Is it possible to be a CPA and start a small practice without being the quintessential “tax guy”? (I’m not sure the term ‘tax gal’ translates but this equally includes female tax practitioners.)
You know that guy. Whether or not he loves them, his life revolves around taxes. He’ll do any taxes you want him to at his hourly rate. Estates, trusts, individuals, non-profits, tax planning and maybe even some accounting software too.
Due to the nature of the compliance deadlines, the “tax guy” burrows in a hole in December each year and emerges close to May of the following year. During “hibernation”, he services hundreds of clients, answering questions for all of them regardless of their situation. This CPA is responsible for the entire tax code and the required 40 hours of annual continuing education each year are spent in a flailing attempt to understand what Congress is doing with taxes.
Clients don’t bother to email about non-tax questions during this stretch of the year because he is so busy with other clients that he’ll only address it “after April 15th”. So they wait, and bunch their questions together and try to get a meeting after tax season has ended.
Crawling to the finish line in the middle of April, clients’ returns are completed (or extended) and they may have had an hour or so to meet with their CPA until the next planning session.
CPAs need a new business model
Is it any wonder public accounting is not able to recruit to this lifestyle? The fact that 78% of public accounting partners are men should clue people into the non-family-friendly nature of the business.
To keep, recruit and service clients beyond a tax return, the profession needs to change.
Other professions are changing their cultures. Residents in medical school are no longer required to do the grueling schedule imposed upon the previous generations. Career “hazing” just isn’t what it used to be. Call it a byproduct of a market economy, but the new generation of employees isn’t as willing to sacrifice today for an economically insecure tomorrow.
Most business clients need more support than they are currently receiving.
Bookkeeping questions, expansion plans, new investments, tax planning, employee benefits, monthly close, depreciation questions, and new software are just a few of the questions clients are considering. Business owners’ minds are constantly weighing the next step for their business and need support beyond the annual tax filing.
Some clients want an advisor in the “trenches” with them.
I started Red Earth CPA to address a few shortcomings of the profession.
1. The unresponsive CPA
Your CPA has hundreds of clients. S/he receives emails, phone calls, LinkedIn messages, facebook messages, and texts in addition to the tax questions at the Friday night high school basketball game. S/he is drowning in questions and clients most of whom want more and better service.
Red Earth addresses this by working with far fewer clients with more touchpoints than the industry average. As opposed to the hundreds of clients most CPAs service we measure our clients in dozens.
This business model allows us the time to dedicate to each client throughout the year and provide them the service they need. Rather than the traditional transactional business model, this engages clients in active communication about their business.
2. Tax season deluge
As mentioned above, the tax season stops all other client work. If the CPA has too many clients during the year, this is exaggerated during tax season. If medicine functioned the same way as public accounting, all patients would become ill at the same time each year. This leads to all advisory, accounting work, bookkeeping questions and payroll problems being pushed to the back burner as tax is the priority.
Red Earth addresses this by only working with business clients. Clients sign an annual engagement letter with services and price agreed upon before the work begins. The accountant is active in the client’s file reviewing transactions regularly and maintaining a dialog with the client throughout the year. When tax season arrives, the return only needs to be prepared as all the information has been reviewed throughout the year. All the regular work continues to be performed throughout tax season.
3. “I can’t figure out how to get my accounting software to work”
Accountants spend dozens of hours each year supporting software. Between unsupported accounting systems, QuickBooks accountant transfer files, restoring backups, and learning journal entries in different software packages, the time spent is mostly in low-value tech support, troubleshooting client problems.
This isn’t fair to the client. Clients want to spend their time making sure their information is correct, not whether the software works.
In response to this, Red Earth supports clients only in QuickBooks Online.
On the surface, this is an inflexible position for prospective clients requiring them to learn new software. However, the time spent on client activity is much greater.
The decision to only support QuickBooks Online results in much more efficient communication between the accountant and client.
There is no transfer of information and the accountant can address issues from anywhere at any time leading to far greater service to the client.
The accounting industry is undergoing tremendous change. While most firms are content to be tax generalists, Red Earth is an accounting firm looking to solve the accounting and advisory challenges of relatively few business clients. Accepting fewer clients with annual engagements, less tax work, and only one software package is how we offer a superior service to our clients.