AUDIT & ASSURANCE

The New Formula for an Accounting Business

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Productivity isn’t the same as putting in the hours.

By Alan Anderson, CPA
Transforming Audit for the Future

Getting the right clients and projects goes a long way toward building a profitable and successful firm. But that’s only part of being business-minded about your firm. CPA firms have followed the same overall business model for generations, based on billing clients for the hours worked on a file. While that has been successful and has allowed many partners to achieve great wealth, a few forward-thinking firms are successfully challenging that model.

MORE: How to Upgrade C and D Clients | Eleven Types of Audit Clients and Which to Fire | Don’t Take on Audits in an Industry You Don’t Understand | How ‘Business Expert CPAs’ Get Their Own Business Wrong | Exceptional Audit Client Service Demands Effective Communication | Five Ways to Prevent Audit Bottlenecks | How Do We Drive Relevance in Audit? | Lack of Relevance Drives Audit Commoditization | Four Basic Understandings Every Auditor Must Master | WANTED: Great Audit Mentors | Closing the Audit Expectations Gap
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Many firm owners obsess about chargeability and realization rates. But that’s missing the big picture: the only thing your revenue model needs to accomplish is bringing in enough cash to cover your expenses with leftover profit. We know how much we’re paying the staff working on the audit, and we need to collect two to three times their salaries for that work. That will give us the cash we need to pay them and all our other expenses, plus a return to the partner, and make up for the weeks when they’re not as busy or are in CPE or taking PTO.

That’s why, instead of obsessing about chargeability and realization rates, a better way to measure success for your firm is by looking at your collected rate. READ MORE →

How to Upgrade C and D Clients

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Use relationship building and a little bit of detective work.

By Alan Anderson, CPA
Transforming Audit for the Future

Ideally, if you’re practicing business-mindedness, you only keep the A and B clients. If a client is below that level, you must consider whether that client is salvageable. If the answer is no, you need to exit the relationship.

MORE: Eleven Types of Audit Clients and Which to Fire | Don’t Risk Losing Good Employees for Bad Clients | Four Questions to Make Your Firm More Successful as a Business | Say Adios to Audit Fee Pressure | Deliver More Audit Value by Getting Out of the Conference Room | Six Essential Elements in Audit Planning | Before the Audit: More Than Just Planning | Five Crucial Attributes for Successful Audit Leadership | Put the Ethics Code to Work for Your Clients and Your Firm | Is Audit in Crisis Because of Definitions?
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For C and D clients, you want to try to grow them into A or B clients by developing a relationship with them. If they don’t reach that level within three years, they can be passed off to another firm. There’s always more than enough work to go around with A and B clients.

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Eleven Types of Audit Clients and Which to Fire

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Bad clients can bring turmoil by increasing the likelihood of regulatory scrutiny, legal troubles and reputational damage.

By Alan Anderson, CPA
Transforming Audit for the Future

In the realm of auditing, client selection is a critical decision that can significantly impact the health and harmony of your team and your firm. Auditors should be highly selective about their clients because engaging with entities that lack ethical standards, have complex or opaque financial practices, or demonstrate a history of compliance issues can lead to substantial risks and challenges.

MORE: Don’t Risk Losing Good Employees for Bad Clients | Can a Service Center Model Solve Audit Staffing Shortages? | Move to Advisory and Assurance with Relevance | Use Eight Audit Exit Items to Deepen Client Relationships | Know Your Three Audit W’s | Planning Lays the Foundation of Audit Relevance | Are You Correctly Identifying the Relevance Intersection? | Traditional Audits Don’t Deserve Premium Billing

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When we discuss the types of clients that our teams find challenging to work with, we can divide them into these categories:

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Don’t Risk Losing Good Employees for Bad Clients

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Keep the right KPIs and the right clients, and you’ll keep the right staff.

By Alan Anderson, CPA
Transforming Audit for the Future

Audit in the future will be much different than in the past. It’s going to require different skill sets. In the future, we need to teach more thinking and interpretive skills. The ticking and tying can be automated, but we’ll need people to interpret the anomalies that the bots and automation tools kick out. They’ll need to develop a deeper understanding of the industry, the client, and general business sense to discern whether an anomaly is just a mistake or a sign of something more profound.

MORE: Can a Service Center Model Solve Audit Staffing Shortages? | Don’t Take on Audits in an Industry You Don’t Understand | How ‘Business Expert CPAs’ Get Their Own Business Wrong | Exceptional Audit Client Service Demands Effective Communication | Five Ways to Prevent Audit Bottlenecks | How Do We Drive Relevance in Audit? | Lack of Relevance Drives Audit Commoditization | Four Basic Understandings Every Auditor Must Master | WANTED: Great Audit Mentors | Closing the Audit Expectations Gap
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

 

As the owner of a business myself, I understand the need to ensure there is enough cash coming in to keep the lights on and everyone paid. But sometimes, firms take on work just to keep people busy all year round. A prime example of this is EBP audits, which seem quick and easy but have their own risk factors. Doing only one or two a year can be especially risky for your firm.

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