Years ago, practice management was just another name for time and billing, with perhaps due-date management thrown in. Mobile access was mostly constrained to updating files with expense and time data once the employee was back in the office.
Fortunately, times have changed. Computers have become quantum-levels more powerful, as have the applications that run on them. Access is easy, over the internet or by performing the actual processing in the cloud. As a result, practice management today is a whole new story. Practices are just as complex as ever, but managing them has become a lot more efficient and productive.
As we do every year, we surveyed many of the major vendors of practice management applications to get their read on where we are, where we are going, and what the hot spots are in the application.
Defining practice management
One thing that hasn’t changed much over the years is the definition of practice management — there really isn’t a formal one. Each vendor has their own idea of what it should encompass, usually very much in line with the product or products that they offer. Still, there is some agreement on minimum core functionality.
Thomson Reuters product manager for firm workflow and administration Christie Johnston feels that a comprehensive approach is necessary. “A practice management system needs to include all the information about a firm’s clientele and the services they are performing, so that staff at a firm have one location in which to execute and deliver those services. This includes client information tracking, time and expense data, billing and receipts, project tracking, access to documents, staff capacity and benefit tracking, and firm data analysis tools and reporting. Firm leaders rely on their practice management system to offer key insights on staff utilization, client service levels, and overall firm performance. Sophisticated and flexible management reporting is also a fundamental core function of practice management.”
Canopy vice president of product and design Nate Barrett doesn’t stop there. “While a practice management solution should include the above components, professionals today are demanding more,” he said. “PM solutions should be built with the following in mind: ease of use — software in the accounting industry is complex and often takes months to configure and hours of training to use, turning software into shelf-ware. Today’s practice management solutions need a modern, intuitive design and out-of-the-box setup so practitioners can be up and running on Day One. Another needed function is automation. Built-in automation allows accountants to ditch repetitive tasks and leverage real-time analytics, so they can spend more time on advising clients and less time on busywork.”
“A key component in a practice management application is project management,” said Nicole Fluty, OfficeTools product manager at AbacusNext. “The entire practice utilizes project management from the front office to the CPA to effectively communicate internal and client expectations.”
And Cameron John, director and accountant partner at Sage Group, added, “Beyond any one specific component, what’s most important is how well these components work together. Well-integrated systems that share data and information, and talk to each other, can eliminate massive amounts of time-consuming work.”
Steve Templeton, founder of Templeton Solutions, agreed on the importance of accessibility and integration: “First and foremost, it must be deployed in the cloud, include client particulars, be easy to use, and be accessible anytime/anywhere by everyone in the firm. The data should be captured in a standard, systemized way to drive profitability and enable powerful business intelligence visuals for firm and project management.”
Many of our respondents also agreed about the need for practice management to encompass both workflow and client relationship management functionality.
“We believe that in order to serve clients better and accelerate growth, you need a holistic view of your business that allows you to identify changes and make smart business decisions, at any given moment,” said Templeton. “The only way to achieve this is by managing your practice, people and projects via a single, unitized system. This allows you to analyze data as it comes in, optimize your staff and resources, minimize waste, and identify new business opportunities.”
“Our research shows that firms using a high degree of integrated solutions were 18 percent more confident about their ability to navigate change and meet client needs than those that used little or no integration,” said Jim McGinnis, executive vice president and general manager of the medium to large segment at Wolters Kluwer Tax & Accounting North America. “Workflow management and CRM are practice management technologies that may be important in varying degrees for different firms. For firms that need these types of solutions, their practice management system should accommodate those needs.”
Canopy’s Barrett is equally positive about this. “Workflow management and customer relationship management are essential components of a PM system, and contribute to maximizing productivity and building healthy, long-term client relationships,” he said. “Workflow is the heart of an efficient practice. It standardizes how you execute service offerings, assign work across and within teams, and keep everyone on the same page. It’s crucial for meeting deadlines, consistently delivering quality work, and providing a positive experience for clients. Customer relationship management is the foundation of organizing customer data and simplifying collaboration between practitioner and client. It provides insight into the entire client relationship by centralizing contact data, emails, projects, notes, documents, invoices, and much more. CRM allows practitioners to see the latest client activity and get up to speed quickly. Accounting firms need both components to be successful and the more integrated the two, the more efficiently you can service clients and deliver a superior experience.”
And Thomson Reuters’ Johnston pointed out the effect a lack of these functions can have: “When you separate workflow and CRM, it begins to create additional work because it requires cross references and updates in multiple systems within a firm’s office. This introduces possible human error if information is not updated consistently. We also see inefficiencies when staff go to multiple locations to look for information and may end up duplicating efforts because of poor visibility into what is happening with the client.”
