Promoting CAS services to entrepreneurial students can add better recruits to the profession.
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New Zealand doesn’t have a tax season. This is largely because all tax returns are due one year after the standard March 31 year-end for businesses and individuals. But also: Fewer than 20% of individuals actually need to file a return.
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“The returns that accounting firms are filing are for business owners and people with more complex investment structures,” says Giles Pearson, CEO and co-founder of Accountests, an online knowledge-testing company that focuses on recruitment, selection and development assessments for chartered accountants, accounting graduates and candidates.
Pearson adds that while a few do wait until the last minute, “the reality is for a lot of smaller firms here, by January, they’re literally twiddling their thumbs.”
This is something that Pearson suggests the AICPA and the profession could be lobbying Congress to adopt in America. Alas, the profession has been trying for years, to no avail.
Another difference between the US and New Zealand is the process of qualifying for the equivalent of a CPA. In New Zealand, accountants get a three-year degree and then work for three years while also studying for a graduate diploma in accounting.
Pearson says that the one year of work experience required in New Zealand is “not enough to call yourself a CPA” because of how long it takes to “get into your head what accounting is all about” and because “university courses haven’t gotten any more work-relevant in the 30 years since I did it.”
For the U.S., Giles suggests providing an option to swap out the extra year of education with a year’s work experience. This could be “absolutely as good in terms of the product that you’re going to get at the end.”
However, despite these comparative advantages, many young people in New Zealand – just as in the U.S. – aren’t interested in becoming accountants because they think it means being stuck in front of a computer all day.
But getting the word out about how the CAS side of accounting can appeal to those with an entrepreneurial bend and who want to assist business owners could make the work more interesting and appealing to the next generation.
8 More Takeaways from Giles Pearson
- Instead of focusing on timesheets, focusing on productivity improvement is the way to make more money and get the jobs out the door quicker.
- It’s bizarre that many accountants aren’t interested in the business side of their accounting firms even though their work is helping business owners.
- The accountants who are pushing the boundaries of professional growth are moving away from compliance and towards business advice.
- Giles founded Accountests because he couldn’t find a way to gauge a job candidate’s technical proficiency before hiring that person. Testing someone before the hire gives you options:
- Don’t hire this person; or
- Hire them, but at a lower salary, in exchange for on-the-job training and a later increase in pay.
- Every firm owner needs a mentor or an online community where they can get guidance on building the firm they want. Some Facebook groups also provide tremendous value in the discussions between members.
- As accountants, we get to see the consequences of a lot of different business decisions at a level of honesty we rarely experience. We can reflect those results back to our clients so they have the benefit of the learning.
About Giles Pearson
After 18 years as a partner with PwC, Giles Pearson co-founded Accountests to give accounting firm employers the ability to make informed decisions when hiring. Accountests provides pre-employment testing that evaluates a candidate’s skills and personality, allowing public accounting firms to hire fast with confidence.
Transcript
(Transcripts are made available as soon as possible. They are not fully edited for grammar or spelling.)
Liz Farr 00:02
Welcome to accounting disrupter conversations. I’m your host Liz Farr from CPA Trendlines. My guest today is Giles Pearson, co-founder of Accountests. How are you today Giles?
Giles Pearson 00:17
Hi Liz. It’s good to be talking to you today from New Zealand.
Liz Farr 00:57
… We have a lot to cover. So let’s jump in. Now accounting talent in the US and all around the world has been scarce for years. COVID made it worse. What are some ideas that you have on how to make things better?
