Bringing in new business and finding top-notch staffers to handle anticipated growth are emerging as the new, most pressing challenges for CPA firms today.

With a rebounding economy, the AICPA says in its new PCPS “Top Issues Survey” that client retention, which had been a significant concern for firms in the 2009 survey, has been overtaken by a tilt toward growth issues.

“Finding qualified staff” was a top issue from 1997 to 2007 for all but the smallest firms, but disappeared entirely from Top 5 lists in 2009. Now it’s back.

“When the economy was in freefall, firm leaders largely focused on stabilizing their client base,” said Mark Koziel, the AICPA’s vice president of firm services and global alliances. “Now we’re seeing firms being able to catch their breath and engage in more planning for future growth.”

Succession planning, for example, was a Top Five  issue for only the largest firms two years ago. Now it’s an issue for firms of most sizes.

Key differences remain among different firm size groups. “Keeping up with changes and complexity of tax laws” remains the top concern of small firms with five or fewer professionals, which isn’t surprising after a particularly busy tax season. Sole practitioners and firms with 2-5 professionals were also the only groups to include “Seasonality/workload compression” on their Top Five lists.

The largest firms, meanwhile, emphasize “Owner/partner accountability and unity,” which appears on only one other group’s Top Five list.

Fifty-three percent say they are not likely to job search, falling five percentage points from the previous quarter.

Confidence among U.S. finance and accounting workers decreased 2.4 points to 53.4 in the first quarter of 2013 after rebounding in the last quarter of 2012.

The Mergis Group survey, conducted online by Harris Interactive^® among 190 U.S. finance and accounting workers in January, February and March of 2013, finds that alongside the drop in overall confidence, there has also been a decline in their confidence level in job availability and in their personal employment situation.

Finance and Accounting Workers Believe the Economy is Getting Stronger

Nearly a third (30 percent) of finance and accounting employees believe the economy is getting stronger, rising five percentage points from the fourth quarter of 2012. The number of finance and accounting workers who believe the economy is getting weaker fell five percentage points, from 37 percent to 32 percent.

Fewer Finance and Accounting Workers Believe More Jobs are Available

Just 20 percent of finance and accounting employees believe more jobs are available, falling three percentage points from the previous quarter.

Confidence in Ability to Find New Jobs Slips

Just under half (49 percent) of finance and accounting workers are confident in their ability to find a new job, slipping four percentage points from the previous quarter. The number of workers who say they are not confident they could find a new job increased by 10 percentage points, from 16 percent to 26 percent.

“Although the first quarter of the year brought a declining confidence level among finance and accounting workers, we believe this may be an anomaly due to the recent sequester and the economic uncertainty it is creating among consumers overall,” said Steve McMahan, president of The Mergis Group.

“In fact, several recent reports continue to reflect the promising growth of the finance and accounting sector in the coming year. For example, the Financial Planning Association’s 2012-2013 study revealed that 43 percent of firms intend to hire new staff in 2013. As of January, those predictions appeared to be on track, seeing the highest volume of job ads posted online in the past four years, according to Wanted Analytics.

“An ongoing challenge for finance and accounting professionals in getting the right job this year is the ability to possess and excel in the most in-demand skills and to offer value-added education achievement such as an MBA with an IT or auditing background.

“As the housing market continues to show strong recovery, there will also be more growth in the mortgage industry but specifically directed at origination. Refinancing will begin to slow as rates rise so origination may be the most in-demand skill in the near future.”

Dan Gaffney

With CPA firms and corporations rushing to staff up with a suddenly warming economy, finance and accounting employment agencies are booming. But it can’t last. Sooner, rather than later, the internet will change everything.

Dan Gaffney, a CPA, CIA, CISA and a 20-year audit veteran, in both public accounting and in corporate, is positioning himself to take advantage of the paradigm shift. He’s out to revolutionize the finance and accounting temp business.

