307 Tax Pros: What To Know About Working With Bookkeepers

Tax pros. Hey, Listen, I'm a 15 year tax pro. I ran a 40 person tax practice. I know how frustrating it can be to work with bookkeepers that will dump stuff into opening balance equity, the negative balance sheet accounts. I get all that, okay? It's frustrating. But what if, okay, stick with me here. What if we could build a more productive partnership with bookkeepers to save us a whole ton of time on workflow stuff, but also to maybe even attract like a more profitable, more specific type of, type of client to add some stickiness to that client relationship because you got, you got the holy trinity. The tax pro, the bookkeeper, the business owner, all working together in perfect harmony. Is that a thing that can do? We can do it. And today we're going to talk about how to do it by being better partners of professional bookkeepers. I know you already have feelings. Come on in. Scooch that chair on in. Let's talk about it. It's Jason Dal. Okay. Welcome to part two of a two part series. Yesterday we talked about things bookkeepers ought to know about working with tax pros. Today we're talking about tax pros and things we need to be thinking about when we work with bookkeepers. If you're new here, welcome. We talk shop about running tax, accounting and bookkeeping firms every single day, which is a lot. I know. You don't need to tell me. Okay, just a level set here like we did yesterday. Everything we talk about here today is generalizations. There will be bookkeepers and tax brokers that fall outside of these generalizations for sure. By and large, the folks tuning into this podcast are way ahead of the curve because you have an openness to learning and developing and all that that most people won't have. So what these tips are in large part is not how to navigate the other firms like the ones who are tuning into this podcast, rather how to navigate today. Bookkeepers who do not tune into this. This sort of thing, who are not investing in themselves, who are not maybe, maybe at the level that they wished they would be at. If we hold ourselves up to be the professional and capable tax professionals that I know we aspire to be. So for bookkeepers listening to this, you may not have a lot of these problems that we talk about today, but boy, is there a big old spectrum in what quote unquote bookkeeping is from super professional outfits who have got their stuff together and do triple A work to. You know what? My nephew's home from school between fourth and fifth grade. I think he's a bookkeeper now. And the fact that people call those two things the same thing is a big part of the problem. And unfortunately, because sort of the lowest common denominator is oftentimes what we associate with, quote, bookkeepers. And the same thing that happens on the tax pro side, like the very worst of tax bros, the folks who are complete hermits and will not even have a conversation with you or respond to an email because you couldn't possibly understand how busy they are right now. Just the most annoyingly entitled and overwhelmed tax pros that can't seem to run their own business. Like on the, on the bookkeeping. On the tax pro side we got a huge spectrum of folks who are good at this stuff and folks who are struggling for one reason or another. But how do we get to, to a framework that makes us collaborate better, save a, save a pile of time and maybe even create like some new business opportunities in the process? Okay, I got 12 things today for tax pros to be thinking about and how they collaborate with bookkeepers. Number one, also, this is a product of a whole bunch of people that spoke into this on social media and from my newsletter. Thank you very much for contributing to the conversation. If I bias on either side of this, it's probably on the tax pro side. While I did create a bookkeeping practice that I ran the last three years that I own my firm for 15 years, I was a tax pro before that. Okay, number one thing tax pros need to be thinking about to be better partners of bookkeepers. Number one, stop breaking stuff. You are like a bull in the freaking china shop. I don't care how busy you are, you are ruining my nicely put together file by just wham, bam, like plugging anything and everything you can just to make the answer be what it needs to be for the tax return. Meanwhile, I've got a job to do. This is actually my house that I'm responsible for keeping up. Please take your shoes off at the door and be a little more mindful of the space that I've created that there's like a time of the year when a lot of tax bros are just seeing red and they've got tunnel vision and they're like, buddy, I don't care how I get there, whatever's going to get me to the end of this project soonest because little Timmy's got a violin recital at seven tonight and I missed the last four of them. So whatever's going to get me there quickest, like that's what I'm going to do. But boy, do we make bookkeepers jobs hard by doing that? Number two, it is very often and it's worth asking, but it's very often that the bookkeepers themselves actually want to be the ones to make the adjustments to the books because an AJE is very rarely the best way to adjust the thing that you're trying to