Is it cost beneficial to upgrade hardware? Will Windows increase productivity of staff? Should each staff member have their own computer? What is the role of the notebook computer? Is it really effective to do tax research using CD ROM technology?

The CPA Journal's computer editor Mark A. Plostock traveled to Atlanta, Georgia for the AICPA Eleventh Annual Microcomputer conference to interview some leaders in the field of microcomputer usage in accounting firms and departments in industry. The panel consisted of L. Gary Boomer, CPA, of Varney Mills Rogers Burnett & Associates, Manhattan, Kansas, specializing in computer consulting to CPA firms; Kenneth Askelson, CPA, Internal Audit Department of J. C. Penney Co.; Rick Jackson, CPA, Managing Partner, Jackson & Jackson, CPA, Springfield, Missouri; and Sarah Astor, CA, Director of Technology, Lopez Edwards, Frank & Co. All are very much into using computers in their work and active in the profession in sharing their innovative uses of computer technology.

The Right Hardware for the Right Job

Mark Plostock: The initial invasion of the personal computer into the CPA's office is now complete. A CPA without a computer is now a rarity. Today a very common question is whether it is time to upgrade the hardware. Panel, is the IBM PC, XT, and AT obsolete? And should I buy a computer with the 386 or 486 chip? How much memory do I need?

Gary Boomer: I think that the workstation for today's CPA has at least four megabytes of random access memory (RAM), is a 386 chip machine or better, has a super VGA color monitor with a least one megabyte of video ram, and has 80 megabytes or more of storage on the hard drive. I would seriously consider as much as 120 megabytes of hard-drive space if the computer is a node in a network. Today's programs require a significant amount of hard disk space. Windows based programs run more efficiently on a network with nodes that have hard disks. Our firm is currently replacing all 286 machines with 486 machines.

Ken Askelson: In our Internal Auditing Department, we currently have PCs from IBM XTs to high-powered 486s. We try to match the right equipment for the right application and users. For example, the older XTs and ATs are utilized as print servers, at satellite office locations for host connectivity and file transfer, and a few are used for spare parts. Although the equipment is obsolete for some applications, we are able to still use them effectively without additional need to upgrade. If you don't have either a 486 or a 386, it's probably smart to invest in the 486 considering the small difference in price. If you currently have a 386 and your current applications are running fine, there would be no advantage to upgrade. If the applications are process intensive compared to input intensive, you would benefit from the additional speed the 486 provides. The 486 also includes a built-in math coprocessor. The memory you need again depends upon the applications. Many of our PCs have 640K memory and are more than sufficient for work processing and spreadsheet applications. We have other "power" PCs with up to four megs of RAM that allow us to retrieve large data files.

Rick Jackson: The standard workstation in our firm is a 386/33mhz unit with 4 megs of ram, a super VGA monitor, and running multi-tasking software like Desqview or Windows. We don't currently use hard drives on our workstations on our network, because all need data and software is on the network file server. But we have concluded that there should be disk storage space at the workstations to give the users a sense of privacy and self-identity and for efficiency as well. Therefore we are going to install hard drives into some of them. I still see some CPAs operating with the old first and second generation PCs. I think they are missing the boat from a productivity standpoint and on the quality of product they could be producing.

Sarah Astor: Our firm has gone through the process of upgrading all our machines to 386 units, four megabytes of RAM, hard drives, and super VGA monitors. We still use older 286 machines for word processing, which are on a separate network. With the arrival of Windows, graphical user interface and the transfer of information from the other networks into the word processing department, we really need to look at upgrading those machines. It's currently a network that is about three years old, and we will be replacing with 486 computers.