His Chicago-based incubation-stage start-up, Vouchedin.com, is seeking to do to short-term staffing placements what Monster did to newspaper classifieds and what Apple did to the recording industry: leverage the internet to cut out the middleman, re-channeling profits to both the worker and the employer. It could change a big part of the accounting profession as well. – The Editors

By Dan Gaffney, CPA, CISA
Vouchedin.com

According to the American Staffing Association, 11.5 million people are hired by staffing firms over the course of the year. The staffing industry generated approximately $117 billion in sales in 2012: $104.8 billion from temporary and contract staffing and $12.2 billion in search and permanent placement services. Temporary staffing provides employees with flexibility and variety in the type of work they take on, and also provides for choice of the types of assignments they take on.

Growth in the employment services industry, which includes employment placement agencies, temporary help services, and professional employer organizations, is projected to be among  the fastest in the nation, 3.8 percent annually, increasing by $71.6 billion, to reach $229.3 billion by 2020.

The growth in jobs for accountants and auditors is projected to be 15.7% between 2010 and 2020 and for bookkeeping, accounting and auditing clerks the growth is projected to be 13.6%.

This all sounds great for the economy and staffing firms, but let’s look at the impact on employers and contract workers.

With the economy showing signs of growth, employers are using temporary staff to supplement their needs without commitment to the long-term cost of full-time employees.

Employers have access to arguably the strongest pool of talent in our history, particularly for those in finance- and accounting-related fields. We’re seeing two significant groups that contribute to the strong pool: stay-at-home parents looking to re-enter the workforce into part-time or on flexible arrangements, and those over 50 years old who may have a harder time finding a full-time role after the staffing reductions of the latest recession.

What’s changed for contractors over the past decade? Not much, except there are more staffing firms calling with potential opportunities. Over the past few years, the two most significant challenges for contractors have been lack of health care in temporary work and the inability to make a reasonable living. Health care will continue to be a challenge in the foreseeable future, but some are optimistic that ObamaCare may take some of the sting out of being a contractor.

Now let’s look at the pay structure for temporary workers. In our research and experience, the staffing firm model for temporary services is generally to split the rate an employer pays into three components: one-third goes to the contractor and two-thirds to the staffing firm to cover overhead and profit. So if the employer is willing to pay $120 per hour, the staffing firm is looking for a person willing to do the work for the lowest rate in order to maximize gross profit.

There are a few downsides to this model:

the employer isn’t getting the most qualified person for the job,

the contractor may not be the best fit for the project, and

a contractor can’t make a decent living working for one-third of what their services are worth.

The person who would have done the project for $100 per hour – a better deal for the employer in terms of cost and experience and quality of the candidate – was priced out of the equation by the staffing firm.

This leads to a new trend in the staffing model – online where both parties win, employer and contractor. We believe there will continue to be a need for temporary staffing firms, but their niche will be for employees in transition between long-term roles and those who seek temporary assignments as a career, but don’t have the skills or resources to network, build relationships and sell themselves. Successful contractors will seek direct connections to employers where they earn more and employers pay less.

With this in mind, contractors also want to control their destiny and not sacrifice their value with staffing and temp agencies. Too many of them accept a much lower rate in order to get the work and are left feeling taken advantage of, or undervalued.

My goal is to let employers and contractors connect directly, allowing contractors to earn their value while saving employers money, removing the typical middleman focused on big earnings. What will be the impact? We’re not sure but we do know that contractors are very interested in having more control over their careers.

15-item checklist on effective staff management.

Ed Mendlowitz, CPA, ABV, PFS
Author of “Implementing Fee Increases”

Question: My staff doesn’t listen to me.  To be able to manage and control my business I need them to prepare a monthly schedule of what they plan on doing that month.  I further need to know each morning if they did what they were supposed to do the previous day, and whether there was anything not done, or anything extra that wasn’t planned on.  My problem is that they don’t give me the schedule and then don’t call or email me to tell me what they did. I really need to know this stuff and can’t figure out how to get them to do it.  What can you suggest?

