Buying a New Suit

I have a special occasion coming up and want to buy a new suit to wear. The truth of the matter is that I do not need a new suit. I bought two new suits about four years ago and probably wore each one two or three times. Also, since COVID started I haven’t even worn a suit and perhaps a sports jacket maybe twice and no ties at all, yet I want to get a new suit to mark my special occasion.

Sometimes things need to be freshened up, renamed or dressed a little differently. That is what is happening somewhat in accounting. I see a lot of the “old” things being revived in different suits. Here are some examples.

Client Accounting Services (CAS). This is the performance of outsourced accounting and bookkeeping services for clients. We’ve always done this. For many clients it makes no sense to have these functions in house as it pulls energy away from their core mission. This is not a new concept, but larger accounting firms have awakened to this and some smart digital and robotic providers of support are promoting it intelligently. My father did this when he started working in 1930. He called it “trying to make a living.”
Bundling services. This is a new term for what almost every small accounting firm has been offering forever. Bundling services is where everything a client needs is packaged together and there is a single agreed upon price for the year. Bundling also includes unlimited phone calls and the typical consulting or advisory services such clients need. BTW, out of the 46,000 United States accounting firms, 45,000 could easily be classified as small with 20 or fewer people in the practice. My father did this too, to try to make his living.
Subscription model. Fancy name for getting paid a monthly fee automatically. Been there; Done that; and still doing it. It just never had a name.
Choice pricing models. This is where a prospective client is offered a choice of three or more levels of services. Early on, maybe three levels weren’t offered, but there have always been at least two. A basic and a premium level, but they weren’t given those names. Clients were presented with a proposal to coincide with their expressed needs and then given an added choice of a stepped-up service that included everything the client really needed. Occasionally a third level was provided which included some unlikely services with a higher price that guaranteed the client would not be charged at the prevailing rates for such services such as a tax audit that might occur…or might not.
Value pricing. This is a model where the client and accountant discuss the services the client needs and the value of those services to the client and a price decided upon. This sounds like every negotiated fee for every client since time immemorial. A hindrance to this is something called competition and the fact that a half dozen other accountants in a ten-mile radius would likely offer the same services for a similar fee, without the added feature of the “value to the client.” There are some situations where one accountant might be able to provide a superior benefit and a value price should be charged, but most of the services for deliverables is pretty much standardized. Don’t think I am suggesting that all accountants are providing the same service, because they do not. There should be a premium for experience and ability to apply that to the client’s situations and exposure to out of the ordinary or complicated transactions that should result in a “value price” but that is outside the normal range of the professional relationship. Also, in my case there is the “Ed Mendlowitz” factor and that creates added value.
Advisory services. This is the new word used for the hand-holding smaller accounting firms routinely provide to their clients. There are some outside the box advisory services some accounting firms perform that command premium prices and provide superior value and these are rightfully classified as advisory services. However, from what I’ve seen these are not offered by many firms and except for some smaller firms that have a high concentration and expertise in an industry or niche, the true advisory services are probably limited to the top 100 or 150 firms. Further, the smaller accounting firms with boots on the ground are hands on with their clients are usually the first person clients turn to when there is a problem and these likely fall under the umbrella of the bundled package.
Millennials are different. They might be, but not in the context it is used. Millennials that want to be accountants are no different than whatever entry level accountants were called when Luca Pacioli gave us his rules of double entry bookkeeping. The blame placed on a lack of performance or responsiveness on new accountants is a poor excuse for inadequate, improper, careless and thoughtless staff management and training. Get over it and make the necessary investment your staff need to get revved up.
Tax season workload compression. This is a real issue but is continually mismanaged by firms, and I’ve seen this mismanagement accelerate since I started. There are some easy remedies such as calling clients pre year end to find out about any unusual things that occurred that needs tax reporting and then working on that before tax season gets hot and heavy; or staff training for what they actually would be working on and not the complete updates that have more than half of stuff they will not be doing and for which they do not have a clue for. There are more but just these two could relieve some of the stress and pressure. However, the feedback I get is that firms are “too busy” to make any changes. Duh?

