Certified Public Accountants (CPAs) have a unique perspective on the economy having worked with several different industries in various levels of recovery. Although business is up, accountants have exercised caution and often recommend the same for their clients in anticipation of a flattening economy. However, new practice areas are experiencing growth and have opened the doors to more business moving forward. Recently, Nevada CPAs met at the Las Vegas offices of City National Bank to discuss the health of their industry.
Connie Brennan, publisher and CEO 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 are some emerging practice areas?
JAMES MAIN: There’s going to be trillions of dollars from baby boomers changing hands. The succession and exit planning and what would be value engineering for businesses is going to be immense. I’ve seen it take off with the firms here locally. That’s where I see a big area of service because whether the businesses are sold, there’s an extreme amount of acquisition. There’s private equity firms that have obviously been in the market. There’s private deals. There’s family offices that are buying businesses. There’s an immense amount of work for everybody in this room as related to due diligence, transaction planning, tax planning and estate planning so it’s an area that I think is a really green pasture for professionals that are trusted by their clients and have a financial background.
MARK RICH: Our firm has growth because of specialization, which is a key element of our survival. We have a much bigger practice in forensic and fraud work litigation support, which has picked up the slack, and then some. That’s a whole new area we’ve grown since the recession. We’ve always done practice in that area, but now it’s a big area.
BILL WELLS: The services that we see escalating are cyber security with the concern about privacy and security of IT systems. Then merger and acquisition. It’s not at the same level as 2015, but it’s prominent either because of generational issues where the baby boomers are exiting and taking money off the table and succession planning. That’s one of the items of the succession plan. Also, I think business is getting tougher and status quo is not what’s going to make it in the future. With their margins being cut and business becoming tougher, there’s some people just exiting in order to move on.
TOM DONAHUE: The cyber security issue affects everybody. I’ve been to a lot of seminars on that. That’s an area of our practice we’re actually making an investment in to try to get that expertise in house where we can provide some of those consulting services. It’s the stuff that keeps you up at night. Just the other day, we had a phishing attack where somebody sent an email and was trying to get our controller to transfer money.
How have new regulations impacted your clients?
MAIN: Some of the DOL (Department of Labor) and overtime issues in our state and the ACA (Affordable Care Act) are two that you constantly get [questions on]. They raise what would be the exempt limit for the salary people that are now subject to double time pay. If you want to keep a good client, you basically have to be their CFO to a certain extent. From the standpoint of our side of things, we have to be prepared for everything that’s out there. We’re supposed to know everything and it’s a tremendous burden.
RICH: [Regulations] are a constant annoyance because, with ObamaCare, it was all new reporting requirements last year. Then DOL. Clients do look at us to inform them as consultants. There is a responsibility there that we have. They hold us up there so we have to know everything and inform them. Just this year, what will affect all of us is W-2s are due January 31st, not February 28th. That tightens that requirement. We have to inform the client. If we don’t and they miss that date, they’ll ask us why we didn’t tell them. It’s not just on a local level. All of us have clients in just about every state, and also international clients. It’s not just what’s going on with federal law. It’s state and local [law].
DREANA RESLER: How do you communicate when you have all these different things that are happening? Do you do a blanket email to all of your clients or do you do it individually?
RICH: All of it. Every which way you can. We’ll do email blasts. We’ll do emails to specific clients if it applies to them. We do a newsletter. We do an annual tax update. We have seminars in our office. We do all of it to keep clients informed.
MAIN: It forces you to keep up-to-date, too. It helps your staff from a training and mentoring standpoint that they’re actually being brought into that environment.
Is staffing a challenge in your industry?
GLENN GOODNOUGH: It’s the biggest challenge, but seems to also be the biggest opportunity. [The opportunity] is to develop experienced professionals and continue to build the capacity of the firm.
WELLS: I think the profession challenges a lot of people to stay technically competent, which a lot of people don’t want to do. It’s an ongoing process. Because of the seasonality of our business, there’s real compression of time and some of the younger people’s values are not necessarily in line with that. They’re looking for different things in quality of life other than what we can offer because the compression of time and busy season.
DONAHUE: Staff retention is a continual battle. The next generation expect a little bit more out of the work/life balance situation than what we had as professionals. Sometimes it’s hard to marry those two cultures together. We found that, while we do have a pretty good retention rate, a lot of people who leave our firm end up completely changing career directions altogether. So it’s not necessarily our firm, it’s just the public accounting grind in general. There are times of the year that things get very compressed and the hours tend to shoot up. It is very challenging. Accountants sometimes have a hard time being creative, but we need to be creative in terms of thinking of ways we can entice our staff to want to stay and figure out how they can get that work/life balance achieved and still be a productive member of the firm.
GOODNOUGH: We find that one of the things important to the staff is that we define expectations, we document the expectations, we communicate them and then give them regular evaluations and reviews to let them know how they’re doing as compared to those expectations. That’s something we hear frequently that is high on their value list. We put quarterly evaluations into place with the understanding that communication is a condition, not an event and we like to just keep that fluid. We find that seems to help a lot with the mentoring process as well.
