Magazine article The CPA Journal

Finding the Value Proposition in the ASP Business Model

Magazine article The CPA Journal

Finding the Value Proposition in the ASP Business Model

Article excerpt

The Internet economy promises to enable CPAs to provide businesses with the right financial information presented at the right time. Continuous reporting means online real-time records of cash, sales, accounts payable, accounts receivable, profits, even inventories. Clients have real-time access to their financial data anywhere, anytime. With a laptop and a Web browser, the small business owner or company officer can get daily "snapshot reports" of financial performance. These "five-minute numbers" enable smart, timely business decisions.

CPAs cannot be content to just provide the basics of business measurement and reporting, serving simply as information middlemen. There is intense competition among companies offering quasi-- accounting and quasi-auditing services, especially in the developing technology sector. These growing businesses require more than just financial data turned into business information. They also need decision support services from their independent or internal CPA; they need a "virtual CFO" who can analyze the meaning behind the numbers and help with higher-level decision making.

Technology can open the door to this lucrative business opportunity. The Internet enables CPA firms of all sizes to maximize their client base without selling novel services. Instead, they can smoothly upgrade clients from basic services to training in computerized accounting and payroll services; tax return preparation, planning, and compliance; litigation support; corporate structuring; and controllership. CPAs in industry can spearhead these same initiatives and expand their role in business strategy and planning.

It is important to remember that implementing new forms of technology is not enough. Before venturing into the world of outsourced bookkeeping and online accounting services, CPAs must be able to answer the inevitable questions of pricing and perceived value.

The Small-Business Dilemma

To facilitate growth, small companies (10-19 employees, $5-15 million in annual sales) must efficiently automate their business processes and effectively measure their financial performance. Business owners experiencing rapid growth have little time to spend on day-to-day business operations. Most are typically troubled by three brakes on growth: lack of sales, poor cash management, or problems in the work processes. Building relationships with employees, customers, and vendors and adding value to products or services should be the focus of all business owners.

Business owners who spend time outside of core competency work could be falling short of their potential. They need a way to streamline day-today business processes and obtain timely mission-critical information. In addition, business owners need the flexibility to grow their information systems along with their businesses.

Small to medium-sized companies require the power of a mid-range accounting system, but many have been stuck using a combination of paperwork and entry-level accounting software because they can't afford expensive, overly sophisticated information technology. Application service providers (ASP) can be a cost-effec tive solution to this software problem.

The ASP Model

An ASP offers or "rents" business application software over a network as an outsourced service. The fixed monthly fees (ranging anywhere from $9.95 to $10,000, based on the package and functions) include the application software, hardware, service and support, maintenance, and upgrades. …

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