276 The Leading Bottleneck for Firms (and how to beat it)

You ever met a firm that isn't hiring for that? Oh, that senior X role. Man, if we just had another tax senior, another accounting senior, we could get to that next level, do that next thing. Why is that the person that everybody needs? One of the big reasons, arguably the biggest reason, technical review. Because the people that are signing off on that work before it goes out the door, they are the unicorns, the hardest to find people. Because review has been built up to be this like monumental, daunting, scary thing. And you should only be allowed to review something in an accounting firm if you have earned your stripes, put in your years, demonstrated absolute infallibility, and as a result, there's not very many people that can do review. Imagine that. Okay, today we're going to talk about a different way to approach review. What I did in my firm, that was an old wooden ship from the Civil War days. It was not a modern. I mean, this was not the Starship Enterprise. But it worked to get my firm to a place where review was not this big mystic, arcane thing that was always the bottleneck. So I'm gonna share with you today our alternative approach. Something that accelerated the growth of our youngins and helped chip away that bottleneck a bit. Come on in, let's. Okay, I shared a bit about this. I've teased this several times now in the last couple of weeks. Let me run you through some of the problems, why we got to this point of implementing this change, because I think it's probably something that most firms share. The big one I already hit on review was the bottleneck. Always the bottleneck. Whether it was tax prep, whether it was month end closes, Whether it was 1099 prep, the review Q was always a mile long. And it's because within the firm there was a wee bitty tiny subset of people who were ordained reviewers. And interestingly, these were usually people that we hired from another firm or from a bigger firm where we came in and we had to pay them more. And we're like, oh yeah, no, they're, they're reviewers. We added more reviewers that way than organically, interestingly enough. And I think that was. And I'm crunching together the 13 years I spent at my last firm just thinking of all the people who went through that review chair. And I was by no means an owner that whole time. But I think the reason why we were more impressed by external hires was we didn't see them in their years of innocence. I don't know when they were still learning and still figuring it all out. And so we kind of put them on this pedestal as if they were infallible when they absolutely weren't. Another issue we ran into a lot we would get. Sometimes we get our most senior technical people cherry picking the easy stuff. They're having a hard day, whatever it is, they're going to come in and somebody's going to like swoop the easy, the easy work and then there's nothing for the people who can only do the easy work to do. And it was not the best use of that senior person's time. On the flip side, we would oftentimes have entry level folks like, stumbling into work that was way over their head that they shouldn't be wading into. And all of this just did nothing to solve what was the bigger problem that reviewers were treated as something that just fell from heaven one day. Not something that an imperfect being was crafted into, rather something that you were either just born with or not born with, rather than acknowledging it for what it is, which is somewhat technical, but also just. People are going to make mistakes. Even our most senior reviewers are going to make mistakes. So what's an alternative method, rather than knighting that person one day to say you now can do this thing, or what's an alternative method that can baby step them into review with the support they need to do it well, and it be more of a linear path to that. Right. Rather than just put in a decade and then the next day you can review. And we achieved this by using complexity scores or difficulty scores for the work that we did. And so some examples of this on the tax side and on the accounting side, some tax softwares will do this automatically, but in my experience it's useless. Like the figure that comes out of there for us was not at all tied to complexity. So we created our own super simplified system. If I can remember off the top of my head, there were either four or five levels. And it was literally as simple as level one was just W2 and retirement income. No adjustments to AGI, no deductions, no itemizing or anything like that. So basically just W2 or retirement earner. I think level two, they could have adjustments to AGI or credits. Level three, they could itemize. Level four, they could have one or several schedule E's. Schedule E, page one, rentals and level five was everything else. So if you had a K1, if you had a Schedule C, anything like that, it immediately took you to the hardest difficulty. Today's episode, it is sponsored in part by liveflow. Liveflow is an extension for your Spreadsheet app, Excel, Google Sheets, whatever you use that lets you pull live QuickBooks data from client files into your spreadsheet. So your spreadsheet had a baby with QuickBooks. Now how can you use that? How about to get the client to quit sniffing around in QuickBooks where they don't belong? Okay, stop touching stuff. The moment they start fumbling around in there, you get concerned they're gonna break something. But also they're absolutely hopeless when it comes to getting to the