OPPORTUNITIES IN A CHALLENGING ECONOMY

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OPPORTUNITIES IN A CHALLENGING ECONOMY

• JON BARON
• PRESIDENT, PROFESSIONAL SOFTWARE SERVICES
• THOMSON REUTERS, TAX ACCOUNTING
• JUNE 2, 2009

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Opportunities in a Challenging EconomyAgenda

• The Data the Story
• External Data
• What is Happening in Accounting Firms?
• Key Actions to Take and Why
• The Basics - Tackling Now the Fundamentals
• Futurizing the Long-Term

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Opportunities in a Challenging EconomyTop Sites
if you Really Need to Know

• Economic Indicators http//www.economicindicators.
  gov/
• Bureau of Economic Analysis http//www.bea.gov/ind
  ex.htm
• Bureau of Labor Statistics http//www.bls.gov/
• Economagic http//www.economagic.com/

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Opportunities in a Challenging EconomyThe News -
GDP
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Opportunities in a Challenging EconomyVarious
Surveys

• Grant Thornton Poll 1
• 23 of senior financial executives believe that
  the economy will improve in the next six months
• 39 expect their companys headcount to decrease
• 75 expect the U.S. economy to be the same or get
  worse in the next six months
• 31 expect their companys prospects to improve
  over the next six months
• 87 of those polled said that they believe the
  U.S. economy will remain in a recession through
  2009
• 15 expect the prices or fees charged by their
  company to increase in the next six months

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530 US CFOs and senior controllers
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Opportunities in a Challenging EconomyVarious
Surveys (contd)

• The Accounting and Finance Employee Confidence
  Index
• Dipped 42.3 in the first quarter of 2009
• However, fewer believe that the economy is
  getting weaker compared to the fourth quarter of
  2008

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Source Survey by The Mergis Group and conducted
by Harris Interactive.
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Opportunities in a Challenging EconomyVarious
Surveys (contd)

• AICPA/UNC Kenan-Flagler Business and Industry
  Economic Outlook Survey (1Q 09)
• 83 of respondents responding that their outlook
  was pessimistic or very pessimistic
• 20 are very pessimistic
• 32 feel that it will take longer to recover than
  they initially thought
• 41 expecting improvement to begin in the 1st
  half of 2010
• 8 not expecting recovery to begin until 2011

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Opportunities in a Challenging EconomyVarious
Surveys (contd)

• AICPA/UNC Kenan-Flagler Business and Industry
  Economic Outlook Survey (1Q 09)
• Companies respond with cost cutting
• 51 - compensation freezes
• 47 - hiring freezes
• 50 - capital spending cuts
• 43 - indicate layoffs coming
• Butabout one quarter of respondents still expect
  increases in revenue, profit and employees

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Opportunities in a Challenging EconomyWhat is
Happening in Accounting Firms?

• Rosenberg survey1
• 28 expected a normal tax season or up 10 or
  more
• 76 of the firms expect total revenue for 2009 to
  be down or flat
• 16 expect 2009 to be up more than 10
• Most firms still raising rates
• 33 - regular increases
• 41 - increases, but smaller than usual
• All firms experiencing increased receivables and
  slower collections

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Rosenberg Associates Feb 09 Study 40 firms -
5M to 20M in revenue
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Opportunities in a Challenging EconomyWhat is
Happening in Accounting Firms? (contd)

• Other - Anecdotal
• Dramatic differences regionally/locally
• Large firms flat to slight declines in revenue
• Smaller firms, slight growth or flat
• Some firms are taking write-down requests
• Audits are smaller in scale bare bones
• Some specialties are particularly hurt (autos,
  real estate, restaurants, etc.)