Giles Pearson 01:20
Yeah, it’s you know, so I had to I spent a month traveling around visiting CPA firms and tax firms and bookkeeping firms in January and you know, this was this was a really hot topic of conversation. I’d have to say it is much more a conversation in the US than it is certainly down here in Australia and New Zealand. You know, one of the things that I guess I’ve been hearing a lot about is this 150 Our role. And I think, you know, we can maybe talk about that a little bit further, but, you know, that seems to be a serious issue. And I get the fact that it’s not the only reason that people don’t enter the profession, but it certainly from a time point of view and a cost point of view. You know, I’d see that as a significant barrier that the firm or the AICPA needs to work on and lobby to change, you know, fairly quickly and I really don’t see the need for that extra year. So that’s, that’s something I think that can be done. You know, the other the other sort of lobbying issue I think that the profession probably needs to jump into is this whole tax season which you know, when you say to people, for example, in New Zealand, we don’t we don’t have a tax season, and they go what, you know, how can how can that possibly be? And, you know, I think the fact that there’s these fairly short, hard deadlines that just make people work ridiculous hours for, you know, various periods of the year well, that’s, that’s something that profession can easily lobby to change. And it’s, you know, it doesn’t seem to me that it’s insurmountable government just wants its money. To make sure that it gets its money or it gets interest on its money. Then, you know, when you file a return is really irrelevant. That that’s just sort of confirming the last few dollars, so So I think the profession can do something there, which will hopefully make people look at accounting and go, you know, oh, I don’t have to work 80 hour weeks for sort of three or four months of the year. You know why? at 23 24 what I ever want to do that? Well, 23 24 and onwards. So, you know, I think that’s, I think the profession can can work on some of those things. I think firms as well can make life more interesting, you know, so I’m part of a running group here and I was out yesterday running with this young guy who’s in his last year at school, and he’s taken accounting, and I said, Are you thinking of doing accounting and he goes on, nah, I don’t want to be stuck in front of a computer all day. You know, so that’s the impression that people have of accounting. Whereas I think the whole sort of CAS. Part of the counting is much more interesting, and that’s what he was saying to meet, I want to be I want to be in business. I want to, you know, have that sort of entrepreneurial side. I think that’s where the sort of whole advisory part of accounting, you know, is much more interesting for for everyone and you know, sure, you’ve still got to learn you’re learning the ropes and do those early years of, you know, making sure you really understand the technical issues and you know, get that that grounding, but if you can see a pathway to, you know, working closely with business owners on their strategy, you know, helping them out with with, you know, technology solutions for their accounting needs. That’s you know, that’s that’s interesting. You know, I think the other the other the other thing is probably around culture, and, you know, it’s a challenge for firms. Now with this whole, you know, work from home and remote work in to make sure that they get that cultural fit, right for the younger team members as well as their older ones. And I think what I saw in the US when I was visiting the firms there was actually getting pretty good at that. And a lot more switched on, for example, in the UK, where I was last year, and they’re having terrible times trying to get people to come back into the office at all, you know, the young people there want to come into the office some of the time, the older ones don’t want to come into the office at all, and then some significant culture issues in firms there, and to some extent, that’s possibly the whole route. You know, if your whole firm is remote, it almost makes it easier. Because you then just have one set of cultures that you need to work to. Where, you know, you work on making sure that that that sort of interpersonal stuff is happening. You’re not trying to sort of retrofit that around a partial office partial home working scenario. So you know, I think those are some things that we can do as a as a profession, but firms can do individually to to you know, make accounting more attractive and therefore, get more people coming into the profession.
Liz Farr 07:01
I think those are all good ideas. Yeah, you mentioned that you’re you’re in New Zealand. How is it how is qualifying for the equivalent of a CPA? Different in New Zealand than in the US?
Giles Pearson 07:17
Yeah, yeah. So So you know, and I guess it’s something that I’ve been been reflecting on and having having a look at and so, when you look at what you need to do here, and my my, from my understanding, you know, in the US, you’ve got your 150 hours and then one year of experience on the CPA exam. And it’s not it’s, it’s sort of cyber here. It’s a three year degree. So all you only need to do a three year bachelor’s degree, and that’s the standard. That’s the standard bachelor’s degree here. And you but you then have to do three years of into work experience. So you need to work for a CPA and you need to have a logbook and you need to choose various specialties. Some of which you take to a certain level of proficiency and then then one at least you take to a much higher level of proficiency. And you need to work through that logbook with your mentor and make sure that your experience is up to the standard that you need. And then, through that three year process, you then set a graduate diploma in accounting, which is basically administered by the CPA societies here. And that’s equivalent to a one year full time study. And most firms will give people time off to do that. The most most young accountants wouldn’t take blocks of time off, unpaid time off to do that they fit that around their their work commitments. So it does mean those first three years out of college are quite full on because people are studying and learning the trade At the same time, but at the end of that three years. but obviously they’d be paid through that process. So, yeah, the end of the three years. They. They. think come out with their their chartered accounting CPA certificate and I guess I reflect on that and I reflect on my first three years of of working and if I only had to toe don’t one year work experience and I know what I was like at the end of one year, you know, I mean, I’m sure this you know that you can clearly just by looking at me that was some time ago but, you know, life hasn’t changed in terms of how long it takes you to get your head into what accounting is all about. university courses hadn’t got any more work relevant I don’t think in the in the 30 years since I did it. Sadly. One year is not enough. of work experience to then call yourself a CPA and go and, you know, put your put yourself in the market that you have that level of skills because I actually just don’t think that you do you might have the you might be able to show that you’ve SAT exams and you’ve got some theoretical knowledge but it takes more than a year to apply that theory to practice to actually make you a half decent accountant in my view.