information that they actually need. Which is why using live Flow to build, like, customer reporting, the stuff that your clients actually want to see in a concise view, super, super valuable. And as I've shared before, can actually take the pressure off of the month end close as well. Because when I send those financials to my client, they're like, this is cool. I guess it means the work's done, but I've got no idea how to use this information. So instead I'm going to give them like a real time set of reports that live inside of this spreadsheet. I give them access to the spreadsheet, I'm keeping them out of QuickBooks. They're not asking about the monthly financials. Everybody wins, right? Sounds like a home run to me. Learn more about life, float and link in the show notes. This episode is sponsored in part by Tech Guru. Gang. We live in confusing times. We've got artificial intelligence, all sorts of technological marvels happening all around us that we're very excited about. But how do we wade into this stuff responsibly? How do I know that I'm not giving up my lucky charms to just whatever new hot AI thing just cropped up? Gang, you need a team of smart, attractive, well educated IT professionals that are on your side because you got better things to do than fix Tina's laptop when it doesn't boot up on Thursday. You're better than that. Okay, Tech Guru's got everything you need to help your firm navigate what is, what is a tricky time. You know, boy, managing tech with the like, even in an office, but across a remote team, too. Not fun. It's a lot of work. Tech guru, they just work with accounting firms, so they know all the stinky old tools you gotta use. If you're a tax firm, they know the weird cycles of your business and they're learning from every other firm that they work with. And you know, who's gonna, who's gonna benefit from that? You? You? Okay, so go swipe the link in the show notes, schedule a call with them. You got nothing to lose. K, that's tech guru. On the accounting side, we had an even more simple version of this. It was basically like, is it straight up cash bookkeeping? Is it cash bookkeeping? But you got to tie out wage expense every month, is there a payroll accrual? And then just a catch all for anything hairier than that. And by being able to carve out like half of our projects out of this most complex bucket, we could distribute both the prep of the work and the review of the work in a a more mindful way. That ensured that it was landing in the seat of someone who could do that work, wasn't overqualified for the work, but also wasn't under qualified for the work. So if you think about something as audacious as what would it look like to build an SOP to prepare a business return or to prepare a month end close from end to end, the idea of building an SOP for that whole thing is kind of unthinkable, right? And that usually keeps us from even starting considering doing something like that. But what if we could build an SOP for like the most simple example, and whether it's tax, whether it's accounting, whatever, that would be your level one return, your level one month end close, whatever it is, level one, 1099, pay, run, pick, whatever it is. The easiest difficulty. Could you build an SOP for that? You probably could both to prep it, but equally important, maybe even more important also to review it. So what, you know, go to your most senior reviewer and ask them what would your process be to review this type of thing? Build out an SOP for us. Otherwise what ends up happening is you have people who have a decade plus experience who have never reviewed anything and just kind of stumble into a process where what I want to do is in my firm, make everyone in the firm a reviewer. Pretty much from day one. I'm completely removing the mystique around review and the privilege around review. I don't want my team looking at reviewers and being like, wow, I don't, I don't know that I'll ever get there. That feels incredibly high stakes. How could I ever do that? I want them being like, oh yeah, I've done review from day one, now I'm doing like just a more difficult version of it. Like I have more technical skills, so now I'm going to, to that next level. As I'm incentivizing my team to grow, this can be a factor in how we compensate them and like what their role within the team Is are they doing technical things? For me, part of the problem in our firm was it was a traditional firm where a lot of the review was done by a mix of the partners and the most senior staff. And when we moved the firm to a more traditional org chart where you take those partners out of there and they're not doing a lot of the heavy lifting, what you end up with is actually a whole bunch of staff people who are kind of like career write up people who aren't, aren't really reviewers. So we had people that had done this work for decades, but didn't have the confidence to do any amount of review. That was like unthinkable to them. And I'm like, you're telling me you've done this stuff for 25 years and you're not capable of signing off on the work that somebody else has done? And that was just a product of the environment that they were kind of professionally raised in. They were never given the opportunity to do that to begin with. And that's what I'm trying to avoid and what I'm trying to unwind. I want everybody reviewing stuff pretty much from day one, where you draw the lines on like, what these different difficulties are, isn't really important. The goal is to pull more and more things out