Five reasons accounting firms are struggling — and what to do about it

Let’s start with a broad “state of the profession” as I see it, by first listing the top challenges that are universally impacting accounting firms today. It’s highly likely that these issues will resonate with you.

  1. Recruiting and maintaining enough staff to get all the work done.
  2. Tax season compression, which leads to owner and staff burnout.
  3. Inability to identify the right applications and build a proper tech stack due to technology fragmentation.
  4. Heightened cybersecurity threats and lack of security protocols to properly handle a data breach should one occur.
  5. Work overload for firm owners, which limits the time to deal with the previous issues listed here.

If you’re still reading, then you probably know all too well just how debilitating these pain points can be when trying to build and run a successful business. You’re likely also seeking insight into possible resolutions.
So, let’s dig into each.

Staffing: Not enough people to handle the work

Accounting firms are clearly not the only profession and industry dealing with staffing shortages and ridiculous turnover. Every business, in every vertical, is feeling the pain.

With accounting firms, however, I believe staffing issues stem mainly from a stressful work culture. Unrealistic expectations, lack of standardization, and a hodgepodge of clientele all lead to work overload and stressed-out staff.

So, what can you do to help fix this issue? The first step is cleaning up your business model. To accomplish this, you must have clarity in three distinct areas:

  1. Who you serve (think ideal clients);
  2. What you sell (think about what services you are great at supporting); and,
  3. How you deliver services (think technology stack).

Lack of clarity in any one of these areas creates chaos. And chaos will only perpetuate your staffing issues. Once you have clarity with your business model, you can begin to build a firm of clients you enjoy serving with services you’re highly skilled at offering — complete with a tech stack that enables you to efficiently deliver end products.
Chaos quickly dissipates when your employees enjoy building relationships with clients and supporting services that are standardized, clear and delivered by advanced technologies.

Tax season compression: Leads to burnout

This is arguably one of the biggest challenges facing firms today. And to be crystal clear, the issue is not that firms are doing tax work but that they’re taking on too much of it. This leads to ridiculously busy tax seasons, which now seem to last until the October deadline.

This level of workload intensity can quickly drain energy levels across roles — causing staff to leave and hindering firm leaders from implementing much-needed business model changes (ie, growing an ideal client roster, modernizing the firm’s technology stack and creating a positive culture where employees love their jobs). While tax season is profitable, too much tax work can have a devastating effect on your firm in terms of long-term growth and sustainability.

Firm leaders need to ask: What is the right amount of tax work? The good news is that this is a fairly easy number to calculate (especially if you’re serious about creating a balanced, positive work culture), but we have to start with another question.

Consider the following: What is a reasonable number of hours for the team to work during tax season (beyond the typical 40-hour week)?

Here’s the equation to answer this question: If 20% is the answer, then the amount of excess per week is eight hours. If your non-tax-season workload per staff member is 80%, then you would have another 20% capacity (or eight hours). In order to maintain the tax season workload (and support a healthy work culture), you have the capacity for an extra 16 hours each week to work on tax returns. You can multiply this amount by the number of staff members affected by tax season to get the total hours available each week. Then, based on the average time it takes to prepare a return, do the math to reach your capacity limitations.

Tax season profits are a key driver of your financial success, there’s no arguing that. However, the goal is to replace excess tax revenue with services that offer recurring monthly revenue and support a sustainable business model that will help you and your staff stay sane — during and after tax season.

Technology fragmentation: It’s just plain confusing

The number of applications available can be overwhelming to firms, not to mention the lack of integration and the complexity of training and updates required. Throw in the mix that you have both browser- and desktop-based solutions to choose from and it gets even more complicated. Finally, when you consider the apps required to effectively collaborate with clients (eg, QuickBooks Online, Bill.com, client portals, e-signature apps), things get even hazier.

The bottom line is that there is no one-size-fits-all technology stack. The components that make up your tech stack depend on your business model. Remember, you must have clarity around your who, what and how before you can even begin to identify the apps you need. Further, you must also define the type of experience you want to provide clients and staff in order to select the right apps.

The best recommendation here is to seek out peer groups or an organization that specializes in helping firms build a business model for long-term success.

Security: The threat is real

The accounting profession continues to be a prime target for hackers. And when you consider the sophistication of today’s cybercriminals, many small and midsized firms can’t begin to understand what it takes to combat security threats. As such, security will continue to top the list of challenges for firm owners for the foreseeable future.

The big issue is that most firms have no IT infrastructure plan or strategy. Who owns this function overall? Who checks for updates on all devices that touch your network? How secure are the devices used in remote workspaces? Are you entirely cloud-based or do you have a mix of offline apps as well? As you can see, there is a lot to consider when it comes to security. And this short list only scratches the surface.

One way to shore up your security is to work with a world-class, accounting firm-focused, private-cloud solution. This means that every app your firm uses launches from inside a private cloud — whether it’s QuickBooks Online or for desktop, Google Chrome, Office365, tax software, etc. In addition, the same provider should be able to consistently monitor your endpoints (laptops and other devices) and provide all staff with accounting-firm-focused security awareness training throughout the year.

Smart security management encourages firms to take an intentional, holistic approach that encompasses a plan for local devices, employee training and moving business-critical apps to the cloud. Enterprise-level organizations have been functioning in the cloud for years. The time is now for small and mid-sized firms to follow suit.

Work overload: A roadblock to change

When firms are not intentional about their business model, it quickly creates chaos at every level of firm operations. And where there is chaos, you’ll find overworked business owners who don’t have time to correct major challenges and modernize their firms.

In fact, many owners still adhere to the “cross-your-fingers-and-hope-things-will-get-better” strategy. Clearly, this method brings significant risk in all areas of operations. Continuing to operate in chaos opens you up to losing staff, data breaches, and an inability to move to a recurring revenue model.

The solution? Get help and stop trying to go it alone. Seek out organizations that have already figured it out and can help guide you down the path to firm improvement. There’s no sense, and no time, to reinvent the wheel.

The wrap…

Over my past 35 years in the profession, I believe now is the best time to be part of it. There are so many opportunities to grow and thrive. So many intentional changes we can make to build a modern, profitable and sustainable firm — one where our employees love their jobs, clients love our services, and no one has to contend with chaos.

Start with the top five challenges laid out here to launch a plan to conquer each. And when you get stuck, reach out to the right organization or group to help you keep moving forward.

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