Liz Farr 10:48
It sounds like it’s more of an apprenticeship program. And and I think that that really is the best way to learn to have more on the job training, more practical training, rather than more book training.
Giles Pearson 11:06
And 150 hours which is you know, and all the discussion that I’ve heard is, you know, here’s quite a few people will do a master’s in tax or whatever in that last year, but they don’t actually need to do anything that’s relevant. And if that’s the case, we’ll surely a years work experience wouldn’t be better a basic use of their time. Shoot if you want to do a Masters do a Masters absolutely, absolutely great, but, but provide, you know, potentially in the shorter term, provide an option where you can swap out that fifth year for another years work experience. You know, with some sign off processes and actually give that as an option to get your to get CPA instead. And I think that would It would provide a different pathway and be absolutely equally as good in terms of the product that you’re going to get at the end of those. Whatever that is six years of of training.
Liz Farr 12:13
I think I kind of agree with you. The I switched majors between the time I got my bachelor’s and I decided to be an accountant. So the 150 hour rule was relatively meaningless for me. And the only thing that I really needed to do was get my 30 credit hours of accounting classes that the state board of accountancy required for me to sit for the CPA exam. So that was the only thing that it did for me. Yeah. For somebody with an accounting undergraduate degree who isn’t interested in pursuing something more difficult a Master’s of tax or masters of finance or something like that. I’m not sure that that fifth year really has any practical utility
Giles Pearson 13:16
Well, look, the reality is yes, if you want to go and work for the Big Four, they might say you know, we want to see that. That fifth year, we want to see that master’s and absolutely fine, you know, go for it. But if you’re going to enter into a small CPA firm in Ohio, you don’t need a Master’s of tax you you actually need a lot of other skills. That you know, the technical difficulty is not going to be the thing that’s going to be your shortcoming in your ability to advise the clients that you’re working with. It’s there’s a lot of other things that you’re going to need to have and you’re not going to learn those sitting in a class at college.
Liz Farr 14:00
Yeah, absolutely not. Now, another another thing that’s a little different in the US is how accounting firms operate. You mentioned that you don’t really have a busy season in the in New Zealand. How does how does that work? Baffles
Giles Pearson 14:27
Yeah. So so we, so you havea standard December 31 standard year end, we have a March 31 standard year end. And the only the only requirement that accounting firms need to have for for tax filing is that they need to have all their tax returns. filed by the march 31 of the next year. So they’ve got 12 months to file to be fear. Probably less than 20% of people actually filed returns because there were for example, federal deductions. So for most wage and salary earners, there’s no return file. So the returns that accounting firms are filing are for business owners and people with more complex investment structures but around that is a requirement to pay tax as you go forward for relatively sort of smaller tax payers that simply based on the year before was income. So you could make payments through the year based on the previous year. And as long as you’ve got your return filed by nasty run in the following year, which is when you then top up whatever shortfall you haven’t paid this you know that that’s all there is to do. So from from a work management point of view and I know people have said to me all surely that just me do and leaves things till the last minute and you just end up with a massive Russian in March. There’s a little bit of that, but the reality is and this will be the same this is the same if you were you know 20% of business owners are desperate to have their financial returns and tax done in the first 60 days. Because there’s just others need it in the first three or four months because they’ve got lenders who want to see the numbers. So so you’ve got sort of self selection works for quite a good portion of your client base. Because they’ve got people who are demanding the information others who might be do large refunds have got a an incentive to get their returns done quickly because then they’ll get the money. And yes, they’ll always be a few who leave it till the last minute but the reality is for a lot of smaller firms here by January. They are literally twiddling their thumbs. They’ve got the work done. And they’ve been they’ve been working on getting the clients ready for for the next year. And so, you know, I think, again, it comes down to it comes down to the government, the government just wants the money. And there’s always you have a mechanism for them to either get the money or get interest on their money because you haven’t paid enough. And that really only applies to larger taxpayers, because they’re the ones obviously from a fiscal point of view, makes the largest impact if they don’t, if they don’t make the right payments. Then you take all of that filing deadline requirements away. And you know, so you could you can end up in a situation I would have thought quite easily where people have a requirement to pay by April 15, but no requirement to file and if they don’t write them out, they pay interest, like so. So again, you’ll you’ll end up with self selection. Some people will will be motivated by that and others won’t. And the firm’s here some have suddenly you know, the the the profession has is getting increasingly I guess sophisticated at managing client demands. So, a lot of people a lot of firms will will just shedule their client work and and they’ll tell the clients this is when you bring your work and we don’t say that and if you bring it in after that we don’t know when we’ll get around to it. This is when this is when we’ve sheduled that you need to be you know you need to be ready. This is the time of course it doesn’t work for everybody but now you can get 80% of your clients into A into A shedule that means that you can manage your own workflow rather than your clients managing your workflow for you.
