Accounting Roundtable - 2012

June 18, 2012 • An Advertising Supplement to the Los Angeles Business Journal

The Businessof Accounting*

David Krajanowski, CPAManaging PartnerSingerLewak LLP

Thomas D. Leaper, CPA Co-Partner In-Charge, RBZMiddle Market GroupRBZ LLP

Selwyn Gerber, CPAManaging DirectorGerber & Co.

A ROUNDTABLEDISCUSSION

Ron Friedman, CPAPartner-in-Charge,Southern CaliforniaMarcum LLP

Dennis L. Duban, CPA Managing PartnerDuban Sattler andAssociates LLP

Kevin O’Connell, CPACEO & Managing PartnerMacias Gini & O’Connell LLP

Steve Milner, CPAManaging PartnerSquar Milner, CPAs

Todd Van der Wel, CPAO�ce Managing Partner, LosAngeles & Woodland HillsMoss Adams LLP

This special advertising supplement did not involve the reporting or editing sta� of the Los Angeles Business Journal.

*

45_61_biz_of_accounting_06_18_12.qxp 6/15/2012 9:33 AM Page 45

46 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL JUNE 18, 2012

S our economy

and its challenges continue to present new and

complex climbs and dips, the Los Angeles

Business Journal has once again turned to a

selection of leading accountants in the greater

Los Angeles area to get their assessments regarding

the current state of business accounting in the

region and the various trends that they have

been observing, and in some cases, driving.

Following is a series of questions the Los Angeles

Business Journal posed to these financial stewards

of Los Angeles County and the unique responses

they provided – offering a glimpse into the

state of business accounting in 2012 – from the

perspective of those in the trenches delivering

financial advice and leadership to the businesses

of our region and beyond.48

ROUNDTABLEPARTICIPANTS:

Dennis L. Duban, CPAManaging PartnerDuban Sattler andAssociates LLP

Ron Friedman, CPAPartner-in-Charge, SouthernCaliforniaMarcum LLP

Selwyn Gerber, CPAManaging DirectorGerber & Co.

David Krajanowski, CPAManaging PartnerSingerLewak LLP

Thomas D. Leaper, CPACo-Partner In-Charge, RBZMiddle Market GroupRBZ LLP

Steve Milner, CPAManaging PartnerSquar Milner, CPAs

Kevin O’Connell, CPACEO & Managing PartnerMacias Gini & O’Connell LLP

Todd Van der Wel, CPA O�ce Managing Partner, LosAngeles & Woodland HillsMoss Adams LLP

A

Business ofAccountingRoundtable

H OW have the changesin the economy

a�ected your clients andwhat advice have yougiven to help them?GERBER: Our clients have become more cautiousand far less reliant on banking relationships,because even the most secure of those relation-ships has proven to be worthless in the face ofmore stringent directives from the regulators andchanges in lending criteria. Previously, ourclients had banking relationships that transcend-ed the loan document. In today’s environment,lines of credit are arbitrarily withdrawn, andmaturing loans are not being extended. Also,document banking and contract-based bankinghave, in most cases, taken the place of relation-ship banking as we once knew it. We advise ourclients to be proactive, and not wait for theirbank to re-define the relationship. We urge themto seek loan extensions and alternative financingarrangements well before their current loansexpire. With respect to their private investments,our clients are revisiting their family portfoliosand we are assisting in objective evaluations ofthe performance of their wealth managers andtheir asset allocations to respond to a radicallyaltered economic landscape.

MILNER: The biggest problem with the US econo-my has been, and will continue to be, the lack ofcertainty. Are the so-called “Bush tax cuts” expir-ing? Will they be renewed? If so, what will the



BUSINESS OF ACCOUNTING

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taxes on business owners be? Certainly, nodeal will be made between Congress andthe President until after the election. Thisuncertainty has justifiably caused greatapprehension in the business community.They want to push forward, but they needto know what the rules of engagement are.Our advice to clients: proceed cautiously. LABJ: Have you seen a change in the wayyour clients monitor cash flow and whatare some examples you can share?

MILNER: Clients have become more cautiousin their management and monitoring ofcash flows. They are generally projectinglonger receivable conversion cycles, andaccordingly, are delaying the payment ofaccounts payable and have become very cau-tious in managing inventories. The net resultof these policies has been a reduction ininventory levels to the extent that some ofour clients are sacrificing sales growth inorder to minimize liquidity risks. In addi-tion, due to expected longer receivable con-version cycles, clients have put more empha-sis on credit and collection efforts. Credit cri-teria has been tightened and changes indeployment of accounting personnel havebeen instituted to devote additional time tocontact with customers with balances.

