COVID-19 is Accelerating Digital Transformation in Accounting
After twenty-some years working as an entrepreneur, I’ve seen my share of buzz words – the cloud, SAAS, Artificial Intelligence, RPAs, IoT, Big Data, Blockchain, quantum computing… Today, I’m addressing “Digital Transformation” and what it means if you are a managing partner in an accounting firm.
But first, digital transformation really is more than just a buzz word. Simply put, it’s the ongoing work of using technology to improve the people, processes and tools you use to conduct your business.
Digital Transformation is Not New
In one way or another I’ve been talking with companies about digital transformation my whole career. In 1985 I remember having animated discussions with executives from Citibank about whether customers would ever embrace ATM machines. I was at Aetna in the early 2000’s when we started introducing automation and scoring algorithms to lower our costs for handling claims. And later when I started my own business working with hospitals and skilled nursing facilities, we built tools that shared data and supported better decision making between the different processes for admissions, discharge planning and quality reporting.
In all those cases my clients were keenly aware that the only way to remain competitive was to transform their brick and mortar businesses into digital companies.
The Cost of Doing Business
Companies that fail to make this transition will likely land on the list of the 50% of businesses that will be closing by 2030. Research shows that since 2000, 52% of companies in the Fortune 500 have either gone bankrupt, been acquired, or ceased to exist as a result of digital disruption.
Most people understand the benefits of digital transformation, but they struggle on how to take advantage of the opportunities. I will use my experience in healthcare to illustrate an approach you can take.
Digital Transformations Are Driven by Business Processes NOT Technology
As a Vice President of innovation for a national managed care company, I ran one of our first digital transformation pilot programs, working with a medium-size medical practice with ten physicians and 52 FTEs. Many of the challenges I found there are similar to the ones I see in accounting practices today; a reliance on manual processes, siloed technology and inconsistent ways of working among different partners in the practice.
I learned then that the key to managing change in any organization is to start with a common vision of where you are going, and a clear methodology to managing the process.
Choosing an Approach
There are various digital transformation models out there. I favor the four pillars model, but regardless of what method you choose I highly recommend that you implement a “Business Process Management” roadmap. Digital transformations will change the way we do business. However, new technology is useless if it doesn’t correlate with an improvement in your business processes.
Business Process Management Should Start Before – Not During or After -Your Digital Transformation.
For this medical practice, we started with the physician partners. Through a series of half-day workshops, we began to define their new “future state” without going into detailed workflow requirements or identifying specific technologies. This let us stay focused on defining the business drivers that fed our roadmap, as well as the cultural changes needed to drive change in the practice.
Business Process Roadmap
Define Business Goals:
- Define value drivers
- Identify business objectives
- Define core competencies
- Assess alignment
Identify Pain Points:
- Identify potential areas of improvement
- Identify areas of inefficiency
- Provide a structure for new processes
Map New Processes
- Identify opportunities to better
- align with business goals
- Improve future state
- Address inefficiencies and pain points
- Quantify business improvements
- Identify soft and tangible benefits
- Assess ability to scale with existing team
|Company Strategy||Mass Standardization & Efficiency||Rapid Change & Innovation|
|Spending Philosophy||Cost Center||P&L|
|Talent||Low Cost||High Skills|
|Operating Model||Service & Support||Relationship & Partner|
|Technology||Legacy||AI, Robotic Process Automation, Mobile, Cloud|
|Financial Approach||Cost Center||P&L|
|Business Model||Focus on Short-term Profitability||Obsession with Customer|
Coming out of the roadmap we identified two initial areas of focus:
- ePrescribing – to address medication errors and delays as well as high liability costs from insurers
- Increased reliance on Medical Assistants and Physician Assistants – to address high operating costs per visits.
We then applied a templated approach to identify the various activities and technologies we would need to address these opportunities. For illustration purposes I’m including a simplified version below. I’ve also listed out similar, related opportunities you might find in an accounting practice.
- ePrescribing > Related to Accounts Payable Automation
- Shift to Medical Assistants and Physicians Assistants -> Related to Outsourced Accounting Teams
Opportunities Worksheets (Example 1)
E-Prescribing eliminates handwriting errors/illegibility and gives both physician and pharmacist access to a patient’s prescription history to reduce the chance of the wrong drug being dispensed.
Accounts Payable automation addresses costs and inefficiency resulting from manual data entry and routing for approval.
Track patient fulfillment of prescriptions: Once a physician gives a patient a handwritten prescription, there is no effective way to track whether the prescription was filled. Patients often forget to fill prescriptions, can’t afford the drug, lose the piece of paper, or start to feel better and decide not to take the medication.
E-Prescribing allows physicians to verify whether patients fill prescriptions, and to counsel patients on medication management if they haven’t.
