How to make a success of software consulting; accounting program installations open doors to new business.

Accounting software installation can be a highly profitable venture for CPA firms-generating not only revenue in its own right but opening the door to new accounting clients. However, many CPA firms that have expanded into this new field over the last few years have been disappointed, not only with the business installation engagements they have generated, but also with their failure to generate as much new accounting work as expected.

According to a survey conducted at the 1990 American Institute of CPAs Microcomputer Conference, CPA firms that installed accounting software posted an average of only 871 billable hours in 1989. Staff were paid an average salary of $36,600 and billed out at $58 an hour-less than desirable results.

Clearly, these disappointing results say more about the firms'marketing and training failures than the software-installation business, which is burgeoning. This article will describe how CPA firms can make the software consulting business a successful venture.

MARKETING OPPORTUNITIES

Before a CPA firm can be successful in the software field, it must be aware of the obstacles it faces. One of the biggest is the fact that, by their nature, software installations are often a one-time engagement. Or, if they do generate future work, such engagements generally occur years later, when a software package is updated or new modules are introduced.

But that drawback can easily be transformed into an asset simply with a mind-set shift: To stay in business, the CPA consultant must pursue a vigorous and continual marketing effort. That involves, among other things, fielding phone calls, pursuing leads, screening prospects, writing and submitting proposals and engagement letters and following up continually.

These are marketing activities that many CPA firms only reluctantly undertake. But pursued with enthusiasm, these activities often produce a stream of new business. The marketing skills CPA firms must develop to make a success in the consulting business are essentially the same skills that contribute to their success in the more traditional businesses.

Software installation creates yet another sales opportunity. While a consultant may not be called back soon to do another installation, he or she may persuade the client to expand the relationship into a longterm accounting, tax or audit engagement.

How to do it: During the initial stage of the installation, the consultant should take the opportunity to review the client's financial statements and other reports with management. This not only ensures the client is getting the desired results, but it also gives the CPA the opportunity to impress the client with accounting and business expertise and to show the firm has genuine concern for its clients.

THE MARKETING IMPERATIVE Here's what a good marketing plan contains:

* Identification of target markets. The most likely are those areas a firm already has a foothold in, but that doesn't mean the consulting business has to be limited to them.

CPAs should be aware that some areas tend to be more profitable than others. Retail, manufacturing and construction, for instance, not only have a great need for the information computer systems can provide, but they also often have the personnel to make the engagement successful.

* A money and time budget. This should cover the investment in staff continuing education and a schedule dedicating time to marketing.

n Acquiring expertise. One of the most effective marketing strategies is to become a qualified installer" (QI) for an accounting software package. Most vendors offer Ql programs. Here's how such programs work:

For a small fee (about $500), the vendor provides a full set of demonstration software and manuals, hands-on training, access to its technical support staff and an assortment of marketing materials. Most valuable of all, the vendor refers potential clients to its Qls. The vendor-Ql relationship is important. The consultant should nurture it carefully by maintaining good communications.

Of paramount importance is the consultant's track record. As can be expected, vendors steer more business to consultants with satisfied customers.

* Retailer relationships. After Ql, the next best marketing strategy is to build a strong relationship with a local retailer that sells computers but generally does not install accounting software.

* Advertising and public relations. These could take many forms: brochures, marketing letters, public addresses, yellow page ads, vendor referrals, dealer relationships, etc.

Yellow page advertising is a promising marketing technique, especially for start-up consulting operations. However, to be effective, many consultants suggest that the ads should include the logos of the accounting products the consultant supports.

Be aware that preparation and mailings of brochures and newsletters, while a good way to build an image of consulting expertise, represent a large investment.

In addition, consider mailings to members of such groups as chambers of commerce. Direct, unsolicited phone calls and even door-to-door solicitation also have been used successfully. Of course, some CPAs don't like this approach.

Promotional seminars are effective, too. But CPA firms shouldn't try to run their own; seminars take a great deal of time, effort and resources, and still the seminar may be poorly attended. Seminars that CPA firms cosponsor with accounting software vendors tend to have a higher success rate. In this case, the vendor does all the planning, literature mailing, follow-up phone calls and facilities preparation, while the CPA simply shows up and participates in the presentation.

Another option is to offer speaking services to various organizations, such as business groups.

n Client lists. CPA firms shouldn't overlook their own marketing resource-their client list. To prepare the CPA firm's staff for this effort, thoroughly educate he professionals about the work consulting staff can per that way they can promote the software services during their usual contacts with clients.

Client caveat. It's important to know when to walk away from a prospective engagement. That decision will depend on a firm's defined scope limitations for client acceptance and the CPA's judgment and intuition. The successful consultant generally turns away about a third of potential engagements. In the long run, it's often wiser to reject clients that exhibit poor accounting records.

