Digital Transformation-Transform Buzzwords into Action

From PP&Co Partner Phuong Mayer, CPA/MST  

(published in the Nov. 2023 issue of CalCPA Magazine)

I’ll be the first to admit that “digital transformation” sounds like the latest in the ever-growing tech buzzword salad. Many practice leaders inherently sense that digital transformation can add value—but what is it? The question is difficult to answer because it can—and should—mean something different to every firm.

You might think of digital transformation as the process of assembling a toolkit. A fully digitized firm will have a suite of technology tools and a team skilled at using them to help the firm solve day-to-day business problems or improve processes.

These toolkits may include cloud-based software, data warehouses, business intelligence, data analytics, automation, bots, AI, machine learning and many others. Each tool requires investment and skill-building, so don’t try and tackle everything at once—which can feel overwhelming.

But don’t let FOMO (fear of missing out) drive your actions. Instead, focus on the one or two things that will have an immediate impact on your organization. For most CPA firms, business intelligence and process automation tools are excellent starting points.

Business intelligence is the concept of extracting insights from your raw data, which can then be used to inform your decision-making.

It goes beyond traditional financial analysis by giving you the ability to integrate non-financial data—such as WIP hours, projects and labor rates—as well as employee, client and even prospect data. It often involves combining data from multiple software sources, and once established, the combined data becomes the backbone for building many customized data analysis and reporting tools.

So, how does one go about transforming these concepts into an action plan?

As with most plans, success is contingent upon management’s ability to develop a strategy and articulate the goals. What are your firm’s most pressing business challenges? If I had to guess, they probably sound something like this:

  • You’re facing pricing pressures from clients and concerned about protecting your recurring compliance-service revenue.
  • At the same time, you must find a way to grow revenue from value-added services and upscale the business.
  • You’re entrenched in a never-ending war for talent. When you do find talent, you need to figure out how to keep them engaged and satisfied. Long-time employees are burning out, and the bench of future leaders is getting thin.

Sound familiar?

A multi-dimensional view of your firm today

A great starting point for CPA firms is to build a comprehensive revenue dashboard that provides an understanding of what your business looks like today. Where are your revenue streams coming from, and how profitable are they? By pulling this information directly from your practice management system, you can easily slice and dice total revenue by service line, client industry, partner in charge, manager in charge or any other level(s) of classification you need.

You can also quickly see historical trends in each of these segments. Weave in time entry and payroll data, and you now have an extremely powerful data analysis tool.

These self-service dashboards are far superior to static Excel reports that are difficult to generate, not comparable and often become obsolete a day later.

With these dashboards in place, your management team can easily answer questions such as: How much of your business is concentrated in a specific industry? How quickly have certain emerging services grown over the past three years? How profitable are tax or audit engagements above or below a certain size? What are effective bill rates for each service type?

The insights to be gained from a simple revenue dashboard are limitless. Once you have an accurate understanding of your current revenue and profitability by segment, you can plan for strategic growth.

Growing with intention

Unplanned top-line growth in too many areas is a sure path to employee burnout. Scaling, or growing with intention, is particularly important in a profession where human capital is our most limited resource.

Consider how much of your firm’s revenue is concentrated in compliance-based services vs. value-add or emerging services. Compliance-based services have been under attack in recent years due to all the talk of automation and AI. While that’s a valid consideration, it’s also true that those same services are still the bread and butter of many firms. It’s what pays the bills today and tends to withstand economic downturns.

If your firm is growing, the key is to actively manage your revenue mix—protect and optimize compliance-based revenue while closely monitoring your return on investment in higher-growth areas. A well-designed business intelligence solution can help you do just that. For compliance-based services, the focus should be on how to deliver them as efficiently and optimally as possible. That means selecting the right markets to target.

A multi-dimensional revenue dashboard is a requisite for implementing any kind of institutional marketing plan. In the compliance services arena, you also need to pay close attention to your fee structure to ensure that you are neither undervaluing your services nor pricing yourself out of the market each year.

Business intelligence can bring clarity to the true cost of each service type so you can develop creative value-based fee structures that appeal to an evolving clientele.

Firms investing in emerging services or new markets can use business intelligence to monitor growth, profitability and return on investment in those areas. Historical data for similar services can be used to develop target key performance indicators for the new services. By developing a consistent scorecard early on, you can determine timely when to pivot and when to double down on your investments.

The employee experience and avoiding burnout

We all know the billable hour requirement has been the bane of public accountants since the beginning of time. Practice leaders grapple with the conundrum of needing employees to generate billable work while inherently understanding that it rewards inefficiency and doesn’t address service quality at all.

But the problem isn’t the concept of measuring billable hours. It is simply that measuring only billable hours is no longer enough.

A business intelligence model can supplement billable hours with additional metrics that, when analyzed together, will paint a more comprehensive picture of an employee’s overall performance. There are many other indicators of productivity and efficiency, such as revenue generated, revenue under management, gross profit, effective bill rates and revenue-to-salary ratios. You can even measure service quality by tracking project-related metrics such as average turnaround time or percentage of total project time spent by preparers vs. reviewers.

Having an objective, transparent and data-driven performance evaluation system can promote a culture of accountability that motivates high-performing employees and reduces unnecessary toxicity among your staff.

This type of system is equitable and removes any false perception of bias. By analyzing multiple aspects of an employee’s performance, it’s less likely that employees will feel unfairly judged on one aspect of their performance while their strengths in other areas are ignored.

Another important benefit of tracking real performance trends over time and among peer groups is that it can help your management gain confidence that the performance targets and compensation structures set by the firm are reasonable and achievable.

There are many other practical ways business intelligence can be used to improve the employee experience at CPA firms:

  • A real-time scheduling tool that shows employees’ prior week hours and current week’s workload based on project statuses that are used to allocate workload evenly.
  • A project assignment tool that monitors the type of projects employees have completed and ensures that assignments continue to align with their career interests.
  • A capacity tool that utilizes historical data to project staff hiring needs.
  • Workforce dashboards that share commonly requested information, like organizational charts and employee locations and titles, minimizing time wasted on tracking down basic information.

Many people are quick to presume that employee burnout stems from long work hours, but if you dig deeper, you’ll probably find that employee burnout is as much about the employee’s mindset and motivation (or lack thereof) as it is about hours.

Employees who are excited by the work they’re doing and have opportunities to upskill are more likely to consider the long-term benefits of investing time in their careers. Therefore, practice leaders should consider creative ways to use business intelligence to actively manage employees’ workload and professional development.

Ready to move forward?

We’ve only touched the tip of the iceberg here. Truly, the opportunities are boundless, but to avoid disruption, it’s best to start with two or three projects in mind.

Next, build a dedicated digital transformation team that possesses skills in business analysis, data management, automation and IT. If your firm doesn’t have in-house personnel specializing in all of these areas, finding an outsourced solution is likely your best bet.

Finally, expect that the transformation will take at least a year. While this may seem like a long time, remember that you’re building the foundation for a firm of the future that is highly efficient, effective and attractive to future leaders.

Have questions or need help getting started? Contact Phuong at or (408) 287-7911.