What this means for accountants, and why giving clients more power will mean more loyalty

Next Generation Advisory

Compliance Collaboration Empowerment

AbstractA notable and undeniable trend has emerged within the accounting industry in the past year. There’s been a shift away from solely compliance-focused services toward advisory-based services. This move is intended to make clients’ businesses more productive and profitable. Compliance services such as filing tax returns and preparing financial statements have been impacted by the emergence of automated, cloud-based software, enabling accountants and their clients to access information wherever they are, whenever they want. This shifts the relationship between them to more of a collaborative advisory role. There are still challenges for those businesses using multiple software applications to manage their operations, but that’s where the collaboration concept comes into play; the accountant can help connect the dots.

In this white paper, we propose the idea that software technology is already advancing further toward empowerment of the client in being able to retrieve their own financial data in an easy-to-ask – easy-to-understand method. This is a concept with the potential to have profound implications. Using everyday, natural language, businesses have the ability to access their business data – collected from multiple cloud-based applications – simply by asking questions and receiving instant and understandable information, whether just numeric or graphical. This gives businesses intuitive and immediate access to their own data and changes the level of client engagement with the accountant. Together they can efficiently determine not just “what” is going on in the business, but more importantly “why.”

While some accountants may see this advancement as a threat to their services, it’s not – it only changes the relationship and can ultimately lead to an extremely engaged and loyal client. It’s the same loyalty concept those businesses have found to be true through empowering their employees and customers.

Much has been researched, written, and documented explaining the benefits of both employee and customer empowerment – how these concepts lead to loyalty. But little has been written about applying these same principles to the client/accountant relationship.

Empowerment builds loyalty

A 2015 study by the Journal of Accountancy reported 90% of CPAs agree the delivery of digital business processes to clients will become key by 2020. At the same time, Forbes estimated that up to 70% of all software, services, and technology spending will be cloud-based by 2020. They were right… it’s happening. The cloud has proven to be a solution that helps increase business productivity and profitability. Businesses and their accountants can collaborate to understand and leverage financial data in many positive ways.

But having this kind of access to the data is not a panacea for businesses. Most often the information is saved in spreadsheet software like Microsoft Excel. Users need to be competent in Excel, and they need to be able to clean and export the data. So, they typically seek to collaborate with their financial advisor for help. That too isn’t a perfect process as the financial professional also has a busy day planned, and often the client has to wait. And sometimes the information being sought itself just isn’t easy to assemble; such as, wanting to know how much cash flow each customer has generated over the last two quarters. It could be a matter of pulling various generic reports, some spreadsheet work, and then sending that to the client.

The client still doesn’t have practical access to their data. They still have questions about cash flow, or which customers are paying their receivables too late, or if changing their product mix will help from an inventory standpoint. It’s not that the data isn’t accessible, sometimes it’s just complicated to retrieve or make sense of. A frequent comment from accountants is that their clients don’t even look at the financial statements that are sent to them.

Background

“Figures may express with accuracy, but they can never represent either number or space.”

William Playfair, 1786.

2020

Another challenge is how the data is reported via numbers. With multiple applications and spreadsheets generated, understanding the story or stories within the data is extremely difficult even for clients who know their businesses well. The takeaway? Access to data does not necessarily translate to access to usable information.

All of this is a step toward empowerment, but it is not in itself empowerment.

“The graphic method is rapidly becoming a universal language.”

HG Funkhouser, 1937

“Another strange effect of this electric environment is the total absence of secrecy. With the end of secrecy goes the end of monopolies of knowledge.”

Marshall McLuhan, 1970

While McLuhan may have been referring to the emergence of television in his time, it’s not hard to expand his views to apply to the emergence of the internet, social media, and cloud-based accounting services and their influence on transparency. Monopolies of knowledge create rigidity and inflexibility of thought. McLuhan was talking about empowerment.

Scholars vary in how they define empowerment. Many studies define it as intrinsic task motivation (Conger & Kanungo, 1988; Thomas & Velthouse, 1990) or motivation reflective of the person-environment fit (Zimmerman, 1990). Empowerment can also be viewed as a process: the mechanism by which people, organizations, and communities gain mastery over their lives (Rappaport, 1984). It can also be defined as the act of giving people the opportunity to make workplace decisions by expanding their autonomy in decision-making (Vogt, 1997), or the breaking-down of traditional hierarchical structures (Blanchard, 1997).

Psychologists have also, traditionally, defined empowerment as a mental state. A person who feels they can put into effect their own choices through demonstrating their needs, wants, and demands in their decision-making with other individuals or organizational bodies feels empowered. More recently, psychologists have begun to propose a new model for empowerment which states it cannot come from merely feeling empowered but must involve real world evidence of one’s ability to have an impact and achieve results (Cattaneo & Chapman, 2011).

Empowerment is a concept that links individual strengths and competencies, natural helping systems, and proactive attitudes to the wider environment in which they function. From a psychological perspective, empowerment links mental health and well-being to mutual help and to the creation of a responsive community.

Consumer empowerment

Today consumers expect that information and services will be available on demand, at anytime, anywhere. They want what they want when they want it. Some companies have taken this concept and have used the internet to integrate their customers into more actively helping to select product concepts to be marketed by the firm (Fuchs, Prandelli, Schreier, 2010). This kind of empowerment leads to stronger customer loyalty.

Employee empowerment

Psychology studies worldwide have documented that employee empowerment leads to greater organizational trust (Kans Nurse, 1996) (Kirkman et al, 1999; Locke et al, 1979).

Empowered employees believe:

• Their work is personally important, • They have the ability to successfully

perform tasks, • They have the freedom to choose how

to initiate and carry out tasks, and• Their personal conduct at work contributes to important outcomes (Spreitzer, 1995).

And empowered employees are more likely to be creative in solving problems (Academy of Management Journal).

SolutionIt’s the merging of these concepts of employee and consumer empowerment, and how they lead to a strong sense of loyalty, that the idea of Next Generation Advisory emerges.

This empowerment can be achieved through newer and more sophisticated software that allows clients to query their data by simply asking questions in their own words, and getting easy to understand answers.

In the Next Generation Advisory concept, clients not only have access to their own financial data, they are also empowered to know how to get the information they want, instantly, without needing to contact their accountant everytime they want to know something. The data is presented to the client in an extremely simplified form such as numerical tables, or bar graphs. This clearly helps the client to view the data, but it helps the accountant too because it changes their value proposition. The value of commoditized compliance work now gets changed to that of a trusted advisor. Accountants will still spend time with their clients, but that time will be spent discussing why certain KPIs are where they are, rather than wasted time searching through data.

And the relationship between accountants and their clients will continue to evolve, shifting the collaboration between the two from data acquisition and reporting into one where a now-empowered and fully engaged client can ask their own questions of the financial data wherever they are and whenever they want. This allows for more quality time with their accountant advising them on how to grow their business and make more profit.

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The value of commoditized compliance work now gets changed to that of a trusted advisor