If you’re still buried in paper documents and manual tasks, this guide’s for you.
In this article, I’ll show you how to build digital accounting systems that can take you from slow, traditional accounting practices to faster workflows and a more scalable business.
I’ll also show you how to use accounting software to translate accounting functions into streamlined, automated accounting processes that both your team and clients will appreciate.
Let’s get started!
Table of Contents
- What Is Digital Accounting?
- The Business Case for Digital Accounting
- Differences Between Traditional and Digital Firms
- How to Transition From a Traditional to a Digital Accounting Firm
- Challenges in Digital Accounting (and How to Address Them)
What Is Digital Accounting?
Digital accounting refers to using cloud-based tools and technology to deliver your accounting services online, rather than in-person or through manual back-and-forth.
It’s fairly common nowadays, but it was quite rare back in 2013.
Xen Accounting, which I launched in that same year, was one of the first fully cloud accounting firms in North America. Here’s an article I wrote during that time.
It was exciting. But since I was one of the first movers in the space, it was also a bit scary.
Still, I believed there was a smarter way of handling financial data than storing stacks of papers in filing cabinets or lugging around USB drives.
And with digital accounting tools like Xero and QuickBooks, there was no reason firms couldn’t perform financial transactions in the cloud.
But more importantly, I believed that going digital:
- Was the pathway to getting the life I wanted as a firm owner
- Would allow me to create a better experience for my clients
We’ll cover the benefits of going digital next, but it starts with understanding that running a digital accounting firm doesn’t just mean using more apps.
It also means rethinking how your services get delivered from end to end.
The Business Case for Digital Accounting
I’m not here to knock firms that still work in-person. If in-person works for you, great — stick with it.
Still, the benefits of digital accounting are hard to ignore. For starters, it gives you more flexibility to meet specific business needs like hiring more people and reaching more clients.
Here are reasons why you should consider transitioning to a digital firm.
Better Client Experience
In a traditional firm, handling client work often means chasing documents, juggling emails, and setting up endless calls to clarify things.
This pain point is common enough that several people in my Future Firm Accelerate program bring it up every once in a while…
It’s slow and frustrating for both sides. But with a digital setup, that all changes.
Business transactions are faster and smoother. Clients can see what’s going on without even reaching out to your team.
It also makes it easier for your clients to meet the deadlines you set for document collection. This is actually one of the steps I recommend in my guide to surviving the busy season.
Your clients will remember the convenience you gave them, which is also one of the five things you can do to increase client retention. I talk about that in this podcast episode.
Scalability and Profitability
There’s a lot of opportunity out there, but you can’t access that if you’re an office-based firm accepting clients in person only.
For instance, about 5 million businesses are started just in the US alone each year.
Source: Commerce Institute
Here are some numbers outside the US too:
- There are 2.6 million actively trading businesses in Australia (Australian Bureau of Statistics)
- There were 5.45 million small businesses in the UK at the start of 2024 (Federation of Small Businesses)
When you’re a digital firm, your client pool is that much bigger. Any business with accounting needs and an internet connection becomes a potential client.
A Bigger Talent Acquisition Pool
In a traditional setup, your team usually has to live near the office or be willing to commute.
But with a digital firm, you can hire talent from anywhere in the world.
In fact, my Future Firm team is completely offshore. Here’s a photo of us during our 2024 retreat in the Philippines.
Because the cost of living in other countries outside of North America is lower, you can pay your team members the salaries they want while still enjoying cost savings.
And like I talked about in a LinkedIn post, the only issue you should worry about when hiring team members is when they fail to deliver — not where they’re based.
A Happier and More Productive Team
Let me tell you a story about a firm owner named Gerry…
Gerry started a paper-based accounting firm after getting exhausted working in corporate. After hearing about how I scaled and sold my previous cloud accounting firm in 2018, he wanted to work with me so he could do the same.
Starting in 2019, we worked together to transform his traditional firm into a fully digital firm.
In just one year, his firm…
- Increased their productivity by 4x
- Takes every Friday off (4-day workweeks!)
- Stopped doing any paper-based work
- Nearly tripled their revenue
- Doubled in team size
And Gerry? He enjoys weeks-long vacations now.