Liz Farr 19:11
Fancy that now and I think that in the US we could do that. And there are some firms that aren’t doing that. It just takes a little bit of assertiveness.
Giles Pearson 19:26
Well, the filing deadlines actually make quite a bit of that quite moot because it’s really hard. How can you possibly shedule in all your work? you know, before March 15 or April 15. It’s just it. I don’t know how firms can cope with that. you know, obviously they they worked really hard to make sure they actually get all the information and or not or automating the process of collecting information they don’t have and that’s you know that’s a smart way of trying to get around it. But to my mind, you know, AICPA and the profession should be lobbying. Lobbying federal government to. to look up the way that those deadlines set and and see what can be done because as I say, I don’t think it’s I don’t think it should be fiscally neutral. It would make a massive change to.
Liz Farr 20:29
Absolutely. Now, what about business models? You know, in the US we many firms still use hourly billing. And they’re very hierarchical. You know, they’ve got a couple of partners at the top and then a layer of managers and then a big fat layer of staff at the bottom is how does that compare to the model in the in New Zealand?
Giles Pearson 21:01
I’m also I think the firm’s structures, not necessarily that different. Technology is is sort of flattening that pyramid out. You’re obviously need less people at the bottom a fixed price billing is very common. The hourly rate billing for annual compliance and tax is pretty, less, less than 50%. Now fixed billing. And, you know, I think that the, the whole time sheet mentality you know, there’s there’s been whole podcasts on the the case for and against timesheets, and I sort of having having spent my whole career. So I was I was 25 years with PwC in a in a in a smaller regional office. So probably like a mid sized US firm. We had 45 people in our office. So it was you know, it was not that not a large environment but but you know, I did 25 years with timesheets, and so I sort of I can I get the benefits in terms of that, but I think that what the firms need to focus on and most of the firms that I met in my recent trip over were the more progressive firms because they were the ones who put their hands up and said, You we’d like to, we’d like to meet you. And, you know, then they’re totally focused on productivity improvement. And I think that’s it rather than focusing on on timesheets. I think focusing on productivity improvement is going to be the way that you’re actually going to make more money and you’re going to get jobs out the door quicker. You know, the challenge in that is getting the pricing right. But to some extent the market, the market gives you that pricing. And there’s no reason for example, not to do some some work on a on a sort of a case by case basis to understand how long jobs are taking and you know, there’s always the ones you get that you miss price. You know, and though you know that that’s a question of just understanding how badly you’ve missed priced it and having that upfront discussion with the client but but yeah, I think focusing on productivity improvement rather than timesheet recording is going to get you a much better answer. overtime.
Liz Farr 23:52
Yeah. Yeah. And what about growth in firms Do you think that firms really even need to grow. I mean, in many of them focus on growth is big, sexy thing that they’ve got to do but do this every firm really need to do that.
