|Business models for CPAs
. . . making a profitable transition to web GLs
A. Pure consulting fees model
Go directly to the fundamental need in the marketplace for better, more timely and accurate financial reporting. Earn fees implementing Web GLs. XBRL (the Extensible Business Reporting Language) and the emergence of web ledgers are phenomena that will likely make it possible to serve the actual needs of small business and their creditors better than ever before. ebXML (Electronic Business XML) will during 2001-2002 standardize much of ecommerce into machine readable dialogs over the internet, a development much broader and deeper than EDI.
Get out of the business of semantic translation of clients' data from its raw form into static, printed GAAP financial statements. Instead, put yourself in the shoes of owners and creditors. Provide them with secure remote access and drilldown into the actual facts of the business. Fix the accounting system. Prepare journal entries if necessary, but eschew attest services. Provide, instead, systems that are intrinsically transparent.
Why are Web Ledgers any different from AccPac or MAS90? Because they are accessible to you to service the data remotely, and accessible to owners and creditors remotely. The old systems didn't present the opportunity for you to review financial results frequently, or fix anything, to make the software deliver reliable reports intra-period. That's changed now.
If your client's LAN-based system supports complete Web access and rich reporting, fine--keep using it. That's fine. Don't change the software-- change the world by changing the way they use the software.
For those clients who migrate to web GLs, your fee income will be some tens or perhaps hundreds of hours in year one, planning and assistance. in phasing from the LAN based system to the new software or service. Then, there will be recurring fees for ongoing review of transactions and training the client to post their own adjusting journal entries. Additional fees will result from the coming decade-long expansion of i-commerce opportunities. You will bring these to your clients as they become available and cheap enough.
B. Web GL host
Identify and install a Web GL capable of scaling to your targeted size of accounting practice. When the host software has been installed, and all of your security and other challenges have been met, sell connections to clients.
This architecture puts you right at the database location, which is really like having a tiger by the tail. The costs and risks are higher than reselling another Web GL service in (A) above, but you are in a position where you can download any of your clients' financial data into your chosen tax software, writeup software, reporting or analytical software.
Since you are controlling the platform, you will also have no barriers (other than economic) to implementing connections to other internet commerce services such as bill consolidators, banks and other payments or merchant account providers, etc.
C. Branded Website utilizing a powerful back-end ASP
NetLedger, BizTone, and several other online accounting services, provides back-end functionality or outsourced processing, to primary businesses that are actually the operating companies in the real economy. Many of the legacy midrange accounting software vendors now provide their software online with Windows terminals or Citrix, either directly or thru ASPs,
Network Magazine Sept. 1, 1999 said, "According to International Data Corp. (IDC, www.idc.com), spending in the high-end ASP market will reach $2 billion by 2003. (IDC defines ASPs as service providers that offer contractual services to deploy, host, manage, and lease from a centrally managed location what is usually packaged application software. The company defines high-end ASPs as those that handle more complex applications and offer services such as consulting, customization, and technical support.) ..." I do not update this sheet often but you get the picture.
"Many of the recent announcements regarding the adoption of ASP services involve applications in the Web hosting and e-commerce arenas. Other areas of activity include Enterprise Resource Planning (ERP), e-mail, and messaging applications."
Clearly, there will be powerful, featureful web ledgers on these big ASPs which will be impossible to match on a low budget, with homegrown programming. These big ASPs will be the first horses out of the gate and their features and performance will be superior to any small webledgers, forever. The gap will widen not shrink, on features. (This doesn't matter much to small business. SMBs buy software that is cheap, and "good enough".)
CPA firms should be alert to the possibility they could operate a webserver on site or co-located at a nearby ISP, which may look to the visitor as if it were 99% or even 100% homegrown WebLedger, while actually using the powerful, complex and featureful software that cost the ASP millions of dollars to develop. (A criteria grid for evaluation of such middle tier software platforms will include your ability to access the whole database efficiently to perform tax and accouting services.)
Sooner or later, an ASP will break ranks from Great Plains, SAP and Oracle, to provide web ledgers cheaply to small business, and, to provide a business model for independent VARs and CPAs. When this happens, it will certainly be a more functional and less risky business model than developing your own Web ledger.
D. Replication Slave
CPAs who are mostly focussed on providing tax services, compilations and other traditional downstream services, may avoid the more ambitious E-commerce goals of a webledger, and instead, focus on replication solutions. "Replication" includes a whole range of technologies ranging from PC Anywhere to near-realtime relational database technology, to bring an exact replica of your client's accounting data to the CPA's office. The CPA thus becomes a great beneficiary, as network speeds and reliability improve with each passing year.
The logic for this business model is that small business E-commerce doesn't directly contribute to the CPA firm's revenue unless you're a strong technology consultant and system implementer. Sure- businesses would still want to send and receive invoices, orders, and payments over the internet. This scenario does not address those. Let them find internet specialists for that.
E. Partnerships and joint ventures
CPAs with broad experience in accounting and taxation for partnership or joint ventures have a very good opportunity right now to improve services to these entities, if you can somehow deploy a web solution for them.
This solution surely would begin with providing partners with secure, reliable views into the financial transactions of the business. For example, a webserver running a cheap data warehouse, running someplace reasonably secure, and fed by nightly data updates. Done right, this database would have a broad/deep selection of reports, and drilldown into the line items. See other whitepapers on my website such as "Shadow Ledgers" and "Hypercubes".
The solution would certainly have to be carefully designed to interface with the software used for tax returns for the entity, timely and efficiently, i.e. to help the CPA perform services they already perform at great effort.
A transaction repository containing the period's detail in a SQL database would be a rich resource for providing addional services, nuff said.