LEAPER: Prior to the recession in 2008, andfor some time into it, many clients reallydid not actively monitor and actively man-age cash flow. The situation is much differ-ent now, clients have become more pro-active and forward looking – and it’s neces-sary. I feel the most important element tothis is to anticipate problems so there isadequate time to react. An example of thiswould be to increase management ofaccounts receivable by working more close-ly with customers. This would includemonitoring aged receivables on a more fre-quent basis and talking with customers tounderstand when payments will arrive sothat you can anticipate any potential prob-

lems. I have also seen clients weeding outbad customers and changing paymentterms to boost cash flow. Inventory isanother area that can burn lots of cash ifnot managed well. Similar to receivables,clients are monitoring their inventory levelsmore closely and stocking only the itemsthat are necessary. And in some cases theyare eliminating product lines that are not asprofitable as others. A focus on lean andefficient operations is defiantly the trend.Clients are also developing better manage-ment reporting so they can be more on topof their operations. Examples include finan-cial dashboards that measure specific keyperformance indicators on a daily or weeklybasis and cash flow forecasts based on salesorders, accounts receivable, purchase ordersand accounts payable. These tools givemanagement more visibility into their oper-ations so they can anticipate issues andhave the time to take corrective action.

GERBER: Yes, we’ve seen changes in allindustries. Clients are far more aggressive interms of collections, and more judicious inextending credit. For many, receivablesmanagement has now become a key ele-ment of administering their enterprises.

H OW has goinggreen impacted your

practice and your clients’businesses?VAN DER WEL: Over the past several years,companies have increasingly recognized theneed to focus more on the environment, thewell-being of their communities, and thesustainability of their business practices.Major companies such as Walmart, Costco,and Microsoft are now “greening” their sup-ply chains by demanding that their suppliers

regularly report on “codes of conduct,”which often contain many items included intraditional Corporate Social Responsibility(CSR) reports. The supply chain reportingphenomenon has been given additionalimpetus by the California Transparency inSupply Chains Act, which took effectJanuary 1 of this year. This law requires allretailers and manufacturers doing businessin California and having total worldwiderevenues in excess of $100 million to formal-ly publish their policies and safeguards toprevent the use of slave labor and humantrafficking in their product supply chains.The California attorney general estimatesthat 3,200 companies will be required toreport under this law. As an independentauditor, we are well suited to conduct theverification of these reports, which frequent-ly address personnel-and payroll-related mat-ters, environmental and factory conditions,and other requirements that may overlapwith financial statement audits.

H OW has the use oftechnology impacted

how your clients run theirbusiness? Are they willingto make the investment inthis economy?KRAJANOWSKI: Technology is a game chang-er for many businesses. When done right, itcreates a strategic differentiator. When tech-nology is leveraged effectively, managementmakes better decisions, managers managetheir work areas with better informationand visibility, and people communicate farbetter – all in order to better service the cus-tomer and/or client of the business. Webtechnology has added strategic value in the

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Continued from page 46

Prior to the recession in 2008,and for some time into it, manyclients really did not activelymonitor and actively managecash �ow. The situation ismuch di�erent now, clientshave become more pro-activeand forward looking.THOMAS LEAPER

*We’ve seen changesin all industries.Clients are far moreaggressive in termsof collections, andmore judicious inextending credit.SELWYN GERBER



ways that businesses touch their con-stituents, and has mitigated the dependen-cy on geographic proximity at the sametime. When there is a clear ROI (return oninvestment), clients do invest in technolo-gy, even in this economy.

GERBER: Technology is to business todaywhat steam power was to the industrial rev-olution. Hardly any aspect of any of ourclients’ businesses is un-impacted by newtechnologies. Working with clients, we seea great keenness to make any necessaryinvestment. The return on these enhance-ments – when carefully planned – is gener-ally extraordinary.

W HAT is the bestsuccess story you

have seen and what haveyou learned from it?O’CONNELL: We have a client that was able totransfer the ownership of their business totheir heirs with minimal estate and gifttaxes. The value of the business was in thehundreds of millions, so the tax savings wereconsiderable. This success was the result ofmore than 25 years of work for all of us –proper planning, tough decisions, airtightstrategy, sophisticated estate planningmethodology, knowledge of complex busi-ness structures, buy-in from all family mem-bers involved, and diligent execution. Theclient understood that effective planning is acommitted process. This story stands outbecause of the scope, duration and complex-ity of the planning efforts. However, after allthese years we’re most proud of the relation-ship we’ve developed, because it is muchmore than a client-accountant relationship –it’s really all about trust.

W HAT are commondi�culties that you

are observing and whathave you learned fromthem? How have yourclients managed them?GERBER: The common denominator in termsof challenges to our clients is the shrinkingconsumer base. For those who are vendors tothe State of California or the cities, transac-tions are often hamstrung by frequent rene-gotiations and severe delays in payment.

LEAPER: In general, our clients have seensales or profit margins decline and havetaken steps to be more efficient by manag-ing direct costs, including product costs,and managing cash flow better. These havebeen the biggest difficulties. We have beenhelping them by recommending things likemonitoring aged receivables on a more fre-quent basis, keeping a close eye on invento-ry levels, ordering only what is absolutelyneeded, and shifting their focus on prod-ucts lines that are the most profitable forthem while phasing out others that are not.