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Opportunities in a Challenging EconomyWhat is
Happening in Accounting Firms? (contd)

• Other Anecdotal
• Firms need to become more efficient
• Some firms too content in the good years
• IT is taking a hit in some firms
• Many small businesses turning to their
  accountants for guidance and services
• There are firms that are actually thriving

There are some positive signs, and trends that
provide opportunities
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Opportunities in a Challenging EconomySome
Positives

• Home sales rising
• After sinking to all-time lows in January,
  new-home sales were up 5 in February
• Mortgage applications up 30 in March
• Auto sales seem to have bottomed out
• And cash-for-clunkers will provide additional
  help
• Consumer spending up 2.2 in Q1

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Opportunities in a Challenging EconomySome
Positives (contd)

• Small Business Optimism Index was up in April 1

Higher by 8 of the 10 index components
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FBIB Small Business Economic Trends May 2009
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Opportunities in a Challenging EconomyEconomy
Some Positives (contd)

• Difficult times can produce good societal results
• Greater savings rates financial planning
  opportunities
• A less mobile society more stable

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Opportunities in a Challenging EconomySmall
Business Trends1

• The Recession Drives Small Business Innovation
• Re-evaluate, re-design and refine products,
  processes and business models
• Governments take an active role
• Awareness of federal, state and local government
  policy and program changes and their impacts
• The Number of Small Businesses is increasing
• Driven by economic conditions in general, Baby
  Boomer retirement problems, and Gen Y
• Now easier and cheaper than ever to start small
  or personal businesses

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Small Business Labs Emergent Research
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Opportunities in a Challenging EconomySmall
Business Trends 1 (contd)

• Mobile Computing Continues Strong Growth
• Notebooks outselling desktops, smart phone sales
  growing rapidly, and netbooks are taking off
• Cloud Computing Continues Strong Growth
• Lower capital costs and turns fixed costs into
  variable costs
• Expansion of Online Marketing Tools
• Cheaper and often more effective than traditional
  approaches

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Small Business Labs Emergent Research
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Opportunities in a Challenging EconomyAction
Plan The Basics For Clients

• Simple tax advice current changes
• COBRA consulting
• Liability exposure to business owners subject to
  COBRA is at high levels
• Provide clients logical, realistic plans
• Help clients to look at their businesses
  strategically

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Opportunities in a Challenging EconomyAction
Plan The Basics For Clients (contd)

• From the AICPA
• Navigating the Current Economic Crisis What It
  Means for Businesses 1
• The Stimulus Package
• The Stimulus Package What it means for growing
  businesses (ebook by MyVenturePad)
• Recovery.gov http//www.recovery.gov/

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By the AICPAs Business, Industry and Government
(BIG) team along with the AICPAs Communications
team
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Opportunities in a Challenging EconomyAction
Plan The Basics For Clients (contd)

• Financial analysis technology
• Benchmarking
• What if analysis

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Opportunities in a Challenging EconomyNow about
YOU Futurize!

• Tough economies separate the best from the rest
• Survival of the fittest
• The best feed on the rest
• What are you? In survive mode?, or thrive mode!
• The bad times can be the best times
• Futurize your firm
• Right people
• Right clients geography, specialization, etc.
• Right firm offering
• Right technology tools to support your brand
• Right innovation culture Process Innovation

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Are you only looking in the rear-view mirror?
The 3-box framework is the work of Vijay
Govindarajan
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What is Futurize?

• When you Futurize, you understand the gap
  between where you are and where you want to be
• And you focus on bridging the gap, by acting on it

Source Bob Johansen Get there Early
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Opportunities in a Challenging EconomyFuturize
Your Firm

• Digitize, and all that implies
• Use the Web portals, social networks, etc.
• Process innovation
• Marketing, Marketing, Marketing

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Opportunities in a Challenging economyFuturize
Your Firm
Known knowns

• There are known knowns. These are things we
  know that we know. There are known unknowns. That
  is to say, there are things that we know we don't
  know. But there are also unknown unknowns. There
  are things we don't know we don't know.
• - Donald Rumsfeld (2002)

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Opportunities in a Challenging economyFuturize
Your Firm

• Three known knowns about the future - and they
  are interconnected
• Business cycles are natural down now, but we
  are due for an upturn
• Changing demographics
• Accelerating technological change

