138 The First Step to Systematize Your Accounting Firm

All right, we got a meaty one today. This is one of the most important things I ever did in my practice. We're going to talk about how to get super explicit about the services that you provide to your clients. Naming them, bucketing them, getting super clear about what exactly those things are. Most firms do not take this far enough. And it's a blocker to delegation, to simplifying pricing, and to building systems around. Around what you do. Have you ever felt that what you do is too abstract to build turnkey systems around? It's because you haven't gone through this process yet. So come on in, let's talk about it. I'm going to share with you basically what I did. That helped a lot. So you can steal the bits that you like. Let's do it. What are all the things that you do? In my case, I did tax and I did accounting, and I did a little bit of advising. But specifically, what beyond that are you engaged to do with each client? And it is really important that we get explicit about exactly what the expectation is with each client, because it ensures that you're on the same page with the client about the expectations of the engagement, the things you're actually going to do. It ensures that you charge them accordingly. So many little extra things that we do for people that we don't necessarily charge for. And I'm talking about getting as granular as Bill's got your cell phone number, or Tina is allowed to fax you payroll hours when the other person, you can log in and grab the hours. Maybe that's a painful example, but you know what I mean. It enables downstream, downstream systems for each of the fiddly little aspects of what you're doing for your clients. So if you can't build a very explicit task list of what has to be done for the client, it's oftentimes because you're doing things a little bit differently for different people. And that's okay to a degree. We can actually codify the things that we do differently for clients. There's ways to manage that. But until we go through this exercise, it gets really difficult to, like, build a clear task list for your team. It helps you build SOPs around specifically how you need to do this stuff. And not an SOP that's ultimately unique to every single client, because that becomes a massive headache to have a different SOP for every single client that needs to be updated and all that. But Instead you're building SOPs around service lines and the specifics that are relevant to that client. Identifying these items, these service lines, and these, these specifics of a service can also be a helpful mechanism to upsell clients, to do more for them or to do less of the stuff that you don't want to do. So one of the benefits of us getting really explicit about the details of these service lines was to create a clear path toward upsell and to where we were trying to get each of those clients to when it came time to do the year end renewal, proposing packages, that was something that my staff could put together to like suggest an upsell, where in the past that was something that I had to come in and like my hand had to bless all of those. So the goal here is to remove any sort of ambiguity with the client about what you're supposed to be doing, but also I would say equally important, removing any ambiguity internally about exactly what you're supposed to be doing for that client and then building much more explicit processes for each of those specific things. And this goes way beyond like meta level tax prep or a month end close. So an exercise to think through or to literally jot down on a piece of paper. Write down the things that you do in your firm at a high level. Maybe that's monthly accounting, maybe you do payroll for a few clients, annual income tax reporting, some tax planning at year end, maybe quarterly advising for a couple of clients. Write down those high level things, but then under each of them get nuance. Like write down what are the fiddly little things that you do differently for different clients. So some examples, Steve's got your cell phone number. Patty comes in and meets with you when she drops off for tax info. Mark wants you to drive out to his house to deliver his tax return to him each year. You've done it for a decade. That's just part of what you do. Eddie faxes you payroll hours. Oh, we also do 1099s for them. Oh, and that other client, we do a couple W2s for them. We don't do the other payroll, we just do the W2s for them at your end. Oh, and we also make retirement contributions for that one company after running their payroll. It is, it is death by a thousand cuts. And if we just say that we do payroll and then all those engagements end up looking a little bit different and we don't have a codified way of like handling the differences between those engagements. It's a mess. And basically everybody's doing everything from memory, which is what makes it impossible for somebody to step out and anybody else to know how to get that work done. But I would argue even if you are a solo practitioner, if you ever are going to obviously hire somebody or even pull in like a virtual assistant, this level of like, specificity ensures that those people can actually be helpful to you because they know what the expectation is. And that's a good kind of litmus test for is this, this definition of our services and the specifics of each service and which of those specifics a client has, like a good litmus test for how deep you need to drill into that is, could you step away tomorrow and somebody know exactly what you were supposed to be doing for that client? For most of us, like, the answer there is no. And I know a lot of us struggle with the notion of working on the business more instead of working in the business. And there's this ambiguous sort of stuff that you just, you know, stuff tied to client engagements that just, you know, that is a blocker to ever doing that. This is a killer step to get you one step closer. So here's my