Giles Pearson 24:17
Yeah and it’s, you know, it’s sort of. interesting. I spent my time working so I was a sort of a tax partner I guess, but had a lot of private clients. so a lot of our clients, we sort of large operated businesses. And what you what you saw was over the years, you know, you talk to people, some people listen to what you said and acted on it. Other people listened and talked to a range of other people and acted. Others listened to a range of people and did nothing. And so, you quickly realize that there are different sorts of people in business, and some people are particularly entrepreneurial and motivated, others are just not, and accountants are no different to that. So I guess as a slight segue to. perhaps try and answer your question as I think some accountants are not born business people and in terms of, you know, that whole ability to grow, they probably actually just don’t have the ability to grow because it’s not in the mindset. What they want to do is they just want to serve clients that want to work hard or not too hard. And take home a reasonable income. But what pushes the buttons is providing tax advice providing business advice, you know, having those that working with the clients and the whole being in business part of accounting is just something that they just don’t get. And they’re not really that interested in which is sort of bizarre for people who, who are there helping business owners, but I think that’s that’s the reality. So. So I don’t think there is a need to grow but clearly there are accountants who are very entrepreneurial. And again, you know, come back to that discussion around productivity and improving productivity. What they’re doing is pushing the boundaries, both in terms of tech but in terms of where’s the professional growth going, and that’s, you know, moving away from compliance tax and compliance accounting. towards business advice, you know, virtual virtual controller virtual CFO Cares all of this, you know that that that’s, that’s the direction of travel and you know you can you can certainly grow and mature your firm and make it a more interesting place to work as well to be fair by doing that or you just absolutely systematize everything you know, for example, one of the one of the accounting firm owners I met he wasn’t even an accountant has got a team of 65 all remote and he just spends his day working on systems and processes. And you know, making sure that you’ve got quality standards and he’s got turned around and he’s got productivity and you know, half the team are in South America and you know, so this is the, I think, if you want to grow that is that you can just get really, really efficient at compliance, I guess is what is what they’re doing. And I saw a fair bit of that. But I’m not sure I’ve already answered your question, but I don’t think growth for growth’s sake is is necessarily going to be the savior of firms and I think some people are just not suited to.
Liz Farr 28:03
I would agree with you there. I worked with a couple of firm owners who had not a single entrepreneurial bone in their bodies and they really just wanted to serve the clients and do their work and get paid and lead a small team and that that was good.
Giles Pearson 28:27
Yeah, that’s right. You know, that’s sort of to be fair. That probably fits the archetypal account of personality.
Liz Farr 28:38
Think so. Now know your firm Accountests specializes in skills testing for new hires. Now, one, want to limit that I think accountants here in the U.S. have is that it’s not just that it’s hard to find people with the skills that they need, but it’s hard to find warm bodies. Curious. So, how do you how do you balance the need for skills and just the scarcity of talent?
Giles Pearson 29:27
Yeah, well, that they’re almost to two different questions. I think that the scarcity of talent comes back to that question, were you pleased with what we started with? Which is, you know, how do we how do we improve the perception of accounting as a profession? And, you know, I know there’s quite a bit of work being done bringing in high school graduates into firms, you know, bringing, bringing people from, you know, who pletely know, virtually nothing about accounting and training on the job and I think that’s as an interim step, anyway, that’s a sensible solution. I think that the better solution is for people to want to come into accounting and to go through the more more traditional pathway so that firms actually get people who it’s a lot more expensive to bring somebody through from high school, particularly if you’re paying for their training to bring somebody who’s coming out of college but but I guess in terms of the of the sort of skills testing you know, the the challenge firms have, as you say, is just not getting enough candidates for the roles and you know, the the the testing part of that, it makes it makes the testing part a bit more challenging and I think that that is challenging, and certainly we’re seeing some of that through statistics, I think is that you know, the market is improving. It’s not it’s not an it’s not an employer frankly market as yet, but it’s not it’s not as extreme as it was, say, towards the middle and end of last year. But look, you know, my experience and why we ended up with developing this business. So, you know, at the firm that I was at, you know, we hired people who didn’t have the technical skills that we were expecting. We saw quite a few of our clients, hiring people who didn’t turn out well for them. And that was the, I guess the genesis of the idea. We were looking for some skills tests to use and just couldn’t find anything that was a good enough technical competency and professionalism, that we would have felt happy putting in front of a candidate who was going to come to work for us. But most of them will either simple or just old. You know, pre cloud accounting, sort of focus and T accounts and all this stuff. And you just look at that you go What are they talking about? I