Boomer: I agree. I have to question the practice of using the older machines for word processing. The one product that our clients see is the report or letter. With the graphics capability and the many sizes and variety of fonts of today's software, the CPA firm or other business can distinguish itself through a more interesting and visually attractive written presentation. The drab, typewriter looking work product will soon be as obsolete as carbon paper. But these graphic packages take tremendous amounts of computer power and consume storage space. We're going to put 486 machines in the word processing area, because we feel most users will be involved in imaging in one way or another in the future, which will take a great deal of computing power. It doesn't make sense to buy old technology at this time. The difference between the price of a 386 and a 486 is not worth it. A recent PC Magazine survey of 486/33 machines showed the difference to be less than $500.

Askelson: There are still uses for the older equipment. We use them as print or communications servers.

The PC as a Fax Machine

Plostock: One recently popular use of PCs is receiving faxes over a modem. How does that work? Is it different than electronic mail? Some companies are using a PC as a dedicated fax server to communicate with clients and customers.

Astor: Fax is different than electronic mail. In a fax situation, the transmission from computer to computer is in a graphic format, not text. A document can be faxed from a regular fax machine to a computer that has a phone modem, a fax board, and fax software. The document can be viewed on the computer screen and printed. A text file in the computer can be converted to a graphics file and sent to regular fax machines.

The major benefit of having the computer fax a document is that it can be sent to multiple locations without refeeding, or it can be saved and sent at a time when phone rates are lower. The benefits of having a dedicated machine would depend on the volume of use. An example of a use for us would be when we have a software upgrade notice that we want to send to clients using that software. Everybody has a fax machine--we can set our computer fax to send a message to our master file of users.

Boomer: That is also on our priority list. The PC, the fax board, and a complete system is less than $4,000 now. An advantage of a network fax machine is the distribution of faxes as they come in. The fax can be attached to an electronic mail message. Staff can view it on their screen and decide to print, save, or destroy it. This will eliminate some of the paper that is flowing around the office, increase confidentiality, and speed communications.

Where Are We Headed With Networking?

Plostock: More and more CPA firms are networking all the computers in the office. Some have more than one network--a tax department network, an audit network, and a word processing network--all of them feeding into one another. What has been your experience?

Astor: I think everybody is going to be networked. It is the key to effective use of the high volume of stored information and has the potential of substantially improving communications in a department and in a total organization.

Boomer: Novell is certainly the network of choice that I have seen. However in some smaller firms, i.e. less than ten professionals, peer to peer networks have been successful. The Novell approach calls for a dedicated network server, whereas the peer to peer network does not. There are other approaches to connecting PCs. For example, Unix-based systems operate with "dumb" terminals connected to powerful computers including main frame computers.

Notebooks and Portables

Plostock: What are firms using for portable computing? Are these same machines used in a firm's network?

Boomer: The majority of professionals that I see are using desktop workstations. Those that use notebooks should invest in a parallel port adapter to be able to hook into full size peripherals in the office and the office network. I think it's a mistake to use a notebook if you don't have a VGA monitor and a 101 keyboard or keypad available in the office. Notebooks are great on the train or plane, or for a short time in the client's or customer's office. But for all day projects, it is physically demanding to work with tiny key boards and LCD screens.

Askelson: Our department is currently using the Zenith laptop computer. The laptops range from 8088s to 386s with 10 meg to 40 meg hard drives and 640k memory two meg of memory. Some of our laptops have ports allowing access to the network. We will be upgrading to the lighter notebook computers.

Astor: Some firms are asking employees to share in the cost of notebooks. In some cases, the firm pays for a monitor and a network adapter. This is done to provide everybody with a computer. A problem I have with portables is that the market for them is in constant flux--the equipment and change monthly. I think the most value for the dollar is in the 386sx/25 units.

Plostock: How does your firm or company measure up to the one workstation or computer per person concept?

Jackson: We have had a computer on everybody's desk for at least six years. Some in our firm have both a desktop and a portable.

Boomer: We have more computers than people. We can buy so much more capacity with the desktop computer that we encourage that notebooks be supplementary and shared among a group. The portables that we are using in the field have at least an 80 meg hard drive to be able to store all the software tools that accountants take into the field.

