CPA Trendlines

Tax Season 2012: Lessons Learned

Plans for 2013 center on tighter management, new investments.

by Rick Telberg

After one of the best busy seasons in years for most practitioners, many are laying plans for an even better 2013.

Based on lessons learned this year, practitioners are mainly planning for new technology, earlier and more intense staff training, and bigger and and more aggressive marketing and business development programs, according to preliminary findings from the CPA Trendlines Practitioner’s Tax Season Performance Review and Outlook.

A wordmap created by the verbatim responses of professionals responding toa question about what they learned from 2012 and what they plan to do differently in 2013 shows better management and a client focus as two of the most important themes. Hidden within the answers, additional themes emerge, such as a new surge in investment in paperless workflows and more long-term planning.

With a better 2012 behind him, Jim McGowan at McGowan and Baker in Davis, Calif., says, “We have invested in tech solutions which make the process of tax prep more predictable and efficient.” So he’s only half kidding when he says his big plan for next year involves approaching retirement. This will mean changes in the way I approach things and change is not always easy.” His main goal: “Try to work less.”

Thomas Westfall at Westfall Financial Service in Cincinnati will be looking for ways to “get returns in and out of the office faster” since he added a slew of new clients this year.

Quarte

Bob Quarte a partner at Albrecht, Viggiano, Zureck & Co., one of the largest CPA firms on Long Island, has a three-prong plan for 2013. “I will attempt to leverage my time better,” he says, “have clients be better prepared and use technology effectively.”

In Gretna, La., one CPA reports a better year based on filing electronically for the first time. “How nice it is,” he says. “So much less paper.” But there’s more work to do: “An increasing number of clients will not come by the office to drop off tax information next year Instead, we are encouraging them to scan their tax information and upload it into their portal, from which we will retrieve it. Also, when we finish tax returns, we plan to let the client review it in their portal, and pay our invoice electronically. The client will not have to come by the office to pick up anything. We plan to use Skype and GoToMeeting more. We just signed up with an online fax service, basically a phone system in the Clouds. We can now work from anywhere, and at anytime. A client will call our regular number, be greeted by an auto-attendant, or dial an individual’s direct line, and we can answer the call from anywhere. The client will not know if we are in the physical office, at home, in a hotel room in Vegas. The BIG question now is — Do I really need to pay rent for my existing office? I have two years left on my lease. I am trying to see if we can do without a conventional, and expensive office.”

McIntee

David G. McIntee in Fairfield, N.J., reports “more returns but more headaches” in 2012. For 2013, he’s planning on shifting his practice into more litigation support.

Ralph Mooney at Mooney  & Thomas in Aurora, Ill., can’t say 2012 was better all-around than 2011. “Improvement is visible, but it’s coming very slowly to small businesses.”

“Late information and a proliferation of investments that are reported on K-1 instead of 1099′s has made a joke of smooth workflow,” Mooney says. “Clients balk at higher fees for things they can’t see (Form 8949).  Our costs are up but pricing flexibility didn’t follow.”

For 2013, Mooney is planning to get aggressive in management: “Train until my people can’t stand it anymore and do a better job preparing clients.”

Schmidt

Lynn A. Schmidt, a Winter Haven, Fla., enrolled agent, reports a challenging 2012. “Clients brought their information in much later this year than ever before.  We were very slow in February. March was filled with appointments. And [by April] we were cramming more than ever to get as much done as possible.”

Still, Schmidt “raised revenue per client (on most clients). But revenue per client dropped due to increased costs.  Also, returns we did prepare were so involved and with high technical demand that, in order to be competitive, we couldn’t charge for all the time we actually had in the return.  Clients do not understand the complexity of their own situations.”

Even tough “the economy sucks in our area,” Schmidt is committed in 2013 to “actively seek new business clients.”

David Sorblum at DHS & Co. CPAs in Tarrytown, N.Y., just e-filed for the first time in 2012. They didn’t “get final approval until April 10th but were able to efile a bunch of returns at last minute.” Now he’s planning to take the firm paperless as completely as possible for 2013, “looking to eliminate most file cabinets, yield more office space and enhance efficiency.”

Tom Blair had a good year competitively and plans to take advantage of some competitive shifts in his favor. “The local economy is bad and growing worse,” he says. “Every ‘mom and pop’ operation closed this year in my area except my own.”

“IRS compliance audits of my local competitors caused all but one to quit outright, and that one retired just a week after his own compliance audit,” Blair says. “And yes, I also had a compliance audit… but I passed.”

So for 2013, he’s planning to “raise my rates; fire 200 of my 700 clients; move into a smaller and less expensive office and discontinue advertising. “Most all my new business comes now by referrals.”

Danny G. Perez, EA, MST, in Milford, Dela., plans to “do more outreach programs & marketing to a more selective group of clients.”

Piper

Dennis Piper, CPA, MPA, in Pittsburgh, is planning for “more technology, better staff training.”