Gerry was able to pull this off because he knew what he wanted and took focused action towards that goal.
If you want to build a profitable firm that lets you enjoy a healthy work-life balance, you should check out my Future Firm Accelerate program. 🙂
Differences Between Traditional and Digital Firms
| Business Aspect | Traditional Accounting Firm | Digital Accounting Firm |
| Client Communication | Communications are performed via email, phone, or in-person meetings. | Communication happens in tools like Slack or Financial Cents. Clients get updates without having to follow up. |
| Document Management | Physical paperwork, folders, and filing cabinets. Manual data entry in client documents is not uncommon. | Financial records and client files are stored in electronic format. Clients can submit financial reports in seconds, and managing financial data is done fully online. |
| Service Delivery | Relies more on in-person meetings, mail, and manual steps. | Services are delivered with tools that automate processes like accounts payable and payroll. |
| Team Collaboration | Collaboration depends on being in the same office or holding meetings. | Cloud-based systems let your team collaborate from anywhere. |
| Scalability | Growth is limited by location, physical space, and manual systems. | Can scale with a remote team and digital tools. No office expansion required. |
| Cost Structure | Higher overhead from office rent, physical storage, and on-site staffing. | Lower overhead thanks to remote work, digital document storage, and offshoring. |
How to Transition From a Traditional to a Digital Accounting Firm
Step 1. Define Your Vision and Goals
Lots of firm owners get excited over digital accounting solutions, but let’s take a step back first.
Before you begin your digital transformation, you need to be clear on where you want to be.
For me, this is what that looked like after I sold Xen Accounting:
Ask yourself: What do you want your ideal firm to look like?
Maybe you want more flexibility, better clients, or a setup that lets you step out of the day-to-day over time.
There’s no wrong answer here. Just be honest.
Step 2. Choose Your Tech Stack
Lots of firm owners get excited over digital accounting software, but this is also where many of them get stuck.
It’s tempting to sign up for a bunch of apps right away, especially when everyone’s talking about the latest and greatest.However, having advanced tools doesn’t mean much if they don’t actually make your life easier. They’re just shiny objects, like I talked about on LinkedIn.
Before you load up on subscriptions, take a step back and look at what accounting tasks you need to get done. What’s slowing you down? Where are the bottlenecks?
Think about time-consuming, manual accounting systems and start there.
For example, if you’re struggling with collecting client documents, you might want to look into client portal tools like Financial Cents or Karbon:
Or if you’re spending too much time processing expense receipts, a tool like Dext is worth looking into. It lets you process accurate financial information with minimal effort:
Don’t try to build the “perfect” stack from day one. Choose a few core tools that solve real problems. Then test, adjust, and add as needed.
I recommend joining communities of firm owners like yourself. For example, there is a dedicated discussion forum for technology and software in my Future Firm Accelerate program.
This way, you’re getting feedback from fellow accounting firm owners who are actually using the apps instead of getting overwhelmed with the sheer number of cloud accounting tools out there.
You can also get started by reading my guide to building an accounting tech stack.
Step 3. Implement Cybersecurity Measures
You’re handling sensitive financial information every single day. Client tax records, payroll data, bank details…
You need to take data security seriously.
Start with the basics:
- Strong password practices: Every password should be at least 12 characters and include a mix of uppercase letters, lowercase letters, numbers, and symbols. Avoid using real words or repeat patterns.
- Smart file sharing: Avoid sending financial documents over email. Use a secure platform like Karbon, Google Drive, or Dropbox with permissions locked down to specific people only. Require login access for shared links, and turn off downloads if it’s not necessary.
- Clear controls over who can access what: Go into your files frequently and review who has access to sensitive folders. Remove old staff immediately after they leave. Admin access should not be given to everyone by default.
A password manager like 1Password or LastPass makes it easy for your team to create and store complex passwords without writing them down or reusing them across tools.
We use LastPass at Future Firm.
I also recommend turning on two-factor authentication for every app that supports it.
Most threats don’t come from “hackers.” They come from phishing emails and weak passwords.