kind of current thinking on what your service architecture ought to look like. Generally when we're proposing something to a client, it is a package or a set of packages. Maybe you're proposing three different packages. Packages are really only just like a sales facing thing in my mind. Generally they're going to be a collection of services like tailored specifically to what makes sense for that client. That's probably the best way to propose it in a simplified way. The notion of how you sell something here in my mind, completely separate from like what it's going to take for your team to track that work internally and get it done. You know, even the vernacular you use around what you call it externally and internally could be different. But there still needs to be a connection, like in my mind, to keep this from getting really difficult. I still want there to be a connection between explicitly the collection of things that I'm proposing to them in an engagement and the collection of tasks internally. Then that's going to be associated with. So at the top, and this is really just for sales purposes, we have packages or collections of services. These could be standardized. They could be unique to every client. In my case, they were generally unique to each client. And this worked because the level below that for us was more explicit than I think most people will go. So at the top you got packages. Packages are a collection of services. So services could be tax prep, could be tax planning, could be bookkeeping, could be payroll processing, advisory. I tried to keep them relatively high level like that. And what I think was different. About my approach was we went one level of hierarchy beyond that to define the specifics of each service that were relevant to a client. So I kind of had like three levels of hierarchy. We had packages, which you kind of did ad hoc, just like pulling together a collection of things that made sense for a client. We had services which were kind of the high level things, and then within those services we had specifics which within those services that could look a little different for each client, that let us tailor what would work best for them without creating ambiguity internally about what we were supposed to be doing. Gang. This episode is sponsored in part by Copilot. Are you sick of Copilot ads on this podcast yet? Because you shouldn't be. Because, bless their hearts, they're making all of this magic come together and all of this possible. You know, Okay, I know we got some hyper nerds in the audience out there. If you saw our practice management report that we released recently, Copilot was on the list because they've got this hyper flexible approach to building a client portal and they're not getting in all the other stuff, the workflow and all that. All they want to make is a super flexible portal platform for you. And if you are a mega nerd, boy, wouldn't it be nice if all these tools in our space had killer APIs so that we could automate all this stuff automatically? Wouldn't that be nice? Not a thing though, right? Wrong. It's a thing. If you use Copilot, they've actually got a killer API that lets you work with pretty much everything in the entire platform. So the notion of building some like fully automated stuff where before that wouldn't have been possible. It is. It's possible. With Copilot, it's possible. But let's say you're just a little bit nerd, not mega nerd. Your little nerd. Through stuff like Zapier and make, you can actually build a bunch of your own automations. In fact, I got the Zapier page up here and there's what the cheese. There's an absolutely shocking number of triggers and actions. Hang on. Pause. Quick count. Break. 35 triggers and actions in Zapier for Copilot. If you like building your own automations. Pretty cool, right? Hey, if that is exciting to you, check out the link to Copilot in the show notes. And thank you to Copilot for your continued support. It's that time of year again, gang. Halloween? Nope. Thanksgiving. I guess it's soon. But worse than all that, it is Time to fulfill your annual continuing education requirements. That old chestnut. This episode is sponsored in part by Pronto Tax. We know how that that CPE deadline usually feels, right? More boring than watching paint dry. CPE really do be like that, especially virtual cpe. Man, you usually can't even see the person that's talking. It's like this awful, like, set of slides with these fade animations between each of the slides. And then you hear this like, super corporate voice, which frankly, might even be AI. Actually, if it isn't, it absolutely could be. Well, are you ready for better cpe? Me too. If you're ready for a continuing education experience that's different than anything else out there and not incredibly boring, yet still highly educational, you could be ready to give Pronto Tax School a try. The people at Pronto are a little crazy. What? Their training's not for everyone. Things can get spicy. But the people at Pronto really know their stuff when it comes to taxes. And they make a valiant effort to make completing your annual continuing ed at least halfway entertaining. They're approved by irs, CTEC, and NSBA so that you know you're getting valid credits that match your credit credential. And over 4,000 tax pros choose Pronto's CE/CPE solutions every single year. Visit Pronto tax school.com or check out the link in the show notes to learn more. So let's zoom in on that middle layer. Services. Services being tax prep, payroll processing, that sort of thing. Anytime we had a client that had a service, that service generally had a frequency. So if that was income tax prep, that was generally, generally annual. We, if we're doing bookkeeping that could be weekly, could be monthly, could be quarterly. If we're doing payroll processing that generally just tracked with the frequency of how when they were paying people. So we're at the middle level here, Services. And you can assign. I don't