of that bucket that is only reserved for your most scarce resource, the most senior people. This is not unlike what we've talked about around delegation, where if you're a firm owner or a firm leader, is there a level of project below which you maybe don't even need to be privy to what's going on? Like, if you have clients that are paying you 500 bucks or less a year and you have a team, could you trust those ones to your team? You probably could. And when you start with that small dollar threshold, you can imagine the worst case scenario and what the dollar impact of that would be. And you're like, okay, it wouldn't actually really be. But then when you get out of the way and you have the beneficial experience of having gone through that exercise and been like, oh, things actually just went fine. In fact, they may have even gone a little better because they weren't waiting on my dumb behind who's like holding everything up, there's a threshold there where it's like, do I really need to be involved in this? We're doing the same thing here. On this difficulty scale, which is not a novel concept, but is, I still think, pretty foreign to most small firms, our people who are most time constrained, our most senior folks There's a level of project where they just, they don't even need to be engaged in that because you have other people on the team that are capable of doing it. Now those people are going to struggle from the whole problem around our identities and how our internal identity, how we define ourselves and what we're capable of perpetually lags behind our external reality. The things that other people see you of being capable of, that will always be ahead of what your internal identity thinks that you're capable of. Now, there's a few maniacs out there for whom that is not the case, who think they're capable of way more than they actually are. But that's not most people. For most people, it is the opposite. That's the problem. We're lagging behind believing what we're truly capable of. Even if other people around you are telling you you may have experienced that in your life before and like the third or fourth time somebody tells you you are this or you're capable of this, you're like, okay, maybe I should start believing them. Because people are saying it, right? And the value of this, this difficulty scale to me is to offer that linear path to complexity rather than going from you don't do any of this technical review to you can now do any technical review that doesn't make sense, right? How can we create a more linear path and develop training and SOPs to accommodate people at each step along the way, whether it's review or whether it's prep, so I bring in an intern or something like that, what am I going to start them at? Is somebody just going to spoon fee, like hand pick a couple projects for them? Like, maybe. But with a framework like this, you have a more clear entry point for someone with no experience, where they come in and they just do level one write up. And over in our team workspace, here's some training and sops and guides and all that stuff for level one write up. Now, maybe down the road they'll be able to do level one review. I think what we actually did in my firm was you could do review for the number that was one behind what you could do write up for. So if you could do write up at level three, you could do review up to level two. If you could do write up to level two, you can only do a review up to level one. But it meant as soon as that new accountant, metamorphosis, metamorphosized, emerged from the cocoon, as soon as that new accountant could move to level two, like, just got a bit of experience like six to 18 months under their belt. They were then reviewing level one work, which is largely did somebody key all this stuff in, right? And just remember all the to dos. It's not really technical at that level. So from the beginning they're doing technical reviews. They're is no, there is no stigma around this. This episode of the podcast is sponsored in part by Makers Hub. Hey, the age of AI, just like the cloud accounting transition is going to create lean in arbitrage opportunities. Arbitrage, it's the word of the day. Opportunities where tech gives us a wildly better way to do something overnight. We stumble into these things still with our clients that have awful back office procedures and we just get them on a better tech stack and it like cuts the necessary headcount to do all that work in half. That's why I loved doing our managed accounting service where we just come in, find super unoptimized back offices and be like, hey, we'll come in and do this for more or less what it was costing them to hire a team to do it and then we just automate the heck out of it. As we're in this very transitional period with AI, I think the first example of a AI driven arbitrage opportunity is frankly going to be accounts payable. Makers Hub is one of the providers now using AI vision models to take extraction, like automated extraction, to a wildly different level than has ever been possible before. You know that old chestnut, the whole notion that your tool is going to do bill extraction so well that it'll completely eliminate manual entry, which people have been saying for over 10 years. But I don't know if you're like me. You do an AP for a client, all it takes is an extra digit somewhere and you just, you just burned a whole lot of the client's cash. And that's gonna be an uncomfortable phone call. So that's a little easier said than done to like blindly trust invoice