Printer Friendly

Can a CPA sell computer products and still give unbiased advice? A growing number of consultants seek ways to maintain professional standards.

During the past decade, CPA firms increasingly have expanded into the computer consulting field. Over the years, many formed close relationships with some hardware and software vendors to develop the expertise to install specialized products. In time, some took an additional step-becoming sales agents for a select number of vendors.

As this trend has grown, so has the criticism of the practice. Some CPAs have complained that, while ties with vendors probably are good for consultants, such financial relationships may prejudice CPAS' professional judgment and, as a result, clients may not receive unbiased advice on hardware or software selection.

This article addresses those concerns. It examines the computer consulting business and the evolving vendor-consultant relationship, which has come to be known in the field as a "business partnership."

A RELATIONSHIP EKPLORED

In general, hardware and software vendors market their products without help from outside consultants. The accounting field is an exception because computer use in accounting is not as straightforward as it is in most other applications. Mastery of two fields-computers and accounting-is necessary for a successful installation.

While it's difficult to teach an accountant to master computer and software technology, it's far more difficult to train a computer expert about accounting. As a result, hardware and software producers eagerly invite computer-savvy CPAs and those willing to learn to join them in a business partnership.

The relationship usually occurs in stages. First the CPA firm seeks to expand beyond pure consulting (limited to advising clients what products to buy) and then into software and hardware installations.

Since accounting expertise is most relevant in software consulting, many software vendors offer special training programs to consultants who install their products. Upon graduation, consultants are qualified installers (Qls) for a product. That designation also gives the consultant access to the vendor's technical staff. This is important to consultants because frequently they face unique installation problems.

The relationship benefits both vendors and CPA-consultants: The vendors now have qualified and experienced people to install their products, and CPAs get referrals and a steady flow of updated data from vendors. Once that relationship matures, it's a small step for the CPA firm to become a sales agent for the vendor.

In a typical business partnership arrangement, hardware or software vendors either pay CPAs a commission on each sale or sell their products at wholesale prices to the firms, which then act as resellers. Some states prohibit such transactions.

In most cases, CPA firms do more than act as retailers; they add value to the products they sell by tailoring them to clients' needs, installing them and then training the clients' staffs to operate them.

CPA firms often carry more than one product; some even sell competing products. But practical considerations limit the number: How much time can consultants invest in gaining multiple Qls?

From the clients 'point of view, having a computer consultant who is also an accountant makes sense. Without experienced CPAs as advisers, clients are at the mercy of vendors who know little or nothing about their accounting needs. In most cases, the problem is even more complicated because it involves multiple hardware and software products, including networking programs. The goal is to get all these varied and sometimes seemingly incompatible products to work together.

MEETING BUSINESS NEEDS

While many businesses recognize the effectiveness of computerizing their accounting, few are anxious to become so knowledgeable about computer and software that they can perform all the steps of a consultant. As a result, they often turn to a single consultant to take the responsibility for the whole operation-a turnkey arrangement.

For years, large accounting firms have provided such a one-stop service. In many instances they have gone the extra step of developing special programs from scratch.

In recent years, small and mid-size CPA firms, with less staff than the large accounting firms, also have expanded into this business. This has further focused attention on whether CPA firms are continuing to maintain the levels of independence and objectivity required by the American Institute of CPAs and the various state boards of accountancy, some of which prohibit members to sell products.

THE CONSULTANT'S BURDEN

Because of the broad range of business needs and the competitive nature of the industry, a wide assortment of software products are marketed, many with exaggerated claims. It takes in-depth knowledge to recognize the puffery. And since programs usually are configured in unique ways, it's often a challenge for consultants to adjust software to meet clients' special needs.

This puts a big burden on consultants because there are more than a hundred personal computer-based general accounting packages on the market. Clearly, it's practically impossible for CPA firms to become acquainted with all or even many of them. So most firms learn one or two packages very well and generally offer only those to clients. When midrange or mainframe systems are involved, the CPA firm either offers a single available package or develops special software.

While clients may be satisfied with the recommended product, few, if any, CPA firms will, or even could, search for and review all the alternatives.

