With looming regulatory changes and increasingly complex tax laws, accountants must keep pace in order to remain as trusted advisors for business owners. Recently, Nevada accounting executives met at the Las Vegas offices of Gordon Silver to discuss the challenges in their industry.
Connie Brennan, publisher of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.
What challenges face the industry today?
Daniel Gerety: [It’s challenging], staying up to speed with the software and technology that we need, staying paperless, keeping the privacy of our clients’ information and making sure we’re using what’s most efficient.
Mary Heinz: Our biggest issue is staffing
Michael Bosma: The biggest challenge I see is recalibrating for people who don’t want to work the busy season. That seems to be a lot of the Millennial mentality.
Michael Patchett: The complication of tax law with Obamacare issues and the late action by Congress and the President to enact any type of tax legislation these last several years [are challenges]. It just makes a nightmare for planning when you’re a year behind in taking care of those things with clients.
Is it challenging finding and growing quality professionals in this field?
Lynda Keeton-Cardno: You can’t get quality professionals unless the education is there, and you can’t get the education unless the universities have it. You can’t get to the candidates at an entry level position unless there are career centers to publicize that you have an open position.
Gary Johnson: With succession, it’s not only sticking in a body to replace a partner because succession has to be what’s good service to the client. That’s what makes it more incumbent upon us to make this profession desirable for these young people and give them an experience that they are growing into more of this consulting role that they seem to love to do and not so much compliance work.
Jessica Sayles: I taught at UNLV for a senior level course in the accounting program and they’re all terrified of being burnt out. They want to make it through their two years, get their CPA and get out to have a normal life. We’re so deeply rooted in our mandatory Saturdays and 90-hour work weeks. Why would they possibly want to stay in that? They don’t want work-life balance, they want work and life.
William Wells: The answer lies in a shift in the profession and wealth redistribution. The partners are going to have to make less money to redistribute the income down further. We all watch our margins with people and other things relative to profitability and that’s going to have to go out the window. We’re going to have to promote a different type of profession, one that fits the Millennial mentality.
Mark Rich: We address that issue as a firm. We have a philosophy that we pass onto staff when we recruit that says we’re number three. Priority-wise, our suggestion for balance is God, family then our firm. If you don’t believe in God, that’s okay – then we must be number two. I’m really pleasantly surprised that it’s very appealing to the staff.
Stanley Weiner: We’re not dealing at the recruit level but at a much higher level, particularly to take over those of us who are ready to retire. I’m looking for somebody to take over and we just can’t find any quality people with 15 to 20 years experience ready to come in to develop a transition.
What type of in-house training do you do?
Sayles: We assign mentors to our new staff to make sure they’re acclimating well and can ask all their questions. We also do an external leadership program that’s specifically for CPAs.
Gerety: Our philosophy is that we want you to have more than the minimum. We want you to have double what’s required because I want the smartest people and the only way to do that is to experience and learn new things.
Lance Bradford: Besides the standard training, we focus separately on the consulting aspect from these five to seven year people. Every month we target a different group of people to really focus and extract from them how to actually consult and deal with clients and issues. The more we seem to get the needed training to these up-and-comers, the better chance we have of keeping them for the long term once they feel like they can really handle their clients.
What are clients looking for in an accountant?
Weiner: The reality of today’s world is that clients don’t really care who does the compliance work. They rely on your judgment, your expertise and your years of knowing them for guidance.
Bosma: As businesses are getting larger and more complex, the larger firms have seen the trend that a significant portion of their revenue is in consulting. It’s not general consulting, it’s specific niches of consulting. The more of a consulting practice you have, the more appealing you are to a more sophisticated client base who are willing to pay for it. From a small firm perspective, that becomes a significant risk if you don’t have real robust consulting that you can bring to the table.
Jason Gamett: We’re deemed to be the most trusted advisor that people have. We’re going to get the questions regardless of what they are, if it has anything to do with a dollar sign. We are consultants and sometimes we have to partner with other consultants who have expertise in other areas so we can help direct our clients to the advice they’re looking for.
Keeton-Cardno: Clients just want someone to talk to. They have financial questions, and a huge part of consulting is just being able to talk leisurely with your client and not make them feel stupid.
How big of an issue is pricing pressure in the industry?
