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From Paperless to Cloud Computing

What does 2010 hold for financial execs?

January 7, 2010
by Sukanya Mitra

From information security to paperless to cloud computing. Finance execs have seen and heard quite a few changes in technology in the last decade. Should you adopt new technology as it comes around the bend? How should cloud computing be used? What are the pros and cons of all these apps? What’s to come?

Corporate Finance Insider caught up with James C. Bourke, CPA.CITP, CFF, partner and director of technology at Red Hook, N.J.-based accounting firm, WithumSmith+Brown, PC. He currently serves on the AICPA Council and is chair of the AICPA CITP Credential Committee. Additionally, he was recently named one of the Top 100 Most Influential People in the Profession.

From a technology or software solutions standpoint, what trends are having the greatest impact on CPAs and financial firms today?

James Bourke: Mobile technologies — With CPAs being more and more mobile, tools and applications that allow access while away from the office are becoming more popular.

Scan and Populate — Applications that automate the population of fields in tax preparation software directly from source documents such as 1099s, W-2s, etc.

Portals — The use of secure portals as a means to share confidential/private data between the CPA Firm and the client.

Encryption — No matter what the industry, type of equipment or type of data, everyone, including CPAs, are concerned about privacy and confidentiality of client data. Encryption solutions are being implements to protect everything from memory sticks to hard drives.

For the last five years, information security has ranked #1 in AICPA’s Top 10 Technology Initiative. What can financial firms do to curb security breaches? What can financial firms do to stave e-mail viruses in company-used BlackBerrys and PDAs?

Bourke: Educate the end-users — your staff! Security breaches traditionally occur when weaknesses are in place. Tech savvy individuals will easily spot these weaknesses and some will use them for personal gain

When it comes to viruses, BlackBerrys have been known to be pretty much virus proof. In 2006 a possible vulnerability was found that takes advantage of the tunnel between a Blackberry and a Blackberry Enterprise Server, but due to the way BlackBerrys operate, it was unable to self-replicate — one of the “features” that makes a virus, a virus. Having said that anything is possible, but it will be unlikely to spread due to the way BlackBerrys handle attachments and applications.

PDAs, however, running windows-based operating systems will generally have the same, or nearly the same vulnerabilities as many personal computers. With this in mind, there are many third-party tools available to insure viruses are detected before an infection or replication occurs.

In 2009, 55 percent of mid-sized and large organizations reported that malware had successfully infiltrated their network through the Web. How can CPA firms protect their companies?

Bourke: Malware has become a significant problem, as many existing virus and spyware applications do not currently detect many of the most intrusive forms of malware. One of the only ways to deal with this ever-increasing problem is to deploy a good anti-malware application. Similar to anti-virus and anti-spyware applications, a good anti-malware tool provides for weekly data file updates and has the ability to search disk space for existing malware intrusions, remove malware detected and most of all, block potential malware at the point of entry. In fact, a search for anti-malware apps at MajorGeeks.com yields a number of good shareware and freeware applications.

What are some of the pros and cons of Windows 7 vs. Vista as well as those who are still clinging onto Windows XP and their Word and Excel 2003s?

Bourke: Here is what I have been telling those that I meet. If you have old or extremely basic hardware, XP would likely be the operating system (OS) that I would stick with until replacement time comes around, as it is an OS that can run with only 64MB or random-access memory (RAM), leaving lots of system resources available for applications to run.

If you operate high-end systems and powerful PCs, I would opt for Windows 7, as it is created for multi-core central processing unit (CPUs) and quite frankly has a number of features that make it the best solution for the latest hardware.

I encourage organizations to keep the entire organization on the same OS platform or at least groups within the organization on the same OS platform. Doing so will save lots of headaches when attempting to diagnose problems within applications.

With Windows XP having gripped our profession for such a long period of time and vendors in our space now starting to put out the word that their applications are tested and run well under the Windows 7 environment, we are not seeing a real need for Vista in the CPA firm environment. If a copy is on XP and considering their next platform jump, I would be advising Windows 7.

