Teresa Mackintosh: The Client of the Future for Accounting Firms [VIDEO]

Demographics Shifts Aren’t Just about Staffing. Clients Are Changing Too.

When it comes to bridging the generation gap, most accounting firms focus on what it means for their staff and their own firms.

But there’s another dimension to the demographic shifts that are bringing Gen X’ers and Millennials into positions of influence — the shifting client base.

In this 3:28-minute clip, Teresa Mackintosh, senior vice president and general manager for workflow and service solutions in the Americas Professional Division of Thomson Reuters’ tax and accounting unit, explains how those demographic trends are changing the client of the future.

Today, she notes, the workforce is made up of 48% Gen X’ers, 38% Baby Boomers, 20% Millennials, and a few Traditionalists. But that’s not at all the client base for today’s CPA firms.

“As a whole,” she says, “firms are not successfully serving that layer of younger demographic.” If firms don’t try to capture that generation today, she wonders, will they be there as a market in the future? “We really need to worry today about what clients will need tomorrow?”

More from Mackintosh here: Message to Accountants: Master the Pace of Change or Get Left Behind [VIDEO]

See more videos at the YouTube CPA Trendlines channel here.

Posted on March 13, 2010
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Top 7 Most Clicked CPA Links This Week

What accountants and finance executives are reading

  1. AICPA INSIDER: Top Secrets of a CPA Start-Up http://ow.ly/1fNGo
  2. How do accountants define “success?” http://ow.ly/1eZUh
  3. John Jantsch: It Is Make a Referral Week! http://ow.ly/16KiPh
  4. Do You Know the Top Seven Growth Areas for CPAs? http://ow.ly/16J2pG
  5. Jim Boomer on Accountability: The Lifeline of Firm Success http://ow.ly/16KZB6
  6. The Accountant in the Modern World – Francine McKenna http://ow.ly/16LKdM
  7. Rita Keller on Tom Peters: CPA Managers Need to REALLY Manage [Video] http://ow.ly/16LweU

Source: www.twitter.com/cpa_trendlines

Posted on March 12, 2010
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CPA Net Income Per Partner Surges 16%

(What recession?)

The surprising thing about  AOMAR’s CPA Firm Practice Management Survey 2010 is that there were so few surprises. The study turned up very few significant changes between 2009 and 2010.

Of course, it’s possible that the major metrics could lag a year and show up in next year’s survey. Or, it could mean that firms have been more resilient than many would care to boast about.

One good sign you can’t ignore: Net income per partner increased by over 16 percent. (What recession?)

2010 2009
Leverage 6.6 6.8
Utilization 1,164 1,108
Billing Rate $135 $132
Realization 91.3% 92.1%
Profit Margin 36.5% 34.8%
Net Income Per Partner $330,723 $283,364

Source: Accounting Office Management & Administration Report, February 2010. Subscribe here: subserve@ioma.com.

Posted on March 12, 2010
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Sandra Wiley: Keep Recruiting [VIDEO]

Even in a down economy…

Even when you don’t think you need the staff, great talent can attract new business you never expected.

Here’s a tip from Sandra Wiley’s presentation “Moving Human Capital From Paralysis to Growth,” Recorded Aug. 16, 2009, at the pre-conference session of the Boomer Technology Circles™ All-Circle Summit.

Posted on March 11, 2010
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Are “Amazon Tax” Laws Backfiring on States?

So Says The Tax Foundation

via The Tax Foundation

Citing significant budget shortfalls and the inability to collect sales taxes on many Internet-based transactions, a number of states are considering the adoption of “Amazon taxes.” Such laws, nicknamed after their most visible target, require retailers that have contracts with “affiliates”—independent persons within the state who post a link to an out-of-state business on their website and get a share of revenues from the out-of-state business—to collect the state’s sales tax.

Contrary to the claims of supporters, Amazon taxes do not provide easy revenue. In fact, the nation’s first few Amazon taxes have not produced any revenue at all, and there is some evidence of lost revenue. For instance, Rhode Island has seen no additional sales tax revenue from its Amazon tax, and because Amazon reacted by discontinuing its affiliate program, Rhode Islanders are earning less income and paying less income tax.

Amazon taxes also do not “level the playing field” between brick-and-mortar and online businesses; the laws actually mandate disparate burdens on online businesses. Litigation over the constitutionality of Amazon taxes is ongoing, with scholars on the left and right disputing their wisdom and legality.

Enacting an Amazon tax law also sends a signal of hostility to businesses engaged in interstate commerce, runs the serious risk of retaliation from other states and from affected businesses, and undermines efforts to improve the uniformity of state sales taxes.

Key Findings

Unconstitutionally expansive nexus standards like the Amazon tax undermine legal certainty, burden interstate commerce, and harm economic growth.