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Opportunities in a Challenging economyFuturize
Your Firm

• Changing demographics
• Are indisputable
• Affect accounting firms internally
• Affect clients and prospects
• Change the profile of clients

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Opportunities in a Challenging economyFuturize
Your Firm

• Macro demographics
• Traditionalists (b. 1925-1945)
• Baby Boomers (b. 1946-1964)
• Generation X (13th Generation and Baby Busters.
  b. 1965-1979)
• Millennials (Generation Y, Echo Boom, b.
  1980-2001)

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Opportunities in a Challenging EconomyAge of the
Current Workforce1
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Opportunities in a Challenging EconomyAge of the
Current Workforce1
Requires Action now to compete in the future

• Hiring the best and brightest
• Leveraging technology to
• Attract talent and clients for the future
• Drive efficiencies

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Opportunities in a Challenging EconomyGenerations
Served by Firms
Millennials (Under 28)
0
Traditionalists (62)
Generation X (28-43)
7
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Need to look forward now to take advantage of the
new opportunities the future generations hold
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Baby Boomers (44-61)
Source CS Suite Pulse quick poll 2008
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Opportunities in a Challenging EconomyA look Ten
Years from Now (U.S. Workforce, est.)
The landscape quickly changes
What are the Implications for the Firm?
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Opportunities in a Challenging Economy
Transitions In Firms
Today
Most Likely Near Future
vs.
Baby Boomers manage the firm
Transition management to Generation X
Generation X performs most of the work
Baby Boomers perform much of the work
Baby Boomers and to some extent Generation Xers
are the culture
Millennials become the culture
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Opportunities in a Challenging Economy
Transitions In Firms
Characteristics
Influenced by

• Ambitious
• Change jobs more frequently than their
  predecessors
• Limited loyalty to any particular employer
• Are brand conscious
• Insist on working in a stimulating job
  environment

• Cell phones, texting
• The web

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Opportunities in a Challenging Economy
Millennials Impact on Communications
The Millennials (Digital Natives)
Use online applications and collaboration tools
GoogleApps, SharePoint, etc. Wikipedia is a
central research source
Interact via social networking sites
90 of college students use Facebook
Use a wide variety of other communication tools
28 author a blog 44 regularly read blogs 76
use instant messaging
34 use websites as their primary source of news
Get their news from digital sources
Junco and Mastrodicasa 2007 survey of 7,705
college students in the US
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Opportunities in a Challenging Economy Futurize
for the Digital World

• Dont implement technology just for the sake of
  technology
• Butdont discount too quickly
• Examples
• Twitter (More likely Socialcast and Yammer)
• Social Bookmarking
• Social Networks of all sorts
• SaaS or Cloud Computing
• Work on your accent

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Opportunities in a Challenging Economy Futurize
for the Digital World
Age of the current workforce
2007 1
2018 (estimated)
Traditionalists
Traditionalists
1
Millennials
Millennials
4
10
22
20
38
Baby Boomers
Baby Boomers
48
57
Generation X
Generation X
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Opportunities in a Challenging EconomyFuturize
Right Tools and Culture

• The promise of the Web
• Use the Web to
• Drive efficiencies
• Grow the business
• Attract talent
• Process innovation and communication tools

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Opportunities in a Challenging EconomyFuturize -
The Promise of the Web
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Opportunities in a Challenging EconomyFuturize -
The Promise of the Web
1
Pew Internet and American life December 2008
Study
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Simple Examples The Power of Personal Client
Portals
Using Paperless, the Web and Workflow Tools
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Opportunities in a Challenging EconomyThe
Promise of the Web
With the right Web Tools your reach knows no
limit
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Opportunities in a Challenging EconomyThe
Promise of the Web
Private Portals
Your Firm
The Deeper the Client Relationship,
the Stronger the Client Relationship
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Opportunities in a Challenging EconomyFuturize
Right Tools and Culture

• The promise of the web
• Use the web to
• Drive efficiencies
• Grow the business
• Attract talent
• Process innovation and communication tools

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Process Innovation
What is Process Innovation?