H OW has internationalcommerce impacted

your local client businesses?O’CONNELL: We have many clients that haveinternational operations, source from for-eign suppliers, sell overseas or all of theabove. This adds additional complexity inthat supply chains must be validated or test-ed, local jurisdiction regulations must becomplied with and foreign currency expo-sure must be managed. To assist our clientswe have expanded our international expert-ise and have a presence in approximately100 countries through the BDO Alliance.Our participation in the BDO Allianceallows us to offer our clients global resourceswhile maintaining the strength and energybehind our local commitment to meetingtheir service needs here in the states.

GERBER: The world has indeed becomeflat – the internet has meant that sourcingproducts in other countries can easily beconducted on the web, and many inter-mediary companies are now out of busi-ness. For most of our clients, doing busi-ness internationally has been a naturalevolution. Inbound investors require acomprehensive tax plan which harmo-nizes the various tax treaties and mini-mizes overall tax impact.

W HAT have you doneto prepare your

clients for the InternationalFinancial ReportingStandards (IFRS) and howdo you think it will a�ectyour clients’ business?FRIEDMAN: We have advised our clientsthat these standards are coming. Most ofour clients haven’t done much at thispoint to prepare due to the continueddelay of the standards. Once we confirmthat the standards will be adopted andidentify the related timeline, we will workwith our clients and the banking commu-nity to ensure they understand the changesthat will be taking place.

DUBAN: Many of our clients were unawareof the international reporting requirementsand of the aggressive enforcement that hasincreased over the last several years.Reporting not only includes foreign bankaccounts with over $10,000 balances butalso interests in foreign corporations andcompanies and interests in foreign assets.This year we have sent out detailed ques-tionnaires to each client. We are requiring100% compliance in connection with thosereturned questionnaires so that there is nopossibility that a client did not receive oneor did not understand the requirements.We are informing our clients of the signifi-cant penalties to taxpayers AND to tax pre-parers for non-compliance and also of thevast amount of information that is requiredfor foreign corporation interests and foreign

asset interests. We are also stressing thatthere is no tax due as a result of having aforeign bank account, provided that theinterest earned is properly reported. Wehave also informed our clients that if theycannot provide the information requiredwe cannot represent them as their certifiedpublic accountants. Although the actualimpact on their businesses is minimal, thiswill once again result in additional costs tothem to prepare the information, get it tothe CPA and have the CPA prepare yetadditional returns and reports to providethis information to the appropriate govern-ment agencies. And these increased costscome at a time when businesses can leastafford them.

KRAJANOWSKI: This is an interesting ques-tion since it assumes that our clients need tobe prepared for IFRS. Though the SEC hasindicated that they may require IFRS report-ing at some point in the future, no deadlineis set and there are no equivalent move-ments for privately held companies. CurrentFASB projects (and there are many) are jointprojects with the IASB. Statements emergingfrom this collaboration should be both USGAAP and IFRS compliant. So, it is entirelypossible, that our clients will become literateregarding IFRS over time by simply adoptingthe new FASB statements as they are issued.Our clients’ operations are, increasingly,international and IFRS statements of sub-sidiaries are becoming more prevalent. Wehave several partners that have been trainedin IFRS, but, more importantly, we have alarge international base of affiliates that canhelp our clients with their compliancerequirements as they arise.

O’CONNELL: To assist our clients in anticipat-ing the impact of IFRS, we provide periodicstatus updates on the timeframe andimpact of adoption; identify contract termssuch as loan covenants or compensationarrangements that might be impacted;identify client specific issues, such as con-solidating entities previously excluded fromthe company’s financial statements; andwork with management and owners todevelop an implementation plan so thatcritical areas are addressed early on.Regardless of the eventual method andmanner of implementation in the U.S., webelieve that adoption of IFRS for most com-panies will cause a moderate and temporaryincrease in financial reporting compliancecosts with little impact on the ongoingcosts. For larger entities with companies inmultiple foreign locations, the implementa-tion costs will be significantly higher, butparadoxically may result in lower costs overtime (assuming a single set of accountingstandards is accepted in each of its report-ing locations.)

MILNER: There is a lot of talk in the busi-ness community regarding IFRS. Certainly,this is the case with companies that eitherdo significant business internationally orhave international investors. They havebeen asking: “When do I need to change?”At present, as I understand matters, the USFinancial Accounting Standards Board andthe International Accounting StandardsBoard are trying to reconcile the differentstandards. There is some expectation thatthe reconciliation will occur by 2016. Whatthat means at this point is unclear. In the


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meantime, many clients are not waiting. Infact, many clients have been requested toproduce financial statements under IFRS asa requirement of their foreign investors. Weexpect to see more of this.

W HAT federal/stateregulations appear

to have the most signi�cantimpact on your clients’business? Why?VAN DER WEL: Currently, the most pressingissue affecting our clients is the long list oftaxes set to sharply rise at the end of theyear. For businesses, one of the central con-cerns is that tax rates on gains from long-term capital transactions—currently at 15percent—will revert to the previous 20 per-cent level if no congressional action istaken. This applies to gains on sales of capi-tal property, including stock. It alsoincludes dividend income, which, for themost part, is currently taxed at the 15 per-cent rate. In the past, dividend income wastaxed at a higher rate, just like ordinaryincome. On top of these possible increases,a Medicare surtax of 3.8 percent takes effectin early 2013. The surtax applies to invest-ment income such as interest, dividends,and capital gains.