Askelson: Our department has become very workstation oriented. We have had computers for everyone for the past five years. Our inventory consists of laptop and desktop computers and totals approximately 175.

Astor: We aren't at that point yet; we have more people than computers. Notebooks are shared, and they take a lot of punishment because no one person is responsible. If we have people going to a job for two or three weeks, we bring in a desktop top unit rather than use a portable.

Tax Return Preparation

Plostock: Computerized preparation has had a major impact on how CPAs do tax returns. The revolution began with CPAs sending batches of input sheets to computer service bureaus and has come down to 100% in-house preparation with PCs, sometimes a modem, and a laser printer. How do you prepare tax returns? What's new in tax preparation software? Are there more dramatic changes in store for us?

Astor: We use Computax's ProSystem fx. We tried several other software packages, but for the returns we process, it was the best overall. We can enter directly onto the screen, but at this point we are still using data entry clerks for the initial input from input sheets. Members of the review department review the initial computer output and make corrections to the tax return directly at his or her workstation. ProSystem fx is coming out with a Windows version. Under the Windows method, the software will track the work flow through the office as the return is processed. Notes can be attached to any line or anywhere on the return. As steps are completed they can be checked off within the software and the return passed on to the next person.

Jackson: We use the network version of Turbo Tax Pro Series. We haven't any real problems other than the limitation of only being able to prepare one state tax return. We attach notes in the program which is a nice feature. We have used the program for enough years to know how to work around any of its limitations. We use the tracking program so we know where any job is in our office and its stage of completion. We can quickly respond to inquiries as to the status of a return.

Boomer: We are also using ProSystem fx for the second year. We are interactive with the software for 1040 processing. I think it takes about two years to evolve from batch processing until everyone is comfortable with interactive processing. Once preparers are totally interactive, there is no way they would go back to batch. But there are still some who think they should not be data entry clerks. We like the direction ProSystems fx is taking with Windows and the way they have reevaluated the pricing. Our office in Kansas is next to a large military reservation. We get many requests for out-of-state returns and ProSystem fx gives us the capability we need. Last year it was by modem; this year it will be strictly in house. The other software that I hear good things about is Lacerte. In fairness, all the software is getting better. It depends on the region of the country you are in, the type of practice, and the type of returns. You definitely need to change your review procedures as you go from batch to interactive. That's difficult for some firms, but you will find a great deal of efficiency after you change those procedures.

Plostock: What about preparation of business tax returns?

Jackson: We use Turbo Tax for everything.

Astor: We use Pro fx for everything. Rick, do you have a problem with using two systems to prepare returns or do you have your office organized so there are people that do business returns and others that do 1040's using different systems?

Jackson: Our business and 1040 software products are written by the same company. However, we tend to have one group of prepares do personal returns and another do mainly business returns. It just has worked out better for our firm to keep the returns separate.

Boomer: We also have business tax specialists. I think this is a trend in firms because the tax systems governing businesses and individuals are so totally different. It doesn't pay to train everyone in the firm to do all the types of returns. We also use ProSystem fx for our business returns. However, this year we tried TaxForm from Direct Link and had success with those clients that are already on the AICPA's Accountants Trial Balance (ATB). We like the advantage of not having to reenter or transfer a file from a trial balance workpaper into the tax software.

Electronic Filing

Plostock: What are you doing about electronic filing of tax returns?

Boomer: It's a big marketing gimmick. It's not cost effective for us to do it and compete with volume prepares that offer loans. I don't think we should discount it entirely. I think it's here to stay and we're going to have to do it because the IRS likes it.

Jackson: This year we didn't offer it. We didn't have one person ask for it. We had been doing it the last three years.

Astor: It goes back to what type of clients you have. You can get into the storefront situation where you are refunding money right on the spot. Our tax software does give us the ability to transmit returns to the IRS.

Accounting and Auditing Software

Plostock: What are firms doing in the general area of accounting and audit software?

