Practice Success Podcast

Randy Johnston discusses accounting trends, the importance of picking a vertical, and why technology is so important

• Randy Johnston • Season 1 • Episode 12

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Randy Johnston, executive vice president of K2 Enterprises, sits down with Canopy to discuss his 30+ years in accounting and technology. In the episode Randy discusses the need for keeping up on accounting trends, why it's important for accounting firms to identify who they are and what they do, and why technology is crucial to running and efficient firm. 

KC Brothers:

It's time again for another episode of Canopy's Practice Success Podcast. In this episode, we sit down with technology pioneer Randy Johnston. Randy is the Executive Vice President of K2 Enterprises and has been involved in technology since the 70s, helping accounting firms use technology better. We discuss Randy's views on the world of accounting, how firms should approach their tech stack, and why it should match your operational structure. I'm KC Brothers and I'm here with Randy Johnston. Randy, will you give us a quick introduction of yourself professionally, your involvement in the accounting industry and the things that you're doing today?

Randy Johnston:

Yeah, I'm happy to do that, KC, and welcome to you and all of the listeners viewers. So I've been around the accounting profession quite a long time. I've been involved with implementations of technology, a hot topic right now. It is. And I've done it since the 70s. So the mini computer days. And have helped develop a lot of systems through the years. So I have watched the evolution of the platforms from many computers down through DOS based computers back up through networks to cloud. And so I've been involved with a lot of those technology stacks through the years. So my normal operational rule is I keep track of anything that's technology related to accounting. And that is true in public practice, or it's true in. Accounting transactions, so it would be industry accounting systems, and then try to help people understand what the best options to fit their needs are.

KC Brothers:

Which is, can be tough, because there can be, it's easy to feel inundated with variety, with too many decisions, especially because there are best in breed point solutions, there are all in one solutions, there are all in one solutions for different types of needs. How do you go about first helping them see what, you know, diminish, decrease that list as much as possible for them? But how do you do that? How do you help them see like, okay, here's how we're going to narrow in.

Randy Johnston:

Yeah. And I actually have very specific techniques that I use because. Most practitioners know they've got an issue, but they don't have to describe what they want as the solution. So over the past decade or so, an associate of my self and I have run the accounting firm operations technology survey. So we've seen trends in the profession about 18 months before they occur because of the survey. Now that said, you are correct. That traditionally we bought our suites from the big providers, the Walters cluers, the Thompson Reuters, and they were the only two that had a full suite, but other people would buy products from into it, for example, and kind of build things together. So there's been this debate for quite some time. Do I buy a single suite or do I buy different products? Best of breed as you've outlined properly. So the question then is, well, what are you trying to accomplish now? Historically, Casey, what I've done is. Ask what you want to deliver as services to the clients and then how do you make that work best for the team members and what drops the maximum bottom lines to the partners. That's the traditional. A few years back though, because of staff shortages, which we knew accountants would become hard to find and in demand, I flipped it around to what's the best team member experience that you can deliver. Okay. Okay. Okay. And with that team. What services can you deliver to your clients? So we can optimize the profitability of the firm. A team centric approach is pretty important, but you just have to listen to what people want. So some people are very compliance driven. They're all about tax. They're all about audit. Very few, frankly, are about client accounting services or wealth management. And there's about 30 verticals that people can choose from. So when you think about the niches in the prep profession, again, you're just kind of listening to what they're trying to get done. But normally there's going to be some hot buttons or pain points. So for example, The correct hot button right now in my mind is single portal. So my favorite managing partner comment of the past year on a consulting job was quite elegant. I couldn't say it better than the managing partner, so I'll kind of paraphrase, but quote him. He said, look, Randy, you've been brought in because we've got a splinter in a whole bunch of fingers. And what we did was we bought a bunch of band aids to put on the splinters and your job here is to take all the band aids off, get all the splinters out and show us the right way to get a portal. And that particular firm had eight portals. Well, single client portal is a big deal. Yeah. So, for example, in your canopy world, part of our design work that I did years and years ago was to try to get to a single portal experience for the clients. There's 22 portals that I'm tracking today. And usually I'm listening to what's the problem. Oh, I want clients to have easier interactions. I want to solve my staffing problems. So normally what I do is you have a conversation first, and I usually will do it not only with the partners, but also the operational people in each area of the firm. Just listening to pain points, and once I've heard all those different pains, then I try to rank order them and say, okay, based on what you've told me you need, here's what I would suggest. Now, the problem for most practitioners is it's kind of hard to do self healing, diagnosing yourself. If you think about it, most of us don't really do our own diagnostics when we're sick. We go to a physician, right? But a lot of firms try to do it. Diagnose themselves. And I think that's actually a little ill guided because you don't know what you don't know. Yes. Right. So that's part of this discovery process. And I try to be straightforward about what will work and won't work when I'm asked questions and I usually provide two or three solutions in every category. And so today. I'm watching 52 different practice management solutions, and I think there's another one or two that are in the pipeline that should be, you know, considered. For certain applications, we don't have a lot of choice. For example, in tax, we don't have a lot of choice. In client accounting services, we actually have a lot of choices, but many of them are not the traditional choices. So you have to be thoughtful about what you're trying to deliver. to the clients. And that's how you pick your technology.