O’CONNELL: Federal and California govern-mental regulations coupled with uncertain-ty and future Federal Income and EstateTax and California Income Tax changeshave had a disquieting effect on companiesand individuals trying to conduct businessin California which, according to a recentsurvey, ranked last in terms of business-friendly environments for the eighthstraight year among all 50 states. While weenjoy a high quality of life here, taxes andother regulatory requirements make it diffi-cult to conduct business. Our state used tooffer one of the most attractive businessenvironments in the country, but we arenow falling deeper into a regulatory wellwith no real promise of reform on thehorizon. We see these challenges affectingour clients across the board. It’s staggeringto think that between 45–55 percent of theincome generated by our high net worth

clients is eaten up in taxes of one kind oranother. Beyond California’s challengingtax and regulatory environment, our smallto mid-sized business clients are very con-cerned that the new Obama Care regula-tions to provide health care for all employ-ees will create a significant financial strainfor them and possibly threaten to putthem out of business.

W HAT issues keep yourclients up at night?

FRIEDMAN: Cash flow and meeting theirbudget.

KRAJANOWSKI: Uncertainty, plain and sim-ple. Whether it is the economy, tax lawchanges, government regulations, bankingand credit; clients just want to know whatthe rules of the game are. Once known,businesses are capable of navigating over,around or through good and bad times, nomatter how rough the seas are. What theycan’t deal with is navigating one way, onlyto find out the rules have just beenchanged and they have to start all overagain if not make up ground that they lost.

DUBAN: This year more than ever before ourclients worry about potential tax increases.With promised increases by both the Federaland State governments, our clients, many ofwhom had difficult years during the reces-sion and are now just coming out of unprof-itable years, worry that the modest increasesin their bottom line will be nominal afterthe increased taxes are levied. Many needtheir profits to pay off debts incurred duringthe recession in order to stay alive, and theincrease in taxes threaten to make the debtreduction that their financing arrangementsrequire impossible. And since California tax-payers cannot offset profitable years and lossyears, the state increase in income taxesbecomes even more ominous.

O’CONNELL: Closely held family businessesface a number of unique challenges thatkeep them up at night: Governance-what isthe appropriate structure that balances theneeds of the business and the interests ofthe family? Succession planning-who willtake over the leadership of the company?How will they be selected and groomed?How can the business attract the best talent

from both inside and outside the familyranks? Our daily focus is to use our expert-ise and years of experience to help clientsnavigate these challenges and address thedramatic level of uncertainty they face intoday’s environment.

LEAPER: In today’s economic and politicalclimate, there are many issues to whichbusiness owners should be paying closeattention. Internally, the main thing thatconcerns our clients is cash flow. They allneed the ability to cover current liabilitieswhile still putting food on the table. Thesecret here is to monitor your key figures –those financial balances, ratios or other sta-tistics that you use to make decisions. Forstarters, do you know how your customersare doing? What are your average days inaccounts receivable? Have you checked yourcurrent and quick ratios recently? Knowingthis information can help you manage yourcash in a way that will allow you to sleepthrough the night. What about external fac-tors such as litigation or regulatory changes?Sometimes there is nothing that can bedone about these but often times businessowners can have some control over theirown fate. For instance, workers compensa-tion claims increase during tough economictimes, as do instances of fraud. Policies andincentives related to employee safety andsatisfaction can not only decrease the num-ber of actual claims but also help protectagainst disgruntled employees attempting todefraud your company. It may seem that asa business owner there is nothing you cando about regulatory changes, and this maybe true, however, your ability to respondwill let you keep a leg up on your competi-tion. How do taxes and regulation impactyou? Do you know your margins? Is thereroom to pass on increased taxes? Keepingclose tabs on your product performance canhelp you manage these changes in youroperating environment. For organizationswho receive government funding, it’simportant to know your options. If yourfunding disappears, are there other avenuesto get the cash you need? It’s on you, thebusiness owner to develop contingencyplans. To put it plainly, there are a millionthings that keep our clients up at night butour advice to them and all those reading isthis: “Have a plan.” Know what drives yourbusiness and how it’s performing and you’llfind you can navigate through even themost unexpected circumstances.


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* Whether it is the economy,tax law changes, governmentregulations, banking and credit;clients just want to know whatthe rules of the game are.DAVID KRAJANOWSKI



GERBER: Fundamental economic uncertaintyis the black cloud hovering over everything.