adjust. This, frankly, is where I've. I have always advocated for tax pros to have a standalone like dedicated trial balance app so that you can pull the balances from the accounting ledger into a separate system and then adjust them with ajes and fjes and rjes as necessary without like impacting the actual source books. Example of tool will do this well these days, a tally for I'll put a link to it in the show notes. Basically it imports the balances from the accounting system. You make any adjustments to it in your trial balance software, not the ledger software, but in the trial balance software. You can then I think with tally for you can actually push like the grouped federal balances to your tax software. But then you've made your adjustments without bungling the underlying books, which is what creates a bunch of work for the bookkeeper. And then either during prep or after prep, you can send those adjustments back to the bookkeeper, talk with them about why you made those adjustments, and they can work out the best way to get them back into the books, which almost certainly is not a journal entry. Back in the day I was using CCH Engagement for this. These days I wouldn't recommend people go to CCH Engagement. We had been on it for over a decade, but it had like built in trial balance functionality since all of our work papers were already there and made sense to do our trial balance stuff there. But these days I don't recommend that. Tally for is probably the best option for most people for a for a standalone trial balance app. Number three, stop expecting bookkeepers to read your mind. If you're giving adjustments without description, that is hardly helpful. Especially if they're trying to post those adjustments like in context where they actually ought to live, not just as a journal entry. That is per the tax accountant. If you got a supporting work paper, some sort of rationale for why you did that, don't be afraid to share it. Like, don't be too precious with that. If you're afraid that by sharing it you're gonna find out that it's wrong, then maybe you should have had a conversation during the prep process to ensure that it was right. Number four, just cc the bookkeeper. This may mean getting an authorization like on file, so that the client has authorized you to discuss this stuff with the bookkeeper. But just sending stuff direct to the client when it's not the client doing the bookkeeping can make the bookkeeper's job harder. Cause oftentimes none of that information makes it back to the bookkeeper. Number five, you may have to stress the importance of direct contact with the client. You ought to be able to present a united front, Tax Pro and bookkeeper to the client to say, here's the importance of us being able to work together. We'll for sure keep the business owner in the loop. But the risk of the business owner running telephone all this stuff is they miss important details or don't even communicate things to the bookkeeper. A bunch of the people speaking in on, on social media were like, yeah, the Tax Pro will give all the adjustments to the to the client with like the tax return deliverable. But the client doesn't give me the the tax return deliverable. Oftentimes like I don't get a copy of the tax return. So the bookkeeper never even sees what those adjustments are. And then the next year comes around, the Tax Pro's annoyed that the adjustments haven't been added to the book. And then they run the bookkeeper through the mud saying, wow, they're not doing their job. When it was actually the client that never passed that information along to the bookkeeper. We eliminate a lot of these issues just by being able to have open communication between the Tax Pro and the bookkeeper. It's not gonna waste a bunch of the business owner's time getting like, pulled in on stuff they don't need to be in a loop on, or at least don't need to be the one dictating themselves. But the small business owner may not understand that. And so it may take the Tax pro saying like, hey, here's why this is important that I have direct access to your bookkeeper. Hey. This episode is sponsored in part by Live Flow and do I have big news for you, buddy. Live Flow now supports Xero Xero accounting ledger. Xero for the first time speaking big news. I ran a primarily zero practice and I can tell you what a headache it was to have like some tools that worked with my QuickBooks clients, some tools that worked with my Xero clients drove me nuts. Live Flow, let's just zoom out and recap everything that liveflow is doing for you because it's bringing everything together. Google Sheets support, Check Excel support, Checkaroo QuickBooks online. You betcha. Zero support now exciting stuff and sneaky, sneaky feature like valuable feature consolidations. Consolidations. Being able to roll up a whole bunch of different like chart of accounts that like no matchy matchy required various charts of accounts, rolling them all up in a super simple, really nice ui. And then because it's live flow, you can pull just about any report from the accounting system into your favorite spreadsheet either one time or on an ongoing basis. Like it continues sinking out and it works across your whole stack now. Okay. I honestly don't know what more they