extraction when it comes to bill pay. But we've done some, some demo days on my channel now with Maker's Hub showing off like just the level of detail that it will pull off of invoices, especially complex accounts payable use cases where you're doing like inventory and receiving and matching numbers of widgets to products in your system and all that. I had clients that had multiple staff doing like detailed receiving and all that matching with purchase orders. An insane amount of like manual work in these systems that Makers Hub is now like automating to a level that it's never been automated before. If you're looking for tech enabled opportunities where you can where you can use AI to deliver super like high leverage, more profitable work to your bookkeeping clients. Maker Sub is a really interesting example to look at. I'm actually excited for more of this stuff. I feel like it's kind of like the cloud accounting transition, but with even like even more promise, potentially even higher leverage. You want to Explore that for AP, check out MakerSub. Put a link in the show Notes Today's episode is sponsored in part by the folks at TeamUp who help you find talented accountants in the Philippines. Join your team Education Break Common vernacular you hear when you're hiring offshore bp. What is a bpo? BPO is a business process outsourcing company. Basically a company that employs a bunch of folks offshore and then you hire the company to get part or all of those people's time. The appeal of a BPO is for folks that haven't done offshoring before. Sometimes this can feel like maybe a more comfy place to start, can help you navigate, you know, kind of cultural misunderstandings. Usually the BPO will do the actual recruiting and bring a bunch of folks to you. Some BPOs also sell you more like the product, the deliverable, not the time. So like buying tax returns or month end closes instead of just having a person that works for you around the clock. But there's some downsides to BPOs as well, namely high ongoing fees. It's not uncommon for half of what you pay to the BPO to actually go to the BPO and the other half to go to the person. The BPO is usually going to set the person's schedule as well who's working for you. So you lose a little bit of control. And if you ever wanted to leave the bpo, getting those staff to come with you and like getting them out of the bpo in my experience is virtually impossible. So you're kind of stuck with that BPO if you love the people that you have at the BPO. So upsides and downsides to BPOs. But if you want to do direct hiring, that's what today's sponsored Team up does. They've got recruiters that'll find you awesome folks to join your team. You pay a one time recruiting fee, they don't pay anything after that. Those folks just work for you directly. There you go. Now you're BPO expert. If you're looking to hire folks directly in the Philippines, check out Team up link down in the show notes. Now one other concept that I'm a believer in that I think makes this even more valuable is something we were. We had developed within our cast team, but hadn't yet rolled out to our tax team. A huge unlock for me was having an assistant for the first time. Was getting over myself enough to be the type of person who would have an assistant. Because I think that's why most people don't have assistants, is they're not willing to raise their hand to help. They will literally single handedly burn down their entire business, bottlenecking absolutely everything, and then will say, I'm not the kind of person that's gonna have an assistant. Buddy, you're ruining everybody else's day. Like, get out of your own way and get some help. And when I got an assistant, I started identifying all these other situations where I'm like, boy, these other senior people on my team would really benefit from from an assistant as well. You look at things like a senior tax person. How much time they waste collecting and organizing tax documents that are getting sent to them through tax season, how much time a senior accountant wastes gathering like accounting information, all the little details they need from clients for each month and close the number of trivial, stupid things that your most senior people waste their time on. We talked about this quite a bit in the service library week. But how even a project that is, you know, extremely complex, something that is one of your more difficult projects, 80 to 90% of that project is identical to your easiest projects. It just has this one little thing, one little thing at the end that makes it hard, but just because of that, it defaults to the only person in the building that can handle that really hard thing. Right? I say the building, the proverbial building and how we solve for this. In my cast practice was pods, small teams. And here's one approach. There's probably a bunch of different ways to do this, but here's one approach that is interesting. Not only to get the most from your senior folks, but to develop people along the way is to have pods that have a senior technical person, a junior technical person and an admin. And those three work together super closely, chugging through all of their projects. Maybe projects have to hop around between pods a bit if review has to come from outside that group or something like that. But the benefit of this is all of your technical people have an admin at the ready to help them anytime. This is something that we are all bad at unless we are constantly reminded that there is an admin there to help. We're