H OW does a companyplan for tax changes

given California’s politicallandscape?MILNER: With respect to California taxes,planning is not all that difficult.Unfortunately, we are a one party state witha big budget problem. Planning is simple:Taxes are not going down, and at best theyare staying the same. We may not like that,but we can plan for it. There are two com-peting ballot initiatives this fall which willattempt to raise taxes on those with higherincomes. In other words, if you own a prof-itable business that is in a flow throughentity such as LLC or S Corporation youwill likely be paying more tax. This meansthat you will need to distribute more cashto the owners to pay the tax, which in turnmeans businesses will have to get by on lesscapital. Welcome to California.

VAN DER WEL: It’s hard to foresee what willhappen at the end of this year given thepresent political environment. As a result,it’s probably best to assume tax increaseswill take place. This possibility has beenchanging the inner dynamics of M&A deals.Buyers, aware of the potential rise in taxrates, are using it as leverage in negotiationswith sellers, who can hold on to a greaterportion of the sale proceeds with the lower2012 tax rates still in effect. A possibleincrease in taxes has also intensified theconstant tug-of-war over selling assets versusselling stock. Buyers often want to purchaseassets to receive a step-up in basis and gainthe opportunity for a write-off over time.Sellers, however, frequently want to sellstock to benefit from the low 15 percent taxrate on gains from long-term capital transac-tions that’s now in place.

GERBER: Our core tax philosophy issummed up in the philosophy: “Surprisesare for birthdays not for tax time.” We con-tinuously keep our clients apprised ofimpending tax changes and provide fre-quent tax projections throughout the year.This way, they are well-positioned to planahead and take full advantage of savingsopportunities.

O’CONNELL: You can only safely plan aroundthe rules and regulations and income taxlaws in place at the present time. InCalifornia, the Legislature persists in passingexpensive new regulations for businesses,particularly in the environmental arena. TheCalifornia Revenue and Taxation Code ishighly complicated and unduly complex inits non-conformity to the Internal RevenueCode. In these challenging economic times,California’s businesses are partially or evencompletely limited from using prior years’losses to offset their current year income. So,for example, many businesses that struggledto survive in 2008 and 2009 were precludedfrom utilizing their loss carryovers to offseteven meager gains in 2010 and 2011 as theState’s “reward” for staying the course andrighting their ship. Recent Bills passed bythe California Legislature and loomingCalifornia tax increases on the Novemberballot create an environment of financialuncertainty, giving California one of themost challenging tax climates for entrepre-neurship and small businesses in the U.S.It’s a significant understatement to say thatCalifornia is not a business friendly-environ-ment. Unfortunately, sometimes the onlyway for clients to address the tax changes isto leave and do business in another state.

H OW should companiesevaluate value from

an accounting �rm?O’CONNELL: We see a lot of firms that wantto be all things to all people. In fact, somefirms won’t even call themselves “account-ing” firms anymore because they feel it’s toolimiting. We believe what’s really best for ourclients is working with CPAs who have thetype of deep, specialized expertise that’s onlyfound in an accounting firm. We’re not try-ing to be your investment advisor or sell youinsurance. We’re not joking when we saywe’re proud to be boring accountants.

DUBAN: The value provided by one’saccounting firm should be directly relatedto the quality of the advice it receives.Compliance and technical expertise shouldbe a given; but over and above the abilityto correctly prepare income taxes andreview financial statements, an accountingfirm should provide advisory services thatassist the individual or company in makingsound business and investment decisions,

minimizing their tax liabilities, attractingcapital and new business and should be theresult of open communication wherein theCPA is able to focus in on the clients’ needsand provide valuable input.

MILNER: Most business clients want asounding board and a trusted advisor. Theywant to know they have someone to callwhen they have a major transaction or forsomething like, the toilettes don’t flush, doyou know a good plumber? While youraccountant will never know as much aboutyour business as you do, they can give youinsight from their experience which willhelp you make the right decisions. Most all,look for a firm that is practical. Picking theright accounting firm is just like Goldilocksgoing from bed to bed. One is too hard andone is too soft, but somewhere there is onethat is just right.

KRAJANOWSKI: Forget the compliance side(audits and tax return preparation) andseeking the lowest price. Lowest price is notthe lowest cost. Find a firm that can beyour business partner, challenging you withnew ideas, providing up- to-date alterna-tives in dealing with accounting and taxlaw changes. True value comes from a CPAthat isn’t afraid to tell you you what youdon’t want to hear but should hear, bringresources to you that you can’t get yourself,including industry knowledge, so-calledlocal knowledge and contacts to other like-minded service providers. Most important-ly, how do you feel about the partner andstaff assigned to your account – can youbuild a relationship with them?

FRIEDMAN: It is important to look at theteam the accounting firm puts together foryou. Did they take time to match you withexperts in your industry? Do you feel com-fortable with the team? Simply put, allaccountants know how to do the account-ing work so the differentiator is whetherthey will go beyond that to provide youwith good advice and solutions specific toyour needs, your business and your indus-try. Ask yourself “do they handle similarclients and are those clients successful?”Don’t hesitate to ask the accounting firm(s)you’re considering hiring to provide refer-ences from current clients.

