By Edward K. Zollars, CPA

If there is one thing that CPAs in small and midsize firms are used to and likely tired of, it's change. Between keeping up with developments in accounting, reporting and taxation, there appears to be more than enough to keep us busy. So for many, keeping up with technology changes is far beyond what can be expected. But because clients rely on us for strategic advice in a variety of business areas, change presents a number of opportunities for our firms.

The AICPA again this year convened a group of members with technological expertise to determine the ten most important technology issues facing members. The ten issues chosen, which are discussed in detail below, all provide opportunities both to improve your practice and serve your clients. The most important thing you need to do is devote the time necessary to keep up with developments in technology (for more information, see the sidebar with useful online references).

E-Business

Your clients may feel pressure to investigate electronic commerce and likely will turn to you for advice on the issue. Part of your job will be to gain an understanding of the options available and the issues to be dealt with. While e-commerce is a rapidly changing area, certain key issues must be addressed:

• What does the client see as the goal of the site? Is there a consumer audience or is the site meant for other businesses?
• Who will host the site? Does the client want to deal with hosting in house? Or would it make more sense to outsource? And how do we rate the quality of the outsourcing?
• Who will build the site and how will it be maintained?
• Will the site take orders? If so, how will that interface with the accounting system?
• What about tax issues?

As the client's CPA, you can expect that clients will raise some of these issues with you, while you'll need to introduce clients to some yourself.

Information Security and Controls

With the growing importance of information stored in computerized systems, and the increasing linking of such systems, information security and control become ever more important. This issue affects both the information controlled by your own firm and the data stored at your clients' sites.

Because more of us have advanced access at Home and work from home with "always on" connections, anyone who can manage to break into your system might have access to confidential client data. Your clients likely will be similarly vulnerable, having some sensitive data on their home machines. You need to educate all of your partners, staff and clients about the need to secure even seemingly "personal" systems that have online access.

Training and Technology Competency

For most smaller firms, the real problem in this arena is devoting the time necessary to make use of the technology that has been acquired. In smaller firms, it's important that everyone (and that includes partners) understands how to use the technology to leverage the investment. In fact, the more valuable that a person's time is to the firm, the more important it is that he or she be adequately trained to make use of the technology.

You likely will find an opportunity to help your clients become more competent on their equipment, as well. Remember that by helping them learn how to use the technology they've already paid for, you are creating value for clients.

Disaster Recovery

What would happen at your firm if a natural disaster destroyed all of your technology equipment and anything else onsite tomorrow? Most firms' leaders have, at best, a vague concept of how they would recover from a disaster, and that lack of planning can prove very costly should a natural or man-made disaster occur. Other considerations are issues that might involve the failure of a supplier of a critical piece of software or hardware for your system (for example, if the tax software vendor goes out of business in Jan. after failing to ship the current year's tax package). Similarly, your clients likely are inadequately prepared for a disaster, presenting you with an opportunity to help them construct a disaster plan.

High Availability and Resiliency of System

As we place more reliance on electronic systems, downtime becomes a more serious problem. If a company is involved in electronic commerce and its electronic sales systems go down, sales disappear almost immediately to a competitor. Similarly, in our practices, if systems we rely on go down, we may find our firms effectively shut down until the critical systems (tax preparation, research, etc.) are repaired.

The difference between this problem and the disaster recovery issue discussed above is that, in this case, we are talking about taking a proactive stance to head off the downtime rather than reacting after a failure. Similarly, we need to educate our clients about these issues and look at them as an opportunity to expand the services we market to our clients.

Technology Management and Budgeting

Even the smallest firm needs to step back and come up with a rational method of introducing technology into the firm. That means taking the time to learn about the technologies we should be adopting and integrating them into our practices.

This challenge also presents an opportunity. The majority of our clients are facing the same problems, and many of them are using systems that will be similar to the ones our firms will choose. If we are smart, we will be able to use our own experiences to create engagements with clients to help them through the same process.

Electronically-based Financial Reporting

A revolution may be brewing that could bring changes just as radical as the ones we've seen as smaller clients have adopted computerized accounting systems over the past decade. The AICPA is working on using XML to develop a standard method of reporting financial information online known as XFRML (XML-based Financial Reporting Markup Language). You can visit the Web site of the working group at www.xfrml.org. It is very possible that, in the future, your clients may "publish" their financial statements to a selected group of interested users (such as their creditors) directly in electronic form.

Net Issues

This item pretty much overrides all of the others on this year's list. Practitioners must realize the importance that the Internet will have for firms and their clients. While the development of the Internet is difficult to predict, it's clear that it will be the basis for many new technological advances. The Internet provides smaller firms an especially important set of opportunities in addition to the challenges.

You can "offload" much of your system support by using online services that replace systems that had been moved into your office. For instance, you can now get virtually all of your research materials in subscription form online, and even professional tax preparation software systems now exist via Web access (CLR GoSystemRS). Smaller firms can also make use of online professional newsgroups, mailing lists and Web-based forums to bounce ideas off other professionals who aren't competitors.

The Virtual Office

As more and more of our information ends up in electronic form, there is less need for employees in information-based environments to be in a particular physical location. The virtual office has no physical office and the staff actually interacts via high-speed access lines. While this creates a number of personnel management issues, it also offers consulting opportunities with your clients.

Privacy

One of the issues rising on the electronic horizon is that of privacy. Firms and their clients need to consider this problem both from the perspective of privacy policies for customers/clients and with regard to what information is made available about your own and your client's firms by other entities.

Ones to Watch

These areas are the ones that technologically advanced CPAs believe will be important to your practice over the next year. Now is the time to begin the process of learning about these issues and starting to use them to your firm's advantage.