Posted June 07, 2017

The CPA Firm of the Future

This article was originally published in the May 2017 CPA Journal, The Voice of the Profession, a publication of the New York State Society of CPAs. It has been posted here with permission of the Publisher.

Over the next five to 10 years, CPA firms are going to see change at a pace the profession has never seen before. With the rise of automation and computer technology, the mundane and compliance tasks that CPAs spend most their time doing now will be done almost instantaneously by machines. Tax return documents from banks, employers, and the government will be seamlessly integrated with tax software programs, downloading themselves automatically. Computer algorithms will be able to perform audits and relay that information to banks or the public in a few seconds. Bookkeeping will be automated, with seamless integrations between banks, vendors, and customers.

These automations will provide a great opportunity for CPAs to transform and differentiate themselves from the tax preparers and accountants of the world—the “machines” of the industry today. CPAs are already considered the most trusted advisors; to succeed in the automated future, firms must transform themselves into advisory firms that give clients advice and support that only a CPA can provide—and also handle tax returns and audits, by the way.

Most CPA firms are not doing this. Instead, they are trying to turn their firms into tax return factories where the client drops off data, never talks to anyone, and a few weeks later comes back and picks up their return to sign. They are lowering their prices to compete with TurboTax and HR Block—commoditizing their practice. CPAs cannot win a fight against TurboTax.

Adding Value

When someone calls this author’s firm, or any other for that matter, and asks about tax return pricing only to complain that it’s too high, it’s vital that that the CPA, responds: “You are having a CPA prepare your return, but not only that, you are going to get advice and guidance on how to plan for your financial future and what you can do to minimize your tax with us. That is why our price is high. If you don’t want any of that guidance, then you may be better off going to a non-CPA or TurboTax to prepare your tax return.” A CPA-prepared return should be double the cost of HR Block to reflect this added value.

So why are CPAs firms not doing this? Because preparing tax returns is comfortable. It’s what CPAs have been trained on and learned to do over their entire career. And it’s nothing to be ashamed of; being able to look at a tax return, analyze it, and tell the client what they can do to minimize their taxes is hard to do. It takes years of training, concentration, real expertise, and self-confidence to be able to give clients sound advice. Isn’t that why CPAs get into the profession in the first place, to help people achieve their financial goals?

Of course. But doing that solely through tax return preparation, while necessary, is no longer sufficient. It’s time for CPAs to go to the next level. It’s time to focus on the hard parts of the job—the advising parts—and turn that into the core function of CPA firms.

The first thing firms should do is start meeting with their clients and building relationships with them. If someone drops off tax data and comes back to pick it up in two weeks, it’s hard to build a relationship with them. It’s also easier to prepare a return for someone if they are there in the office and can answer the CPA’s questions immediately instead of playing e-mail tag. The next step, which is probably the hardest, is delegating the easy tax returns to the less experienced CPAs in the office. This is how they learn the basics, and how experienced CPAs free up time to work on the difficult and most demanding clients—as well as time to focus on finding and retaining new, value-focused clients.

It’s also important to have the right systems in place to supplement and enhance the firm’s process. Remember, the goal is for experienced CPAs to spend the majority of time working on providing value for the client, not printing, scanning, and PDFing. If the firm is spending too much time on administrative work, then management needs to spend some time researching products that will increase efficiency or retaining firms with more efficient workflows. (Hint: It should not take more than 2 days to assemble a return once it’s been completed).

Changing the Mindset

Most important, however, is the mindset. CPAs need to think of themselves as the trusted advisors that they are, and they need to be training the younger generation on the importance of being such an advisor. Firms need to brand themselves as problem-solving, value-producing organizations. They should position themselves as a place from which clients know they can receive the much-needed advice they crave. If CPAs can accomplish this, the profession will be profitable and successful for many generations to come.

By Jason Ackerman, CPA, CFP®, CGMA