Integration is key
Another place where our vendors seem to agree is in the integration of practice management with other applications in the firm. “Integrations are incredibly valuable. By bringing together multiple systems, accountants get a more complete view of their practice and enable processes to run more efficiently,” Canopy’s Barrett told us. “Furthermore, integrating with software that practitioners use to perform services (e.g., tax preparation) has synergistic effects that create firmwide efficiencies. Since PM incorporates CRM, workflow, documents, time and billing, and more, the entire process of servicing clients becomes more streamlined, from how you manage client work and organize relevant files to track time and invoice clients. These workflows not only become more efficient but can benefit from automation to save more time and eliminate redundancies.”
TR’s Johnston agrees. “Integration between applications and your practice management software is key for being able to trust your client contact information. This is an area of duplicative effort that can really add up over time. Many tax and accounting applications can create invoices or track project status. Having these features integrated into your practice management system will ensure that you have a central place to get the full picture of the health of your business.”
Other vendors, including Sage, offer somewhat more limited integration, often mostly within the vendor’s own products or using a third party to provide integration. Sage Accountant Cloud integrates into the Sage accounting and tax preparation suite.
Karbon also relies on third parties for integration. “A practice management system is the system of how, not the system of what,” said co-founder and vice president of education and partnerships Ian Vacin. “It informs the staff what to do, how to do it, and where to go to complete it. Some integrations need to be tightly integrated (like pricing and proposal software, time tracking, and document management) while others can be enabled by springboarding to an application via hyperlinks. Karbon incorporates both methods in ensuring the workflow is tied to where the work is being completed.”
Does your billing have value?
Value billing is another place we found agreement among most, but not all, of the vendors. “Practice management systems need to have the ability to streamline the billing process whether that is through fixed fee/value billing, billing of actual time and expenses, scheduled recurring billing, or progress billing,” Johnston told us. “Value billing is often used in the same context as billing at a flat fee amount based off the value of the work produced to the client, and this type of billing represents a good percentage of what firms are billing today, but it is still rare that this is the only type of billing firms use. Overall, firms need a flexible system that allows them to bill clients in multiple ways depending on the services they receive, and any ad hoc work requested. The more a firm can streamline and automate the billing process, less time can be spent producing invoices, which is critical to allowing partners and managers of firms to focus on their clients.”
Canopy is another vendor that believes that firms should have a wide choice of how they bill. “It is very important for a PM system to handle value billing. Value-based billing is a growing trend in the industry and becoming more common with transactional services. Not only does it remove uncertainty for clients, but it helps accountants better manage and grow margins. However, hourly billing will always have its place for services that have highly variable workloads,” Barrett said, adding, “Progress billing certainly has a place in today’s environment. It’s most useful for long-term projects that have large budgets because it breaks up significant payments into smaller chunks that can be invoiced as work progresses. This provides vendors with consistent cash flow to cover project costs and gives clients a more palatable payment structure without large upfront payments.”
Say it with pictures
Another area where vendors have mixed approaches is in the graphics their applications offer. Dashboards seem to be popular among the solution providers. According to Canopy’s Barrett, “We leverage graphical components as a way to more easily interpret information and make decisions. We use dashboard visuals to highlight tasks and workloads, so team members can prioritize their day and managers can effectively allocate resources. We also illustrate billing information so owners can see revenue over time and break down invoices by age.”
Practice Ignition is another vendor that uses dashboards. “Practice Ignition provides revenue dashboards focused around helping a firm keep track of their service fees’ KPIs, like monthly recurring revenue, average fee per client, most popular services by dollar amount, by percentage, as well as conversion rates on all proposals,” said Trent McLaren, head of accounting & partnerships. “It doesn’t provide Kanban-style capacity planning charts, as this is managed inside tools like Xero Practice Manager, Karbon and QuickBooks Online Accountant.”
Karbon does offer Kanban boards, Vacin told us: “Karbon provides customizable Kanban boards with a myriad of filters and display options to view a practice in any manner desired. We also offer practice-wide reporting with our Karbon Insights. In addition, Karbon work processes can be exported and represented easily into Microsoft Visio or Lucidcharts for further visualization.”
And Xero takes a varied approach to displaying firm data. “Xero Practice Manager delivers real-time visibility and insights across a firm’s clients, as well as a curated selection of third-party apps. It provides individual dashboards showing the status of different projects, the ability to receive notifications when milestones are reached, and the ability to drill down into specific jobs. Key integrations that include graphical components include Spotlight Reporting, which makes it easy to visualize accounting data with powerful reporting and forecasting, and Futrli delivers always-up-to-date forecasts, KPI dashboards, alerts and reports,” said Ben Richmond, vice president of business growth.