Response: I had two phone calls, each lasting almost an hour, with the practitioner who called me. But I could spend a couple of days on this.

Here are 15 action items to consider.

“My staff doesn’t listen to me.”  This is the starting point.  You need to recognize who is the boss.  A tip is to ask yourself this question and see how you feel about the reality of it.

In general the staff people are the “bosses.”  This is so in the sense that they do what they want, and not what they ought.  In some cases it is amazing that much gets done in these firms.  Unchecked staff left to their own decisions will do what is easiest, less complicated, most comfortable or as non-confrontable as possible.  On the other hand, the boss needs the most important project done first, followed by the second, and then third and so forth.

In professional practices, staff need to be managed.  Not micromanaged in the areas of their professional expertise and ability, but in many cases, micromanaged in how they choose to spend their time.  Their professionalism will dictate how they will handle a situation, how much time to commit to it, when to seek assistance, when to call it quits, and when to decide if enough has been done or if they’ve reached the point of rapidly diminishing returns.  Professional judgment, creativity and expertise need freedom.  However, which clients are worked on, and when, and for how long, needs strong control. That is the firm’s inventory and needs careful management. In most cases what is to be done should be predetermined, planned and should work off a budget decided on by the client and partner.  Because of the high level of certain staff, much freedom is extended for self-management or direction, but it still needs accountability.  Thus, the monthly schedules and daily status updates.

It is not usually an isolated instance when staff don’t respond and comply with the scheduling and accountability procedures.  There are most likely other things they won’t be doing: things such as the proper completing of audit and other work process checklists, circumventing supervision procedures, not keeping up to date such as the timely going through journals they subscribe to, shortcutting work that needs to be done for clients and inattention to CPE programs.

Noncomplying staff are either the fault of their managers or a lack of something in themselves, or both.  If there are isolated instances within a firm, then I would blame the staff people.  However, if it is widespread, then I would have to blame the managers or partners.

I recommend getting rid of staff who thwart the management controls the firm needs.  No control means no growth and lower profits, and the inevitable leaving of those people at some point and usually at a time of their choosing, which can be at a bad time for you.  This is hard, but your focus needs to be what is best for you in the long run.  Retaining such people is a bad decision.

I suggest that one reason staff don’t follow through on administrative things they need to do is their awareness that the partner does not look at it, or question anything or follow through on what they need to do with the information provided.  Repeated ignoring of the submissions results in noncompliance.  Think about your role, or lack of role, in this process.  If it is important, then you should be on top of it regularly, if not daily.

I know, you say you are too busy to look at it daily.  What about weekly?  Or do you give it a cursory glance monthly or when a problem arises?  If it is important, then make it important!  Make it your job to control your “inventory.”

Oh, you don’t want to spend the hour or so a day? Then hire someone to do it.  Maybe add it to the duties of your secretary or an administrative person.  Work out what needs to be done. Following is a proposed listing of how this could be done:

Each staff person prepares a suggested monthly schedule three days before the beginning of the month.

A partner or senior manager reviews the entire schedule with each staff person discussing what will be done, why, budget requirements, deadlines, carryovers of work not done and what wasn’t scheduled and why.

At the end of each day the staff person will send a brief email or fax affirming scheduled work that was done, listing anything that wasn’t done, anything extra they did, any carryover work and when it will be done, impending deadlines and anything they want to call to their supervisor’s or partner’s attention.

Each morning by 10 a.m., the admin person will review the daily reports and compare it against the work that was scheduled, will make sure unperformed services are scheduled, and find out why additional work was done and whether it should be billed.  A brief summary should be prepared and discussed with a partner – that morning.

The partner should review the results with the admin person each morning, either in person or by phone, to determine the adherence to the schedules and to make necessary decisions.  If a staff person needs to be spoken with, they should be contacted at that time.  It is important and necessary for the staff to see the followthrough and resolve of the partners.