ORGANIZING A CONSULTING DEPARTMENT

All but the smallest firms should consider establishing a separate consulting department, complete with a written business plan that contains revenue and profit goals, scope limitations, guidelines for client acceptance and a marketing strategy. Budgets should include expenditures for hardware, personnel, training, Ql programs, marketing and a reasonable expense account.

When selecting staff, keep this in mind: It's easier to train an experienced CPA to be a good installer than vice versa. As complex as software installation is, comprehensive accounting knowledge is more difficult to acquire.

While interpersonal skills are always desirable, they are particularly important in this field because the consultant must continually meet with prospective clients to market the services. ENGAGMENT PRICING There are two main approaches to engagement pricing: time and materials and fixed fee. The traditional time-and-materials approach usually does not work well because it often puts the staff under excessive pressure to work more quickly and possibly exclude services critical to the success of the engagement.

An alternative is fixed-fee, or value billing. In a fixed-fee engagement, the firm itemizes the services to be provided. In that way, clients are less concerned about how long staff members spend on the job. A sufficiently detailed engagement letter helps justify the total fee.

PROBLEMS AND SOLUTIONS

Here are a handful of problems software installers typically face and ways to solve them:

* The bookkeeper problem. The single biggest factor that determines the success of software-installation engagements is the client's bookkeeper. Even if the consultant does everything right, the engagement could fail if the bookkeeper is unable to learn the new program. Thus, seasoned consultants typically screen a client's bookkeeper to determine his or her accounting experience and ability to learn a new system. If experience or ability is lacking, the best advice may be to refuse the engagement rather than get caught up in a time-consuming, no-win effort to provide remedial education for the bookkeeper.

* Pricing the engagement. Another key problem is the gap between what the client believes the installation engagement should cost and what the CPA charges.

According to the 1990 Microcomputer Conference survey, the average installation engagement by a CPA firm was $4,178. In an effort to cut costs, prospects turn to a software retailer or consultant who is not an accountant. While his prices may be lower, his accounting expertise may also be less extensive-and that shortcoming frequently shows up in the quality of the work.

To overcome price resistance, a CPA marketer must be able to show a prospective client that accounting expertise is a critical part of the arrangement. One effective sales tactic is to cite the experience of accounting software installers: Almost half of the typical CPA's microcomputer engagements involve servicing or replacing an inadequate system installed by a person without accounting experience.

* Billing expectations. While a CPA on the audit and tax staff may reasonably be expected to generate 1,600 to 1,800 billable hours a year, the computer consulting staff averages about half that number.

There are several reasons for this, and consulting partners should explain this to their accounting colleagues: Consultants have to spend significant time marketing their services; because technology is changing rapidly, they must invest many hours in keeping abreast of new developments; and because consulting staff is often used as a computer resource by audit and tax professionals in the firm, billable time is lost dealing with internal computer problems.

* Scheduling problems. Clients usually want to start immediately upon signing an engagement letter, precluding advance planning efforts. Also, the firm's work flow usually is uneven because marketing efforts tend to taper off during busy periods.

Some ways to deal with scheduling problems are:

* Try to even out marketing efforts, improving the chances that engagements also will even out.

* Avoid more than seven engagements at a time. A consultant generally can comfortably manage up to that amount.

* To manage multiple engagements, limit on-site client visits to two meetings a week.

* Limit on-site visits to four hours at a time. Longer meetings may disrupt the client bookkeeper's daily responsibilities.

*n Require each client to install a modem and communications software so the consultant can operate the client's computer via telephone. In that way, much of the work can be done without the consultant leaving his or her office.

ENGAGMENT PAPERS

Hard as it is to believe, many CPAs who would never think of beginning an accounting assignment without first preparing an engagement letter sometimes undertake a software project without even workpapers. That omission is an invitation to trouble.

An engagement letter clarifies to clients the scope of services to be provided, which avoids disagreements on fees and responsibilities. Also, without an engagement budget, scheduling is difficult and time control impossible.

For a structured approach to software-installation engagements, CPAs should prepare the following:

* A standard engagement letter.

* A workpaper table of contents, to be used as a guide for conducting the engagement and in building the workpaper file. (See exhibit 1 on page 77.)

* A standard time chart detailing consultant and client responsibilities and the time frame for achieving these tasks. (See exhibit 2 above.)

* A standard billing worksheet, to be used internally to price each engagement.

* A list of information clients must assemble in preparation for the installation process. Many accounting software manufacturers provide these lists in their manuals.

For additional information on how to manage such an engagement, refer to American Institute of CPAS' Management Advisory Services Practice Aid no. 11, "Conversion to a Microcomputer-Based Accounting System." CONCLUSIONS

As accountants and their clients make greater use of computers, the market potential for CPA consultants grows. As complex as this new field is, CPAs are finding many rewards, but it takes planning and willingness to learn new marketing strategies to succeed. n