know, people have different vernaculars for this stuff. I call it services. A service will always have a frequency. In my case, the service always also had a level. And the level was just an arbitrary number that we assigned to different levels of complexity of the things that we would do. So for example, I think in my case that like the lowest level bookkeeping, we generally refer it out to somebody. So like, we had a partnership with Bench for a while where Bench would handle this really simple stuff for us, and that was entry level bookkeeping for us. The stuff that we really didn't have a way to do profitably in house. And we referred to that as Bookkeeping one, beyond that stuff that was, you know, a certain level of complexity higher so that you fundamentally did it in a different way. Like if you were doing it in house, we would call that bookkeeping too. And then in our case we had some like some larger bookkeeping projects that had to be done fundamentally on like a industry specific ledger platform. Like if they've got, you know, receiving and inventory management and that sort of thing. And that would be bookkeeping three. So bookkeeping one was something we basically outsourced to another group's ledger service. Bookkeeping two was something we were doing on QBO or zero. Bookkeeping three was something in like a larger system. And you can have as many service levels as you want here. Like just being mindful of it, not getting totally out of control. If you think about bill pay, did an episode on bill pay a couple weeks ago. Entry level bill pay, like service level one, maybe for you that's just entering the bills into a billpay platform and like that's all that your team does for them. Maybe service level 2 is entering and paying. And you know, there's a, there's an external approval step where the client has to approve it before you pay. Maybe service level three for bill pay is actually proactively having a list of here's the bills that we know we're supposed to be getting and paying every single month. And if something doesn't come through for some reason, you're actually going to be the one to sound the alarm and say like, where is this bill? Like we're missing one. Or maybe maybe service level three is managing the AP inbox for a client and communicating directly with vendors and that sort of thing, these service levels and you have as many as you want. And I don't think, I think maybe at max we had like four service levels for one thing. But by and large they were the lengths like to which we would deliver that service. So for us every service had a frequency and it had a service level. I guess the one, the one exception was around tax planning. Those different service levels would dictate like how frequently we would do that. I think service level one was we would just do a year end projection. Service Level 2 was like checking in summer and end of the year. And service level three was more of a like rolling throughout the year sort of tax analysis. The struggle getting started here for most people is always how to bucket like a very abstract collection of things that we do for people in the best way possible. And that like that is hard. And this is where as much as possible inside those service levels, we try to kind of compartmentalize what makes, like what makes sense with I guess, sort of broad brushstrokes. So for example, bookkeeping level three, where you're doing it on an, on a different ledger platform, that's like a, sometimes a legacy system or a industry specific system, which we didn't have a service level for every single system that could have been. And this is where the next tier down in the hierarchy beyond your services, which we generally called the specifics. So the specifics of that service, this is where for each of those service levels there were a certain number of custom fields or things that needed to be outlined to better define how we deliver that service. So for bookkeeping level three, one of those would be what, like what ledger system? That would be a specific that is defined for that service. Thinking about payroll, what are the ways that you are willing to take payroll hours from people? We tried to really push folks to a cloud based hour tracking system so that we can log in and get that stuff ourselves. But that would be an important specific of the service. Where do you get those hours? And for a given service level, we would try to track these specifics of how we're going to do that. For a tax return that could be, you know, the delivery method, do they want to meet? Can I just email it to them? Do I need to call them? Do I need to get on a zoom? That would be one specific delivery method of a service. And for each client we have that defined what their preference is. And the way we got here honestly was, was by basically thinking about all the different things that we do kind of in broad brushstroke, so payroll, tax prep, tax planning, accounting, and then writing down what are all of the different things that we do for different people, eliminating some of those honestly, but then bucketing them into service levels. And for each service level, defining what are the specifics that need to be defined for each client so that a different person could hop in and do a pay run or something like that. And when you have this client database that is actually super rich in terms of the details of each engagement, it makes it super easy to manage renewals and makes it plainly obvious for your team when something comes up that's out of scope. I mean, I think most people, like there are things as important as frequency, like think about bill pay things as important as frequency, where it's like if your team is engaged to pay their bills once a week, like okay, why are we hopping in two or three or four times a week because the client asked us to. Like if the frequency for that service item is weekly, then obviously like we need to kind of re scope that engagement. Right? There's going to be aspects of this that feel a little bit arbitrary, but it's an example of a situation where just because you can't make something that is 100% perfect does not mean that you shouldn't have any structure at all. And this is oftentimes the enemy to like delegation, the notion that you're like, how am I going to ever do all of this? You probably won't. But like there is a lot of value in making the effort and trying to to baby step to something better because actually along the way you learn how to better systematize that stuff and some things that maybe you thought you couldn't do. As you learn like you will come up with new ideas to systematize it. Gang. This episode is sponsored in part by by Live Flow. Live Flow is the easiest way to sync that QuickBooks data back and forth to your spreadsheets. You may have seen this actually had a big announcement lately. So this fall G2 gave them the top spot in their fall 2023 report as the leader in the financial analysis category. That's right. They won number one. Nice work. If you've been around my channels for a while, you've seen life float kindly. They have sponsored quite a bit of stuff. And I'm not, I mean, I'm not saying I'm taking credit for it, but that was probably why I'm not familiar with Live Flow. Super easy way to sync that stuff. Sync your QuickBooks data back and forth with Google Sheets. They got a whole pile of templates too to make the process of building that stuff for the first time as easy as possible for you. Stuff for managing cache, AP KPIs, like everything you can imagine. Sync that data into your existing sheets to make them smarter. Get it to auto sync or build your like custom new sheets that talk with QuickBooks. Totally from scratch. Pretty cool tool. Check that one out at Liveflow IO. 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. 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 gonna build our own pipeline in the Philippines, gonna 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 I think to put this in context, we'll do some other episodes like we did on that bill pay episode a couple weeks ago, going through, you know, bookkeeping or payroll or something like that. And we'll go as far as literally defining like what are the service levels, what are the specifics for like a hypothetical scenario. But the real beauty of having this stuff super, super detailed and defining like the fields, the custom fields, like what are the properties of each of those services for your clients is then for the full cycle of the engagement from proposal to ultimately, what goes into your practice management system can be like super locked down. So to start with the proposal, what we would initially propose to a client or what would you would put in front of them in a renewal, what that now looks like is a collection. It's a collection of services. So like that middle tier of the hierarchy that we talked about, a collection of services that each have a frequency and a service level. And in the scope of an entire engagement, you may have, I don't know, one to six services in there. So maybe I'm doing annual tax prep, quarterly bookkeeping, and you know, bi weekly payroll or something like that. Those are all services, service items that have a frequency and a service level. And when you set up those items in your proposal, you can have terms specific to those services and those service levels, defining exactly what is and what is not inside of that service level. But then what's really powerful is on acceptance, when that proposal is accepted, you have task templates associated with each of those services service levels. So when that person first accepts a proposal or accepts a renewal, then in your practice management system you've got a collection of tasks that are hyper specific to that client. It's not like A general bookkeeping template or something like that. It is the weekly bookkeeping template for, you know, service level three. But then even within that you have some properties or specifics defined. Their ledger is in qbo, these are delivered via a video. They receive, you know, a PDF of the financials or they're published to a reporting system X. Those are all specifics that needed to be defined within the service so that everybody knows exactly what's going on. I think some people push back on this because they're like, geez, this is a lot of work and maybe feels a little bit arbitrary when you're, when you're doing a lot of different things for people. For me, this was the first step to doing things in a more standardized way. We never had a model for what are the things that we do until we went through this exercise of explicitly defining them all. And what you'll find is once you do explicitly define them all, you've got kind of all the tools there that you generally need in the toolkit to engage that next person or to make a recommendation to that next person. And until you've defined that stuff, your recommendations are kind of willy nilly and like bodged together as opposed to like oh no, like this is what we already do for this person. It works really well. We get that new client or we're going to upsell that existing client on a better solution. We're going to use this and this is, you know, service level three or something like that. I would even encourage, I mean those of you. So the context was my Firm was an 80 year old practice and had all of the trappings that you would imagine with an 80 year old practice. It had clients who didn't want to provide you the information the same way as people that wanted to turn up in person person, people that just wanted to do stuff online. And we accommodated that with a combination of service levels and then specifics to each service level. Now could you go out there and run a firm that only does these things one way for everybody? Like for sure you absolutely could. In our case, our firm was set up to be a little more white glove where we would tailor stuff to like the ways that specific people wanted to do that do this stuff. And that is okay as long as you know that about yourself and people are willing to pay for that service. But what then required of us is a greater degree of customization and how we define our service levels. And that is the specifics and whether that feels like a lot of work to you or not, right? Now I would argue, like, we're already doing it. Like, if you, if you got one of those practices where we're kind of doing disparate things for different people, all that complexity exists in the business right now, just bumping around in your noggin rather than being explicitly defined within an engagement. Like, if I think about the way engagement letters have been historically, like, you go and you get a engagement letter from your carrier and that just goes out the door. When it's like the notion that you just have this amorphous definition of like, whatever you'll do for clients, like, to me, that is just not realistic. Like, you have to define explicitly what those things are in order for anybody downstream from you to know what is expected for that engagement to be successful. And so this was a big lock for me coming from being, you know, a junior person in a 40 person practice to ultimately buying out some of the partners and eventually getting to where I didn't do any client work. Like, this was actually a really big step in that process, getting out of client work. Because we could define on paper exactly what we were supposed to be doing for the client. And everybody had an agreed upon understanding of what that meant. Now, did it change over time? It totally did. We would find, you know, more preferred ways of doing things. We would find that maybe service level one or service level three or certain things like that were not very profitable. And so we would go back to the drawing board. But it was valuable having an explicit definition of what these things were in order to like coordinate change management around those specific things as opposed to just like the ambiguous what we do for client X. And there's maybe a little bit of a Venn diagram with what you do with this other client. And then there's like this other project over here and it crosses over in some different ways. The goal here is to get as much of this as we can on Rails. And that's hard. It absolutely is hard. But that's not a reason to not try to bucket that stuff the best that you can. Probably the hardest domain to do that in is tax. Ultimately what we did was we ended up with service levels that were like historical fee ranges. And so everybody kind of got organized into these different tranches. And then service level 5 or 6 or something like that was just like jumbo. Everything above a certain threshold fell into the largest service service item or service level. And everything else got standardized into fixed prices at the service levels up to just that kind of jumbo. Big catch all for larger projects. Uh, so some People will call this productization. I don't know. To me, it's more just getting explicit about your services and really detailing those things out. After doing that PM report and talking about bill pay the other day, I think there's probably more we can do in terms of like, putting together actual resources and like templates that you can use with your team to map this stuff out for your firm. So I think kind of the next step for me in that exercise is probably going through a service, maybe like payroll, like whether you do payroll or not. I think it's a useful exercise to see how does that get explicitly defined and kind of these service definitions. So maybe the next time we go through a service like that, we can drop that into some sort of worksheet that we could start developing so that you can have something in your hands that'll. That'll make that a little easier for you to put together. I think even like building a massive list of like, what are the things that we might do for people that we may not have on our radar. Something like payroll could be like the various ways that you get hours from people, whether you, whether you print checks. Oh, whether you do like reloadable debit cards, whether you do retirement contributions, whether you can self service to get the hours, whether it's on your preferred payroll platform or you have to go to a different one. Going through a service like that and like building it into a worksheet. Let's do that next. I think that could be helpful for like, kind of helping get our heads around this in a more explicit way. But then we can also chuck a bunch of that stuff on a website or something so that you could pull it down and see like 200 different considerations for a payroll service of things that you might do different for people, and how to build those into specific service levels. Trying to think of what we can do with this podcast that becomes like a lasting asset, how to capture some of this stuff in a way that feels less ephemeral. You know, that's it for today. I highly recommend thinking through that if that is overwhelming, because it is a big change and it's something you really want to do as you're thinking about renewals, because it kicks off with re engaging those clients and deciding what service levels they each have. This absolutely is not a thing that you have to yourself. So if you got a team member, you really need to get them versed on on the framework and how to approach it to help you with a lot of that heavy lifting. So if that feels like too big of a lift for you. Like send this over to somebody in your practice that can help you start to develop that so that it's not just coming out of your head without any context. Cause then like, you are the expert in that thing and how it works, and if you don't bring anybody along with you as you're developing that idea, it ends up being a lot more work to you. So some things to think about. Any cautionary tales or positive experience with this sort of thing, drop them in the comments and I'll see you tomorrow. Sa.