Jackson: Our write-up work is done on a proprietary package that we developed ourselves. But no one new goes on it. Instead we use Computer Associates packages that many of our clients are using.

Astor: We are using ATB for our year end work. All our write-ups are done on PCs using software from Computer Associates. This way, when a client decides to buy a computer, the data from our system can easily be transferred.

Boomer: We're on ATB for both year end workpaper preparation and just recently, client write-ups. I know our staff would really be disappointed if we took ATB away from them. It's also used in the tax department.

CD ROM or Brown Paper Envelopes

Plostock: The tax services are really pushing their CD ROM tax services. Accounting and auditing research material is also available in that form. I recently saw where one tax services vendor was using a combination CD ROM system for preparing tax returns. Are you using the CD ROM services?

Astor: We have a CD ROM server on our network and currently have two services--Matthew Bender and RIA--up and running. We used to have an online service. Everyone knew how expensive it was with the result that nobody really used it. We have several people who do tax research using the CD ROM and it has worked out very well. We run CD Net Serve and have two CD ROM players attached. The information is available to any user on the network.

We subscribe to the CompuServe on-line service that enables us to join conferences with Novell, Microsoft, and Computer Associates for updates and questions.

Boomer: We also have a CD ROM server with two different players--one with RIA and the other CCH. Our people are very pleased with both. The difference between the two services is that CCH has its own proprietary software and RIA is using Folio Views. For accounting and auditing research we have the AICPA's Electronic Index to Technical Pronouncements, which is quite easy to use. We do have paper services, but their use will dwindle. Brown paper envelopes with material to be filed can still be seen in the tax library. But when a CD ROM update comes in, it is immediately put in the player.

Most firms have a file server based network like Novell Netware. However, in order for all on the network to access the research software, firms will have to put in place some type of peer to peer software that runs on top of the network. We use a product called MAP Assist from Fresh Technologies. My advice also is to use multiple CD players as opposed to the "juke-box" type. A juke-box type will store multiple CD's, but only one can be accessed at any particular time.

We also use CompuServe's online service. It's a must if you're on a network. When installing devices and need drivers for a particular device, you can obtain the latest by downloading from Compuserve. You don't have to wait for an update from the software vendor, which can take up to six months.

Long Live Electronic Spreadsheets

Plostock: People have always associated electronic spreadsheets with accountants. Are they still being used to the same extent as when they first appeared? And are they perhaps being over used?

Astor: We have moved away from using Lotus 1-2-3 for everything. We now use specific software for specific tasks.

Jackson: We still use spreadsheets a lot. Believe it or not, in my neck of the woods, we still have many firms that don't even know what a spreadsheets is. I wouldn't say they are overused as much as they might be misused by people who are not familiar with the software. We have tried to use standardized formats when developing a spreadsheet.

Askelson: We use spreadsheets on almost every audit we perform. Because we have varying spreadsheet knowledge, we have designed spreadsheet templates that are macro driven with the user making choices form a menu. For example, we use the spreadsheet as an analytical review tool when we retrieve operating data from the mainframe and import the data in a spreadsheet template.

Boomer: I have seen some spreadsheet disease. It depends how the person was trained--for many people it is the only computer application that they learned, and perhaps not that well. It's like the carpenter that only has a hammer in his toolbox--everything starts to look like a nail. In the last few years there have been many good programs like ATB that we now use for analytical review and comparison.

The real advantage of the spreadsheet of today is in its graphics capability. You can take information out of client writeup, put it into your spreadsheet, create a graphic presentation, and move it into your word processing software. The result is an impressive report or other communication.

The Future for Data Storage

Plostock: In the area of electronic data storage and image processing, what does the future hold?

Boomer: I see hard disk storage requirements doubling each year in most firms. We manage our hard disk space, so the increasing needs are not from being sloppy and retaining information too long. It's true growth because of more people using more advanced software applications.