LEAPER: Like all professional service firms,companies should be looking for “addedvalue” from their accounting firm. As partof my normal marketing activities, I have



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*We believe what’s really best forour clients is working with CPAswho have the type of deep,specialized expertise that’s onlyfound in an accounting �rm.KEVIN O’CONNELL


NOTE: THIS “WEALTH ROUNDTABLE” ORIGINALLY APPEARED IN THE LOS ANGELES BUSINESS JOURNAL AS A PAID ADVERTORIAL SUPPLEMENT. THE LABJ CANNOT BE HELD RESPONSIBLE FOR ANYTHING CONTAINED HEREIN.


had many initial prospect meetings withthe owners or CFO’s of many types of com-panies. I don’t remember ever leaving oneof those meetings without the prospect ask-ing me, “What can you do for us over andabove your basic services?” In other words,what value added services can you provide– how can we help make the company bet-ter or more competitive? I don’t believethere is a single way to quantify the valueof your accounting firm. What I can tellyou is that in my role of a service providerthere are things I strive to achieve in aneffort to provide additional value to myclients. I call all of my clients before theyhave a need to call me. I maintain contactwith key client personnel throughout theyear – especially when I am not typicallyneeded. When I see an article that pertainsto a client I get it to them immediately. Istrive to be the first person they call when abusiness issue comes up or when even theirfavorite [sports] team has a big win – yes,your business relationships can become per-sonal and fun. I think what it comes downto, if you only speak with your accountingfirm contact once a year when the work isdone, your evaluation score for youraccounting firm should be, “No Value.” Gerber: “Value” implies going beyond fill-ing forms, preparing tax returns, and pro-viding audited financial statements.

VAN DER WEL: Value is not an abstract con-cept. In any business relationship, you wantto know you’re getting a good return onyour investment. We take this very serious-ly. This means going beyond just producingan audited financial statement and: Staffingyour audit team with knowledgeable,industry-specific professionals;Communicating with you throughout theyear; Keeping your audit team consistent soyou don’t have to get new people up tospeed; Giving you access to our most sen-ior-level practitioners around the firm;Responding to and anticipating your needs;Meeting with you frequently to discussaudit issues before they become problems;Training your internal staff on technicalissues to help you reduce future costs;Keeping you aware of pertinent regulatoryand accounting updates as they’re issued.All of this is about forging a long-term busi-ness relationship and becoming one of yourmost trusted advisors.

H OW will the mergerand acquisition

activity within theaccounting professionimpact client service?KRAJANOWSKI: It depends! Some clientscould benefit and see positive changes thatare needed. Others will see disruption inservice as merged firms have to blend sys-tems, processes, procedures, authority guide-lines, etc. Some firm personnel will leavethose firms ending key relationships. Thiswill create an opportunity for those clientsto interview alternative service providers.Clients can evaluate if the merger is as goodfor them as it is for the merged firms.

FRIEDMAN: When done correctly, the mergerand acquisition activity within the account-ing profession should impact client service ina strongly positive way. We merged with anEast Coast based accounting firm, MarcumLLP (our California and Hong Kong officeswere previously Stonefield Josephson), whichenabled us to offer a broader depth of expert-ise and national reach, without compromis-ing the high-quality, personal service that ourclients know and expect.

LEAPER: Simply put, M & A activity will havea negative impact on a firm’s ability to pro-vide quality client service. M & A expertsexpect to see a high volume of M & A activi-ty for at least the next five years. Who canwe blame this activity on? The babyboomers. Many small to mid-size firms arenot adequately prepared for internal succes-sion and therefore, are looking to other firmsas their exit strategy. How does this have anegative impact on client service? If you haveever been involved in a business combina-tion, then you already know. People get dis-tracted and their focus shifts from servingtheir clients to serving the litany of adminis-trative and integration responsibilities thatneed to be handled, such as: learning and/ortraining on new software, utilizing and opti-mizing personnel, moving offices, and othermatters that will hopefully gain someeconomies of scale or market share. Evenwith the best intentions and best laid transi-tion plans, there will be increased instancesof failing not only to meet client needs butalso not adding value, which then results inmissed revenue opportunities.

DUBAN: This activity will continue to be atwo edged sword within the profession. Onthe one hand, a merger can provide anaccounting firm with additional expertise;additional industry specialists, additionaldedicated staff and team members. Thesewill benefit the clients and the firm.However as firms grow, they must be ableto maintain their levels of service and stan-dards, and each client must be made tocontinue to feel important even as theclient roster grows due to the mergers. As aboutique firm, where clients receive addi-tional levels of hands on service and caring,those concerns become even more impor-tant as additional clients and expandedareas of expertise are added.

MILNER: The intent of most mergers within theaccounting business is to deliver more servicelines to clients and maintain, or improve, deliv-ery of services. We have done three mergerswithin the last six years. With all of them,there was no disruption of the accountant-client relationship. We attempted to keep, asmuch as possible, the same accountants serv-ing the clients. But, the larger firm gave theaccountant greater growth opportunities with-in the firm so that he or she would be motivat-ed to continue serving his or her clients with-out feeling the need to change firms.