People who don’t comply need to be spoken to and continued noncompliance should lead to dismissal.

The U.S. tax, accounting, and bookkeeping industry added a seasonally adjusted 10,700 jobs in March, the ninth straight month of year-over-year expansion, according to CPA Trendlines sources. Women and non-exempt employees are making up the bulk of the workers returning to the industry, but not, it seems, to CPA firms, where caution seems to be continuing. At the same time, CPA Trendlines finds renewed pressure on fees and pricing while utilization rates and salaries continue to increase.

– Rick Telberg
CPA Trendlines Research

In this report:

• Overall hiring trends
• Women employment
• CPA firm hiring
• Overall trends in pricing and billing rates
• CPA firm pricing trends
• Tax prep pricing
• Pricing for bookkeeping and compilation
• Number of hours worked per week
• Trends in wages and earnings

The 3% increase to 932,900 full-time equivalents from the year-ago month represents the biggest jump in a year. Still, the rise left the industry’s head count 14,100 jobs shy of the month’s record high of 946,700 in 2008.

ALL EMPLOYEES, THOUSANDS

And much of the increase is coming in the hiring of production and non-supervisory employees, which expanded by 12,700 jobs from January to February and by 17,100 over the year, to 719,000. In percentage terms, that’s a 1.8% month-to-month increase and a 2.4% year-to-year increase.

In addition, women are flocking back to work, with February’s 600,900-woman headcount up by 8,400, or 1.4% from January and 4.2 percent for the year.

Focusing on just CPA-owned and –operated firms, employment increased by a statistically insignificant 700 jobs from January to February’s 412,700-person workforce. That’s a 0.2% monthly increase and a 1.4% yearly increase.

Wages at CPA firms rose an average of $31.87 per hour, down a little from January’s $31.93 and up from the year-ago’s $31.18.

If the rest of the industry is showing signs of expansion, CPA firms are showing signs of continuing caution. The number of production and non-supervisory employees at CPA firms came in at 298,000 in February, up a paltry 500 jobs – up 0.2% for the month and 0.5% for the year.

On the pricing front, CPA firms cut billing rates by 0.4% in February , the latest month available, representing a reversal of from the 0.4% increase in January, but still a 1.3% advance from the same month a year ago.

Overall pricing trends, 12-Month Percent Change, CPA Firms

The measure of prices for financial audits led the price cutting, with a 0.4% reduction in February, another reversal from the month-before’s 1.1% gain, and a 0.6% cut from the same year-ago month.

Pricing index, Financial auditing, CPA firms

Overall prices for CPA-firm tax preparation and planning services, however, showed surprising strength. For the month, prices rose 0.5% from the month before, albeit a slowdown from January’s 1.3% rate of increase. And the month’s 0.5% rise comes in stark contrast to February last year when prices drifted lower by 0.1% from the month before.
In year-over-year comparisons, February’s billing rates came it at 3.9% higher than the year-ago February, continuing a seven-month string of increased billing rates.

Tax preparation and planning price index

Pricing for CPA-firm bookkeeping and compilation services advanced at a relatively fast 0.8% rate in February from January, which posted only a 0.3% month-to-month gain.
In year-over-year comparisons, tax prices rose 1.6% in February, again an acceleration from January’s year-over-year 0.8% increase.
The data shows that the last time the industry suffered a year-to-year decline in tax pricing was March 2010. Ever since, tax prices have been consistently rising.

Price index for CPA firm bookkeeping and compilation

Taking together all the primary services of CPA firms, prices were knocked back for 0.1% decline in February, following January’s 0.7% increase.

But in year-over-year comparisons, prices were shown advancing at a 1.4% annual rate in February, the seventh straight month of yearly improvements.

Price index, primary services, CPA firms

As the tax, accounting and bookkeeping industry appears to be generally adding jobs and increasing prices, it is also increasing utilization rates.