Watt Smith’s three-person office in Orangeburg, S.C., Smith, is coming off a relatively disappointing year. Smith says 2012 was characterized by “time gathering information that was not directly affecting the amount of tax the client would pay.” Next year, they are planning to increase hourly rates.

At Zinner & Co., in Cleveland, partner Robin Baum reports improved volume at similar margins delivered improved results over last year, attributable to better staffing and a transition to paperless review. For next year, she’s looking forward to “more planned extensions.”

Dailey

Julie B. Dailey in Overland Park, Kan., enjoyed a “much better” year in 2012 than the year before. “I pulled in significantly more clients and significantly more money,” she says. She credits her successes, so far, to being “easy to find on the internet,” plus “people need an alternative to costly franchises and CPA firms…and I’m the local alternative.” She says, “People are finding me and my business is growing quickly.”

Next year, she says, “I’m getting better equipment… better printers, better scanners and I may have to hire an assistant.”

Deborah McFarland, a Venice, Calif.-based enrolled agent, reports a “somewhat” better season than the year before, crediting the improvements to being “better prepared” and “more clients.” Still, “it was exhausting,” she says, adding, “I need to learn to triage better and let some troublesome and time consuming clients go, tactfully.” She has few complaints, however. “Our business is growing,” she says. “We like extensions. Extensions are more complicated returns with more interesting issues, usually paying better than early filers. Our business is always at least 50% extensions.”

“Almost all my clients are doing better and the economy is doing better,” McFarland says. “We need another staff person and I need to let a few clients go and focus on the clients that work for our style of business.” So her plans for 2013 include “try to hire and train one more person in late 2012 for the 2013 year.  Let go a few clients for whom our services do not seem to be a good fit for either side.”

For Dallas CPA Steve Miller, late 1099s from brokerages that compressed the filing season to four weeks from the usual 10 weeks “greatly increased the number of extensions and [added] to higher stress levels.” Despite it all, Miller reports some improvements in financial results like revenues and profits, spurred by “raised billing rates, fired bad clients and increased staff and training.”  He seems only half joking when he lays out his new strategy for 2013: “Move to a Caribbean or South Seas island and sell sunglasses and beer on the beach.”

Gary Jacobson, owner of Tri-Valley Bookkeeping & Tax Service in Winnetka, Calif., held his own this year, reporting “The number of clients decreased but the issues increased – had more problems with the government agencies.” Still, business is good enough that he’s planning for 2013 to “move into a bigger office as we need the space.”

Score Your Firm on Eight Critical Success Factors

Edi Osborne

Does your firm get “it”? Quiz your partners and staffers.

by Edi Osborne
Mentor Plus

Everywhere I go, experts in the profession have a debate about what percentage of the profession really gets “it?” The veritable “it” is the future of the profession. Firms that get “it” have a good grasp on what is critical to thrive in the future. Some experts say fewer than 20% of firms get “it.” Others will stretch that number to 40%.  Only you know for sure where your firm stands (score yourself at the end). Here are eight critical areas of focus that indicate if your firm gets “it.”

1. Succession Strategy - Your firm has a clear path to succession with future leaders already identified and being groomed for leadership. You have a well considered, written plan for identifying and engaging these professionals in the future of the firm. These future leaders are already involved in all areas of firm planning and strategy development. They are seen as leaders among their peers and set a clear example of partner level attributes in their day-to-day activities. Here’s the trickiest part . . . you need to have a ratio of 2:1 to 3:1 next generation leaders to current partners.

2. Engaged workforce - Your team loves where they work. Many of the profession’s younger people are already in the hunt for a better opportunity beyond your firm. For your team to be fully engaged they have to be growing. That means your firm has a program that includes sitting down with each individual (admin team included) to design their education and professional growth strategy each year and there is some discretionary spending for each person to pursue some non-technical training. Each team member has a clear vision of their path for the firm (see #1 for more on this). You can tell if someone is engaged by the number of new team members they recruit to the firm, new clients they bring in, ideas for improvement they suggest for the firm, and their willingness to be mentored by, and mentoring others, in the firm.

3. Client focused - Your firm regularly meets with clients to gain insight about what is important to them. You have a multi-disciplinary team review each client’s situation regularly and “shadow” them at least a half day per year to experience the business from your client’s perspective. You also ask difficult questions like, “What don’t you like about our firm?” “Have you referred any new business to the firm? If not, why not?”  “If you were running our firm, what would you do differently?” “If the government went away, and you didn’t have to have a CPA help you with your compliance, would there still be enough value for you to work with our firm?” You invite and respond to client critiques as an important part of your firm’s growth strategy.  You encourage your team to contribute at least one idea for improvement (i.e. client complaint) each quarter.

4. Technology savvy - Your firm understands and makes investments in staying ahead of the technology curve. With the use of cloud based, mobile technology your team can perform more effectively than ever before; even from home. They can work away from the office, on-site with clients, without any loss in efficiencies. Your clients admire how your firm uses technology to make your work with them more effective. Your clients appreciate how you proactively provide insights about what is happening in their business; because you have real-time access to critical financial and performance focused information.