Given these facts, are clients getting independent and objective advice? A little more perspective is necessary before that question can be addressed.

In the early 1980s, before the big push by the computer industry to form partnerships with the accounting profession, clients usually engaged CPA-consultants to perform five well-defined feasibility and acquisition steps: 1) study the clients'business environment, (2) develop system specifications, (3) contact and qualify vendors, (4) evaluate proposals and (5) negotiate the contract.

Note: The traditional process involved studying clients'needs and finding a system (hardware and software) that best fit those needs. During such engagements, consultants primarily searched for software that met the information-processing needs as closely as possible; of secondary concern was the capability of the hardware.

In addition, consultants were concerned about software vendors'ability to fine-tune, tailor and support the clients' systems. As a result, effort was focused on many different software products.

But now, as more CPA firms take on the sales role, increasingly clients question whether the advice they receive is objective and independent-after all, consultants profit by recommending certain products.

However, what these skeptical clients may not realize is many CPAs who offer consulting have already done the extensive research necessary and they have developed a relationship with a vendor because its products meet most of the CPAS' requirements for good accounting systems.

SALES GLAMOR

A few CPA-consultants get caught up in the glamor of the sales process, promoting what they know best and not what the client really needs. Obviously, CPAs who succumb to that temptation hurt not only their reputations but that of the profession, too.

What can the profession do to ensure clients will get not only independent, unbiased advice, but that the recommendations they get are the best possible?

The decade ahead presents a major challenge to CPA-consultants. The 1990s probably will see new computer products and services enter the market at an unparalleled rate. Keeping up with new developments will not be easy.

Following is a set of advisories that, if applied, will alleviate some of the pressure from critics; also it will help CPAs stay on top of this fast-moving field.

CPA-consultants should

* Decide which markets and application areas they wish to represent. They should limit their efforts to those areas.

* Decide on the size of target clients. A personal computer-based general ledger system for a company with six employees is much simpler to learn and support than an order entry and inventory control system running on a midrange computer for a company with $10 million in sales.

* Conduct a comprehensive search of application software representing the broadest range of computer-based solutions in their chosen areas. They should remember that it's better to find a system with extra features than to select a system with limited capabilities. Systems can be selectively tailored to meet a specific client need more easily than enhanced by adding to a system with few features.

* Decide the extent to which the support staff is capable of modifying or creating computer programs. The software development process is time-consuming and difficult. It should be attempted only by highly skilled software technicians.

* Review the characteristics and capacities of the computer hardware that supports the application software. Consultants should give attention to hardware speed, capacity and expansion ability, as well as the cost and brand name of the equipment. While the equipment is not the dominant element in the overall computer resource package, brand-name recognition is reassuring to most buyers.

Often it's not economically prudent to upgrade clients' existing hardware. If a software package can't run on it (say, because of limited memory), it's frequently best to give priority to a comparable product that can instead of investing in new computers.

n Evaluate the computer vendor carefully. Consultants should be sure the vendor is viable, experienced and responsible, and can provide technical support.

Ultimately, the degree of success and profitability for CPA firms providing computer consulting will depend on how well this strategy is followed. If CPA firms take a casual attitude toward it, the profession's integrity will be hurt. n
COPYRIGHT 1991 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Author:Wixson, John A.
Publication:Journal of Accountancy
Date:Jul 1, 1991
Words:1521
Previous Article:How to make a success of software consulting; accounting program installations open doors to new business.
Next Article:Traps to avoid in product costing.
Topics:


Related Articles
How to make a success of software consulting; accounting program installations open doors to new business.
What do small businesses need from CPAs?
Doing the right thing: case studies give tips on how CPAs can remain within ethical boundaries.
Texas adopts rules on CPA designation; AICPA to seek broad resolution.
Bill Gates' win-win scenario for CPAs.
Life insurance compliance rules: how to survive in a highly regulated industry.
An ethics quiz: the rules are there. These case studies look at some of them.
Structuring for growth: so you want to build rather than buy. Here are tips from people who've made it happen.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters