070 Should Accounting Firms Send Generic Engagement Letters?

Is it just way too much work to customize your engagement letters for every single client when you re engage, it's Q and A time. We used to say Q and A Wednesday. What's a non day specific version of that Q&As day? Also talking about tips for starting a side hustle practice while you're still working. How long does it take me to record a daily show? And where to park your sops? You got Q's? I got as. Come on in. It is Q and A's day. I think we just figured out what the name will be. Okay, this is a really good question. And like, I was stuck on this for a number of years in my firm, worked with a bunch of clients and the notion of switching to like the current kind of cool paradigm of sending every client a custom proposal, man, that just felt like a lot of work. So Eric Grape put this in a YouTube comment, framed it like exactly the thing I was stuck on for years. Sounds like a massive project to update each client's engagement letter with their specific pricing and any other custom details to add for the year. If there's anything like a thousand or more clients, that's a huge lift. At least the first year. Is that simply the case or you found the juice is worth the squeeze, or am I thinking about it wrong? Is there a super easy way to do it with client specific pricing? Okay, so in my firm, we had about 1600 clients. And I think as you grow, like in a traditional firm that is doing the hourly pricing model, hourly billing, you kind of grow into that over time. Your client list gets longer and longer. And for folks that do hourly bill, I think you, I think it's easy to lose track of actually how much time it takes to do all of that hourly billing. And so using like thinking about how we first weighted into custom engagements and proposals going out to everybody, yes, there is this upfront element of holy hell, that's going to be a lot of stuff going out to a lot of people that probably requires a bunch of pre work to do. Well, the way it became worthwhile for us was within those proposals. We were basically saying, here's what your pricing this year is going to be, assuming there isn't a significant scope change. And I know especially for tax folks, that's kind of the main thing that they're allergic to. How am I ever gonna give somebody a price before I actually do the work? What if it changes? And what made that pre work worthwhile for me was taking payment information, giving them a price upfront all of that actually enabled us to get the billing off of the plates of our most busy people, usually the partners. So can some of this take a lot of work upfront? Yes. But if you think about what we do on every single engagement to bill clients, which all that work happens in very like piecemeal ways after you finish a project, probably. But the sum of that work that goes into all of those projects is a huge amount of work. I actually think that is more work than what it takes to beforehand send out a proposal for each client where they all have their own price, because then on the backside you don't have to manually do the work of billing them by hours or something like that. So that was how we navigated that. The other upside is if you're billing at the end of a project, especially in a tax firm, you're probably billing at your busiest time as opposed to being able to knock some of that stuff out in November, December, January. Basically what we did is we batched our 1040s into like five tranches, six actually. We took the work that we did for all of our 1040s, rolled them up into kind of these simplified service levels that had a fixed price on our proposal platform. We could do these mass imports. So we had all the clients there and he just indicated which service level they were, what price would get pulled in. And then the sixth service level for us was anything like above two grand or something like that. And at that point it was just kind of like custom one off. And the price that we would propose would be, you know, some percentage increase range above what they were last year. And so we have this master spreadsheet of all these things. We import that into the proposal software and it auto generates and sends out all of those. And it still took time like, and it still was imperfect, but. And this is a hard thing for firms to get their head around if they're billing projects after the fact one by one. Right now, a big unlock for us was thinking about that work in terms of portfolios rather than how every single little client engagement is going to get priced. Ultimately, what matters for your business at the end of the day is what is the top line and the bottom line in aggregate, right. When all that stuff gets rolled up together. And so if it is easier and saves time for your business to do that in a more generalized way, where yes, there will be some clients that maybe get off better from that and some that get off worse, that's still better for your business. It's still greatly simplifies your processes. And in our case we basically just made a rule where when we gave that pricing upfront and these are once a year tax clients, which I know a lot of folks are moving away from, but this is advice for firms who that is their current paradigm. They're doing a bunch of that. So what's the better version? For those once a year tax projects, we would give them a price up front and then the agreement was basically as long as the work that went into it, like the traditional WIP was not more than 125% of what we quoted or something like that, it would automatically go out the door. Now you can super nitpick the scope on every single one of those projects for me and that business, which was somewhat of a like scale model, wasn't worthwhile. But if things got way out of whack, yes, we would revisit it. But that was ended up being less than 5% of projects. So what we eliminated was was the process of manually billing like 95% of these projects when they went out the door. All the skinny jeans folks that are like 100% subscription pricing have gone to sleep by now. But that was how we approached the issues of like creating custom engagement letters being a lot of work. Like yes, I can understand that. And that was kind of how we tackled that for a large number of proposals going out the door. Main platforms for that in the accounting space right now. Ignition Go Proposal NULA K N U U L A You can go outside the accounting ecosystem and get software that'll do that for you that might be a little bit cheaper. In my experience, it has been worthwhile for me to stick inside the accounting ecosystem for the tools that are a little more specified to like how we work. But also those companies are putting out killer content that is really helpful to me too. So I'm totally fine supporting them. This episode is sponsored in part by Client Hub. Hey, Tales from the hub is back. Season 2, Episode 1 buckle up. Recently on Tales from the Hub, you'll remember super smart accounting firm. Well, they adopted Client Hub to manage their work and collaborate with clients. Right after busy season, they sent out a client feedback search. They are super smart after all. And the results are in. Of course. Clients love working with Client Hub. They're eating it up. When is the last time you heard a client clamoring for a client portal? Right, the clients love the client tasks feature. Super efficient and intuitive. No more emails flying back and forth. Clients love to have access to the super smart firm staff via messaging and client Hub Klaxisan. The firm is a modern tech forward and client service oriented firm. You already knew you were, but now the survey proves it. And Client Hub playing a big role. Great job Client Hub. That's it for this week on Tales from the Hub. Learn more over at ClientHub app or click the link in the show Notes. This episode is sponsored in part by the fine folks at Cloud Accountant Staffing. Do you hire accountants? Bless your little heart. Not the best part of the job in my opinion. Not something I ever enjoyed. Well listen, you can build your accounting dream team with talented offshore accountants in the Philippines that work 100% full time for your firm. Their accountants aren't freelancing or contracting for multiple firms. They're all yours. They work exclusively for you and are incentivized to stay with you and your team long term. They're not gonna get swiped. Cloud account staffing is 100% dedicated to the accounting industry and founded by a former accounting firm owner that understands your business, knows your pain points. They had to hire some accountants and they said you know what, we're going to build our own pipeline in the Philippines. Going to pull in some super talented people and then open that up to other firms. Basically that's the story. I've been talking about a lot about staffing, building more resilient staffing pipelines for your firms. I had staff in the Philippines like totally red pilled me to like oh geez, like we need to globalize the way that we get our work done. Check these folks out. Link in the show description cloud accountantstaffing. Com okay, advice on where to keep SOPs inside your practice management system and SharePoint. Where should that stuff live? I'm not super opinionated on this. I think generally the right answer is first and foremost it needs to be like a rich document creation format. Like a place where you can embed videos, where you can embed GIFs that will autoplay. We've all seen really good and really bad versions of SOPs. Bad ones in my mind are like the old fashioned word documents that like don't link to anything else. Like that aren't organized in a place where you would ever even find them and it's just a collection of screenshots. The good version of that these days is like what something like notion or like modern kind of note taking. Apple Enable where you can embed stuff directly into those pages. Also while I think video is really useful for the first time you're showing somebody how to do a thing long term videos are a Big old pain in the butt. Because the second time that person goes through to do the thing, they don't want to see the video, they just need like the granular. What is the one step that they forgot how to do. Videos are also hard to update down the road if that process is going to change a little bit. So while videos are helpful for that initial run through of how to do something long term, I think there's better versions of listing out a set of steps. So in terms of where to keep them, like, the more rich that format is, the better. Even if you can comment on things, if people can highlight stuff and say, like, hey, this is no longer current. Can we get this updated? That's really valuable. But you want it to live somewhere where people will actually find it. A big issue we have, if you run a team right now, is the discoverability of internal information. You have somebody that makes this just a really valuable, awesome thing, but then nobody knows that it exists, right? And then more traditional organizations where a lot of these things are like Word docs or PDF files that live in a file system, like, you know, your, your employee manual, like you have all this disparate kind of internal documentation in different places. It's really hard to get answers for specific questions when all that stuff is living who knows where. We talked about this actually with like, what right now might be my favorite use case for an AI chatbot. That is a chatbot that's connected to all of your internal, like procedural kind of company documentation, like employee manuals, that sort of thing. Because that stuff often lives in disparate places and because some of the gaps there are oftentimes filled in, in like meetings, take the source documentation, take transcripts from those meetings, put them all behind a chatbot. And now rather than your team having to go out and figure out what is the right place to go, find this or that, instead they just have a single chatbot where they can message it in slack or in teams or wherever that lives, and it will maybe answer the question. But even more valuable, point you to the source of truth for where it thinks it got that answer, so that you can go out and say, like, oh yeah, when we had this staff meeting a few months ago, Tina said like this was how time off accrual over holidays worked, or, you know, something really fiddly like that. So AI is helping us, helping make our documentation more discoverable and ultimately like that. You have to really keep that in mind for SOPs, I think. So if your team is like in a certain location Every time they're doing a monthly close, the closer to where that work happens, you can keep those sops the better so that they don't become this orphaned thing that never gets updated. Right? Like, that's a real challenge with SOPs. SOPs, man. Like, if you run a team of any size, especially in accounting practices, firms are living and dying by SOPs. One of the smartest things I ever heard. Chad Davis at Life ca. They will, they've got like a roaming team of, at least at one point they're doing this of, of accountants who will basically spin a wheel and go do the monthly close for a, a random client. And the expectation is that you ought to be able to do it according to the SOP that is in the file. And their ability to do that like, has to be taken into account in the performance of the person that oversees that close. Right. Like we talk about output based compensation and how that's a positive, but it probably can never be 100% of how people are compensated. Like a really good example of that is how well are you documenting the work that you do so that if that person wants to take a vacation or gets hit by a bus or something like that, you have really good documentation. And if you have tried to implement this in a firm, you know just how hard it is to get people to not only create SOPs, but keep those sops up to date. And if you've got somebody secret shopping, like pulling those things where like you never know what month a client could get pulled and then your actual compensation, your performance reviews are tied to how well those go, like that's the best. Like if in some ways that feels like overkill, right? But you're like, well, if you don't do that, people just don't keep them up. And so maybe that feels like a lot of work or quote, unquote inefficient. But like, how else do you solve that problem? What I see most firms do is they're like, this is the way that you have to do it. Staff and you have these rules and then nobody actually does it. Right. Like, that's kind of been my experience. It's always that last thing that gets done at the end of the list, right? So that just never happens. This episode is sponsored in part by Firm 360, the practice management tool that gives you a 360 degree view of your practice. Talked about this in the past. Project management, documents, time and billing, all that stuff's in there. Manage all that stuff in a single place. Story time Though let me tell you about Lee Lee's team. They were looking for a solution to modernize their firm's processes. They'd grown 30% year over year for the past five years. Holy mama. And their processes were no longer able to keep up with the amount of staff and projects they had going on. Real talk your systems. Like, yeah, no, that changes with the size of your firm. They still had some of their documents and paper copies and they were going around the office to hand off projects to team members. Yuck. Once they were on firm360, they were able to get all their digital, all their. All their. All the goods, all the stuff in a digital format and save a ton of time because they had it all in a single system. Got visibility into project process. Everybody's on the same page about what they're supposed to be working on. They even implemented the secure client portal allowing them to deliver documents and collect payments digitally. You know what took them? Two months. Two months. Not bad. Not switching PMs, not fun. But knocking that out in two months, that's pretty darn good. Hey, let's be a little more likely, huh? You hustle on spreadsheets to manage that stuff. Knock it off. Shuffling papers around the office. Modernize your practice. Learn more about this1@myfirm360.com this episode is sponsored in part by Zero. Hey, listen up. Zero Roadshow. You ever been to a Zero Roadshow? It is like a. It's like a big family band that drives all around the country getting people to come out and hang and talk about Zero and learn stuff. It's not like an actually fan actual family band. Like there isn't a bus or a band or anything like that. I think most of them fly. But it's coming to specifically Austin, Atlanta and LA. So first up we got Austin coming July 27th. At quote unquote, the line looks like a fancy hotel. If you have ever been at a Zero event, you know those people know how to throw a party. Am I right? If you haven't, think about it. So Zero Roadshow, chance to come and hang with a bunch of folks into kind of like the progressive approach to building an accounting practice. Meet some folks that are using Xero in their firm. Six hours of CPE per event. Whoa. Learn about the latest Zero product updates and even hang with some of the Xero like community app ecosystem folks. So July 27th, check that one out in Austin, Texas. I'll put a link in the show notes to register and if you go send me some pics. Send some pics over, maybe post some pics in the comments. I've been to some zero roadshows before. They're a good time. Somebody asked me at scaling, how long does it take me to do these daily shows? I actually get this one quite a bit. These dailies take me about an hour. There's maybe like a half hour of pre work and gathering info and like a little bit of research that I'll do and then about 30 minutes to shoot. And that's not including any of the post production stuff. And now like, I've got a team that does a great job with all that stuff. But this is the result of like years of work. So before I had done any video stuff, like, if I was watching this and thinking, like, ooh, what if I did a daily show for taxidermists? It would have taken me all day to do one, maybe more, and I wouldn't have had the team to support me. Like, it's taken me years to like, get to having the right folks who can do this stuff for me in a helpful way and do it the way that I want them to do it and get all the hardware sorted out and try to make it as easy as possible to flip the switch and like, just start recording. So that's definitely the sum of a lot of work or the sum of like years of, of learning how to do this more efficiently and all that, but also like, and the whole thing around, like taking a break after 66 episodes and taking care of myself and all of that. And I super appreciate the folks that say things like that. And you're absolutely right, but I'm like only six months removed from running a firm right now. And you know what's not a bad gig is doing an hour of work a day and like sponsors paying you to turn up and do that work. Like, let's be real here. Like, in the grand scheme of things, I love doing this because, like, I want to help people. Like, I want to show folks who are like myself there's people like me that actually do this stuff and have like a different thought and different approach on how to get this work done. But let's also be real. I get paid for doing this and it's not a bad gig. Like, if this was the only thing that I had and I just had to shoot a daily pod every day and I just worked an hour and sponsors paid me to be here, right? Like, not a bad gig. So, like, I do get, like, the whole notion of a daily podcast is kind of ridiculous. And, and much of what makes it doable is kind of my competitive advantage, that I've done this for years and I've got the production pipeline sorted out and all that. But don't feel bad for me. Like, at the end of the day, don't feel bad for me. Like, I would still take this over my firm running days and I tell people, if not for this unbelievable, like, ridiculous opportunity that I have to do this stuff for people and somebody out there in the ether finds it helpful. If not for this amazing thing, I'd still be running firms. Cause I do enjoy that and I think it's super rewarding and the world needs it. But even though, like a daily podcast seems ridiculous and unattainable, grand scheme of things, not a bad gig. A lot of these are like very, very first world, you know, problems like this. I'm. I try to stay like, really mindful of just how ridiculous this all is and the fact that I'm blessed to like, call this my business. And then you go to conferences and you like, meet all these amazing people who are lurking and not in the comments, because I've never heard their names before and they're like, yeah, no, I just, I never, I don't post online and I just, I don't know, I don't have anything to say. Like, have you been listening to this podcast? Anyways, you go to conferences and you meet all these amazing people and you're like, you've got like, friends built into all these accounting related things that you go to. I'm used to walking into an office and somebody being like, oh, yeah, Steve's mad again. Can you give Steve a call? Or, Tina didn't pay her invoice again this month. What should we do? So it could be worse. I'm having a ton of fun at the Daily Show. I, like, I feel like it's sustainable for me. Like, I don't feel like I'm burning out because for goodness sakes, I just, I. Because I've done public accounting, you know how much work that stuff is. My body was made for this. Okay, advice on starting a firm or a little firm on the side while working. My advice, do it. If you are not happy in the situation that you are in, don't pull that parachute and just like yolo your way into starting a firm from scratch without a job and no clients. Like, the way to start a firm is as a side hustle, as most things start. Ultimately, you don't know what you're gonna enjoy until you do it. And Doing it for someone else is very different than doing it for yourself. There are awesome aspects of it. There's like, mega bummer aspects of it, and different people handle those things differently. So just get started. That's how you learn what you like. If possible, try to find a way to get, like, a wide amount of experience doing different things. Maybe you like accounting, maybe you like tax, maybe you like payroll. Maybe like app advising or helping folks automate stuff. More operational kind of things. You don't really know until you do it. So if there's a way to get experience, that's awesome. If you're coming from a firm where you've got experience and you're looking at other, like, types of work, there's probably other small firms out there who would happily take you on contract to do a specific type of work. That could be a way to get, get good experience. Then ultimately, once you think you've found, like, what you're really going to enjoy, make some investments in that expertise. So, like, if you've been doing it, I would love to see a ton of bookkeepers get into tax, but just starting and doing that one day, like, probably isn't responsible because that can definitely go sideways. So if you think that you, like, understand what path you want to go down, think about ways that you can invest further in that expertise and that could be still working with other firms in that domain. You know, tax being a good example. If you want to launch your own tax firm, a really great way to get experience is working for other tax firms where they have that technical review framework and you can learn more about what you know and what you don't know. But also stuff like, you know, going out and getting an EA or getting QuickBooks Online certified or, you know, going out there and just like, developing a deeper expertise into that thing that you want to do. So my community right now, we're going through $100 million offers. A book by Alex Hermosi, who is, I don't know if you've seen, like, the kind of, like, business advice guru guy, really, like, stereotypical beefcake, always wearing tank tops, kind of like liver king for business. And it's, it's admittedly really hard to see past, past all of that, but he's got some pretty good stuff, I will say. He talks about, like, sacrifices and the stages in your life where you make sacrifices for yourself and your family and stuff like that. And that's, that's a really hard thing to grapple with at a time when you're thinking about going out on your own because it feels like such a huge bet. And we go out and we start our own business and, and it's so important to us for it to succeed that we will basically, we will do virtually anything to get it off the ground. And the way Hermosi talks about this is he says basically plan on making sacrifices in kind of a cyclical way in your life. And that's okay. And I did this. Like I did, like there were times in my life where I was like, man, I got nothing better to do. I'll probably just be at home playing video games unless I work more. So maybe I should just work more. Reality is I probably should have been like out in the world, like getting meaningful experiences. So even then I probably shouldn't have worked more. And I've shared like the story of, you know, my dad, like his, his whole life was a trade off to. Yep, I know that I go to work before you get out of bed, and I know that I get home after you go to bed. But this, this is what's gonna let me retire early. And then the last day of work, he goes to the doctor and they say you have a 30, 30% chance of living the next year. Trade offs like that, you are doing a dance with the devil. And I think it's almost never worth it in my mind. But what's hard is being patient because oftentimes if you're not going all out doing the 80, 100 hour weeks, it just takes longer to get there sometimes. Also like that insane level of work I think can sometimes make you always take the Bruce, Bruce brute force approach to getting work done, which is just working more. Oftentimes that's easier than stopping and thinking, is there a better way to do this? Is this taking me so long? Because I'm going about it in a completely backwards way. So people talk a lot about that degree of sacrifice that happens when you're starting your own business. I think it's kind of a trap. So if you can build that side, hustle up enough with which reality is gonna be some extra work while you have another job, right? Find a way to do that so that it's not as huge of a risky bet when you do go out on your own. If you have a partner, if you have kids, man, set the terms of engagement beforehand and like stick to that until those terms are renegotiated. But resist the urge of like sacrificing the now for the later. I think that's almost always a trap. And last, if you're doing this, man. Find other people that are doing the same thing and steal all of their ideas. Nobody does anything new and just rolls out of bed one day knowing how to do it. The best thing that you can do is beg, borrow and steal to shorten your path to success. It's absolutely the case when you're getting started and will absolutely be the case every single step along the way as long as you do this stuff. Because there's always somebody that that is quote unquote ahead of you in one regard, maybe on one little aspect of firm running. There's always going to be somebody that you can learn from. I learn all of this, you know, what I do now from other people and other thought leader types. But it's equally true when you're first getting started, don't try to create all this stuff up. Like as you go find the folks out there who've done the same thing that you did in the last few years and beg, borrow and steal everything you can from them and, and do it. Try and do a side hustle. Like that's how you're gonna learn whether or not you enjoy it. The world needs more accounting firms. The world needs more nuanced, opinionated accounting firms who are really good for a certain type of client and really good for a certain type of accountant because we can't afford to lose any more of them. Q&A's day, we did it. Got any more Qs? Check em in the comments generally do this like once a week. Got a fun one coming up tomorrow, so I'll see you then. Sam.