W HAT is the bestformula for creating

a successful and valuablerelationship between youand your clients?KRAJANOWSKI: Listen, understand the spo-ken and unspoken needs, provide guidanceboth when asked and not asked, be aresource and be available when needed.Under promise and over deliver and treatall clients like you want to be treated. Befair in all of your dealings and be willing toinvest in the relationship.

DUBAN: Our formula has been and continuesto be service. The better the service, the quali-ty and frequency of the interaction andcommunication between the client and theaccountant, the better the success and valueof the relationship. Our formula includes notonly matching the accountant with the rightexpertise, but also the accountant with the



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* Taxes are not goingdown, and at best theyare staying the same.We may not like that,but we can plan for it.STEVE MILNER



correct personality, chemistry and under-standing of what drives the client. Servicenot only includes timely responses to clientquestions and completion of assignments,but also must include proactive communica-tion with the client. Those times when unso-licited contact with the client is from theCPA side of the equation allows the clientsto know that they are valued and that theirCPA is looking out for their best interests.

VAN DER WEL: We’re committed to onething – providing noticeably superior serv-ice and value-added services that make adifference to your business. That means giv-ing you more than what’s expected andworking closely with you to help monitoryour financial condition, manage growtheffectively, control costs, and reach yourbusiness objectives. It’s about building astrong, long-term relationship with you andbecoming a trusted advisor. To do thiswe’ve built a service model on many yearsof client-focused best practices. It startswith a high level of partner involvementwith each engagement and a small staff-to-partner ratio. We make sure to approacheach engagement from your point of viewand focus on your needs, schedules, people,and success. As a result, each engagement isas unique as each company we serve.

FRIEDMAN: The key is an open, honest, andtrusting relationship. It is essential that theaccounting firm and their clients are able tocommunicate with each other. A goodaccountant is able to add valuable consultingadvice to enable their client to improve onwhat they are already doing. Accountants thatprovide only accounting and tax services areoffering their clients just half of what it takesto be successful; the other half is providing theadvice and guidance that enables your clientto continue to do well.

W HAT are the bene�tsof using an

accounting �rm that is aspecialist in my industry?FRIEDMAN: An accounting professionalwho specializes in your industry under-

stands your business, from the sales, costof sales, level of operating expenses, etc.,and knows your competition. Workingwith an expert in your business allowsyou to talk with someone who has likely“been there and done that.” In otherwords, you don’t have to reinvent thewheel every time a new issue arises –chances are, your accountant has been ina similar situation and has hands-on expe-rience solving these issues.

MILNER: Undoubtedly, the biggest bene-fit is that they talk your language. Ifyour whole company only speaksSpanish or Chinese, do you want anaccountant who only speaks a few wordsof your language? Of course not. Yearsago, accounting firms were only set upalong audit, tax and consulting lines.Now, many are set along industry linesas well such as real estate, financial serv-ices, technology, retail or restaurants.Now, accountants are expected to partic-ipate in various trade groups and stay upto date on their designated industries –regardless of whether they are auditorsor tax professionals.

LEAPER: Specialization is essential, andfrankly speaking, a real competitive advan-tage for the firm and its clients. The busi-ness world, whether for profit or nonprof-it, has become more complex over the last20 years. The accounting of business trans-actions has had to adjust to this complexi-ty – and it is more complex than ever.Additional complexity brings with it theaccompanying business processes and con-trols, regulatory matters, sales and market-ing functions, and other matters specificto a particular segment of business thatcan mean the difference between successand failure. A specialized firm can help aclient navigate these issues. The benefits ofspecialization are obvious. Client’s benefitby virtue of specialized client service andadded value. The primary value of beingrepresented by a specialist is that youreduce the risk of making errors. Therecould be (and usually are) nuances in busi-ness, accounting and tax that are uniqueto that specialty. By not working with aspecialist, one runs the risk of uninten-tional errors while potentially harming thebusiness. You may also miss out on poten-

tial opportunities that a non-specialistmay not know about. This is especiallytrue because specialists have a tendency tonetwork with other professionals in theirindustry, thus providing additional out-reach to a specialized network with muchbroader and deeper access to your specificneeds. Let me put it this way: you wouldonly go to a cardiologist to take care ofyour heart, right? Then it stands to reasonthat hiring an accounting firm that spe-cializes in the industry that your businesslives and breaths in would make the mostsense. Why entrust your livelihood withanyone else?

H OW have lending

relationships or your

clients’ ability to raise

capital been a�ected over

the past 12 months?

KRAJANOWSKI: Improving and continuingto improve. Money is available to existingcustomers of banks, who have a need andcan tell the story supporting the request.Money is available to new customers basedon a proven need, the ability to repay, anda story as to why funds are needed. Privateequity markets are teeming with cash … forthe right deal at the right price. There is nofree lunch but the climate is the best it hasbeen in quite a while.