have no idea. So so so that was the genesis of our idea to build a test suite that public public accounting firms could use to, to test their candidates. And, you know, the reality is whether you’ve got one candidate, or three or 20 you is still much better to understand what their technical capability is before they start with you than waiting for three months down the line. And then sort of the grinding teeth moment comes along and it’s like this is this is not working out. You know, now now what do I do? Do I Do I exit this person? Do I suck it up and train them? You know, so, forewarned is forearmed. If you’ve got a job at a particular level, and you test somebody, and they’re not at that level, but you need to hire somebody anyway. Well, you can have an open discussion with that person about what sort of training it might be that they need, who you’re going to have to work with. So if somebody needs a bit more help and guidance, that’s there’s possibly one of your managers who’s going to be more sympathetic, or there might be a manager that you really, really don’t want to do is is going to, you know, people who got a short fuse when it comes to people who don’t understand and look to be honest, have a discussion around salary as well because it’s like you’ve you’ve applied for this job, you know, with this remuneration package. But, but the requirements were that you know, we’re looking for somebody with with this level of skills and what you’re showing me is you don’t have that I’m, I’m willing to hire you and I want to work with you to make you get you to that level. So I’m going to make some investment in you. Let’s talk about salary, starting salary and maybe a review of three months, six months, whilst we work towards getting you to the skill level that you need to be to justify the salary that that you know that we’re offering. Somebody who does have those skills. So, so it’s around trying to make it a positive experience. And I think that cuts both ways, you know, candidates, candidates who want to who are applying for a job where they actually want to stay with that firm as opposed to I want a job to put on my CV, I’m going to be there 18 months, you know, and then I’m going to move on, you know, they’re actually not going to care if those candidates that they, they they’re ticking a box. But for a candidate who actually wants to build a longer term relationship with a firm having that sort of having a firm who’s interested enough in them to put them through you know, skills but also other other testing as well. Maybe personality profile and wanting spend that time getting to understand what’s going to work for them. And explaining to them why that why they’re doing that. And the test is not a is not a pass fail. You know, it just makes the whole experience you know, more, more rewarding, I think for both both parties.
Liz Farr 36:08
I agree, sir. You know, I wish that they’d had something like that the firms where I worked. It would have possibly screamed out a few people. You know, there was one young man I worked with who couldn’t reconcile himself is way out of out of an alley. Just he just never could do that. And there was another job where we were acting as the remote CFO. For a company that had lost their CFO because, frankly, this person they hired did not have the skills. And we came in and there was a big stack of tax filings, payroll tax warnings, because it seemed that his approach to paying payroll taxes was to pay something and then find out later that he paid the wrong amount and then pay the right amount plus interest in penalties and so there’s a nice stack about an inch thick of problems with payroll taxes.
Giles Pearson 37:26
Yeah, yeah, that’s right. Look, and, and you know, at the end of the day, when you’re hiring somebody, there’s only so much you can do. I guess what we’ve tried to do is, is to make it as short and as as simple as we can by having, you know, a half hour intensive technical test where you get to see their candidates response to 40 Questions 40 technical questions that are at the right level for them. And, yes, it’s challenging for them as a candidate to be asked to do that. But at the same time, it’s a lot easier for the employer that trying to elicit that amount of information in another way. And some firms have tests that they have built in house or things that they do corporates, you know, I know may may use something like a little case study where they get people to go away and and these things are actually really good, and some of them are excellent. They tend to work for people at a particular level. So they’re not you can’t flex them for a junior person versus a, you know, a senior Accounting Manager, you know, you can’t so So you then leave, it’s like what so do you have multiple tests for that? And you know, that’s, that’s challenging. Or you can ask questions of interview, but how many questions Can you can you realistically, right? And what’s the science behind that whereas what we did was get a known group of, if it’s a CPA legal test, get a normal group of sort of CPAs in that area to tests so that when you’re candidates, instead of just a raw score, you’ve actually got something to compare your candidate with a with a pull off what is essentially the population of of, say public accounting CPAs. So that makes it good for small firms who don’t have that bench mark. You know, if you do a lot of tests or anything, of course, you can develop your own internal benchmarks. You can see, you know, I, here’s this person, they scored, you know, whatever 60% In the test, and this is how they’ve turned out you know, so I get, I get a little data point on that. And when you’ve had 10 People go through the test, and you’ve got all of those data points, suddenly you’ve you’re getting your own benchmark. But their tests, I guess, are particularly good for that small firms who just don’t have that. Don’t have that sort of benchmark of wheat. So we provide the benchmarking for the most part of the test.
