accounting Firm Tech Systems Are Weak

Aug 14th 2015
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New research shows yet again, accountants are taking sometimes potentially disastrous risks with their firms and – worse – with their clients.

The recent “Accounting Firm Operations and Technology Survey,” published by CPA Trendlines Research, shows these risks go beyond merely “falling behind” the technology curve because of traditionally penny-wise, pound-foolish spending. At one time, “falling behind” risked obsolescence, or worse, maybe irrelevance – either of which was a business risk, but a risk that could only be measured by benchmarking against “the competition,” whatever that was.

Today accounting firms are taking on a whole new category of risk – the risk of sudden, unforeseen and irrecoverable disaster. The black swan event.

This year’s survey lays it out in stark and frightening detail. For instance, 22 percent of firms said they delivered client tax returns by email, despite the broadly known risks to client privacy.

Lesser security breaches have wreaked catastrophic consequences on global corporations. Accountants are fooling themselves if they think they are immune.

Firms aren’t just gambling with client data and security, they are playing Russian roulette with their own business operations. For example, 10 percent of firms have suffered a network failure or software lock-up that caused “major” downtime in the past year. That’s a lot of billable hours at stake, not to mention the potentially catastrophic fallout from missed due dates or surprised clients.

The appalling paradox, of course, is that most accounting firms aren’t blind or deaf to the issues, they fret about them all the time. The problem is that too few are doing anything about it.

Too many firms don’t back up their email safely. Too many have no policy to purge old files, or, if they have a policy, too many don’t follow it.

Most firms don’t even have a regular upgrade schedule for their most critical servers. Most firms have no professionally designed document management system. (And what is an accounting firm but a living, breathing document management organism?)

Our research also found that the vast majority of accountants are working while on the go. This isn’t new, of course, but the risks of something going wrong are only escalating. Why? Not enough firms have deployed sound security policies or installed the systems necessary to safeguard client and firm data.

Speaking of mobility, 55 percent of firms indicated they don’t support tablet devices. As a result, 55 percent of firms have no way of managing the security of employee tablet use or any hope of developing a technologically progressive strategy for adoption.

Moving on, the study clearly shows that firms understand the imperatives of improving workflows – for effectiveness, efficiency, speed, and cost. But too few have any real plans in place to move forward.

The study also shows that firms are happy to have employees work from home, sometimes on their own hardware, yet few have any idea on how to manage the phenomenon, benefit from it or minimize all the obvious risks.

Other findings showed a third of firms are still relying on spreadsheets to run their audit work. Who wants to defend that practice in a liability trial?

The vast majority of firms can’t even budget effectively for their technology. A whopping 85 percent fail to break down their tech spend to a per-person metric. Firms certainly calculate per-person metrics for all sorts of other activities, ranging from rent to pencils to health insurance. Why not tech?

About 38 percent of the people in charge of technology strategies regard technology not as a potential competitive differentiator capable of providing competitive advantage, but, sadly, as a mere expense item.

Perhaps the most alarming finding from the study is that too many firms don’t know what they don’t know. And what they think they know is wrong.

Specifically, a third of firms believe they currently use nothing that could be considered a cloud service. But guess what, if you’re reading this, you’ve been using the cloud. More astonishing, two-thirds of firms say they aren’t even considering a cloud solution. (Psst, if you’re thinking of upgrading your phone, you’re already considering a cloud solution).

Next Question: Which top trends in technology are right for your practice? Join the survey; get the results.

Rick Telberg is founder and CEO of CPA Trendlines Research, at, which delivers actionable intelligence to tax, accounting and finance professionals.



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By Briancs
Aug 19th 2015 16:50 EDT

I have spent the better part of the last 15 years working for several accounting firms as their IT/Info Security Director. It's refreshing to see someone else validate what a many of us on the inside have been saying for years. This industry typically treats IT as an overhead, you don't generate billable hours so were not investing in it. I once had a discussion with a firm owner about their lack of disaster recover and was told that if the disaster was that bad they would take the business loss insurance, close the firm and walk away. While I get this is the extreme it's does represent the resistance of firms to invest in IT. In a way it's funny as most firms would find it impossible to bill any time without Technology but they still look at technology as just another overhead. The trends discussed above will not change for the better until firms start looking at IT as a valued part of the services they provide and invest in it accordingly.

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