• Innovation is the introduction of something new
  and useful, for example introducing new methods,
  techniques, practices, or new or altered products
  and services

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Opportunities in a Challenging EconomyFuturize
Process Innovation

• Workflow is too confining
• Technology helps but only so much
• its about Process

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Opportunities in a Challenging EconomyFuturize
Process Innovation
The first rule of any technology used in a
business is that automation applied to an
efficient operation will magnify the efficiency.
The second is that automation applied to an
inefficient operation will magnify the
inefficiency. - Bill Gates

• The accounting profession has generally been a
  step-change profession

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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation

• Getting there early
• The best and the brightest want forward-looking
  employers, business partners, and advisors
• For staff and clients, you will no longer compete
  just with local firms
• Firms successful in todays economy tend to move
  quickly

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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation
Do staff in your firm have multiple monitors?
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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation
Does your firm have a web site?
Data are suspect due to the lack of a
broad-based survey. Usage may be overstated.
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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation
Does your firm use Client Portals?
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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation
Does your firm use an ASP version of software?
Does your firm use an ASP version of software
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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation
Evaluate Carefully
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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation

• What are the tools needed to get our firm where
  we want to be?
• Objectively examine and consider implications
• Measure the impact from several dimensions
• Financial
• People both inside and outside
• Overall resources

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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation

• Process evaluation the five key questions
• Does the activity
• Enable new capability?
• Enhance productivity?
• Increase efficiency?
• Insure greater quality?
• Positively affect profits?
• Lets see examples of process innovation
• Lets look at how the tax process can change,
  driving efficiencies with a combination of
  process innovation and new tools
• Digital billing and payment

For either current activities or those under
review for possible implementation
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Opportunities in a Challenging EconomyFuturize
Your Firm Innovating Data Entry
In the Future information (data) will be
gathered from various sources data warehouses
and aggregated through .NET web services In the
web services world of the future, data entry, as
we know it, need not exist
Interim technologies to communicate data and
drive efficiencies will be required until the
vision can be realized Data entry can be
dramatically reduced with temporary or
transitional technology
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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation

• Drive an institutional obsession with improvement
• Foster a pervasive lack of complacency with how
  it is done today
• Real Innovation requires constantly reviewing how
  you do things and what you do
• The starting point should always be Why do we
  do that?
• Process Innovation should be a way of life rather
  than a step-change

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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation

• Key benefits of Process Innovation
• Drive efficiencies at an incredible pace
• Experience the exhilaration of continuous
  improvement
• Impress your clients and grow your business

• Attract and retain the best and the brightest

Marc Prensky, Digital Natives, Digital
Immigrants
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Opportunities in a Challenging EconomyFuturize
Your Firm Process Innovation
Remember the words of Bill Gates
Automation applied to an efficient operation
will magnify the efficiency.
Automation applied to an inefficient operation
will magnify the inefficiency.
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Opportunities in a Challenging EconomyFuturize
Your Firm What else to Focus on

• Marketing, Marketing, Marketing
• Internal and external
• New, quality clients build your future
• Create/enhance your brand
• Use all the digital tools, including social
  media, available

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FUTURIZE YOUR FIRM
20/20 VisionManaging the now, and Competing down
the road
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SEIZE THE OPPORTUNITIES

• If you want to thrive and not just survive
• Use the tools and resources available to maneuver
  the current economic situation
• Futurize for efficiencies, upgrading of staff and
  clients, and better position you for growth
• Be positive!
• Be flexible!

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Economic Conditions, Demographic Shift
Accelerated Technology

• If you dont like change, youre going to like
  irrelevance even less
• - General Eric Shenski, Chief of Staff, US Army

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QUESTIONS?
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Opportunities in a Challenging Economy

• Tough economies separate the best from the rest
• Survival of the fittest
• The best feed on the rest
• What are you? In survive mode? Or thrive mode!