There are more but this is a good short list of the “new” that is really “old.” Like an old suit – it still fits and feels good. I find many firms that keep repeating what doesn’t work and who look for excuses, fancy names and sometimes buy a new suit to make themselves think that that represents a change forward.

Perennial best principles

There is no doubt that the accounting and business world is completely different today than when I started; however, there are more similarities than might be imagined.

The techniques we use are completely different. When I started, I used a slide rule to obtain percentages, today they are almost automatic with the software we use. When I started, a big thrill was getting a new pad of accounting paper with a brand new never used sheet of pencil carbon paper. Today neither exists and pencils are also a relic (except if you do crossword puzzles and make sure you have a good eraser on it).

However, the underlying business principles are still the same. Following are ten best principles that have been constant since I started my career, and probably for many years before then.

Be courteous: Respect other people’s points of view. Listen to them. Let them have their say. Listening doesn’t mean agreeing with them but hear them out. I also have a simple rule that says that the more you let others talk to you, the smarter they think you are. Further, follow the golden rule by treating others as you would want to be treated. It might be a cliché, but it is an important way to act with others.
Clients pay your salary: The sales mantra is that the client is always right works except when they want you to compromise your values, OR when they hire you to help them go in a different direction and then insist on following the old ways they are comfortable with. In those cases you are being engaged to express your opinions and to clearly articulate what you mean that will cause positive forward action, so do that! Clients that constantly say they want change and do not make any changes might not always be a good fit for you.
Clients pay your salary Redux: They cannot pay your salary if you do not bill promptly or if you do not ask for payment when your invoices creep into the past due area. Clients also need a clear understanding of what you would be doing and not doing and the price. Open ended prices are not clear, leave doubt, put you in a position of possible combat every time an invoice is received by your client or having a client hold back calling because they picture that interaction being moderated by a cash register.
Staff create leverage so you could grow: Staff need to be trained, need to understand how they could grow and given that opportunity, need to buy into your culture of superior client service, need to be held accountable for sub-par performance, need to be noticed and made to feel appreciated for superior performance, and paid fairly. They also need to be made proud of their growth and your firm.
Your practice needs to grow: Growth comes from three sources. New clients. Added services to existing clients. Acquiring other practices. Satisfied clients engage your firm for added services and refer new clients. Anything else needs extra marketing efforts which divert energies that could be better applied to existing clients. If your firm has a model that includes adding practices, that is a different strategy and pushes your practice into a “corporate” mode. Know what you want and then proceed toward it, but I do not think all three can be done simultaneously by too many firms.
Develop a strategic plan: Figure out where you want to be in five years and compare that to where you likely would be if you do not make any changes. To me, that is the start of your strategic plan.
Meet all due dates: Due dates are promises. Do not lie. Keep your promises. If you do not believe you can meet a due date, let the client (or whomever you made the promise to) know before then, not afterwards.
Strengthen your brand: You have a brand whether you realize it or not. Articulate it in everything you do, and how you represent your firm and not just how you want to look to outsiders, but how you operate among yourselves.
You are in a business: Businesses need clear leadership, management, direction, processes and systems, and profitability. Your actions should be aligned with this. This also means partner buy-in and no separate systems or procedures for some partners.
Availability: Be available to your clients. Respond promptly to their calls, emails and texts and initiate calls, check-ins and meetings. Great responses to crisis score big while heading off crises does not give you extra credit, but a continuous pattern of calm under your watch will elevate you to trusted advisor status.

Nothing here is new but these are as relevant and important today as they ever were. If you agree with me, try adopting some or all of these as your best principles.

Brief bio:

Edward Mendlowitz, CPA is emeritus partner with Withum, he is one of Accounting Today’s 100 Most Influential People, an adjunct professor at Fairleigh Dickinson University and Baruch College and the author of 30 books.