Liz Farr 40:23
That’s, that’s very useful. Now, you know, in your travels around the accounting world, there must be some things you see accountants keep on doing that are really contrary to their well being to their best interests. So what are some things that you think accountants should stop doing immediately?
Giles Pearson 40:50
It sort of comes back to the same thing, I think, but it’s, it’s the old working on your business and not in your business. And accountants are really good at working in their businesses. So you know, I think for example, if you’re, if you don’t have a mentor, as a, as an accounting firm owner, you should, you should be you should have one. There are quite a few who are providing that in in an online way. So you’re going to be joining a community of other firm owners. And a lot of that is about guidance for developing the firm that you want, you know, and that and I think that’s where the better the better of the mentors flex or their products flex towards the different different people what it is that they’re trying to achieve in their firms but there’s there’s totally ways to make your firm work more more efficiently get it structured, right. You know, the first thing that that I guess the mentors will often do is is is say, you know, what is the structure look like? How do you deal with information? How do you deal with client queries? How do we move that around so that you the business owner, not the bottleneck, right. You know, and you work out how respectfully to delegate a lot of that client interaction to people further down the chain. So I guess in answer to your question, I would say don’t stick your head in the sand, you know, use use the resource resources that are out there. And the collegiality that you get from those groups and having, you know, we’re involved in a couple of those. Not because we’re an accounting firm, but but because we’re helping their members you know, with the hiring processes and seeing the quality of the discussions that happen. On the on the typically Facebook groups that they set up, the quality of the discussions between the firm owners is just gold you know, that can provide more value than a mentor actually provides themselves at times.
Liz Farr 43:26
I think you’re onto something. I think there’s tremendous power in community and informal networks. mentorships. And just asking questions of people who have maybe tried something, or who maybe know somebody who’s tried something different.
Giles Pearson 43:49
And look at the old days, we would have done that through the CPA societies. Yes. And I know I was reading an article from the Nevada CPA yesterday and they were talking about how many people turn up to their member events. And very, very few you know, it’s so they’re one of their big challenges. is to how to get more member collaboration, but I think that’s where the mentoring route is always a replacement for what would have been that local collegiality and amongst members in a in a in a geographical area. Sadly, that’s those days are probably probably past.
Liz Farr 44:38
I agree with you there, particularly in very large states with small scattered populations. Now it’s much easier to find somebody online than in person.
Giles Pearson 44:58
And look, the reality is, you find you’re probably more likely to find people who are who are like minded, like you in an online community, if you find the right ones. There in your local community where, you know, to be fair, 80% of the of even the local CPA is probably not doing what you’re trying to do.
Liz Farr 45:24
No no, they’re not doing that. Now, what do you think, IPS accountants from making these changes that they know they need to make? What What? What are the blocks to making those changes?
Giles Pearson 45:43
I think Texas and is probably right up there. You know, how I I know we’re going sort of round in circles but how can you possibly run a sensible business when third of your year you can’t even lift your head above water and think about what’s going on. You know, it’s really hard to run a strategy in a business that goes from boom to bust, like that, so you know, I think that’s, that definitely makes it definitely makes it harder.
Liz Farr 46:25
I would agree with you. They’re very hard to make changes when, third, there’s no time to do anything.
Giles Pearson 46:34
Well, it’s the lack of continuity. I guess, because you know, you you can pick something up and and try and work on it and then you know, very quickly having to put it down again, and look at it for you know, two months or whatever.
Liz Farr 46:52
Exactly. Okay. Yeah, yeah, we want you to kind of get out your crystal ball. And think about what will be the trends for accounting in the future. Client accounting services, Kas line advisory services, whatever we want to call it. That’s a really big thing right now. What do you think will be the next big thing?
Giles Pearson 47:22
I think CAS has got a long way to go. Actually, I think and just talking, you know, you look at some of the stats and you look at the proportion of fees that firms are earning from compliance versus advisory advisory is still down at 15%. Maybe of of, of income for firms. So I think I think has got a long long way to go. You know, compliance is you know, there’s all this talk about AI doing, you know, doing doing tax returns and things I think we’re a little way away from from that yet. It’s gonna be yet another challenge. Though, to the compliance part of accounting firms business and obviously cloud was was part of that. So that moved a step. A step away from that heavy duty lifting, I think a step in that journey. Has is where the real value can be added. You know, and that’s all around interactions with business owners.