FRIEDMAN: Over the past 12 months ithas remained very difficult for youngcompanies/start-ups to raise capital. Ialways recommend that these groupsreach-out to friends and family for capitalfirst. For mature companies, the banks dohave plenty of money to lend; however,the process of getting a loan from thebank can be especially cumbersome dueto increased scrutiny and precautionsthroughout the process. Many banks havemoney to lend and no one to give it tobecause businesses have been reluctant toborrow from banks and expand theirbusiness during this difficult economicenvironment.



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* Value is not an abstract concept.In any business relationship, youwant to know you’re getting agood return on your investment.We take this very seriously.TODD VAN DER WEL



W HAT are the mostcommon recommen-

dations you have made toyour clients to help themmanage their bottom line?DUBAN: We have really stressed, more thanever before, that our clients review their busi-ness model. The world is changing, economiesare changing and the needs and wants of thecustomers and clients of all businesses are alsochanging. Is your business model still rele-vant? Is the demand for your product or serv-ice growing or shrinking? Is the method ofgetting your product or service to the con-sumer changing and if so are you followingthat trend or trying to play by old rules?Companies must understand that businessmodels are more fluid and evolving than everbefore. Is the company’s method of distribu-tion still relevant? Are they taking advantageof distribution methods like the internet?Have they embraced social media? Is the envi-ronment for their product or service growing?Are there new ways to do their business thatthey are investigating? Is management willingand able to continue to reinvent itself so thatit can be listening for change and adaptingquickly? This will all be necessary for business-es to survive and prosper going forward.

KRAJANOWSKI: Continue to monitor expens-es, staying as lean as possible. Spend yourtime concentrating on not simply revenuegrowth, but quality, long term revenuegrowth in the right product lines with theright customers. Consider investing now toimprove products, processes, people andmachinery to meet your customers’ needs,after finding out what keeps them up atnight. Your success depends on their success.

LEAPER: Find the [right] numbers! It maysound obvious, but it is really important tounderstand the numbers, processes and

related transactions that flow into them tocreate a bottom line. In other words, youmust measure and manage the right thingsabove the bottom line. In my experience, Ihave found that many small business own-ers focus on the things they are most com-fortable with – usually their particular tech-nical skill or selling ability on which theirbusiness has been built. They may not be ascomfortable with, or place enough value on,the financial numbers and other key metricsthat really drive the bottom line. A quickexample of this: one of my clients, whom Iwill call Carl, wanted to hit a certain netincome target. We both agreed that it wouldnot just happen by doing the same thingshe always did. We went through a processwhere we worked bottom-up to get to therequisite top line revenue, but that was notenough so we did not stop there. For Carl,who owned several auto repair shops, oneof his key drivers was shop repair hourssold. When we were able to convert thattop-line revenue target into shop hours perweek, Carl finally had a number he couldmeasure and manage. That “ah-hah”moment changed his business life.

W HAT are commondi�culties that

your clients ran intoduring 2011 and what didyou do to help your clientsresolve them?O’CONNELL: In addition to the more obviouschallenges with cash flow, tightening credit,and ability to raise capital, from an incometax point of view, one of the more visibledecisions made in 2010 — convertingretirement funds to Roth IRAs, thus subject-ing the value of those accounts to incometax in 2011 and 2012 – became even more

difficult as many of those accountsdecreased in value during the first ninemonths of 2011, as they looked towardundoing those transactions (re-characteriza-tions) and then reconverting those samefunds in 2011 at a lower income tax cost.The volatility that occurred during October2011 that led many of them to re-character-ize those accounts by mid-October 2011became their disadvantage as they tried todecide whether or not to reconvert theaccounts in what became one of the mostprofitable months on record. Since markettiming is never advisable, we worked toguide the affected clients in their decision-making processes both for undoing onlythe appropriate 2010 transactions and thenredoing those transactions in 2011.

DUBAN: It appears that more than everbefore, the regulatory environment in whichwe live is affecting all our clients across theboard. Construction and design regulation,ADA, zoning, setback, architectural and ener-gy regulations are becoming more numerousand costly. Employment and local taxation,registration, verification and complianceissues for new business continue to provemore difficult if not impossible to complywith and more often we are seeing regula-tions that conflict with one another andclients that do not know which rules toabide by. Consider the case of the home-owner who must clear brush to avoid firedepartment penalties and fire insurance can-cellation and who then determines that thebrush he needs to clear is a protected speciesand cannot be cleared without severe fines.We are constantly assisting our clients innavigating these continuously changing andoften conflicting areas with the utmost careand concern for their businesses and theirgoodwill. But it is not easy. Overlapping gov-ernment regulation and agencies, althoughwell meaning, in many instances, are prov-ing difficult if not impossible to comprehendand adhere to.

Thanks to all the participants!



*For mature companies,the banks do have plentyof money to lend; however,the process of getting aloan from the bank canbe especially cumbersome.RON FRIEDMAN

*It appears that morethan ever before, theregulatory environmentin which we live isa�ecting all our clientsacross the board.DENNIS DUBAN


JUNE 18, 2012 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL 61


Documents

Accounting Roundtable - 2012