generally bad at getting out of the way and asking for help because we're like, oh, it's going to take me more time to get help than it'll take me to just do it. And then you turn around one day and you're 85 years old and you never delegated a thing because of that. So you've got an admin that is embedded in your process and understands all the work that's happening and just through proximity finds ways to be really helpful. Similarly, that junior person is going to be really helpful for your senior person for handling the 80 to 90% of those projects that do not require the sorcery and the really gnarly complexity that is the last 10%. Now, when I came of age in this profession, I had a couple seniors that I was able to work really, really closely with and that grew me so fast. So I'm also very bullish on the value for juniors of working in close proximity to a senior, rather than just like being an assembly line worker and chucking your work product into some sort of queue for someone else that you don't even know to review it and then give you a document with a bunch of notes like that. Proximity to a senior, I think develops a person a lot faster. Within this pod you also develop who will become those future seniors. So the juniors that are the highest performers, eventually they go on to have their own pod and they take on a junior and they take on an admin. If you don't have the headcount to make this work, maybe you have shared admins across pods at differing sizes, like maybe you gotta flex that a little bit. But it gives you a path to developing future seniors. It puts delegation front of mind for everyone so that they're spending their time on the things that they ought to be spending time on. The senior person is focused on senior stuff. The junior person is focused on doing everything for the senior person that they absolutely can. And then the admin's there to help with anything and everything. And the more we pulled admins in, we actually really quickly made like killer technical people out of these admins. I loved hiring non accountants, man. We hired so many great non accountants that became massive contributors. When I came to the firm, there was not a. There was. I don't know, I guess we had, we had one non accountant there. That was the very traditional. The lady sitting at the phone. And that was like. That was the job description. The partners were always frustrated that she didn't get much done, but that was literally what they told her to do, was sit there and answer the phone. So she always had to be available. But everyone else in the building. And at that point it really was everyone else in the building. They were all accountants. And by the time I was out of my firm, we were making as many non accountant hires as we were accountant hires. So you combine this pod approach with the whole like difficulty scaling the idea that a junior within a pod, you know, say they're level three, they're going to be able to take and do write up on everything level up to level three, they can do review on everything up to level two. But even the senior person in that pod is taking Level 5 stuff. The notion that the junior person can help that senior get 80% of the level five work done, that is a massively higher leverage senior than you have by default. That person that's not asking for help, that is oh my gosh, wasting all this time gathering documents from clients and doing this work that's below them or doing a bunch of review that's below them because they're the only ones who have been knighted to be worthy of review. There's a lot of ways I think we can, we can pry some work out of the fingers of those senior folks. And in my experience, they're, they're usually appreciative of it because it's the type of stuff that they know isn't moving them forward, isn't helping them to grow. And it's stuff that is a great training opportunity for the junior folks and the admin people in the firm. Interestingly, bigger firms like have a hundred different ways of, of skin in this cap from separating technical and detail reviews to having their own sort of difficulty ratings. I don't know. Some of some bigger firms operate actually just like a bunch of smaller firms where you have a partner with their own team. Other have more like an assembly line approach where that stuff is separated a little more into functional groups. But it's something I don't see discussed all that much with smaller firms that I think if we lean into will better serve our growing younger accountants while taking a bunch of weight off the shoulders of the folks who are perpetually the bottlenecks. And that just might be you firm owner. Something to think about if you've, you've gotten that right or if you've gotten that wrong before. Because it's definitely one of those things where if you do it the wrong way, could leave a sour taste in everybody's mouth. Got any experience to that end, man, drop it in the comments. Be good to swipe a few ideas from you. We were early days in rolling this out in our firm, but it had achieved overcoming the problem of folks being afraid to review because we were able to carve out the easiest stuff where it's like, what do you mean? This is basically just like making sure government forms match what was entered. Basically making sure is the bank reconciled? Do we have all the work papers in the right place? It made it much more accessible for everyone. So if you got any wisdom to share there, pop it in the comments. Thanks for coming and hanging today and I'll see you tomorrow.