Frequently named as the most trusted profession by business owners, leaders in the certified public accountant (CPA) industry have had their work cut out for them in 2021. From navigating complex issues arising from the COVID pandemic to dealing with ever-changing rules from the Federal government, CPAs are working to remain flexible and available for their clients. Recently, executives representing this industry met in a virtual roundtable, sponsored City National Bank, to discuss accounting and what the future holds.
Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. These monthly roundtables bring together Nevada leaders to discuss relevant issues and solutions.
What is New for CPAs?
Kelly Bullis: The industry is always changing. There’s always new tax law, new accounting standards. There’s also changes in technology. So, we have to constantly be reinventing ourselves and looking for new opportunities.
Alisha McClellan: I’ve seen a huge escalation in the area of mergers, acquisitions and consolidations among our clients. There has been an entry of private equity into our local markets that we haven’t historically seen. So, we are seeing businesses that traditionally wouldn’t sell to a third party externally getting on the market and being sold.
Jessica Sayles: We work a lot in the non-profit realm and the influx of federal funding that is subject to audit has increased over the last 18 months. We’re getting calls now from for-profit entities that suddenly find themselves subject to, potentially, federal audits of their funding. First time auditees with millions of dollars in federal funding have no idea what they’re in for with these audits. I don’t think anyone explained some of the ramifications of accepting federal funding.
Glenn Goodnough: In addition to the gaming industry, construction is central to the economy in Vegas. Thankfully, they were deemed essential, and they’ve done very well in the past year and a half.
How is Billing Structured in this Industry?
Bullis: We use hourly rates to gauge how we’re doing, but I do a fixed fee. When I sit down with a client, I look at the complexity of their return, the history of what it costs us to do it in the past and I factor in an increase in prices every year. I tell them, “This is what your fee is going to be,” [then] hand them an engagement contract right when we do the [initial] interview. They sign it and they pay up front, and it eliminates any argument [on rates]. They know what they’re getting into upfront.
Mark Bailey: I price in advance as well. The presumption is the client is entitled to know what they’re going to pay for something just as you are when you go into a restaurant. We have some words, of course, in our engagement letters that say, “If you don’t do what you say, it could go up.” But, for the most part, our engagements are quoted in advance. On our tax engagements we have three different levels. We have a basic tax return, then we have a level that adds different services. It might be personal financial statements, two meetings a year or unlimited phone calls. We found that by structuring this the way we have, we actually have been very successful in increasing our fees on that basis.
Curt Anderson: We use that very similar thing [contractors use]. We use our time sheets as a cost accounting measure to make sure we’re tracking and we’re quoting fees [correctly]. We also monitor for changes in scope that may require a change order. We’ve been doing it this way for 15 to 20 years [and] have found the clients are very accepting.
Are you Experiencing Staffing Issues?
McClellan: Our biggest challenge is definitely a shortage of talent and managing the talent that we do have.
Sayles: Staffing has definitely been complex. In the past 18 months, in particular, with all of the changes in tax laws, the grant programs and the federal programs that have been out there, our clients need us more than ever. We want to provide those services for them. We want to provide that expertise, but we also need people to assist us with it.
Bailey: We’ve experienced a surge in growth this year. We need folks in the two-to-four-year experience category. [So many are] tired of this industry. Staffing is an immediate problem and I’m fearful that the shortage we have of folks staying in the profession is going to foment continued shortages as we retire; if we’re ever able to retire.
How do you Remain Competitive in Regards to Workforce?
Sayles: When I go on LinkedIn and look at my own job ad, I see [competitors], looking for the exact same people. We’re all offering the same things and now [we’re] competing with CPA firms from all over the country. It’s not just in our own markets anymore. I’ve heard of firms coming in from California offering full remote work and a $30,000 or $40,000 raise from what wages are locally. It’s tough competition out there for the staff, and we need them more than ever.
Bullis: We try and be flexible and I don’t have a shortage of staff. I’ve actually picked up two really good employees just in the last year and I’m making sure they don’t leave. One of the ideas that I found makes my staff happy is, we work four, 10-hour shifts, Monday through Thursday, except during tax season. We take Fridays off.
Anderson: We’re hybrid. We came back into the office May of last year, and we had some people who stayed home for various reasons. We have a lot of women as partners, but also men that have family issues. They have kids that are getting sick. They’ve got other family members that have health issues. We did see our productivity lapses a bit when people are working remotely. It’s not such a prohibitive drop that we say no, nobody can work remote. We still allow that hybrid model, but it’s been a bit of a profit challenge.
Bailey: We have very flexible hours, and I’ve had people work remotely, including a principal who lives in Denver. It’s worked out very well. We did feel the need to isolate initially, but everybody has pretty much chosen to work in the office full-time so that they at least have some personal contact.
Chris Wilcox: We ask people to work three days a week in the office, two days a week [remote] and we rotate that if we need to. Interestingly enough, most people are choosing to work in the office. We didn’t see a drop in productivity. Part of the reason for that is they upgraded all of our IT [recently]. Honestly, we were probably more productive last year simply because [people] had nothing else to do.
How Much of an Impact does Technology have Within the Industry?
McClellan: Technology has taken away some of those low-level functions, but it has freed us up to concentrate on adding value in other ways. It’s helped us concentrate on being better business advisors, adding value and helping our clients think through complex business problems. It’s an overall positive thing for the industry. It is a good shift and I think it adds to the value of our profession as a whole.
Bullis: If you ask me to say what is the one single new technology that has changed our practice it would be QuickBooks online. For a lot of our smaller business clients we just tell them to go to that platform. I now have access to their records when I’m meeting with them at any time. We can log on and fix their records when they screwed up. For our larger clients, we have the ability to log in remotely to their system and see records live. Both of these technologies are just an amazing leap for accountants.
Wilcox: When I first started out, I prepared some tax returns, not through my firm, but just for friends and family and I did them by hand. Today, I don’t know that I could do those simple tax returns by hand, our laws have gotten so complex. If we didn’t have the technology that we have, we couldn’t comply with it. I don’t think that our clients understand how complex even a simple tax return is [to prepare] and how impossible it would be to do that simple tax return without the technology that we have at our fingertips.
What Regulatory Issues are you Seeing?
Wilcox: Our biggest challenge right now is simply the uncertainty in the regulatory environment that we practice in. We just don’t know. We don’t know what the rules are going to be from day to day.
Bailey: I’m particularly concerned with, not just the regulatory, but also the business environment. The fluidity makes it virtually impossible to consult and counsel our clients in a direction that we have some confidence in, in terms of their growth and strategic planning.
Bullis: There’s uncertainty. Right now, we’re dealing with two big bills in Congress with all kinds of tax changes sitting in them, and we don’t know what will actually be passed. Everybody’s calling and asking what they should be doing. I could guess as to what will actually become law, but there’s not a lot of things you can do until we know.
Sayles: Some of the uncertainty that we’re seeing, in our clients as well, is some of these bills that are being proposed have retroactive implications. Particularly in the capital gains world. If our clients are trying to make decisions before the end of the year, they don’t know what the impact will be. Will I be at a higher tax rate? Will I be at a lower [rate]? What date is that cut off? It’s very difficult for us to advise our clients when we don’t have any idea what date some of this will be effective, if at all.
Wilcox: I haven’t seen anything that’s going to be helpful to businesses. I tell my clients it’s like planning a trip from Canada to San Diego, and the map has been erased and nobody will tell you what it’s going to look like. That’s what we’re dealing with. The regulatory environment that we are trying to work in today is simply unfair to us as CPAs and advisors and it’s unfair to our clients because they don’t know what to do.
How has the IRS been to Work with Lately?
Bullis: I write a weekly column and I had column just a couple of months ago entitled “The IRS is a Mess”. They don’t answer their mail. We found that calling and talking to them on the phone gets things done. We take advantage of that. I tell my clients the new way of dealing with the IRS is, we don’t send them checks anymore. We pay using their direct pay system.
Sayles: I was explaining a K-1 to an agent a couple of weeks ago. I was shocked that he didn’t know. [K-1] is a form that goes out to partners or shareholders of a business to let them know what their portion of the business activity was for the year. It’s al – most as basic as a W-2 for a business. For an IRS agent to ask me what the different lines meant on a K-1 was concerning when they were auditing my client.
Anderson: One problem is, they’ve got these notices they’re sending out now that are, fundamentally, assessments. They’re saying, “We think you owe us another $12,000. If we don’t hear from you, we’re going to assess it,” and off we go. You’ve got to put a kibosh on that to at least get a hold on the process. It’s unbelievably arrogant, their attitude. In my experience, it’s never been this bad. This is all about bureaucracy working on its own to make their lives easier. I don’t have a lot of respect for this process as it stands right now.
McClellan: The budget cuts to the IRS have been going on since around 2010. If you index it for inflation, I’m not sure what the actual numbers are, but I have read that they’ve had a 20 percent budget cut over the past decade or so. That coupled with all of the changes that have come through. It’s just left them severely under resourced and staffed. They don’t have a capacity to handle what’s in front of them right now.
Wilcox: It got remarkably worse during COVID. I have some empathy for them because they’re dealing with a lot of the same things we are, and they don’t have the ability to go out and hire more people. It’s a mess and COVID exposed just how bad their systems are. They’re trying to play in the big leagues with one hand tied behind their back and weight on their legs.
Anderson: Their system goes back to the 60s and it hasn’t really been significantly updated, other than patched. [Now] they’re not really teaching these new agents the technical issues that they’ve got to be aware of for audits. We’ve had agents come in who don’t really understand double entry bookkeeping. That’s scary.
Is this Industry More Cooperative or More Competitive?
Goodnough: I would say it’s more collaborative. I view the people [here in this roundtable] as partners and professionals that help each other serve our clients. If we’re doing things right, we all have plenty of work to do.
Bullis: Clients look for a fit and sometimes we’re not the right fit. I’m good at recommending other CPAs. I would also add that the Nevada Society of CPAs helps create a collegiate atmosphere where we can get together and have lunch once a month and share stories and encourage each other and help each other.
Sayles: I don’t feel within the local, Nevada community that there’s as much of a poaching issue among firms. Our staff are not regularly being approached by local firms. We certainly don’t look within our peer and friend group for our future staffing. But I feel like the gloves are off nationally. There are firms that come in and grab whatever they can. Firms from the outside that have no connection to our community have no problem doing it.
What Should a Business Owner Look for When Hiring a CPA Firm?
Bailey: The single most important thing, from our perspective certainly, is do we connect culturally? Sitting down [with a client] and having a short meeting and asking, “What are your goals? What are your objectives?” One thing CPAs should [be looking at] is service, whether or not they can service that client and give them the service that they need.
McClellan: I would say [clients should look at] their knowledge, expertise and experience in working with businesses that are of a similar size complexity in with their industry. We’re seeing more importance with CPAs being familiar with a particular business issue that are in a client’s industry. That would be question number one. We’re definitely seeing clients that [have] been under served by somebody that isn’t really familiar with their industry.
Goodnough: The question [a business owner should ask] surrounds intellectual and relationship capital. The number one question, [a potential client should ask,] “What resources are you going to provide to meet my business needs?” Number two is, “Who within your organization is going to be accountable to me to make sure that you meet me where I operate my business and take good care of me?”
Sayles: Do your values align? Does the expertise of the CPA firm that they’re reaching out to match the needs of [their] business? Do they appreciate honesty? Do they want the right answer even if it’s not what they want to hear? Are they a nice person? That’s honestly something that we look for in our clients and staff. Do we want to work with them? Can I hand you off to my staff accountant? Will you treat them with kindness and respect, and will they treat you the same way? Those are all the things do we match up in terms of our skill set professionally, but then also, personally.
Anderson: [Clients] should be asking, how do you define yourself in your firm? Do you define yourself by the paperwork to produce? Or do you define yourself by the intellectual capacity and wisdom and experience that you bring to help me run my business, take advantage of opportunities and avoid problems? It’s the idea that we’re not producing tax returns and financial statements, were producing information that then has to be used in a productive manner so that’s what the clients should be asking.
Wilcox: Do we have that expertise in the industry that they’re in? [Clients] need to be comfortable about that and, on our side, I always tell clients this is a two-way street. You’re interviewing me, trying to get comfortable that I have the resources, expertise and ability to meet your needs. I’m in that fortunate position in my career where I don’t have to take all comers. I want to take on good clients that want to work with me, and that I want to work with.
A Stress Test for Your Estate Plan
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