A firm without walls: what happens when practitioners decide the rents are cheaper in cyberspace?

Michigan sole practitioner Janet Caswell has a staff but no office. Her files, computer file server and other sundry equipment are kept in a rented Storage space. Her telephone is a personal 800 number that can be programmed to follow her staff wherever they go. Her employees communicate and "meet" through technology. In a few short months, she has gone from housing her firm in a conventional space to opening a "virtual office" that offers the same services to clients yet exists only in cyberspace and on telephone lines.

Earlier this year, Caswell decided that if she was to continue to serve clients wen and stay ahead of the competition, she would have to make radical changes in how she ran her firm. "I realized that eventually I would have difficulty sustaining profit unless I cut quality, which I wasn't willing to do," she says. And she was concerned about the many challenges facing small practitioners-such as fierce competition from within and outside the profession, new technologies and their effects on practice, rising overhead costs, shifting client loyalties and workforce issues. She decided the situation gave her an opportunity to reevaluate the business and her clients' needs.

UNWILLING TO MAKE A COMMITMENT

It all began a year ago, when Caswell realized she would need more office space but found the locations she wanted required five leases. Among her considerations was the fact that not so long ago, computers and other technology expenses were insignificant. "I asked myself how much more change there would be in the next five years, and I couldn't justify committing to something that might not suit my needs for long."

The situation forced Caswell to think about what she really needed to run a. successful firm. She read voraciously, anything she could find on state-of-the-art practice and business management and technology. Once she began this exercise, pushing herself further and further out of the box of conventional approaches, her perceived needs changed completely. "In less than five years, we're going to be talking to our computers, so we'll need to think about acoustics in the traditional office," she says. "Our clients needs have changed drastically, which has made me realize they are going to require a different kind of business adviser." Considering these vast looming changes gave her a new perspective on the seeming necessities we now take for granted. "When you start thinking about those issues, you find yourself asking," Do we really need offices? Do we really need file cabinets taking up $20 per square foot of rental space when the same information can be stored on a tape I can hold in my hand?...

So instead of opting for new office space, Caswell dropped the lease on her current quarters and began furiously planning her new virtual facilities. The first chapter in her story involved closing down her 1,800-square-foot office in September 1995, renting 450 square feet of storage space and sending her employees home to perform their jobs from there using technology. (More of the details of her reorganization are covered in the article that follows this one--and the Journal will run a follow-up story on Caswell's firm in a future issue.

Most firms won't be making the radical changes that Caswell has, but many are taking steps in the same direction by using or considering some form of telecommuting for employees. The move can lower overhead and raise productivity.

IS IT RIGHT FOR MY FIRM?

Telecommuting success in CPA firms depends in large part on the level of employee and the type of work he or she is doing, according to Roman H. Kepczyk, a director at Henry & Horne, Tempe, Arizona, and a member of the American Institute of CPAs information technology research subcommittee. "If the firm is in a very specialized niche and the people have a very high skill level that allows them to work without a lot of supervision, then it's probably more likely to try telecommuting."

Kepczyk thinks firms need to be able to trust their employees and their abilities. "I believe that in 5 or 10 years, telecommuting will be standard practice because of the high costs of office space", he says, but during the transition he thinks CPA firms will be concerned with devising ways to ensure that employees working at home will maintain quality, billings and collections when not under the partners' supervision.

The major drawbacks seem to be a sense of isolation and a loss of team spirit. "If you are used to doing a lot of team projects, the camaraderie is lost. But," he adds, "all the studies have shown that productivity goes up."

Cost savings depend on the level of the employee, according to Kepczyk. Setting up a home office will add a couple of thousand dollars to the first year's expenses, but many people already have some home computer equipment, which cuts the employer's outlay. A second phone line is a necessity, but other requirements will vary from job to job. A high-level employee's complete home office will be expensive, but, he notes, a specialist billing $150 an hour for business valuations, for example, will cover the upfront costs in the first year.

SELF-STARTERS ONLY

Although the idea of eliminating the traditional office is increasingly popular, it's not right for everyone. In Caswell's firm, "the people who made the switch are the real self-starters--they have more confidence in what they're doing," she reports. To reach a decision about telecommuting, firms should determine the potential savings--which can be high--the administrative burdens--which also can be high--and evaluate their employees, their practice areas--especially their own clients' needs and attitudes--and their cultures to see if the match is right.

RELATED ARTICLE: EXECUTIVE SUMMARY

* EARLIER THIS YEAR, Michigan sole practitioner Janet Caswell decided that if she was to continue to serve clients well and stay ahead of the competition, she would have to make radical changes in how she ran her firm. In a few short months, she has gone from housing a 7-person firm in a conventional space to opening a "virtual office" that offers the same services to clients yet exists only in cyberspace and on telephone lines.

* SUCH RADICAL CHANGES aren't right for every firm, but moving employees out of traditional offices can increase productivity and save overhead.

* TELECOMMUTING SUCCESS IN CPA FIRMS depends in large part on the level of employee and the type of work he or she is doing, according to one expert. Firms likely will be concerned with ensuring that employees working off-site will maintain quality, billings and collections when not under the partners' supervision.

ANITA DENNIS is managing editor of the Journal. JANET G. CASWELL is managing associate of Janet G. Caswell, CPA, PC, Bloomfield Hills, Michigan.

Ms. Dennis is an employee of the American Institute of CPAs and her views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due process and deliberation.