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The Future of the CPA Profession is Now!
Leadership Institute
December 5, 2011
Objectives Today
Identify the 3 most critical areas that must change
Start the dialog about the firm of the future
Offer suggestions for immediate improvement
PCPS Top Issues Partner accountability/unity Bringing in new clients Retention of current clients Fee Pressure/Pricing of
services Developing a succession plan
Source: AICPA 2011
Critical Change Needed
Structure and Governance
Competitiveness and client
retention
Matching skills with tasks and/or
advice needed by clients
“Right” Structuring
Structure and governance•Ability to make timely
decisions?
•Technology application
•Appropriate client service
•Required expertise
•Economic viability
Firm Organization
Ask yourself Are we making timely decisions? Does everyone understand their role
in the firm? Are we able to react to changing
conditions? Are we using technology to our full
advantage? Are we fully utilizing our resources?
Firm Governance
FirmResources
P
P
P
P
Governance
CLIENTS
Structure & Governance Defined roles Clear decision rights Timely decisions Unacceptable to “opt out” Increased accountability
Increased Competition
Fees Client service Quality of advice Depth of relationships
Reactive Client Service
Not managing client expectations•Timing of work
•Fees
•Delivery
•Scope of services
•Value
Key Drivers of Strategy, Differentiation &
ProfitabilityCompetitive Distinct Breakthroug
h
Products
Client Service
Relationships
Source: How to Maximize FeesAlan Weiss, PH.D. 2008
Skill Sets Needed Communication Critical thinking and
problem solving Technical expertise Task oriented Forward looking advice
AICPA Demographics
Source: AICPA 2009
AICPA Demographics
-20 -15 -10 -5 0 5 10 15 20 25 30 35 40
26
31
36
41
46
51
56
61
Women
Men
Current Demographics
CPAs
Non-CPAs
MenWomen
Women Men
Increased Salary & Benefit Costs
Average personnel costs as a percentage of net revenues • 2007 44.7%*
• 2008 45.4% *
• 2009 46.8% *
• 2010 46.4 %*
• 2011 45.1%*
Many firms now 50%+
* © INSIDE Public Accounting 2011 Used with permission
Increasing Salaries
50000
55000
60000
65000
70000
75000
80000
Dollar A
mount
Average Professional Salary
© INSIDE Public Accounting 2010 Used with permission
Average Profit Margins
0.26
0.28
0.3
0.32
0.34
0.36
2005 2006 2007 2008 2009 2010 2011
0.346
0.3250.315
0.3050.291 0.291
0.3001
Perc
enta
ge
Margin
© INSIDE Public Accounting 2011 Used with permission
Passive Firm Management & Client Service
After the fact monitoring •Charge time/Budgets
•Accountability/Profitability
•Credit & A/R Inefficient processes &
systems Reactive client service
Firm of the Future
CPAs
Non CPAs
Active Management
Continuous budgeting and reporting Partner & staff accountability plans Manage
•Margins
•Leverage
•Scheduling/utilization
Active Management
Continuous budgeting and reporting Partner & staff accountability plans Manage
•Margins
•Leverage
•Scheduling/utilization
Staffing Strategy Reverse upward delegation
•Must use lower cost labor when possible
•Don’t allow people to work below their level
What tasks are you doing that you shouldn’t be doing?
Scanning Admin duties Setting up files Making copies Inputting 1099s Typing letters Write up work Payroll reports
Chasing client info Data entry Data imports Filing PDF docs Ordering supplies Deliveries Filing Bank
reconciliations
Staffing Strategy Reverse upward delegation
•Use lower cost labor when possible
•Don’t allow people to work below their level
•Higher level personnel must leverage
•Utilization percentages must increase
Qualities of Successful Firms of the Future
Governance Will Be Supported
Roles will be defined and supported
Decision making will become more efficient
Managing Partners will be allowed to manage
Accountability will be the norm
Average Profit Margins
0.26
0.28
0.3
0.32
0.34
0.36
2005 2006 2007 2008 2009 2010 2011
0.346
0.3250.315
0.3050.291 0.291
0.3001
Perc
enta
ge
Margin
© INSIDE Public Accounting 2011 Used with permission
Reactive Client Service
Service centered •Task oriented
•Deadline driven
•“Have to” services
•“Emergency room” processes
Reactive Client Service
Not managing client expectations•Timing of work
•Fees
•Delivery
•Value
•Scope
Client Service
Communication will improve Expectations will be managed
•Better engagement letters
•Change order process
•Timing will be agreed upon
Firms will focus on client value
Client Service Strategy Describe the engagement Communicate early & often Responsive Deliver on time Understandable fees Deliver value
Change Orders Develop a firm wide
standardized change order process•Starting and stopping work
•Failure to prepare
•Errors in records
•Records not ready at time specified
There will be a One Firm Culture
Staff will be encouraged to work together•Compensation systems
•Coaching
•Evaluations
Mutual success will encourage teamwork
Rating of Motivators
Firms will embrace coaching for improved
performance
Copyright © 2011 Steve Erickson LLC
They will hire and retain the best professionals
Positions will be competitive
Pay will be above market Individual expertise will be
high Appropriate leverage will
be the norm
Firms will focus on what they do best .
Industry specialization Functional area
specialization Exceptional client service Relationship management
They will not only manage change, they will create
change Client service innovation Value enhancement Improved leverage Higher levels of quality Firm structure and ownership
Technology will be fully integrated into every part
of the practice. No ability to “opt out” No shortcutting Standardized processes Consistent files Real time information
Processes Lagging
Over 60%
Files not Consistent
Over 72%
Firms will live their core values, no exceptions. Clients
•Service
•Integrity
Partner/staff relationships Partner/partner
relationships
Implementation
Change process• Simplified
• Incremental
• Positive
• Sustainable
Trusted Business Advisors
Reading•Clients for Life – Sheth & Sobel
•Making Rain – Andrew Sobel
•Trusted Business Advisors – David Maister
•Million Dollar Consulting – Alan Weiss
•True Professionalism – David Maister
Copyright © 2010 Steve Erickson LLC
Accounting FirmProfit Improvement Model TM