Get the full report – FREE DOWNLOAD from The Tax Foundation

Posted on March 10, 2010
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Recession Flattens Accounting Firms in ‘09

No fee growth across all sizes of firm

Rosenberg

By Marc Rosenberg, CPA

The mantra in 2009 was “flat is up,” which meant that CPA firms would gladly settle for 2009 revenues that simply held firm at the 2008 level, given the full brunt of the recession. According to a survey we conducted of CPA firms across the country, firms got their wish: The surveyed firms showed a 0.6% increase in annual net fees in 2009 vs. 2008 – about as flat as it gets.

For the past 10 years, we have maintained what we call our “National E-mail Managing Partner Roundtable.” It consists of roughly 100 accomplished managing partners of CPA firms across the country. 54 firms responded in January and early February to a series of questions regarding the impact of the recession on their firms.

Interestingly, there was very little variation in responses between the three different size groups.

2009 vs. 2008

Fees were flat across all size ranges. The good news is that the ability of CPA firms to be somewhat recession-proof prevented the dreadful losses experienced by many industries due to the world economic crisis. The bad news is CPA firms aren’t used to flat growth, having experienced double-digit growth rates for most of the post-Enron/Andersen years. Yes, they got their wish to stay even with 2008 but it did little to ease the pain of laying off staff, cutting costs and dealing with clients who suffered enormously from the recession, the latter of which took its toll on firms’ accounts receivable, work-in-process and billing rates.

Income per partner was down 2.5% in 2009 vs. 2008. Most of this income decline was due to the late start most firms got in right-sizing their firms to the current year’s fee volume. Because the majority of layoffs and cost cutting moves were made toward the end of the 2009 tax season and soon after April 15, firms were over-staffed during a portion of the revenue year. Somewhat offsetting this was the fact that the tax season is the busiest time of the year, so being overstaffed didn’t hurt as much as being overstaffed outside of the tax season.

2010 vs. 2009

Fees are projected to increase in 2010 by 3.0% across all size ranges. 3% is certainly better than flat growth, but it’s a far cry from the Golden Age that typified the years since the Enron/Andersen fiasco. So clearly, firms are coming out of the slowdown and seeing light at the end of the tunnel. But the tunnel is long, and 2010 will be a sluggish year. Income per partner is projected to increase 5.8%, with the $10+M firms expecting a 7.5% increase. The right-sizing done by firms, both at the staff and cost control fronts, will pay off in 2010.

Lay-offs in 2009

Our 54 firms were perfectly split on this: 50% laid off staff in 2009 and 50% did not. But when we look at the results by size of firm, we get a different picture:

Smaller firms had the most difficult time finding staff, so they were less over-staffed when the recession hit. The larger firms enjoyed a bigger boom than the smaller firms from 2002 to 2008 and hired as many qualified staff as they could because they were confident of getting new revenue to keep them busy. When the recession hit, the larger firms were more exposed than the smaller firms.

Have firms seen a meaningful increase in the quality (not quantity) of staff available in the market?

This is one of the most curious issues I have seen during the past 18 months. For the first time in 15 years, there is a bountiful supply of experienced staff available for hire. Some firms claim that these are the weak people who were let go by firms and, therefore, are not worthy of being hired. But more firms found the opposite, according to our survey: Overall, 65% saw an increase in the quality of available staff and 35% did not. A breakdown of these results by size range is revealing:

So, the larger the firm, the less likely it was to see a meaningful increase in the quality of staff available for hire. This makes sense because, generally speaking, the performance bar is set higher at larger firms than at smaller firms.

Did the firms hire these newly available staff?

60% said yes and 40% said no. This is pretty amazing: despite the fact that firms were reeling from the recession’s impact, as they were laying off staff, they were hiring new people. The combination of the recession and the industry’s staff layoffs enabled many firms to do something they had wanted to do for years: upgrade the quality of their staff. Until the fall of 2008, practically all firms were forced to lower their standards for hiring and retaining staff because they were desperate for labor, any labor.

Hiring plans for 2010

Clearly, the smaller firms are more conservative. The larger firms are more aggressive.

Only 9% of the 54 surveyed firms plan to lay off staff in 2010. This compares to 50% in 2009.

Spending marketing dollars in the recession years

Conventional wisdom says that in down years, firms need to increase their marketing commitment because they have to work harder to grow. 2009 was such a tough year that a lot of firms did not increase their marketing expenditures. But with the recession showing signs of ending, 2010 looks like the year firms will commit to marketing in a more conclusive way.

2010 2009
Firms increasing their marketing expenditures 62% 44%
Firms decreasing their marketing expenditures 2% 26%
Firms reporting this the same for both years 36% 30%

.

Recession’s impact on firms’ strategy for merging in smaller firms

Some industry pundits opined that with a recession, the intense merger market would cool off. The thinking was that buyers were hunkering down to focus on their own problems and sellers were temporarily pulling out of the merger market until they could post stronger profit numbers to drive a better bargain.

