Using Technology att I

u There is no magic number to benchmark CPA firm

technology spending. However, it is important to

understand the similarities and differences between

technologies deployed at your firm and those used at

other firms.

One of the most significant flaws I have seen in trying to compare CPA firm technology spending is that virtually no two firms categorize this spending in the same manner. As such, CPA firms try to compare the line items to some readily available industry statistics which do not truly compare with the actual spending or structure of the firm.

You first need to analyze the separate By James C. Bourke, CPA components of what you are spending

WithumSmith+Brown to ensure that everything technology related is being appropriately captured. Regardless of how you categorize technology on financial statements or tax returns, when analyzing total technology spending, your starting point needs to be the same. Make sure your technology cost is fully loaded, covering all costs associated with firm technology and communications. These costs should include: • Application licensing. • Support agreements. • Hardware, including all end-user

machines, servers and networking equipment (actual dollars spent on

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all hardware during the period versus depreciation).

• The purchase and monthly recurring fees for mobile devices.

• All communication fees, including local and long-distance telephone charges, bandwidth and local and wide-area network connectivity.

• Website hosting and consulting fees.

~

I • Labor and benefits for staff supporting

your technology infrastructure. • Technology outsourcing. • Programs and application fees under a

cloud-based computing model. • All other fees directly related to

technology and communications within your firm.

Once you have compiled the above actual spending for a 12-month period, you can start comparing spending at your firm to that of others. Depending on how technology is deployed within your practice, spending at a traditional CPA firm generally runs from approximately 5 to 6.5 percent of net revenues. While that spread could be fairly significant, this is a target that can be applied once the above analysis has been completed.

The largest bucket of a firm's technology cost is generally software and licensing fees. Most firms spend between 40 and 45 percent of their technology budget in this area. Focusing on the components in this area can often help you better manage this line item:

• Review and understand license agreements. Make sure the number of licenses matches the number of users.

• Verify the price of a renewal upon its base fee calculation. Ask about the current selling price of the product versus the price upon which your firm acquired the application.

• Review applications utilized by the firm. Is your firm utilizing multiple write-up, after-the-fact payroll, engagement management, tax preparation and planning solutions, web-based accounting and tax research tools? Do not license multiple applications that do the same thing.

• Negotiate your best deal at renewal time, and ask about cloud solutions.

. Spending on hardware and backbone equipment is also generally near the top of the list: • Standardize your equipment with

one vendor. This can lead to quantity discounts at replacement time.

• Consider extending the lives of laptops and servers 6-12 months greater than your existing replacement policy. When doing so, look to extend warranty coverage.

If your firm is at end of life on servers and other devices connected to your network, give serious consideration to the cloud model of computing before assigning capital for this investment.

Nearly every vendor serving our profession today has a cloud-based (software as a service or similar technology) model. These solutions allow for the deployment of applications and data storage without the need for any initial investment in servers or storage devices. Under this model, the firm basically pays a monthly fee for access to such technology.

Look to bundle mobile technologies and communications charges with the same vendor, where possible. Vendors are more inclined to offer material discounts based upon volume. Also, make sure your staff has the correct voice, data and texting plans in place. Younger staff has a much greater tendency to communicate with text or email, while senior staff typically communicates via voice. Plans that share voice, data and texting minutes, and volume for the entire firm are a much better fit. Don't lose sight of the primary purpose of mobile devices within the firm: to enable staff to be productive and responsive to clients. Solutions will run from free to more than $500 per device. Keep mobile devices current, and look to replace them upon reaching the end of contract periods. Try not to replace devices within a contract period, as you'll be paying significantly more than fair market value of the device to obtain new technology.

Before deploying new technologies or replacing existing ones, ask yourself,

"How will this deployment make us a better, more profitable firm, and is this technology aligned with our strategic plan?" Knowing your technology component costs will put you in a better position to manage your spending during an economic downturn. View technology cost as a strategic asset to the firm, not as just another cost of doing business.

Don't deploy new technologies or replace existing ones just because your peers are. Don't be the firm with the bleeding-edge technologies that are too early in their lifecycles and not yet ready for full deployment. Don't be quick to fall into the trap of trying to conform to an industry metric unless you can truly compare such results with technology spending within your environment.

Simply put, if the right technologies are deployed the right way and tightly integrated into your practice, you could easily increase efficiencies, improve turnaround time, enhance client responsiveness and ultimately increase profitability. ~

James C. Bourke, CPA, is a partner at WithumSmith+Brown where he is director of firm technology. He is a past president of the New Jersey Society of CPAs. He is co-chair of the American Institute of CPAs Tech+ Conference and has been recognized by Accounting Today and the CPA Practice Advisor. Contact him at j bourke@withum.com.

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