could do for you. Learn more about Lifelo. Check out the link down in the show notes. This episode is sponsored in part by Team Up. I have a story to tell you. It is the story of Laura. Laura was working with a BPO in India. Basically a group that hires all the staffing and the training and all that other people. And you're, you're more buying like the work product than you are working directly with the people. The problem was they were missing important deadlines and annoyingly they weren't able to take the work from beginning to end. They just weren't getting it done the way that they needed it. In frustration, they decided they needed to cut bait, find a new solution. And they heard about direct hiring in the Philippines. They were looking for client facing staff with very strong English skills. And the Philippines seemed to be the perfect fit. Quote, we really needed to break that language barrier. And with the Philippines being more English speaking, that just seemed to be a better fit for, for some of those client facing roles that we wanted to fill. Firm started small, hiring just three teammates in the Philippines, and in a matter of months had hired 10 people across a range of roles including bookkeeping, tax accountant, fiduciary, tax preparer, business tax accountant, admin assistant. Laura said the candidates were actually more qualified than we were expecting. The process of interviewing and talking with the candidates is really no different than trying to hire onshore. Nothing to be afraid of or nervous about. I tell you, when I built my offshore team, as I did, I built an offshore team in the Philippines for my accounting firm. The person who will edit this video literally is in the Philippines. Say hi Derek. Hi Derek. It's the same thing that led me to the Philippines. Really good English speaking culture. But I too prefer direct hiring because I want to be in charge of the development of the feedback. I want them to be just like everybody else on my team. If I'm hiring like a service to do month end closes or something, I just, I don't have that Same level of control what Laura did here. Actually the same thing I did. If you're interested in exploring that. Well, Team up. Team up can find you some super talented peeps in the Philippines. Learn more Check out the link in the Show Notes Number 6 Plugging everything on 1231 makes a total mess of the monthly books. Caleb Jenkins actually called this out on social media. He said write Tool. If you use QuickBooks, you should be using Right Tool. I've talked about this app quite a bit. All one word Write Tool. Right Tool has a feature that makes monthly adjustments easier. I don't know what that means. I don't know if that means it like splits a year end adjustment over 12 months, but he called that out specifically. But if you make all those adjustments on 1231 and they have like carefully crafted month over month reporting, you just bungle all that stuff. Another tool here that could help Accruer. Both Accruer and Right Tool are past sponsors, but that's not why I'm bringing them up. They are the only ones that I know that do these two things. Well, Accruer automates monthly accruals in a really cool way basically. And it only works with QBO right now, I think. But basically in the description of most things in QuickBooks, it looks for the vernacular for the period end or something like that. There's like some combination of words where anytime it sees that it pulls the date range that you reference. So it could be an invoice, could be a bill, and if you say for the period 1124 to 1231 27, whatever that thing is, it will automatically create accruals for every single month for that whole range. And even if you go back and change that original transaction later to change with the date range in it, it will then go and modify all of the accruals that are not in locked periods. Super cool. That one's called a Crewer Accruer. I think we did a whole. We did. I think we did a five minute demo day on my YouTube channel. You can even see how that one see how that one works without having to take a sales call. But number six is recognize if you're dropping a whole bunch of stuff in there on 1231, it is making a mess of the monthly reporting. Number seven, keep your gosh darn hands off accounts receivable, accounts payable and payroll posting adjustments to arap. That is the equivalent of like plastics in your accounting landfill. That stuff never goes away because it's got to be tied to a customer or a vendor and you're just, you're making a mess. That's one thing that came up a bunch with bookkeepers. Stop like plugging that stuff directly. Number eight, very frequently you're blaming the bookkeeper for things that are actually the client's fault. We talked about a couple examples of this. Sending the client the adjustments, but then the bookkeeper never getting a copy of them. The client making dumb requirements of the bookkeeper, but the tax pro not being aware of the requirements. Yesterday we talked about capitalization thresholds. I've had clients who would tell bookkeepers, yeah, anything over 100 bucks or so we need to be tracking here separately. And then the bookkeeper spends an outrageous amount of time going through every $400 Costco receipts to