The 2011 Good Bad Ugly results revealed that 68% of accounting firm revenue is still being generated from compliance based tax and accounting work.  As the following table reveals, this percentage has not really changed much since 2008 - it has consistently hovered between around 60% and 70%.

What is interesting is that this large reliance on compliance generated revenue has continued despite the fact that, over this same period, firms have consistently identified 'growth' as being their greatest challenge.

We could conclude from these results that firms are (and have been for some years now) experiencing difficulty in growing the non-compliance areas of their practice. Why is this the case?

Perhaps the well-documented effects of the Global Financial Crisis have continued to impact the ability of firms to successfully expand their service offerings. Or maybe it is a case of firms either not being prepared to effectively 'sell' their additional services or suffering from capacity restraints due to the unavailability of suitable quality resources and inefficient processes.

If it's the latter - inefficient processes - then this is most certainly well within the individual firm's control. Doing compliance work as efficiently and cheaply as possible has never been more important than it is now - the Internet, the rise of a global marketplace competing for services, and a shift in the traditional balance of power between accountant and client have changed the profession forever. Firms need to innovate; to implement systems and processes that enable them to do more with less.

What are your thoughts on this static revenue mix? If growth genuinely is the accountant's greatest challenge, what is holding them back? We'd love to hear your comments!

Given all the hype around ‘the cloud’ over the last 12 to 18 months, you’d be forgiven for being surprised by the fact that just 36% of accounting firms surveyed as part of this year’s Good Bad Ugly benchmarking study are using some kind of cloud-based software or application. However, this is most certainly what the statistics reveal, and also what our own experience with our own clients supports.

So why is this the case? If the cloud is as great as it is frequently made out to be, why aren’t accountants rushing to implement some kind of cloud solution?

The answer no doubt in large part lies in the fact that there is an overwhelming amount of cloud-related commentary, events and promotions being thrust in the faces of accountants, making it difficult to break through the hype to find some sensible, practical and non-biased advice.

Whilst we haven’t attempted to provide all of this advice in this one blog entry, what we have done is made a start by identifying the fundamental questions which you must seek the answers to before deciding on any cloud-based solution for your firm.

Let’s start with the ‘deal breaker question’ – the one which will decide whether or not you go ahead with any particular cloud-based solution:

Will product / solution / application / service X allow us better (or at least the same) ease of use that we currently enjoy, reliability of service and sufficient space to store all of our data – and all at a price that is affordable?

The answer must be a resounding ‘yes’ before you go ahead.

To answer the deal breaker question, you’ll need to have the answers to the following (not so much deal breaking, but nonetheless fundamental) questions:

1. Why do you want to move the cloud?

2. Have you considered all the issues you need to consider before selecting any particular cloud-based solution? Internet connectivity? Costs? Convenience and ease of remote access? Degree of comfort around data security? Managing the change process (frequently the biggest hurdle – often overlooked)? Your exit strategy (in the event you want to stop using the cloud solution)?

3. Which cloud model will work best for you – the infrastructure as a service (private cloud) model, or the software as a service (public cloud) model?

4. How will you get your processes ready for the cloud? What is your plan?

5. Have you thoroughly evaluated your preferred cloud-based solution provider? Are they established? Do they have similar clients? Can they customise their offering? Are there limits on data storage? Which jurisdiction will your data sit in? What about back-up systems? What do they offer in terms of training and support? And the list goes on ...

In a nutshell? Do your homework so that you can be confident that changing from the status quo will be an improvement, not another frustration.

If you’re after comprehensive, practical, ‘how to’ advice and information to help you answer these questions – and select the cloud solution that is right for your firm – you should take a look at Supplement #2 to our 2011 Good Bad Ugly Report. Very must not just another blind promotion of the virtues of the cloud, and certainly not written with disregard for any practical realities or context, this report is a valuable resource for any accounting practice weighing up its cloud options.

You can download the free Executive Summary here, or purchase the report via www.thomsonreuters.com.au/goodbadugly.

Two of the key challenges faced by accounting firms today are how to improve the efficiency of firm-wide processes to ensure the firm is – and remains – profitable and competitive, and how to ensure all staff stay on top of current rates, legislation and industry best practice so as to manage the risk exposure of the firm.

Indeed, these two challenges have been consistently identified as top challenges over the ten years in which Business Fitness’ industry leading benchmarking study – the Good Bad Ugly – has been carried out.

At Business Fitness, we therefore continue to be surprised that less than one third of Australian firms are paperless or thereabouts, for an effective strategy for going paperless will naturally help an accounting firm to overcome these two challenges. Essential elements of any paperless strategy include effective electronic document management and the use of electronic workpapers – perhaps not coincidentally, these are also two of the most effective (and most easily achievable) ways to improve accounting firm efficiency.

Perhaps we can put this down to a possible misconception that the paperless office is something which can simply be ‘bought’. Or maybe it is due to a lack of a well thought out strategy in place from the start, a lack of leadership, or not having the right electronic document management system in place.

Whatever the reason may be, there is no denying the fact that, by not going paperless, firms are retaining the burden of some hefty costs that are well within their control to eliminate. Take, for example, the fact that, on average, it costs $20 to file a single paper document, $120 to search for a misfiled document, and $220 to reproduce a lost document.¹

Just how much could your firm save by implementing smarter processes and technologies in your practice?

Business Fitness are the experts in helping accountants (and their SME clients) to go paperless. Contact us if you'd like to find out more.

The comments in this blog are explored in detail in our first Good Bad Ugly Supplement Report - 'How to Profit from Going Paperless' - now available for purchase from Thomson Reuters. You can download a free copy of the Executive Summary here.

¹Source: Kofax White Paper: The Business Case for Automating Document Driven Business Processes (2010) (figures based on the results of a study conducted by PwC)

As part of our 2011 Good Bad Ugly accounting firm performance benchmarking study, we interviewed and profiled six of this year's top performing firms. The idea was to get a feel for the strategies that these top performing firms have in place for driving success.

There are some significnat differences in the size, structure, nature and location of the firms profiled. In particular, some focus on maximising efficiency and therefore profit through compliance work, whereas others concentrate on growing profit through providing services that go beyond compliance. However, that being said, it was clear that all firms profiled understand that doing compliance work efficiently and profitably is integral to the overall profitability of their firm, regardless of their preferred type of work.

Other common themese included:

- A dedication to developing and implementing best practice systems which promote efficiency in firm processes;

- Effective client engagement processes which include agreeing prices and fees up-front;

- A continuous focus on the needs of their clients and what these might mean for the kinds of services proivided as well as the way in which they are provided;

- A firm commitment to staff training;

- A disciplined approach to workflow management, relying on the right tools and working with clients to schedule work;

- Recognition of the role the paperless office has to play in streamlining processes and improving job turn-around;

- Clear agreement amongst firm leaders as to the future direction of and plans for the firm, including through documented succession plans; and

- An understanding of what sets the firm apart from its competitors - what makes it 'unique'.

You can download a free copy of the Executive Summary of the 2011 Good Bad Ugly here. The full report is being published and sold by Thomson Reuters this year - please visit their site for information on how to purchase.