For the industry as a whole, the number of average weekly hours worked per employee rose to 35 hours in February, up from 34.7 in January and 34.5 in the year-ago February. In percentages, that’s a 0.9% month-to-month advance and a 1.4% year-to-year advance.

AVERAGE WEEKLY HOURS OF ALL EMPLOYEES

Wages are continuing to rise as well. Industry-wide, the average hourly earnings per employee rose to $28.88 per hour, down, to be sure, by 0.6% from January’s $29.05 but up a scorching 8% from the year-ago’s $26.74.

In this report:

• Five mistakes firms make.
• Four strategies that can’t miss.

First, Microsoft appeals to what creative people crave most – the opportunity to do great work, and then recognition for it by seeing it used. Then they build a culture and a business to sustain that creativity. Second, they hire the right people. They hire only those people who are motivated by what they have to offer. And it works. It’s one of the things that makes Microsoft a great and successful company.

Is this so difficult? Not really. Why, then, do so many companies look outside themselves and their cultures for motivation? Why the growth of the motivational consultants business?

This is a strange business, these motivational consultants and coaches. What’s strangest is not what they do, it’s the need of so many corporations to buy the stuff. Do people really think that the problem of motivation is so arcane and difficult that only an outside consultant, with exhortations and incantations, can do it? Or is it some protectionist scheme, in which, if it doesn’t work, the responsibility is passed on to someone else?

We may not know a vast amount about the human mind, nor the emotions and how they’re controlled, but five things seem obvious.

1. Yes, people want to be adequately compensated, and there’s little likelihood that you’re going to motivate underpaid people. (You can probably overwork inspired people though, if they’re not underpaid.)
2. Exhortations to company loyalty don’t work any more. There’s too long a record by too many companies that have been disloyal to loyal workers for that route to have any credibility. Notice, the tradition of company songs hasn’t done much to save the Japanese economy during difficult times.
3. Productivity bonuses used to work, but in today’s labor market, where there’s a shortage of highly qualified people but no shortage of tough jobs, anything you have to offer can be topped by somebody somewhere else.
4. Perks used to help, but not anymore. See above.
5. Weird systems, like Zen mind training and psycho systems, usually last all the way until the following Monday, by which time the trainers have gone on to the next suckers, and the trainees can’t remember a thing they were taught.

In today’s environment, then, unless you want to waste your money on training programs that enrich the trainers but don’t do much for you, you’re stuck with the Microsoft model.

1. Build a culture that cherishes ideas, contributions, and recognition for both – that invites new ideas, and then uses them or takes the trouble to spur people onto improving their ideas.
2. It should go without saying that you should start with the assumption that people want to do better, and want to feel part of a team – and then give them reason to feel that way. Trust people, and obviously, they will, trust you.
3. And certainly, hire the right people. Not just the people with skills you need. That too. But people who will see what you have to offer as reward enough. A reason for performing well. Oh, and treat them well – as you would like to be treated.
4. Certainly, it pays to have a sound business (which inspired employees will help you get and sustain). Nobody wants to work for a firm that looks like it’s going under. Particularly if it looks like management’s fault.

It all beats psychobabble. And it costs less.

Click to Buy

Bruce W. Marcus is a pioneer in professional services marketing and coauthor of “Client at the Core.” This is adapted from his new book, “Professional Services Marketing 3.0,” available for purchase here.

Copyright. Used by permission.

Lessons from the best-managed firms.

By Marc Rosenberg
Author of “CPA Firm Management and Governance: The Managing Partner’s Guide to Running a CPA Firm Like a Business.”

Baby boomer partners are rapidly approaching retirement age, resulting in a dramatic increase in new managing partners at firms.

In fact, CPA Trendlines estimates that up to 25% of multi-owner firms are operating under managing partners who are relatively new to the job, with tenures under three years. And over the next five years, one-third of multi-owner firms will undergo a change in ownership and/or control.

Many firms are skipping a generation and turning the reins over to “younger” partners. Firms are also asking their new managing partners to divest themselves of a significant part of their client base to free up their time to properly manage the firm.  How should the new managing partner be compensated?

