Readers Sound Off on Liberty, H&R Block Plans to Launch Bookkeeping Services

Liberty Block logosNew strategic ally, or competitive threat?

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.

Hitendra Patil

“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

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

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.

Lawrence Tucker

“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

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 Amaya

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 Beltrone

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.”


8 Responses to “Readers Sound Off on Liberty, H&R Block Plans to Launch Bookkeeping Services”

  1. Steven Myles

    H&R Block has been in the EITC business for years. EITC Drives the retail tax prep market. Their tax season ends in February. Don’t think bookkeeping is going to be anything but a drag on profits unless they do it on a referral basis for a percentage.

  2. Jane Jakobeit

    Obviously those who are commenting don’t realize that H&R Block started out as a bookkeeping company, then began doing taxes for their bookkeeping clients. They eventually evolved into a predominately tax business. However, they have never stopped doing bookkeeping. It is on a much smaller scale and most tax professionals don’t do bookkeeping. Block may be trying to increase their bookkeeping business but this is far from a new venture. I’m an EA and have been doing taxes for 20 years. I also have done bookkeeping, but not for Block. This year I will start picking up bookkeeping jobs @ Block. We also are not doing “old style bookkeeping”. That would be paper & pencil. Most small businesses don’t have the capability of zero data entry, especially a service business. There is a need out there and we’re filling that need.

    • Hitendra R. Patil

      Thank you Jane for taking the time to read the post and sharing your thoughts. You bring a good perspective to the table by defogging the fact that Block has been in the bookkeeping business and that zero data entry is out of reach for many small businesses. There is indeed a need that requires to be filled.

  3. David Krueger, CPA

    If HRB and Liberty really decide to gain the needed capabilities to do bookkeeping, they will most likely gain employees who not only do bookkeeping, but do a better job of preparing taxes than their previous employees. There will be some skilled people who join them and give some of their offices respectability. My comment to potential clients is to ask for a skilled practitioner.

    • Hitendra R. Patil

      Thanks David for sharing your thoughts. I would assume that Block and Liberty would not announce foray into bookkeeping without creating the delivery capability first. I believe they will add quality resources to their team to deliver bookkeeping work.

  4. Jerry Nordland

    I have a small independent tax practice and was approached by HRB to ‘join them.’ During the interview, I learned that they would expect my clients to come to the HRB office and that all work would be done there using their software (Block-Works is replacing the old TPS). They couldn’t address how I would serve my assisted living clients or remote clients. They have an antiquated network system that they don’t trust to transfer tax information between offices, let alone interstate. It appears they are using this to recapture clients who fled HRB offices in the past.
    Oh the District General Manager was from a retail background with no tax experience. Not smart!

  5. Ron Benjamin

    As a former District Manager for a JH Franchise Owner. I see a few problems with HR and Liberty entering the bookkeeping and payroll business. For the amount of critical deadlines and calculations necessary, I find there are a few qualified to take on this venture. The Franchise model is traditionally low paying to their employees, and this is a disincentive considering the critical work they are doing. Additionally, the seasonal and temp nature of HR and Liberty, does not attract professional bookkeepers.

    Probably better to outsource to firms like ADP, or Intuit, who guarantee the calculations, and make some commissions for the referrals, or mark up fees. But there is a small margin of profit.

    We need to communicate to our clients that bookkeeping and payroll are highly critical work that comes with a premium. Then we can charge appropriate fees, and pay our bookkeeping and payroll employees better for the critical work they do.

  6. Frank Stitely

    The chains are getting into old style bookkeeping just as the world is moving to real time accounting and zero data entry.

Comments are closed.