As for the Office Suite of products, such as Word and Excel, what very often happens is that firms are “forced” to upgrade either by their clients who are using more recent releases, such as Office 2007 or by their vendors who have modified their applications to be compatible with Add-ins from the more current Office applications.

Once our primary “mission critical” vendors gives us the word that their applications have been tested and are fully functional under the most recent releases of apps like those found in the Microsoft Suite of products, then I know I can upgrade our systems. In the CPA firm environment, those upgrades will traditionally take place post-tax season.

What is cloud computing? What are the risks?

Bourke: Simply said, cloud computing is the utilization of the power of the Internet. The platform is scalable, allowing firms to buy only what they need. The solution also allows for the sharing of virtualized resources as a service using the Internet.

When discussing risks, I look at the risk of not taking this path as more of a concern to firm. True, an argument could be made that you need to ensure you have reliable and secure access to the Internet. In addition, you need to ensure that the providers with which you are doing business are stable financially and have a logical means to store and protect confidential and private data.

How can CPA firms transform their client accounting services practice through cloud computing?

Bourke: The utilization of the power, reach and stability of the Internet provide the basis for the deployment of the cloud computing model in the CPA firm. The cloud computing model allows small to mid-sized firms to take advantage of applications and systems that in the past were available only to the very large. In addition, the cloud computing model allows the firm to “pay as they go,” thus paying for an infrastructure that is the right size for now, as opposed to buying an infrastructure that they need to grow into and paying for that infrastructure up front. In addition, so long as the firm has a good, reliable pipeline to the Internet, the cloud computing model will generally not require a significant investment in hardware. The cloud computing model also brings the CPA and the client closer together, giving both parties 24/7 access to the same content.

Pretax season, much has been said about going paperless. Should all CPA firms save trees and go paperless? What software programs can you recommend solo practitioners and small to midsized firms that are taking the first step?

Bourke: Although we’ll never be truly paperless, yes, every CPA firm should do what it takes to migrate towards a “more” paperless environment. Tools like PDF makers facilitate the printing of documents to digital files. The drop in prices of portable scanners has made it practical to deploy a portable scanner to every desk in the firm. The explosion of canned document management solutions in our marketplace have made it possible for even the most computer illiterate firms to deploy electronic file rooms, without any advanced knowledge of file types, databases or programming. Many of these canned solutions are Web-based, allowing for little, if any, initial entry costs.

For those who don’t have the capacity of storing all the scanned information, can you recommend any products that CPAs can use for data storage? Should firms still keep back-up copies on CDs or disks?

Bourke: Think “Cloud!” There are a significant number of Web-based storage solutions. Since most of these storage solutions have a “pay as you grow” model, the CPA will simply be paying for the size solution that they need today and be able to upgrade to more capacity as their needs grow.

Keeping a backup copy of scanned information is not a bad idea. In fact, a backup in-house is sometimes the easiest restore solution than going outside the firm. I am not a big advocate of using media such as CDs or disks. However, I am an advocate of using replication technology to create mirror images of hard drives and data on other storage devices located both within the CPA firm and outside of the firm. Having said that, just make sure the firm’s data destruction policies also reach into these multiple copies, regardless of where they may reside.

What are some of the emerging technologies that are likely to be commercially accepted in the next 24-36 months? What will take financial firms by storm next?

Bourke: I mentioned earlier scan and populate technologies … where tax returns actually get automatically populated from scanned images of source documents with little or no human intervention. I do believe that the technology has reached the point of economic feasibility and that tax season 2010 will see the largest deployment of this technology. I believe that once the word spreads about this technology and success stories start to come out, we’ll see a huge migration to tools such as this over the next 36 months.

Although I would not consider cloud computing an emerging technology, I would have to argue that we will see a significant migration to this platform over the next 24 months to 36 months.

Social networking (see related story) will take on a significant role over the next 24 months to 36 months. This is how our young generation of staff and future clients communicates today. We need to utilize these same platforms to be able to properly communicate with them in the future. Social networking in financial firms tomorrow will be the equivalent of e-mail today and the snail-mail of yesterday.

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Sukanya Mitra is Managing Editor of the Insider™ e-newsletter group.