Consider the case of a new managing partner who is relatively young, and his or her comp is 30% below the highest earner.  It would be highly unlikely that the newly promoted MP could justify being the highest paid partner in his or her first few years as partner.  But few would argue that if this new managing partner significantly improves the firm’s growth and profitability, he or she would be entitled to above-average compensation increases, thereby closing the gap on that 30% pay differential.

Like any job, the scope of the position must first be clarified before compensation can be set.

For example:

• Will the new managing partner be a CEO or merely the administrative partner?
• What will the partners expect of the new managing partner?

The new managing partner is taking on major risks:

• Will his or her management style be compatible with the other partners?
• If the new managing partner sheds clients to carve out time for the managing partner job, this could jeopardize his/her compensation, both while managing partner and afterward.

To offset these risks, an increasing number of the best managed firms typically provide compensation guarantees to protect the new managing partner.

(Copyright 2010-2012 Rosenberg. Adapted with permission.)

Rebound in confidence after two quarters of decline.

Next Question: What’s your best career advice? Join the survey; get the answers.

A leading measure of overall confidence among U.S. finance and accounting workers, rose 5.4 points to 55.8 in 4Q 2012 — ending a two-quarter decline, according to new data reported by CPA Trendlines.

The new survey finds growing confidence in job availability and in workers’ personal employment situations, despite continued tepid sentiment in the strength of the economy.

“Confidence among finance and accounting workers has rebounded after declining for two consecutive quarters, mirroring a projected year of growth for the industry in 2013,” said Steve McMahan, executive vice president of Randstad US, Professionals, which produces the Mergis Group Finance and Accounting Employee Confidence Index.

Beliefs about Strength of Economy Remain Unchanged

• Thirty-seven percent of finance and accounting employees believe the economy is getting weaker, a slight decrease of three percentage points from the third quarter of 2012. Only a quarter (25 percent) of workers believe the strength of the economy is getting stronger—showing no change from the previous report.

Increasing Number of Finance and Accounting Workers Believe More Jobs are Available

• Nearly one-quarter (23 percent) of finance and accounting employees believe more jobs are available, representing a significant increase of eight percentage points from the previous quarter.

Confidence in Ability to Find New Jobs Skyrockets

• More than half (53 percent) of finance and accounting workers are confident in their ability to find a new job, marking a 15 percentage point increase from third quarter. Only 16 percent say they are not confident that they could find a new job.

One-Third Likely to Look for New Job

• One-third (33 percent) of finance and accounting workers say they are likely to look for a new job in the next 12 months, an increase from 26 percent last quarter. However, 58 percent say they are not likely to make a job transition, representing no change from third quarter.

And a couple more ideas for high performing firms.

by Ed Mendlowitz
Tax Season Opportunity Guide

Ed Mendlowitz

If you have staff, have happy, cheerful, helpful people. Don’t surround yourself with downers and nay-sayers.  Make sure they are team players.

Part of this is your firm’s culture.  It takes work to get people to work together and to focus on doing what it takes to service the client fully, properly and timely.  Everyone working together gets it done.  You need to create that atmosphere.

Here are three things that might help:

1. No jerk rule.  Don’t employ jerks.  Bad apples bring down everyone else.  If you have people not carrying their weight, not growing, nor reaching forward to help each other and clients – get rid of them
2. Watch for movement.  Many times people do not really know what to do.  You have to look for and notice this, and then work with the staff person to perform the way they should and how you need them to
3. Be a role model. You are a role model whether you realize it or not.  Staff sees what you do.  If your attitude is annoyance when a client calls at the end of a day, or when you are on your way out to lunch, or you blame the client internally when there is a mistake, or try to pass off responsibility – that is what staff see and what they will replicate.  Those who understand what you are doing and don’t like it will leave you, so you will end up with a bunch of jerks – like yourself!

What would you add to this list?