One of the most significant administrative burdens to physicians and the clinical office staff is the need to respond to prescription refill requests. E-Prescribing enables providers to review, authorize, and transmit 20-30 refill authorizations in a matter of seconds.
AP is comprised of 5 distinctive steps: 1 invoice arrival and categorization- 2 Routing & approval- 3 Data capture & validation- 4 invoice matching & verification- 5 GL coding.
AP automation reduces time spent by 20/30% freeing staff to spend more time on higher value activities.
Better patient outcomes increase bonuses paid by insurance companies.
Accounts payable automation can provide significant cost savings for a company beyond the expected savings from eliminating manual tasks.
TIME & COST
In the physician practice pilot program referenced above; ePrescribing cost $530,000 less than paper prescribing, was associated with 3,875 and 39 fewer medication errors and ADEs (adverse drug events), respectively over five years.
Organizations also experience lower processing costs from a switch to automation. Paper is instantly eliminated from the process, meaning storage and printing costs are reduced. Outsourcing of manual data entry is also no longer required due to electronic invoicing and online data capture taking on the role.
Relatively high during the first year, reduced after that.
Low, but the ROI will depend on the number of transactions.
Opportunities Worksheets (Example 2)
Payroll and benefits account for over half of the total expenses of the practice. As such, the staffing model is the starting place for identifying savings. And while cross-training and integration of midlevel providers are common approaches for keeping labor costs in check, one oft-overlooked area of consideration is the forgoing of nurses in favor of medical assistants and substitute physicians with physician assistants.
There is a shortage of qualified candidate for CPAs with five to ten years of experience. Furthermore, the cost of health benefits is increasing at an unsustainable rate. Outsourced accounting teams can provide equally qualified resources at a fraction of the cost.
An EMR (electronic medical record) system allows coordination of care between physicians, medical assistant and physician assistants while tracking important quality measures
Task management portal to coordinate work, business intelligence dashboards to monitor productivity and quality
Clear guidelines, well-defined protocols, and orders outlined in advance give the MAs and PAs a structure for how to approach and prioritize clinical and administrative tasks. The delegating physician will still need to engage the MAs/PAs actively, but with protocols, directions, and orders in place, there will be far less supervising micromanaging required.
Outsourced teams will conduct business based on your policies and procedures. This is an excellent chance to standardize those across the practice and ensure that your entire firm is following the same best practices.
While MAs and PAs will never have the latitude or autonomy of a licensed nurse or doctor, they can still perform a multitude of clinical duties that do not require the physician’s constant supervision. Therefore, the success of the model hinges on the physician’s open-mindedness to the practice model, and their cognizance of the financial benefits of employing cost-effective labor.
Outsourced teams will be internally focused. Your staff will remain the principle interface with clients and engage the team to execute the day to day work.
TIME & COST
In the pilot program referenced above, we added two Medical Assistants rather than two nurses. The Medical Assistant’s hourly rate with benefits was $16.54, as compared to a Registered Nurses rate with benefits of $31.28. That’s a savings of $30,659 for a typical working year.
Annual cost of a Physician Assistant was $86,000, as compared to a physician costing between $200,000 and $300,000. Total annual saving per year: $280,000
A virtual team composed of 1 senior Chartered accountant and five junior accountants will cost around $13,000 per month. One senior accountant in the US will cost you approximately $12,000. When implemented correctly, you will have 800 hours of billable hours versus 160 hours at your disposal
Medical Assistant and Physician assistant require active engagement and management from physicians, which some providers resist. Often set in their ways, the prospect of having to manage an assistant (and be liable for their mistakes) is unappealing. However, as a medical practice center can benefit, financially and otherwise, from employing more cost-effective Mas and PAs, physicians would be wise to take a more open-minded approach to embrace the MA/PA staffing model.
Most of the risks of outsourcing accounting services can be mitigated with solid preparation and planning. Choose a company with a well-established model for remote team integration. Having this model in place proves that a vendor has the needed experience and skills required for successful collaboration.
Leadership Needs to Lead
In this case, doctors were 100% driving the transformation, and I expect partners in CPA firms to do the same. If even one partner is not endorsing the transformational digital change, you’ll end up with a rebellion on your hand. This doesn’t mean you have to wait for a full consensus to get started, but there are additional steps you might take if this is the case. I’ll write more about that in a future article.
Passionate leaders, whether in healthcare or financial services, often want digital enablement to be implemented yesterday. But before you begin, you must identify what digital means to your firm. Regardless, most successful organizations address business process management well before starting technology implementation. By starting your business process management roadmap now, you will be in a better position to decide on your company’s digital transformation.
Yann is Accsurant’s president. With 20 years experience and six different technology startups behind him, Yann has a proven track record in developing innovative solutions based on his technology and financial acumen.