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Archive for August, 2011

There has been much written about the economy recently. The markets have reflected very high volatility and are reacting to revised GDP for the first quarter to a meager 1.3% annualized rate, the obscene posturing of our leaders on the debt debate and most recently the concern over the European Debt.

 

As a CPA, we generally have a pretty good read on the economy, mostly because we are constantly speaking with clients and get real time feedback on how business activity is proceeding. In the first quarter of this year, it was apparent things were slowing; we had most clients telling us that first quarter of 2011 was less robust then the first quarter of 2010. Since 2010 wasn’t anything to get excited about, we were a little concerned. The press at the time, however, was that the economy was moving along and recovering from the recession and the markets were reacting appropriately with the Dow up 10.65% for the year, at its peak on May 2nd.

 

Conversely, we are generally hearing that business has rebounded and that revenues are back up in the second and third quarters of this year. So we are expecting that when the current economic activity is reported, that GDP will be up greater than the 1.3% extrapolated from the first quarter. This is contrary to what we are all hearing in the financial press these days, as the markets are jittery over the European debt and the lack of jobs.

 

I do think 2011 will reflect growth and small business will continue to sustain growing  profitability. However, growth will continue to be slow and we will not be able to add the jobs we need to overcome the job reduction in the government sector and pull ourselves fully out of the recession. Many of our fellow citizens will continue to suffer from the effects of high unemployment. 

 

The problem for our clients and business colleagues, however, is a lack of certainty and confidence. We all hear the abundance of negative rhetoric that goes on in the various news outlets and it is difficult to get a real grasp on where the economy is going over the next 24 months. Clearly, Mr. Bernanke was trying to help with this when he committed to not raise interest rates for two years.  We can only hope that our political leaders will follow suit and abandon similar rhetoric and instead come to reasonable compromises on spending and taxes to give us something to be optimistic about.

 

Bill

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An important overarching decision managing partners of service firms must make when running their companies is how deeply engaged with technology they should become, knowing the use of technology can be a double edged sword.

 

Technology is appealing to clients. Using the latest technologies – mobile devices, laptops, software programs, ‘the cloud’ – implies our firms are on the leading edge and forward thinking. People generally perceive a firm using the latest and greatest technologies will also be cutting edge when it comes to giving advice, keeping up to date with the latest tax and audit literature. They might even expect that technology will assist us in improving our efficiencies in the delivery of services, therefore keeping fees competitive. So the best technology can help attract and retain the best clients. 

 

Technology is also appealing to staff. When was the last time you heard a staff person proudly exclaim they have the best erasers in the profession?  If we give staff the best tools available to our profession today, then they know they are working with a quality firm, one they can be proud of, and they can accomplish their jobs effectively and efficiently. The best technology can indeed help attract and retain the best staff.

 

So, all should be good, right?

 

The other side, however, are costs and the reality of loss of efficiency. I have many times seen clients try to employ cutting edge technology and wind up with systems that run over budget and don’t work effectively. One of my best clients has been trying to unravel a poorly planned and installed system for the past 15 years. It has become the proverbial black hole.

 

To effectively use technology, you need to have a plan. The plan needs to lay out the goals of the system, a time line for implementation and an analysis of true costs. There must be a stakeholder that takes the lead and has some affinity to the technology. It is important to get buy in from key users early on so you don’t implement a system that won’t get used, and you can reduce resistence by those in your organization who loathe change.

 

Most importantly, your company needs to be ready for the technology. As an example, for many years, we have been proud of the fact that our accountants have the best technology available in our profession. However, for the longest time we have delayed implementation of a CRM system, even though many other firms have been using them for years. Our thought process was that our key stakeholders wouldn’t update and utilize the system effectively, and we would be wasting both hard and soft dollars on implementing a system that would have low utilization. But over time, as our firm has grown and expanded and as the market has become more complex, it has become apparent we are ready for a CRM system and will begin implementation over the summer. This decision came easily because the market and our stakeholders were clamoring for a solution to a business problem. And I am sure success will be achievable.

 

We all need to embrace technology and use it to give ourselves the competive edge in the marketplace, but we also need to stay focused on what our clients and staff need. In this somewhat stagnant economy, our investment dollars are even more valuable and need to be spent expeditiously because mistakes will mean lost opportunities.

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