5. People before profits - Your firm has figured out that when you put your team first, clients and profits follow. The saying, “You don’t grow companies. You grow people, and people grow companies” is the cornerstone of your firm’s culture. Firms that “get it” spend two to three times more on expanding their team’s people and non-technical skills than firms that are still operating on old, technical-skills only, paradigms.

6. Lose the dead weight - Your firm routinely fires the bottom 10% of clients thereby creating capacity for more ideal clients and expanded services with existing clients. The firing of undesirable clients also provides a morale boost for your team. There should never be a client of the firm that treats your team with any less respect than you would. Your firm also believes that being a partner in the firm must be continually earned and has clear parameters for firing partners who don’t “get it.” Your firm is only as strong as your weakest partner.

7. Market driven - Your firm has its eye on the prize. You are making investments in developing key industry niches and specialized services to provide more value to your ideal clients. You don’t hesitate to have your people attend industry conferences with your clients. Your team is producing (or supporting others) in publishing white papers that highlight your firm’s depth of knowledge in target niches. Your firm is often included in industry expert panels, publications, and invited to speak at industry conferences. Your firm’s name is immediately referred to as the “go to” firm for your target niches.

8. Expanded services - Firms cannot survive on compliance alone. This is no secret. The profession has been under threat in this area for decades. Yet the percentage of compliance to non-compliance  services has stayed relatively unchanged in the vast majority of firms. Firm’s that “get it” are working towards at least a 50/50 split of compliance to non-compliance service offerings. These firms are client centric, not service centric. Their menu of firm services is continually updating as the needs of clients change. As a result, average fees per client and realization rates are continually growing.

How does your firm score?

If you were able to read and agree with the majority of the statements made above, congratulations! You get “it” and, hopefully, everyone in your firm gets “it” too.

If you struggled to agree with the salient points then I invite you to share this article with your partners. If you are really brave, send this article to your team and ask them for feedback. Ask your team to rate the firm on a 10-point scale, from 1, “we haven’t got a clue,” to 10, “we get it.”

If you score 60 to 80 points overall, you are headed in the right direction. If you score in the 40 to 50 point range, take this to your partner retreat for some critical discussion. If you score below 40 points, it’s time for a serious re-think on your firm’s vision for the future (or lack thereof).

You will likely find that you will score better in some areas than others. This insight will help you prioritize your efforts in the coming year.  A year from now, take out this same list and previous scores and have everyone rate the firm again to gauge your progress.

Click here for more Edi Osborne.

Edi Osborne is CEO of Mentor Plus,  which provides training and consulting in business performance measurement and management for accounting firms. Mentor Plus is on a mission to help the profession make the transition from Compliance to Reliance.  She co-authored the book, “Driving Your Company’s Value: Strategic Benchmarking for Value.”

What, Exactly, Is “Change?”

Hint: It’s not an “event.”

Bruce W. Marcus

by Bruce W. Marcus
Professional Services Marketing 3.0

In the context of professional services practice and marketing, change is alteration of a process, practice, or condition that varies from the past.

First, for all the talk about change, and all the writing and talking and handwringing about change, it becomes clear that too many professionals see change as an event, finite, an end in itself. In fact, change is not an event that’s arbitrarily made to happen, but a process — the result of which is that something changes. Most often, and with rare exceptions, that process leads to an evolution, and sometimes, even revolution (such as professional firm advertising, long forbidden – now common).

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Busy Season 2012 Ends on a High Note

For first time in six years, clear majority enjoy a “better” season.

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How Often Should Small Business Clients See You?

Half of all accountants say monthly.

About 47% of accountants think small business clients should check in with them at least once a month in order to keep their business in good financial standing, according to new research findings. Another 22% are happy with once a week and 19% are fine with quarterly.

Accountants say the two most common mistakes that small business owners make are not having ongoing insight into their financials and only talking to their accountant during tax time, according to a new survey from Xero, the online accounting software maker.

Other findings:

• About 45% report that mixing business and personal expenses in deductions is the most common mistake businesses make that could trigger an audit by the IRS.
• 26% say it is excessive deductions to income.
• 29% say the home office is the most commonly overlooked deduction for small business owners.
• 24% say it is hiring new employees.
• 26% say not having ongoing insight into their financials is the most common mistake small business owners make when it comes to their finances.
• 18% say it is only talking to their accountant during tax time.

What’s the Most Ridiculous Thing You’ve Heard in Tax Season?

Fun, funny and sometimes just pitiful.

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Tax Pro E-Filing Rate Slows Again

 IRS receives 53.9 million e-filed returns from professional practitioners.

That’s up 0.4% from the same time last year, but another slowdown from the previous weekly growth rate of 1.1%.

Meanwhile, the number of self-prepared returns e-filed so far stands at 32.4 million, up 8% from the same year-ago period, also a slowing, from 9%. The IRS website remains one of the hottest sites on the internet, with over 210 million visits, up 24% from last year.