Sayles: It’s more from other competitors with one or two people in an audit practice trying to grow their business. They’re the ones getting these false prices out there, so clients are putting pressure on us only because they’re getting solicitations from people who just aren’t giving them a price that any reasonable firm could compete with.
Rich: It’s the post-recession syndrome where clients have greater expectations at a lower price.
Wells: The challenge is to add value and take their eye off of the pricing. Pricing is one of the things that’s challenging to the profession. There’s pricing sensitivity and the economy has brought this on.
Johnson: The pricing issue just depends on what the clients are looking for. If they’re looking for just compliance work, then you can’t compete with the pricing. But if they’re looking for something different, we’re finding that clients are willing to pay for value and they just want to make sure they’re getting value for what they spend. If they’re not recognizing value relative to compliance-type work then it comes back to consulting. Are we helping them be more profitable and are we helping them take advantage of new tax laws to save taxes?
Bradford: There are more stronger, new start-ups and bigger projects. Those groups are more apt to be less price sensitive as opposed to the ones coming out of the recession.
What Regulatory issues are facing the industry in the near future?
Johnson: The margin tax is a big thing. It’s extremely complicated and it’s not clear how to calculate it. The formula says it’s the same as the federal tax, but the items are different. The cost of compliance for this is going to be astronomical.
Andrew Zimmerman: There will be a lot of businesses going out of business.
Sayles: It could be very detrimental.
Rich: When I started my practice, the federal tax code was about 25,000 pages. Now, it’s about 75,000 pages. Having all these changes, including some where the IRS doesn’t even have a form yet, drives us nuts
Weiner: The retroactive changes make it impossible to plan for anything.
Patchett: When I started back in 1986, we did tax returns by hand and we knew all the formulas in our heads and they were even numbers. Now, with computers, we can tweak numbers by just one-tenth of a percent and see how much revenue we’re going to raise. That goes into the law so the technical complexity that we face is because of the technology available at our hands. The problem is, as an accountant, we want to know how to get that number. If we’re going to consult our clients, it’s knowing how to get the number that’s going to save them money or be more efficient and effective to not pay more than they should be paying.
Zimmerman: With all of the intricacies around new tax code language and case law, we find that it works best when accountants and lawyers can work as a team. When they work together, the client is the one who benefits the most, and gets the best possible result.
Are there increasing mergers and acquisitions in this field happening across Nevada?
Wells: Firms are trying to develop scale. The succession plan problem is part of that scale. A lot of the issues we’ve talked about – the people shortages, technology – scale could make that go away.
Bradford: We’ve acquired a few firms already in the past three years and we’ll continue to do that over the next five years. We focused on the attest (audit data review) side and we do smaller to mid-sized public company work also, so we look for really strong experience there.
Bosma: I’ve been doing business with a lot of people over a lot of years, just in different firms. You get the economy of scale if you come together and then you’re more top-of-mind as you’re thinking of all these other skill sets that you have around the table. It has to be a win for the staff and a win for the clients.
How competitive is this industry?
Johnson: We sometimes meet with prospective clients and recognize we’re not the best fit for them, and we’ll refer them to other firms. It has also happened where we’ve met with a prospective client and got an understanding of why they thought they wanted to change firms and recommended that they stay. It’s an obligation to business owners and potential clients that they have the right fit.
Sayles: In the reputable firms, there’s more camaraderie than competition. As much as clients are interviewing you, you’re interviewing them as well. There are going to be clients who would be profitable but it’s just not going to work, the communication isn’t there or the desired output from them is not what you’re willing to do or can do.
Gamett: It’s important to know why a client leaves you and why a client is approaching you, then you’ll have a good understanding of what’s going on with that client. If they were happy with what they’ve got but not happy with the price, then maybe they’re not going to be a good fit for you. They’re not going to be happy no matter what you do.
Wells: It’s less competitive now than it used to be. Firms are narrowing their scope and focusing on what they think they can do.
What does the future look like for the accounting industry?
Bosma: Specifically to Northern Nevada, right now the entire region is experiencing a flight of a lot of Millenials out of or over public accounting straight into private. Without having the large firms there, a lot of the top talent is going out of the area. I call that the “Reno Brain Drain.” We’re trying to be very proactive to get ahead of it, but it’s going to cause an increase in prices.