And with all your data in the cloud, it only takes one person accidentally sharing the wrong file for things to go very wrong.
That’s why training your team is just as important as the tools themselves. Here’s an example of a security training email from a cybersecurity agency we previously worked with.
If you’re unsure what to prioritize, you can even bring in a specialist for a quick review. Feel free to also check out my article on accounting security tips to get started.
Step 4. Design Your Internal Workflows
As accounting professionals, we’re not trained to be expert systems builders. However, that shouldn’t stop you from building processes that run on rails.
If you want your firm to run smoothly, you need to lay out, step by step, how each service is delivered.
For example, your bookkeeping processes might include monthly bank reconciliations, coding expenses, reviewing financials, and sending a summary report.
Who’s responsible for each step? What tools are used? How is work reviewed? What triggers the next step?
Document every detail as you go through each process. A simple way to do this is to record a Loom video of yourself doing the task then asking ChatGPT to make a standard operating procedure (SOP) from the transcript.
Here’s a video demonstrating that:
Ideally, you shouldn’t be too involved in the day-to-day so you can focus on making business decisions like hiring, strategy, and growth.
However, that’s only realistic if your team knows exactly what “done” looks like for each task without running everything through you.
Step 5. Reach Out to Clients
With your new systems in place, it’s time to inform your clients of the changes.You don’t have to get too technical. After all, your clients only care about 4 things — which tools you’re using or how your internal workflows are structured are not part of that.
Instead, focus on the numerous benefits they can enjoy, like:
- Fewer back-and-forths
- Faster turnaround times
- Effortless document uploads
- Faster and clearer communication
- Etc.
This is the kind of stuff they’ll remember. These are the things that determine whether they’ll stay as your client in the long run.
Here’s how you can let your clients know of this change:
- Start with your best clients: These are the ones you like or are easiest to work with. Let them know you’re updating how you work to make things faster and easier on both sides.
- Walk them through what’s new: Explain what’s changing and how it benefits them, and reinforce that the quality of your service and your commitment to their success will remain unchanged.
- Provide a transition plan: Clients will feel more comfortable if they know what to expect. Outline the steps you’ll take to transition them and set a timeline for the transition.
- Offer support: Change can be intimidating, so make it clear that you’re there to help. Offer one-on-one calls or demos for clients who need extra guidance, a dedicated email or phone line for transition-related questions, or FAQs to address common concerns.
Here’s a sample email template you could use to announce the change:
Subject line: Exciting updates to serve you better
Hi [Client’s First Name],
I hope this message finds you well. I’m excited to share some updates about how we’re evolving to serve you even better.
As part of our commitment to providing you with the best possible experience, we’re transitioning to a fully digital firm. This means we’ll be leveraging the latest technology to make our services faster, more secure, and more convenient for you.
Here’s what this means for you:
- Simplified processes: Upload documents and access reports through a secure online portal.
- Faster turnaround times: Streamlined workflows mean less waiting for you.
- Enhanced security: Your sensitive information will be protected with top-tier digital safeguards.
We’ll be rolling out these changes gradually over the next [timeframe]. Our team will guide you through every step of the process, and we’re here to answer any questions you may have.
Thank you for trusting us with your [accounting/tax/financial] needs. We’re excited about this next chapter and look forward to continuing to support your success.
If you have any questions, feel free to reply to this email.
Best regards,
[Your Name]
Challenges in Digital Accounting (and How to Address Them)
Challenge #1: Clients Leaving or Pushing Back on the New Approach
I once coached a firm owner who built and sold her practice for a solid exit. But before that happened, she had to make a tough shift.
Her firm was very in-person — lots of legacy clients, lots of meetings, lots of “drop by the office” interactions. When she decided to take things fully online, not everyone came with her. Some clients pushed back.
They liked the way things had always been and didn’t want to change. Ultimately, she had to part ways with some of them.
That’s a real risk when transitioning to a digital model. And it’s something you need to plan for.
Solution: Set expectations early.
Don’t just tell clients what’s changing — explain why it’s a good thing for them.
If some clients still resist, have a plan to offboard them professionally. You can’t build a modern, scalable firm while clinging to the past just to keep everyone happy.
