Response to Five Trends by Sandi Levy

Excellent article, Sandi.

From Compliance to Advisory: We are in an era where software companies and other service providers are performing more and more of the compliance work for small businesses and are unfairly giving  the owners an unwarranted sense of confidence  to do their own bookkeeping and “accounting”.  The business owners are having fewer interactions with CPAs and are not aware of the value we provide, until they find themselves in a situation of an audit, rejection for a business loan or are facing a failing business.  I agree that their success rate increases dramatically when their financial statements are reflective of their current business, so we can help them plan and implement changes, including the development of critical relationships with potential lenders.  I am receiving referrals from lenders that have denied applicants because of the condition of their financial records.

The result of this push to empower owners with a skill that they are not educated to perform, would be like me being a DIYer, and burning my house down from an electrical fire. The cleanup work that I have done over the last decade is significant, and very costly to the client, just to get their books to ground zero where I can start making sense of their business, amending their tax returns and getting them focused on a business plan for the future of their business.  Which leads us to the next trend, hourly billing versus value pricing…

From Hourly Billing to Value Pricing: I am absolutely in agreement with your statement of “hourly pricing is easier when you first get started” because the challenge of cleaning up their books depends upon the condition of them.  Have they co-mingled business and personal expenses, handled invoices and receipt of payments from customers correctly (the good old Undeposited Funds account), etc.?  As soon as we complete an engagement, as there has usually been a valuable outcome from the work we did, we submit a flat fee/value priced proposal.  The work we did to clean the books up was painful for both parties and not work that we prefer to do.  If they choose to go back to their old ways, we more than likely will not be there to bail them out again.

From Operations to Multiple Functions: As small firm owners, you are an entrepreneur in every sense of the word.  You have an expected number of billable hours that are required to cover your salary and prorata share of overhead of the firm.  There are functions that cannot effectively be outsourced.  I get offers constantly from someone that thinks they can sell our services or promote our firm.  Our clients are buying us.  We need to sell us.  Out of a 40 hour week (non-tax season), the partners personally spend 2 – 3 hours a day on sales and marketing, practice development, continuing education, mentoring, administration, etc.  Flat fee/value pricing allows us to maximize our profits while growing the business.  Evenings are for social media, which I enjoy on a personal and professional level.

From Desktop to Cloud:  From earth to heaven, to hell and back to earth!  Wow!  Not what you expected from me.  In 2014 we moved everything to the cloud and loved it.  We had problems with the service provider, service levels declined and we made the decision to pull back to regroup.  We found that we didn’t have backups of our data and applications in a format that could easily be restored to our server in the event of a failed relationship.  We were able to do it, just not as smoothly as I had imagined.  Be very cautious and aware of the risk that you may need to recover your data and applications on a short timeline.  Has anyone found a Disaster Recovery Plan for a cloud environment?  What if your provider goes out of business?  We have multiple servers with one being dedicated to remote access for our applications.

From Technician to CEO:  Continual learning and expanding your knowledge base is vital to your professional development and the growth of your firm.  Not only do you need to continue to expand your technical knowledge, but business and industry knowledge, regulatory changes affecting your professional partners (bankers, insurance brokers, investment advisors, etc.), changes in regulations that affect your profession and a clear understanding of the issues affecting your clients and market area that you work in.

Reach out to the vast wealth of experience and knowledge from your peers on LinkedIn and CPA Trendlines. You are not alone.  There are so many of us that have been doing this for decades that want to help every one of you be successful.  It is a fantastic, rewarding profession, but as a small firm owner, you can feel isolated and alone.  Stay involved in forums like CPA Trendlines, ask questions and provide your feedback.  I hope everyone has a successful tax season.