Based on our survey, the above didn’t happen. Only 4% of all firms held off on mergers. 32% said they were continuing to pursue mergers as in the past and 64% reported no change from the prior year. The “no change” could be that those who were pursuing mergers continued to do so, and firms that were not pursuing mergers continued to stay out of the merger market.

Tactics and strategies to weather the storm

The following actions were being taken by firms (the number in parenthesis is the number of firms citing the same response):

The following were only cited by one firm, but they are excellent ideas nonetheless:

Marc Rosenberg, CPA, is a management consultant to CPA firms nationwide. For the past six years in a row, Accounting Today magazine has acknowledged Marc Rosenberg as one of the 100 most influential people in the CPA profession. INSIDE Public Accounting recognized Marc as one of the most recommended CPA firm consultants in the country. Rosenberg is a widely published consultant. His articles regularly appear in all the industry’s leading journals. He works with firms in partner compensation, retirement and succession planning, mergers, facilitating retreats, strategic planning and practice management reviews. His firm, The Rosenberg Associates, is based in Wilmette, IL. You can reach him at (847) 251-7100 and at marc@rosenbergassoc.com.

Posted on March 9, 2010
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Top Five: Secrets of a CPA Start-Up

In the suburbs of Washington, D.C., an ex-Army intelligence specialist is breaking the mold for accounting firms and inventing new ways of doing business.

by Rick Telberg

Maybe it’s the four years he spent in Army intelligence at the Pentagon. Maybe it’s the influence of a CPA uncle in San Diego. Maybe it’s the entrepreneurial father who, as a part-time magician, established a Guinness World Record for fire-eating.

Brian Wendroff

But 30-year-old CPA Brian Wendroff wants to break the mold for accounting firms.

In his version of a CPA firm, the four-year-old Wendroff & Associates in Arlington, Va., is modeled more on the strengths of a technology company than a traditional professional services firm.  In his firm, he’s working on the kind of new product development, speed to market and customer feedback loops employed by the best software developers. In his mind, he’d rather be less like a KPMG and more like a Microsoft.

“Like a software company,” he says, “we’ve got to come out with upgrades every year, new versions with features that the customer tells us they want to see.”

So far, Wendroff & Associates LLC of Arlington, Va., may only be on version 1.1. But for a young firm, that’s not bad. From a book of business starting with ads on Craigslist and energetic networking through BNI, Brian Wendroff now counts seven accountants and two interns in his firm, plus his brother Darren, who manages marketing and communications. The firm is doubling in size every year. “The Web is our number two source of leads,” says Darren, “right behind client referrals.”

Together, Brian and Darren Wendroff are working to innovate every aspect of how an accounting firm works. Take just five examples of their leading edge strategies:

  1. Adopting flexible and supportive human resources policies — The firm’s tele-work policy was put in place to support a healthy work-life balance and to attract and retain the best talent for the money. But it also came in handy during the “snowpocalypse” that hit Washington in February, which otherwise might have ground their tax season to a halt.
  2. Pursuing Web- and cloud-based business solutions — The firm is a pioneer in QuickBooks Online and sits on an Intuit advisory board. Their CRM system, Highrise, is all SaaS. And they manage many firm processes through Google Docs.
  3. Aggressive experimentation with social media marketing — Twitter has yielded five new clients in the last year, billing about $14,000 annually. And the firm picked up two more in January. The last time I checked @wendroffcpa, they had over 13,000 followers. By comparison, @PwC_LLP, representing the largest accounting firm on the planet, had about 3,700.
  4. Ruthless dedication to changing with client criticism — The firm sends out a client satisfaction survey twice a year, which is unusual enough. But they use the super-simple Net Promoter Score developed in part by Bain & Co. And they follow up with a memo to their client base baring the results and sharing their plans to improve.
  5. Practicing the “sow-before-you-reap” verse is the new age marketing Bible — The firm offers free “Ask-a-CPA” Webinars on basic accounting or tax tips for clients and non-clients alike.  For business owners with at least $2 million in annual turnover, Wendroff & Associates organizes CEO peer-to-peer groups. “It’s a group where C-Level executives or business owners can talk frankly about issues affecting their organizations,” Darren says. “We wanted to join a group like this, and couldn’t find one, so we created ours.” The meetings are invitation-only, highly structured, single-topic and followed by a memo to all, which actually reads more like a Harvard Business School case study than minutes from a meeting.

It wasn’t always this way. When Brian first started the firm, he admits his fees were set too low and he was attracting the wrong clients. Today, fees are set to cover overhead and salaries, plus enough to plow back into the business. And the firm is now getting the right kind of clients — the kinds who want more than just bookkeeping or tax prep, but want and need strategic services.

The proof? Wendroff says, “Nearly every company we worked with last year grew through the recession.”

Copyright 2010 AICPA.

Posted on March 8, 2010
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