You can also use three-tiered pricing as a filter. Want in-person meetings? Great — that’s included in the Gold plan.
Bronze and Silver? Everything’s virtual. Let the structure reinforce your model instead of fighting it.
Remember the firm owner I mentioned just earlier? She took advantage of pricing and sold her firm for 2x the revenue (which is almost unheard of!) after transitioning it to digital.
Challenge #2: Adapting to Remote Work
Remote work has a ton of upside like more flexibility, better productivity, and improved work-life balance.
But if your team’s used to working in the same room, shifting to remote can feel disorienting.
Some people struggle with distractions at home. Others aren’t sure what to prioritize. And without hallway chats or impromptu check-ins, it’s easy for team members to feel disconnected or unclear about what’s expected.
Solution: Create clear SOPs so everyone knows exactly what “done” looks like for each task or service.
Yes, every task. For example, here is our SOP library at Future Firm (we have over 150 SOPs).
Don’t assume your team knows what’s in your head. Write it down and make it easy to follow.
If you have team members in other timezones, you’ll have to lean into asynchronous communication. Instead of scheduling meetings, I answer questions, provide feedback, etc. with Loom. (I record a lot of Loom videos — below is my Loom “award”).
As the firm owner, you’ll need to adapt too.
Remote leadership is less about overseeing every detail and more about building trust and setting clear expectations. If someone’s struggling to adjust, give support, but also be ready to make tough calls.
Hiring remote-ready talent is a skill in itself. Look for people with actual remote experience or who show they can manage their time well. I wrote an article about accounting interview questions that you’ll find helpful.
Challenge #3: Rebuilding Internal Workflows
In most traditional firms, a lot of the day-to-day runs on habit.
Tasks live in people’s heads. When things get off track, you just walk over to a colleague’s desk for a quick update.
But when you go digital, all of that disappears.
Solution: Build systems.
Write down how your core services get done — not how you want them done, but how they actually happen right now. Who does what? What’s needed before something can move forward?
Then, turn that into structure.
Build shared checklists or templates that your whole team can use. Move those into your practice management tool. Assign owners, set deadlines, and create a repeatable flow.
Some tools come with built-in templates, like Karbon below.
Don’t worry about getting it perfect on the first try. Just get it out of your head and into a system.
From there, you can tweak, refine, and improve over time.
Challenge #4: Taking on Too Many Clients
With your reach not limited to your local area anymore, you might have leads coming in from all over.
It’s easy to think, “Why not take them all?” More clients, more revenue, right?
Not all clients are a good fit. And when you say yes to everyone, it doesn’t take long before your team is stretched thin and the quality of your work starts to drop.
Solution: Be selective with clients.
Focus on clients who align with how your firm runs and are willing to pay for a better experience.
I realize this isn’t as simple as it sounds. But in my experience, your gut will also tell you when you have to turn down a client — like I shared on LinkedIn.
Capacity is one of your most valuable assets. Protect it.
Say “no” to the wrong clients so the right ones have space to come in and stick around. Here’s an email template you can use to gently part ways with these clients:
Hi [Client’s First Name],
Thank you so much for reaching out and expressing interest in working with our firm. We truly appreciate the opportunity to connect with you.
At [Your Firm Name], our goal is to provide each of our clients with a fantastic customer experience. To ensure this, we focus on working with clients that [describe your ideal client—e.g., “are in the [specific industry],” “require ongoing monthly accounting services,” etc.].
As your needs don’t fully align with this profile, we believe we may not be the best fit for your requirements. However, I’d be happy to refer you to another firm that may better suit your needs if that would be helpful.
Thank you again for considering us, and I wish you all the best moving forward.
Best regards,
[Your Name]
Ready to Build a Digital Accounting Firm?
There you have it!
Use this guide to start building a digital accounting firm or transitioning into one.
Don’t forget to bookmark this page. Feel free to check out my other articles about running a firm and come back to this later.
You can also check out Future Firm Accelerate and discover the system that hundreds of firm owners used to build profitable firms. 🙂
What tips in this guide did you find most useful? Which do you think is better, in-person or cloud accounting firms?
Let me know in the comments!