DONAHUE: We’ve got similar ideas and concepts. We call it the customized work arrangement, which includes remote access or maybe working from home one day a week. We have clients all over and sometimes it’s a long drive. The other thing we’re experimenting with is making it a fun place to work. We try to do events for our employees like bowling night over at Red Rock. We get all of our staff together and build that team and build that loyalty to the firm. That goes a long way. Sometimes it’s the intangible things that really can motivate somebody to want to stay with a particular organization. Our people are our most important asset and we truly care about every single person that works there. We invest a lot in our people, as we all do. We want to see them succeed and eventually be sitting at one of these roundtables one day talking about their 20 years of experience at the firm. There’s a lot of theories and things that are out there. Those are some of the ones that, so far, seem to be working pretty well from the staff feedback that we’re getting.
How are you reaching out to the next generation of CPAs?
RICH: We’re fortunate to have UNLV (University of Nevada, Las Vegas), which is a world-class business school as far as education goes. We recruit heavily on campus. What’s required to get those top students is, you have to be actively involved with Beta Alpha Psi, which is the most active organization for accounting students. We have them come to our office and I speak there and lecture on fraud on campus just so our name is out there. That’s really what you have to do to get the best and the brightest. We’re all competing for clients and we’re equally as competitive for the top students.
CHRIS WHETMAN: In order for us to be competitive in the marketplace on recruiting, we start very early. We start in the sophomore year. What we also try to do is make sure it’s a good match, so we set expectations early of what it looks like to work for us. After they do take a job with us, we listen to what the employee would like to do from a flexibility perspective and try to adhere to that. We put a lot of emphasis on culture and we like to design the culture of our office and continue to formulate it based on the personalities of the people in the office so we are listening to them. That provides flexibility in itself. We’ve tried to establish a mentoring or a culture of empowerment for millennials. We’re trying to create more opportunities for them as well.
DONAHUE: One of the things that we’ve started is reverse mentoring so the millennials and tech people can teach. I’m ashamed to admit it, but I’m not good at Twitter and all these things. We have reverse mentoring. If I’m mentoring somebody and I can teach them what I know, they can teach me what they know about social media and all these things that I might not be up to speed on. It’s a mutually beneficial mentoring relationship where we both get something out of it.
Will we see more mergers moving forward?
WHETMAN: We’ve agreed to merge with Eide Bailly, a large regional firm. They’re going to merge their current office in Las Vegas with our office. We’re also bringing Bryce Wisan and his practice into our office as well. By year end, we’ll be about a 30 person firm. We think this is going to create a lot of opportunity for our existing people and give us the ability to hire and retain people. It’s going to give us access to knowledge and expertise that we haven’t had previously. Last week, I got a call from a client that needed business valuation services. This is something that we have not done historically and I would normally have to call somebody else, but I was able to reach out with Eide Bailly and find somebody who does this and provide that service to our client.
DONAHUE: What you’re seeing is a lot of the firms that were founded maybe 20 or 30 years ago, the founders are looking for an exit plan and you have to take that hard look at your firm. Do you have the next generation of leadership coming up to support the firm or do you have to look to an Eide Bailly or to people who are looking to establish a foothold in the Valley and see if it makes sense to merge. I think that may be what drives the merger activity. It’s the aging of the founding partners of firms.
RICH: Our firm sees an opportunity right now. We’re looking to acquire. The aging firms are either going to close or sell. We’re looking presently to acquire firms.
Do you think the economy has improved in recent years?
WELLS: I think it’s relatively flat. We’ve had double-digit growth over the last six years, but the general overall business economy, I don’t think we ever came out of the recession. It’s all relative. It’s what your expectations are and what you were used to. We are seeing a slow-down nationwide in our clients. We expect the next two or three years for the economy overall to slow down significantly. We still pay the price somewhere down the road for not having a diversified economy. The stadium, if it comes to fruition, and the convention center and everything that’s happening are fairly compartmentalized in a couple of industries. We just don’t have that broad based economy that helps us have a full and meaningful recovery. We’re growing, but it’s because of different services and different opportunities like cybersecurity and other things like that. It’s not necessarily that we’ve picked up some new clients. The pie isn’t getting a lot bigger.
MAIN: We hear locally that we came out of the gutter, but we came back up to where our clients are surviving. Some are doing better than others. Overall, it’s going to be pretty steady. I talked to a couple people about if the stadium comes in or if Resort World takes off, you’re going to turn around and have $5 billion worth of construction underway.
RICH: You’re feeling our reservations as far as the overall economy, not just in Nevada. It could be viewed as a house of cards, which makes it dangerous. If you pull the wrong card out, we could collapse. I think that could happen. I think it’s not as solid as I would want it to be.
GOODNOUGH: Another interesting effect is the recession hit us so hard that it affected the psyche of the average business owner across the board. It changed how they operated, how they managed risk and opportunities. I think we see that effect. Our firm has also been fortunate to have good, steady growth. In the economy, I agree, it’s so industry specific.
RESLER: Everybody was a rock star 10 years ago. Now I think, even my client base, are a little more cautious with what they’re doing and how they’re spending their money.
RICH: Part of why those attitudes have changed, though, is our clients are the survivors. [The recession] did affect them. It was traumatic. That’s who our clients are and pricing is an issue because of that. Even if things get better, it’s their mindset.
MAIN: It’s like the depression babies. They look at it and say, “We’re not going back there.” In our society where we sell things to each other, what does that mean? Instead of building malls, we’ve got guys building Wal-Marts. When you look nationally, the whole economy is virtually stagnant around the 2 percent growth. We’re not going anywhere fast. So our clients and ourselves turn around and expand the services that we have and provide better services for our existing clients. We’re more cautious and we’re telling our clients to do the same thing. We can’t afford to make any big mistakes.