Talk to your receivables
Many of our respondents were bullish on the new voice assistant and machine learning technologies. Canopy’s Barrett told us, “While machine learning is nascent in the accounting industry, we believe there is great potential in using it to identify patterns in your data and, ultimately, make better decisions. With more convenient mechanisms to automate data collection and more integrations into third-party applications, the richness of data within PM systems will only be limited by one’s ability to draw insights from it. Machine learning is a key component to understanding this data and translating it into decisions and actions. Although voice assistants are starting to gain traction in consumer markets, they’re still in early stages of adoption. As they become more ingrained into how people interact with software and general consumer expectations, we see use cases emerge for basic administrative tasks such as starting timers, adding notes, or setting appointments and reminders. We believe voice assistants become more compelling when used in conjunction with mobile PM solutions.”
Sage also believes that these technologies are important. “Sage uses voice assistants and machine learning across all of its products, as well as in back-office support functions at Sage, such as in customer service, recruitment and T&E,” John told us. “At a high level, we’re excited about the impact machine learning can have on the accounting profession. In the long-term, advanced analytics and AI will make better suggestions for accountants on practice management and advising clients, and flag opportunities and challenges proactively.”
Not every vendor was quite as positive. Practice Ignition’s McLaren said, “Voice has little impact on Practice Ignition today, and a majority of products globally. Once voice becomes widely adopted on a bigger scale and the technology evolves, I can see this having an impact. It’s not on our short-term roadmap for the moment. One day I can see it being available inside a PM, but I believe there’s a long way to go with core functions that need to be developed and released first.”
Different day, different use
Our respondents also told us that they see firms using practice management differently than they did four or five years ago. Canopy’s Barrett said, “Simply collecting and organizing information is no longer enough. Practitioners want practice management tools that interact with clients and streamline the way they service them. More and more practitioners are eager to adopt these tools and workflows, phasing out manual and outdated norms for convenience, self-
service, and a better client experience.”
Karbon’s Vacin added, “The most notable change is the need to communicate and collaborate through the practice management system itself. The work for a client is immediately impacted from a conversation that is had, or email that is sent or received. Traditional PM solutions do not include the communications between the client and between the staff — or if they do, they are not easily accessible or actionable. Those conversations are critical in modifying the work to be done and the workflow that supports it. Thus, a practice management system needs to incorporate the capabilities of communication and collaboration closely into its architecture.”
“Over the past five years, we have seen firms increasing the electronic delivery of information including invoices and payment acceptance,” noted Johnston. “They are much more aware of the data security risks and looking for secure means to communicate with and store information on their clients. Tax and accounting professionals are also realizing how critical a practice management system is to manage and report on new service offerings like advisory and new value-add services. They are looking for systems that are flexible enough to handle these new services in conjunction with the traditional services that they provide.”
Templeton, meanwhile, was not sure accountants were keeping up, despite their desire to: “CPA firms have longed to embrace more agile practice management systems using current technologies. However, they have not identified a system that can accomplish this with an acceptable level of perceived risk. Therefore, practice management systems by and large remain on yesterday’s technology.”
Tomorrow will be different
Finally, we asked vendors what issues they see firms facing in the next several years. “Our customers’ expectations for technology are changing rapidly,” McGinnis told us. “Not only do they expect technology to help improve work/life balance, but they also look to technology as a driver for talent acquisition and retention, as well as firm growth and client satisfaction. Since customer expectations are always changing, we’ve come to see innovation as a journey, rather than a destination.”
Sage’s John added, “We have seen an increasing trend of accountants moving away from legacy desktop solutions, and embracing the benefits cloud-based platforms and SaaS solutions bring to their business. Over the next few years, we expect this trend to continue, and more and more firms will be changing the technology they use to conduct business.”
And, according to Xero’s Richmond, “One of the biggest challenges that firms need to understand is that cloud-based practice management will look different than it did in the desktop software era. Through increased automation and data-driven insights, firms have the opportunity to embrace digital tools to deliver compliance services more efficiently, and increasingly layer in advisory services. While these are hugely positive opportunities, they come with substantial change for the industry.”
“As firms evolve their services, practice management tools will need to incorporate the connection and automation of information between applications while maintaining a seamless workflow experience for staff,” Thomson Reuters’ Johnston said. “The practice management system is the hub of the firm where all data and information are stored. Client collaboration tools will be essential, as the client will become an integral part of the workflow. Through the automation of work, tasks will be assigned to the client, and then based on the completion of those tasks, it will trigger events or actions for the accountant.”
Realizing that vision will require some upgrades, said Templeton: “The technology most firms are using to manage their practice today is old and stale. There are lots of point solutions on the market for practice management and professional services automation, each one focused on a specific task such as billing, workflow management, CRM system, etc. The problem is, none of these legacy workflow systems are integrated with each other, which makes them prone to limitations, creates unnecessary work steps, and adds significant additional costs to operate and maintain multiple systems.”
Finally, AbacusNext’s Fluty said, “The issue facing practice management is providing mobility and expanding product offerings. You can’t play it safe anymore by providing just practice management software. Practice management must act as the hub of the practice by leveraging integrations and synchronizations to minimize redundant systems.”