identify any items that were over $100. They do that the whole year. And then you get to the end of the year and I'm just moving all that stuff to office expense without talking to anybody about it. And the bookkeeper's like, what the heck's going on here? And the tax pro is like, your bookkeeper's an idiot. They're putting all these hundred dollar things, they're capitalizing it. And because the business owner is the business owner and more than 30 days has elapsed, the business owner doesn't remember telling the bookkeeper that that was the requirement. And unfortunately, because tax bros in the current, like professional services, I don't know, food chain hierarchy, business owners assign a lot of value to the input of a tax pro, largely because most entrepreneur entrepreneurs are going to spend more money on taxes than just about anything else. So when their tax pro says something like it is, it is gospel when, when probably it shouldn't be. Because we know the bar for tax pros not super high these days for a lot of reasons. They haven't exactly been dealt a great hand. But we know there's a huge spectrum in quality of tax pros, just like there's a huge spectrum in the quality of bookkeepers. But all it takes is a tax pro saying like one kind of underhanded thing about a bookkeeper and you can genuinely, like create problems for that person's livelihood. Like it's something that we need to be a little more careful of before just throwing somebody under the bus when it could have been your fault for never communicating it to the bookkeeper. Could have been your client's fault for never passing that information along to the bookkeeper. There's a lot of things that go into that whole loop of how information flows. So that's number eight, you're probably blaming the bookkeeper for things that are. That could be the client's fault. So hit pause before you throw anybody under the bus. Number nine, I already gave it away. Passing comments about a bookkeeper can impact a bookkeeper's livelihood. Try not to be quite so flippant about, like something that they have done in the books until you actually have an understanding of it. This got a little more complicated as more tax pros have gone into the business of doing bookkeeping now. And it's easy for them to say, well, if we had been doing this stuff in house, we wouldn't have had any of these problems. That's oftentimes not true because usually it's going to a bookkeeping team. And there's just a different set of miscommunications that can happen within a firm. Maybe it's a little better you don't have all the same info silos. But the fact the more tax pros are getting into bookkeeping has created a little bit more of a conflict of interest there. Not unlike wealth advising, it's very common for tax pros to have a. Well, I will say from the financial advisor's perspective, they would say it's very common that they will build a referral relationship with the tax pro only for the tax pro to then go and start offering wealth management. And so they're annoyed at the tax pro because then the tax pro actually ends up poaching a bunch of the stuff that, that the financial advisor referred to the tax pro. Same thing can be said of bookkeepers who could refer work to tax pros. And then the tax pros are like, I think we're going to do bookkeeping now too. And they start gobbling up the stuff that the bookkeepers referred over to them. That's gotten a little more murky. And if you're a tax pro, like, be mindful of burning all of those ships. If you are getting into wealth management and bookkeeping, there's a lot of value in those networks. Number 10, stop expecting bookkeepers to read your mind. Which is actually what number three was. And so when I was writing this this morning, that one must have been so important that I wrote it twice. Number 11, think about how the right bookkeeping relationship could actually be a great partnership opportunity. Not like, not like equity partnership opportunity. But we talk a lot here about specialization, trying to find a way into specialization. Imagine finding the bookkeeper who is the go to bookkeeper for beekeepers. The beekeeper. Bookkeeper. Oh, my gosh. If I'm trying to build my tax practice around bookkeeping, what a great partnership to find. Like, I'm, I'm going to go to that bookkeeper and be like, you just tell me how you want me to do the tax prep around your stuff because we are going to be best friends and I want this work. There's all sorts of situations where that could be actually a really, really valuable partnership, but because oftentimes we like, devalue it because the perception can be just so low for what bookkeeping is. Because so many people will say, like, well, because you're my wife, you're qualified to do bookkeeping for my business. Just like all the crap you see like that, that unfortunately like devalues really good bookkeeping and how valuable a professional bookkeeping outfit is that, because we then don't assign a bunch of value to that relationship. Aren't thinking about just how great the right partnership there could be. We did a whole podcast episode about partnering with consultants in a space. If you're trying to get more into that space, you want to talk about low hanging fruit. How about