Practitioners are actively debating the effects and impact of H&R Block and Liberty jumping into the bookkeeping business, as detailed by CPA Trendlines' Hitendra Patil here.
"This is an opportunity to highlight quality," says Wesley Middleton, head partner at Middleton Raines in Houston. “The only person who has something to worry about are those that are only focused on price.”
Not all practitioners agree in the discussion which began at CPA Trendlines and has spilled onto the 20,000-member CPA Trendlines Linkedin group.
“What a wonderful opportunity for bookkeepers to start working with their local H&R Block or Liberty branch on a sub-contracted basis to provide bookkeeping services for them,” says Dean Allan of BookPals in Australia, where H&R Block is a familiar sight – “usually small, local offices, with a couple of accountants providing tax return services and one or two office staff providing support/administration services to the accountants.”
He points out that it will likely be support staff who collate client data. “This raises the age-old problem that all bookkeepers face – the support staff are limited to the number of records they can process based on how many hours a day they can find to carry out bookkeeping services. So, what does the H&R Block office do – employ more support staff and face the added overhead associated with employing new staff, or start looking for local bookkeepers to help them on a contracted basis with the increased workload?”
Allan says, “If I was a bookkeeper in the U.S. I would be arranging to take my local H&R Block and Liberty Tax Service business owner out for a coffee as soon as possible because I think there is a wonderful opportunity to increase, not lose business with this announcement.”
Katrina Geety, CPA, president of Geety, Blair & Araya and Accountants' Workflow Solutions Inc. in the Baltimore area, says it is time for accounting professional organizations to compare apples to apples.
“Organizations such as the AICPA, NATP, NAEA and others need to show a cost comparison of the final preparation cost of a return,” she says. “I have seen easy returns that were charged over $300 including all fees, insurance, etc. From communicating with many small accounting and tax practice firms, the chain tax preparation firms are more expensive than smaller licensed firms.”
She says this could be a wakeup call to those who leave small clients unattended for long periods of time, leading to the dreaded "am I too small for you?" call.
“Does this news change how you will allocate your time and workload? It will mine because that small business tax and shareholder return fees x 50 adds up. And many of them have entrusted me with their small companies, to provide business and tax guidance, and are willing to pay for it. It means juggling a lot of ‘little’ balls, but we each have to make the decision based upon our desired client base.”
Jean Ralston, CPA and tax manager at RBSK Partners PC in Batesville, Ind., says the nature of chains might make non-chain clients shy away.
“I wonder if the family-owned business would feel they get better service at a firm, instead of an H&R Block type place. At a place like that, I could see them feeling they were just a number in their list of clients and not an important client.”
“I don't think this is well thought through and will ultimately collapse like H&R Block's foray into mortgage lending,” says Lawrence Tucker, CPA, CGMA of Tucker Accounting & Tax in Longmont, Colo.
“They would have to completely revamp the compensation model of their staff, expand training to include double entry (which isn't even taught in intro to accounting anymore) and work to keep staff. These volume preparers are not well versed in employee retention, which is a significant risk to these initiatives,” he explained.
“Depending on the state, a bookkeeper could accept a job with one of these, build their client list, then leave and take all of the clients (at client's option) without incurring any liability since most non-compete agreements are limited to non-solicitation in non-executive-level positions.”
James Kronenberg, owner at James Kronenberg CPA EA MBA in San Diego, says the companies are “simply expanding revenue streams” as more taxpayers prepare their own returns.
“I really am not convinced that both firms are truly committed to bookkeeping/payroll services (‘in the trenches’ so to speak) but rather are looking to generate royalties (‘overrides’) for management/marketing/administrative services (i.e. management fees) similar to the hotel industry where the major chains ‘outsource’ actual operations of individual locations to hotel management entities. Of course, both of these companies already have the franchise tax prep offices so I'm merely suggesting this approach to ‘franchising’ accounting services is their main focus.”
Larry Gurewitz of Larry’s Financial Services in the Los Angeles area cautioned, “My take is that HRB and Liberty feel that if they get the bookkeeping job they will be the tax preparers for these clients. As an EA or CPA we realize there is not a lot of profit in bookkeeping. I think the real goal is to continue adding to their mailing list so they can sell additional products to these clients.”
Victor A. Amaya, CPA, a partner at ClearPath Accountants in the greater Denver area, agrees.
“If you are scared, you missed the bus a long time ago. Focus on value-added work, instead of busy work,” he says. “Bookkeeping, payroll, compilations (internal ones) are all busy work that is becoming highly commoditized. I'm sure lots of professionals sat around 10 years ago and says that TurboTax wouldn't work, now millions of returns are filed that way. Now whether the returns are right or wrong, that's for another post.”
Larry D. Moore, CPA, CFP, private wealth advisor at Lincoln Financial Advisors in New York, says, “I believe if they are successful, they will further commoditize the field of accountancy, making pricing an issue. You can't grow revenue in that space by increasing prices. Your only solution is to gain more write-up clients.”
William J. Beltrone, a CPA in Austin noted, “When a client or potential client (small business) comes to me, it is usually for an audit of their financial statements or for a compliance attestation required by an agency or governing body. More often than not, the books either don't exist or are not in compliance. I don't believe H&R or Liberty will have the expertise to do the books GAAP, nor be able to keep other schedules required to remain in compliance. I try to capitalize on this by partnering with cash basis bookkeepers and tax preparers to provide the higher level of service.”
Susan Colley says, “Since I am busy amending returns incorrectly filed by employees of H&R Block I am not terribly worried about the competition if they enter the bookkeeping arena.”
On this point Geety says, “You will notice that I am not criticizing the expertise of chain tax preparation firms because I have meet several H&R professionals in discussion groups that are very knowledgeable. They are, however, a very small percentage of their workforce, in my opinion, unlike the small licensed firms that have a high percentage of CPAs and EAs.”