KC Brothers:

You make such a good point because it's not just about the experience in the firm and with the employees and your internal processes, which is huge. We can't understate or well, can't overstate that. It's massive. It's important, but providing that best in class. Experience for your clients is just as big, maybe bigger because of acquisition costs. And if, and if we can deliver experiences that keep your clients there and then, and then you can expand your services within those clients, it just levels up the firm. It's way more efficient. Maybe even more fun?

Randy Johnston:

Well, now here there's, there's lots of moving parts. So we're, right now we're playing three dimensional chess might be a way to think about it. Cause there's lots of different ways you can look at this. Your point to workflow process though is important because for 30 plus years, I've had firms focus around their workflow processes. There's a number of consultants in the profession that try to implement and deploy Six Sigma optimization in their workflow processes, which frankly don't work very well in most CPA firms. But there's good sales pitches to listen to if you're a partner in that area. You do have to get the process right. But you also have some leverage that's available to you today. Automation, which has become much better over the last 10 plus years. Things like artificial intelligence, which at this point in time, we need to be cautious how we proceed because of privacy issues. But I would go, maybe go a little further. There is no real silver bullet to this. And if your focus was around client acquisition, the whole business development cycle, it needs to be understood and firms have different cultures about how they do the business development cycle. But if we can go from business development to engageable client to the onboarding process. To then the recurring services that have to be delivered, to the deliverables to the client, to the e signatures if it's taxed, to the payment, and keep that flow automatic. I like to have people look at their client experience holistically, end to end. The whole journey. All the way. And I, unfortunately today, I think you still have to do it a little bit by practice area. So by tax, by CAS, by audit, that will give you a better idea of the tools that you need to get the job done. But the problem is right now, there are too many tools in most CPA firms. There need to be fewer tools, but we've been getting splinters and we've been buying Band Aids to make that pain go away and it is hard to stop doing what you've been doing to do something that's better or. Maybe right, I, I don't want to use the word ride wrong because there's too many people that are trying to say you have to do it this way. And things are not black and white, they're shades of gray along the way. But if your focus is all around, you know, volume of acquisition, okay. That's a different proposition and the business development software's to do that. The CRM is if we want to use the general term, You know, again, there's hundreds of those in the market, but there's only about a dozen that fits CPA firms. So I try to listen to why, okay, why are you doing this at a moment that way? What's your strategy? Okay. Out of all the tools out here, here's the one that fits you best in rank order. And I can actually identify that. And I routinely do calls with groups. Identifying a particular problem, but I always try to step back, make sure they're thinking holistically before we go solve a CRM problem or engagement letter problem or a, you know, whatever problem.

