PRACTICE MANAGEMENT

By L. Gary Boomer and
T. Rose Rovelto

There is no consistency within the accounting profession when defining practice management systems. Firms and vendors don't agree on the definition. Most concede that there is a time and billing component, and they want an inexpensive (cheap) system. Beyond that there is little common ground. Even owners within firms can't agree on the definition, especially with regard to reporting requirements. Many of the systems on the market today are simply updated versions of software developed in the 1960s and 1970s during the batch-processing era. Finally, 32-bit code is starting to appear. Unfortunately, all of the vendors have had their share of problems moving to Windows applications.

There is no cheap practice management system on the market today that can be easily implemented or will improve profits significantly. The software is a small portion of the cost; however, low price is high on the requirements list for most firms. An integrated practice management system can make money as well as reduce expenses. In addition to the software, implementing a new system requires a significant amount of planning, strategy, process re-engineering, training, team building, and culture changes. The old models of "work a lot of hours and bill once a month" no longer work.

Many firms have tried to install new systems the past couple of years, but have struggled or failed due to poorly planned and implemented projects. As important, if not more so, are the processes a firm uses in recording time, billing, projects, prospects, CPE, and personnel scheduling. Management processes must change to profitably control a dynamic accounting practice. Owners often present significant problems in changing management systems and firm style. On the other hand, owners can provide valuable leadership and support to the implementation team if they simply will get involved early in the process.

The reasons most implementations fail can be attribute to the seven following matters:

1. Lack of planning--Responsibility is delegated to the firm administrator, clerical personnel, or the computer department. Owners generally do not participate in the planning process; therefore, results fail to meet their demands.

2. Inflexible report formats--Owners want to implement a new system, but want reports to look exactly like the reports from the current system that they don't like.

3. Retention of processes--Owners do not want to change their processes. Oftentimes these processes are very redundant.

4. Owner resistance to change--Owners resist entering their time on a daily basis and billing more frequently than once per month. Many firms still use daily time sheets and then key transactions weekly into the system in batch mode (redundant data entry).

5. Lack of technology infrastructure --The firm's technology infrastructure (cabling, server, computers, and telephone lines) is not capable of handling a high- transaction based system. The newer packages perform much better on a dedicated server. This is an area where Windows NT outperforms Novell NetWare.

6. Lack of training--Most employees have less than one hour training on the firm's practice management system. Everyone needs to know how to enter their time and expenses. Additional training is required for personnel who bill and produce management reports.

7. Attempting to convert historical data--Service codes often change when updating a system. (Most firms have too many service codes.) We recommend converting employee information, client information, WIP balance, and A/R balance. Some vendors have been successful using phased implementation where this information (with the exception of A/R and WIP balances) is converted upfront. The firm then starts entering time and expenses at the beginning of a month into the new system. By the end of the month, beginning balances are updated and transferred. Billing everything out of WIP prior to conversion improves cash flow and reduces the amount of information brought forward.

* time and billing is a standard cost tracking system rather than a pricing system.

* everyone must enter their time and expenses daily.

* use the system for value billing.

Higher Priority Requirements

Here are a number of check-off items to consider when considering that new Windows-based practice management system:

* Year 2000 compliance

* Daily entry of time and expenses (on the network or remotely)

* Multiple billing rates (for firms using the system for pricing)

* Attachment of images for expense reports

* Automatic calculation of technology surcharge

* On-demand billing

* On-screen billing

* Project tracking (due date monitoring) with user defined phases (i.e., tax processing--information received, assigned to, prepared by, reviewed by, and date and method of delivery)

* CPE tracking

* Skills tracking (larger multiple office firms)

* Integration with groupware products like Microsoft Outlook or Novell GroupWise

* Integration with human resources

* Intranet connectivity for remote access

* Central client information database

* Client server version for larger firms

* Open architecture database

* Interface with payroll

* Interface with accounts receivable

* Interface with accounts payable

Reporting

On the reporting side, the following are important:

* Client profitability

* Staff profitability

* Owner production

* Employee production

* Owner book of business

* New versus existing business

* Projected hours by employee

* Inventory of projects

* Scheduling

* Exception report for personnel not entering time daily

* Daily, weekly, monthly, and year-to-date statistics

This list of requirements is extensive and some vendors may not be able to currently offer all of the features. Many of these requirements should not be implemented in phase one of the project. Some of these requirements are unnecessary in smaller firms or should be deferred until phase two in larger firms.

If this all seems like a task too large to undertake within your firm, consider outsourcing. Outsourcing can have several advantages:

* Reduces equipment requirements

* Reduces internal support personnel

* Eliminates installation of software upgrades (done by outsourcer)

* Server accessible from any office, home, or client's office

* Saves implementation time. The outsourcer should be very knowledgeable of the software.

Don't Delay

Now is the time to proceed with a new practice management system or upgrade a DOS system to Windows. There will be pain; however, there also is a reward for those who persevere and focus on improvement--increased profitability.

L. Gary Boomer, CPA, and T. Rose Rovelto, CPA, are with Boomer Consulting, a division of Practitioners Publishing Company, in Manhattan, Kan. (888) 266-6375 askboomer@boomer.com

Editors:
Paul D. Warner, PhD, CPA
Hofstra University