What the Tax and Accounting Firm of the Future Looks Like

Lately, I’ve been immersed in helping to actually create the future of continuing education for our profession. This has led me into a fascinating exploration of recent discoveries in the world of K-12 education, the rapidly growing segmentation of higher education, and the changing landscape of interactive learning modalities.

Through it all, I have noticed two key elements upon which the entire conversation hinges:

  1. Changing attitudes about human interaction.
  2. Integration of technology advancements into the learning process.

This particular blog isn’t really the place for me to discuss changes in education. What I will discuss here, however, is that these same two key elements are going to have significant impact on how all professional service businesses are operated. Let’s take a look at some specifics.

Certain shifts in technology, such as the tornado cloud, are already quite pervasive in our profession, and impossible to ignore. Cloud accounting, cloud CRM, cloud tax return preparation, and even cloud word processing are now all parts of our professional lexicon. For better or worse, these technologies are here to stay.

Several of the companies upon which we rely for our software needs have flat out told us that desktop versions of their software will some day not be available anymore. Some specialty services, such as Canopy’s tax resolution case management software, have never had desktop software equivalents, and have only existed in the cloud.

Technology is also driving significant changes in staffing. We are solidly locked in the era of knowledge workers, of which all tax and accounting professionals are a part, by definition. But on top of that, we have also entered the eras of the mobile workforce and the flexible workforce.

According to PGi, which provides collaboration tools for distributed workforces, a 2014 survey of executives and managers indicates that 80% of surveyed companies offer some sort of telecommuting option for knowledge workers. Not surprisingly, 70% of those taking the survey indicated that they themselves telecommute at least occasionally. Telecommuting also isn’t what it used to be, which was often “all or nothing”. Now, it may be any blend of 100% to only occasional, and it may be from home or from a beach in Bali. These trends are what make up the mobile workforce.

The flexible workforce collectively refers to a number of distinct societal changes. First is the fact that, since the 2008 economic decline, more and more knowledge workers are self-employed, freelancing themselves out to several different companies that need their skills, but either can’t afford to hire staff or are risk-averse to doing so.

Second, there is the growth of temporary employment, more appropriately called term employment. This is actually nothing new to those of us in the tax world, as seasonal employment has been normal in the tax preparation industry for decades. Due to both economic realities and generational attitudes, term employment has become mainstream in all areas of the knowledge economy. Older workers that do not have sufficient retirement resources now take on short-term employment as an economic necessity. Even if they do have sufficient retirement resources, many baby boomers hitting retirement age simply don’t want to retire, and thus change the nature of their work schedule to prevent boredom.

The Millennial generation, on the other hand, has been faced with two compounding factors that lead to term employment. One has been the difficulty of finding full-time work in recent years. It is estimated that 40% of those included in the official unemployment number in the US are millennials, making the unemployment rate for that generation about 15%. It’s even worse in some parts of Europe, where young adult unemployment exceeds 50% in several EU countries. The other factor impacting millennials has to do with attitude. Some may argue that it’s an issue of work ethic, but whatever it is, millennials appear to be less ambitious as a whole than previous generations. I realize that stereotypes aren’t necessarily fair, but data indicates that as a group millennials are OK with living at home with their parents even into their late 20’s, which actually makes term employment an attractive option to them in a tight job market.

The flexible and mobile workforces can be a wonderful thing for professional service businesses like ours. Imagine being able to expand your tax prep capacity on any given day with only about four hours notice. Or consider a short-term need for that in-house telemarketer you’ve been wanting to hire, but can’t justify an FTE for. If you don’t regularly engage in tax debt resolution work, and a large case suddenly falls in your lap that you aren’t equipped to handle, you can take the case anyway. Every one of these scenarios is made possible by the flexible workforce.

Consider the benefits of a mobile workforce. In other words, staff people (full time or otherwise) that aren’t physically present in your office. Ever. Imagine the savings on office space and IT support. Lower electric bills. Reduced overhead in almost every way conceivable, to be honest.

The mobile workforce allows you to run what we used to call a virtual office. That phrase has long since been displaced, because it’s already the new normal.

Just as an example, let’s consider a multi-million dollar per year, locally-oriented firm that specializes in 941 tax debt resolution on the front end, but also provides ongoing tax preparation, payroll service, and bookkeeping on the back end. In other words, let’s take a typical Main Street, USA tax/accounting office, slap on a tax resolution front end, and kick the whole thing into the 21st century.

Here’s what that business might look like, today:

  • A simple, two-room office suite with a front reception area.
  • One full time office manager/receptionist/customer service person, on site.
  • Two licensed partners, on site, one in each office.
  • One full time, off-site marketing manager that coordinates all marketing/sales activities, including managing cloud-based software platforms, managing online marketing campaigns, coordinating direct mail vendors, etc.
  • One off-site, full time admin coordinator, that coordinates all client case work, tax prep, bookkeeping, etc.
  • One off-site QuickBooks expert and payroll processor. This person is a freelancer that provides services to one other firm, also.
  • Two off-site tax preparers and tax resolution admin assistants that enjoy flexible work schedules most of the year.
  • Three additional part-time, seasonal tax preparers, all of whom work remotely.
  • Floating pool of contract telephone appointment setters, all hired via Craigslist, managed via online scheduling system, and trained via Skype or Facetime. Outbound calls are handled by cloud-based autodialer, and appointments are set using cloud-based calendar for the two on-site licensed partners, one of whom takes mornings, the other afternoons, for new appointment coverage.

All of the off-site people can be spread out across different states, or even different countries. This operation even works during tax season, as the on-site partners are handling tax prep intake in 15 and 30 minute blocks for those clients that need it, although much of their tax prep work is “drop off” service or even “upload” service. Most tax returns are prepared off-site, and partners simply review and deliver. Everything in the entire organization is 100% paperless.

The operation described here can easily generate $2 million or more per year in revenue. It’s all done very efficiently, and mostly with mobile and flexible staff, with everybody using cloud technologies.

This example isn’t even a fantasy. In fact, many firms already exist that operate precisely in this manner. And don’t forget — we’re talking about a LOCAL service business.

The tax and accounting firm of the future is, in reality, already here. The technologies already exist. The staffing models already exist. Flexible office space solutions exist.

As our society as a whole embraces the two key elements mentioned at the beginning of this post, we will see greater and greater use of these technologies and services in our profession. Excellent customer service will never go out of style, but changing attitudes about the nature of human interaction will continue to change how we do business. The integration of technology into all aspects of our practice operations will make us more efficient, and help us to actually deliver a better quality of end product to our clients.

I still remember preparing tax returns with pen and paper, because it was only six years ago, when I took it upon myself to add the tax preparation revenue stream to an existing tax resolution firm that didn’t do returns for clients. Despite the fact that tax prep software was already ubiquitous, I distinctly remember the increase in efficiency, profitability, quality of work product, and customer satisfaction that resulted from our switch from paper to software.

The tax/accounting professional that fails to embrace these changes in their business will, inevitably, find themselves losing local market share to their competitors. The firm of the future is already here, and it’s time for your practice to either evolve, or slowly wither into marketplace obsolescence.

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