KC Brothers:

Yes, I love that. Well, and it seems to that. Okay, we've had you mentioned. And as a whole suite solutions, and they've continually added to. But we've had a little bit of a revolution with accounting software in the recent past, where that I think is taking accountants off guard, or at least those in the position to make technology decisions, where decisions were made 20, 20 years and now find them in a position to evaluate software and they haven't done it in a while. What would you recommend to people in that kind of a situation?

Randy Johnston:

Well, perhaps a couple of three pieces of guidance on the front side, and then go into the process. My rule of thumb is that you have to evaluate your technology at the product level, at least every 10 years, because if you've adopted a product. And you've used it a while, has the vendor stayed up? And if you keep using the product, you don't know that the technology shifted and you need to shift too. So if you've got products that are, that you've had 10 years or longer, it's time to review and see if there's better alternatives than those categories. On the other hand, this long haul stick with it. Retraining is a bugger. Yeah. So there are soft costs of switching that clearly will become evident. The next piece that you alluded to a little bit earlier with the workflow, it is plain to me when processes are more ad hoc and people are not following the processes. So what happens is everybody does things the best way they know how, I believe, right? It may not be consistent in a firm and it may not be the best way. It's just the best way they know how. So when you replace a system, All of the inconsistencies are exposed again. So normally, I like to actually go back to my workflow processes, confirm them as they are, as is, and transform them to what they should be, to be. And then I use that as a basis for evaluation of the technologies. Okay, because what you're really doing is you're doing a gap analysis. Now, that said, you've got three major ways of selecting these products in my mind. The gap analysis I just described is certainly one way. Most of the accountants tend to do a feature type of evaluation, so it's a feature benefit, and that can work, but you really need to do things together. Features by themselves don't work as well as they did at one time, and in the early days of technology, there were a lot more features. To give you a sense of that. In the accounting software market, the lower end products have about 2, 500 features, which I've tracked through the years, the higher ones have 4, 500 features. Well, most people have trouble wrapping their mind around that. So every little platform has features, so you can do it that way. But then the other part is the actual implementation team, and that's another one of the factors that you need to bring in. The longevity of the company, of the product, there's some other things in there.

KC Brothers:

Let's dig into those two, those last two really quick. So features is what I think both for sales reps. Those selling a product or a solution and those looking for a product or solution. I think it is an easy way to feel like you've done the work without doing the work. It's an easy way for a sales rep to say, we check these boxes for you. It's an easy way for an individual to build check boxes but to take yourselves out of it, to see a good sales rep who isn't necessarily focused on. Those checks boxes, making a list for you, making sure that we software covers everything, but rather lifting up your. Your view and looking at the firm and the, the problems that you have and the solutions that are needed and, and how then a software can provide for that. I'm curious to know how you help people rise above. Getting really feature focused and in those weeds.

Randy Johnston:

Yeah, and let's face it, well prepared sales people have battle cards of those features of their product and competitive products. So, they will always position their product in a superior fashion and if they're doing their job right, plant seeds of doubts where there's shortfalls in other products to benefit and so forth. But the, the issue is, if you've been doing things a certain way, you're gonna naturally be prone to do it the same way. So you're gonna keep doing what you've been doing. So one of the things you have to do is think about what would be your ideal way to solve this problem? Forget the products for much, just what's the IL ideal way to get this job done? Okay. And then I usually will throw some things that maybe they don't think about, but they can name 2, 3, 4. And sometimes I'll do that with brainstorming sessions because. They haven't really talked maybe among their ownership group or among their whole team. They just haven't really prepared themselves. Then, once they've identified a few things, then I usually will throw out a few more. Did you think about this way? Have you considered this? So I tend to be introducing more options rather than fewer. Because part of the problem here is how do we filter this to one that actually fits us? Yeah. And so, my rule of thumb, and this comes from being a long term programmer, old time programmer. All applications have feature deficiencies. All applications have bugs. You're never going to find the silver bullet. You can do analysis paralysis and not make a decision. And that probably is not in your best interest either. And calling your practitioner down the street, the friend you know across the country. That's probably not a real good way to do it either because They will have possibly not done as extensive analysis or made the same mistakes or whatever. You actually do have to go through the process. I do have selection steps that I have on my websites for selecting systems and vetting them properly and contracting them properly. But I don't want to make it too much about that. Overhead, you know, exercise here. That's not the goal, but it's just, did you think about these different items? And because the market is moving as fast as you've noted I'm just going to suggest that technology is moving faster now than it has in any time in the past, and it will move faster into the future. That doesn't mean you have to move fast. You have to move thoughtfully, right? And so you need to look at where you want to be in five years or seven years or 10 years. Remember, I think. The technology replacement window is a 10 year cycle. So if you can picture what you want to be when you grow up in 10 years, that's what you're trying to fit because what is it I want to be? And you're going to go through pain making the transition in my mind.

KC Brothers:

And that's actually a perfect transition because the next point was implementation. And the soft skills that come with getting onto a new system. No two systems are alike. You're going to have to re navigate a few things, re train some employees. It's inevitable, there's no ifs, ands, or buts about it, you're going to experience it. But, it's still, no matter where you're at in that cycle, in that window, There's still a pain you're trying to solve. Curious to know how you advise firms who are in the thick of implementing a new, especially something that might be consolidating several that has, that is a bit more robust is going to affect more teams, more members of the team across the firm. And it's, it's a big shift. How do you. Consult them.

Randy Johnston:

Well, change management in CPA professionals or accounting professionals in general is hard. Right? They're also generally quite intelligent people. I give them a lot of credit on that because I like hanging with really smart people, but they do tend to overthink things in terms of. Detail and a process perhaps, but they don't do a real good job of managing the people part of it, the change management. So there's actually multiple things that you can do to help with this. One of them is to involve more team members during the selection process, because you're getting buy in at that point, they're getting exposure to the potential new platforms or choices.

KC Brothers:

They, and it gives them time to. Prepare mentally for a change and, and to feel like they had some, to your point, buy in. Some ownership.

Randy Johnston:

Some input. Yeah. That's right. And that's radically important, I think, to have the most success. Further, few, I might go so strong because I'm very careful with the way I use words, no implementation teams do a good job. I mean, it's almost that bad. But very few implementation teams do a really good job because Their job is to swoop in, get you running, get the check, and get out. Your job is to get the system in, make it work optimally for your practice for a long period of time, and get maximum value from it over a period of time. Those are Conflicting goals very much so. So, you're going to have to have a way to manage the implementation team. And a lot of the, oh, it's all automated onboarding, you don't have to think about it too much. It does not work like that. So, you're going to have to have multiple training occurrences, usually in shorter amounts, have the greatest success. You should record key things that you want done in a certain way. And you can record those in video with, pick your platform, Camtasia's, Zoom's, Teams, I don't care how you do the video recording, but I think it's actually good to run the product and talk over what you're doing and why, publish those out as a library to onboard new employees, but also as a refresher to go back and say, I know there's a way to do this, I can't remember, and have them indexed well. But then, once you get where you think you are live, and hopefully you've tested before you go live, then you have a debrief, and you cycle back. See, this is not a one and done implementation. It is a cyclical repeat. So it's a rinse and repeat. So, okay, we've got this in. What do we want to do next? Build those steps in a project, complete all those, debrief and then you can cycle back again. And there's training that goes on on a continuous basis. So you can have a lot more success if you use those techniques from change management, people management. There's probably some detailed weed things we could do, but I think those are pretty good overviews.

KC Brothers:

Yeah, I think we could talk all day about that, but I think that was a great introduction. Thank you, Randy.

Randy Johnston:

Okay, thank you very much. I appreciate the time with you.