In the area of image processing we are looking at that right now, and it's one of our five top priorities. We have the network capabilities to do it. The problem has been the indexing software, how to get the material scanned, and the cost. But the cost is coming down. You can store about 30,000 pages on a 650 meg cartridge, and those run under $200. So it looks to me that we are at the point of being cost justifiable.

Astor: I look at our huge file room and our off-site storage space and say sooner or later there has to be a way to do it optically. The technology is there using CD ROM concepts. It's the cost that prevents it from happening. But that will change.

Electronic or Voice Mail?

Plostock: What are people using for electronic mail or voice mail? With regard to voice mail, how are clients reacting to it?

Astor: Calls into our office are handled by our receptionist. If the person being called is unavailable, the caller can enter voice mail or leave a message with the receptionist. These days, few people have problems leaving a voice-mail message. Callers will often leave a more detailed message in voice mail than if they give it to the receptionist. The other nice thing is a message can be left at any hour of the day.

Askelson: We have had electronic mail for quite sometime, and we have access to it in almost every location around the country. Voice mail has become very important to us. It makes us more productive, it eliminates telephone tag to some extent, and allowed our administrative support people to be more productive.

Jackson: We experimented with E-mail and it just wasn't practical for a firm our size. Voice mail is something we haven't looked at, it just isn't received well in our part of the country. We hear a lot of complaints from our clients when they call places that have it, they don't want to deal with it.

Boomer: We looked at voice mail two years ago. We found out we would have to replace the entire phone system to really take advantage of a quality voice mail system. At the moment, no one within our firm is pressing for voice mail. I think primarily this is because we use Futurus Team or Right Hand Man--E-Mail--for telephone messages and internal mail. It has eliminated a great deal of problems that we wanted to solve with voice mail. Voice mail will be something we consider when we replace our phone system.

Recovering the Cost of Technology

Plostock: We have been speaking for a while on all the different technologies that CPAs are using. Presumably they increase productivity, but at a cost. How are firms recovering these costs?

Astor: We have worked through a couple of iterations on this. One approach we took required those working with a computer to use a higher charge-out rate. From that we proceeded to increasing all our rates to cover the cost of computer support personnel as well as new technology.

However, the highly competitive market that we are in is containing what we can bill. We therefore look to increased efficiency through technology to cover the cost of technology while at the same time improving our overall profitability.

Jackson: For tax preparation services we add a technology charge from one of four different rates depending on the nature of the return. On the accounting side, the cost of technology is built into the billing rate. If we become more efficient, we still consider the time for billing purposes to be unchanged from the prior year.

Askelson: We have different levels of billing for our technology within our organization. Information obtained from the main frame is charged to the department based on usage. As far as the cost of PCs, that becomes part of the capital budget of each department and must be managed and justified as would any other capital investment.

Boomer: The flaw that I see in charging the cost of technology to overhead is that it is very difficult to see if those costs are being recovered or are otherwise justified. What I propose--and I think it's rather simple but often a political problem--is to actually compute your technology cost as a separate line item of expense. I define that as the cost of hardware, software, and hard training costs. We just completed a study through Kansas State University of how much firms are spending on technology as a percentage of gross revenues. On average the study showed a cost of 5% of annual revenues, or $2,500 per employee. On an hourly basis it was $2.63 per chargeable hour.

In our firm, we calculate a technology surcharge on every hour of direct labor, whether it's a partner, receptionist, or clerical working on the job. We have our technology surcharge as a separate work code so it will not get buried into overhead. It makes us more aware of the large investment we have in technology.

Plostock: We have covered much ground today and it is time to bring this discussion to a close. I think we have learned today that there are many new technologies in the market place. But each firm must analyze their needs and weigh those needs against the costs and benefits to be derived. But I personally would advise firms not to be faint-hearted. You will not reap the rewards of technology if you always wait for tomorrow's newer and better. You must start somewhere, and that somewhere is now.