Liz Farr 48:34
It’s about talking to people and that’s the stuff that AI can’t do. Right?
Giles Pearson 48:42
Yes. You know, is is that new, the nuances of human behavior? We’re a long way from that. Maybe that’s that’s probably a good thing. Yes. So I think cares. You know, it’s been interesting, listening to all the talk about equity or private equity coming into firms and what they do you know, and I guess when you look at what private equity are looking at is expanding the breadth of services that firms are offering and to things like you know, insurance and wealth management. accountants have great skills for offering wealth management services. I think that’s I think that’s probably in terms of, you know, what’s possible wealth management, I think is a is a is open for people who have a high level of trust with their clients. There is an issue, I think, was overreach with some of that. And we saw that here with firms that came in and added, mortgage broking and insurance and these sorts of things. And I struggle with that from a conflict of interest perspective. I think you end up getting to the point where the moment clients are thinking why are they why are they suggesting this is it to do with the amount of commissions they’re gonna earn? You know, I’m these people are doing a pushing me at stuff because because they’re going to earn money from it. The moment you get to that point, you’ve stepped over a line, I think, as a profession. So I do I do worry about some of that, but I think something like wealth management, where fees are transparent, and accountants have really good opportunities to have relationships with their clients. I think that’s you know, that’s, that’s open. But I would go for CAS first, its core core business. And there’s so much value that you can add to the business owner. I think accountants, you know, probably need to get more entrepreneurial to some extent. But the key with CAS, I guess, is about actually allowing the business owner to make entrepreneurial decisions whilst you’re providing them with perspective. analysis. And, you know, some technical rigor to be able to challenge what they’re thinking. Let them make the leap. They make the entrepreneurial decisions, that’s why they’re in business. And it’s their risk in you know.
Liz Farr 51:44
I think that’s the perfect role. For these non entrepreneurial accountants to have to be able to analyze the business from a strictly analytical point of view. But yet also try to put on that entrepreneurial hat a little bit and look at the business at their clients, businesses, as a business owner, what
Giles Pearson 52:16
Yeah, and I looked, I think the learning absolutely goes both ways there, you know, learn from the clients and you know, the big rules that we add, though, well, there’s a technical rigor and the understanding of, you know, making sure that the clients have got good information to work with. But we also had that perspective because we’re in a really lucky situation where we get to see the consequences of a lot of different business decisions in an environment where even leaning over the back fence and talk to your neighbor, you’re not likely to get that honesty in terms of, here’s what here’s what they did, and here’s how it turned out. We get to see that and we get to be able to reflect that back to our other clients that we’re working with and that sort of such a huge value that we can provide and no one else is going to be able to do that. Whilst we maintain that professional standards around confidentiality. I was just gonna say, you know, one of the things that I really that really struck me in the US which I was so impressed with is people really working on the niche. And that’s that’s the other part of the on another part of this is the ability for you to have information around a particular segment of business and I think remote remote accounting practices have really grasped this in that they can go deep and narrow not only become total subject matter experts on the on the niche, but be able to then provide that benchmarking across the client base and I think you know, the, the move to remote firms has has made that so easy. So in terms of another trend, which is coming, I think deep and narrow is something that firms should be should be working much more towards because if you don’t do that you’re going to find a remote firm somewhere. Who’s going to be going after your clients and they’re going to be pretty interested in somebody who’s got to have a huge understanding of their particular industry that you just could never have.
Liz Farr 54:43
Absolutely, I think that’s absolutely correct. And I think that that the leveraging your expertise as an expert in a specific area plus your analytical abilities. I think that combining those things will really ensure the survival and not just survival but the thriving of our profession for years to come.
Giles Pearson 55:18
Yeah, I think that’s right. Just need to get the people in Hey, yes,
Liz Farr 55:22
Yes, we just need to warm and warm buddy. Well, I think that’s a perfect way to end our conversation we kind of came back to where we started off with the struggle for warm bodies in the profession. And I want to thank you, Giles for taking the time to talk to me. Now if listeners want to connect with you. What’s the best way to find you on LinkedIn?
Giles Pearson 55:50
So just Giles Pearson on LinkedIn. Send me a message click through to our website if you want to do that. My email is just Giles at account tests.com But you’ll find all that on the on the on LinkedIn. So yeah, hit me up there.