partnering with bookkeepers in that space? Or on the flip side, if you're a bookkeeper, partnering with tax pros in that space, partnering with wealth management folks in that space, you get that, right? That can be a great way to get into more of the work that you want to get into in an intentional way, not just inheriting whatever the universe sends your way, but actually going after what you want to do more of rather than just taking whatever stumbles through the door. This episode is sponsored in part by Stanford Tax eight tax firms. You got an eye on that calendar, buddy. Next tax season it is. It's going to be here before you know it. I know we're thinking about extended deadlines and I don't want to be that guy, but the time to start testing your next tax season workflow, and it's now. It's not January when you can't afford for it to go sideways, it's now. Let me tell you about Stanford Tax. K big problem with 1040 workflows is asking intelligent questions, putting personalized questionnaires in front of your clients rather than the dumb boilerplate ones that ask a whole bunch of questions that don't apply to them, right? Stanford Tax, Great way to do it. In fact, they've beefed up the platforms they support. CCH Access Pro System, fx, Question, Gross Alter Tax, Lacert Pro Series, Drake generate personalized questionnaires that only ask the questions they need to using Actual pro forma data from their prior year return. Oh my gosh, somebody did it. Only ask the questions you need to ask in a modern web interface. Get them to upload the required docs and buddy, you're off to the races. You just asked for all the goodies that you need and none of the goodies that you don't. Leaning into what, like, web forms can enable for you without losing that, like, personal touch. The worst version of completing the thing online is the thing where it's like, none of these things apply to me. And my tax professional knows that. Okay, so if you're looking for a smarter way to do intake, check out Stanford Tax link down in the show notes. Today's episode is sponsored in part by makershub. If you want to lean into the very best of what AI is enabling, like right now, like, we're not talking, we're not talking hypothetical what it can do so soon. We're talking right now. You want to lean into that today. It is upending accounts payable. It just is make yourself. We've done several demos of them on the channel. Now. I had clients who had very complicated accounts payable needs, multiple heinies in seats, processing bills, processing the detail, doing, receiving, all the stuff that goes into fiddly inventory management and complex purchasing. We could have streamlined so much of that with Maker's Hub. It's because Makers Hub is using AI vision models to take extraction, like automated extraction, further than has ever been possible before with old OCR tech. We had a whole generation of tools that were built supporting the accounting profession on OCR tech. And man, that stuff is going to get wiped out so fast because AI vision models, they can not only see and understand things. Like, they can not only visually see it. Like, it can pull, like handwritten text notes scribbled on top of a computer bill, but it can, like, comprehend and make connections. When you pair that with a language model, that can be like, normally it's like this, but here's what I'm saying. What do you think that means that can get you so much farther? And it creates an interesting place as we are standing up our own services to be like, is this an arbitrage opportunity for firms to step in? Is this a shrinking opportunity if it's something that, you know all clients are going to adopt over the next five years? Either way, you know what it is, is a phenomenal advisory opportunity where we can step in and be like, gang, there's a fundamentally better way to do this. Talked with people who literally sent My Makers Hub demo videos to their clients to be like, we need to do this now. And in an age of AI hype where you're kind of getting fed up with all the marketing, right, to see something that is actually crushing. That's really exciting. Makers Hub's doing this really well for ap and we got a few providers starting to do this really well for 1040 tax prep. The exact same technology, AI vision models, pulling stuff off of documents in much more compelling ways, doing a bit of reasoning and then like getting it way closer to the end zone than OCR ever got it before. If you're thinking about this for bill Pay, check out makershub link down in the show notes last number 12. Same as the last one I had yesterday for bookkeeping. If you nail this, all three of you working together really well adds an element of stickiness to both the tax pro's relationship with the business owner and the bookkeeper's relationship with the business owner. Once you are all three in lock step, that what that ends up looking like is the business owner not getting pulled into things unnecessarily. It's fewer miscommunications and the business owner not having to play telephone tag. And in the perfect world, things just kind of happening. Like you get to the end of the year and that stuff just goes to the tax pro. And it's not the business owner having to do a bunch of work and organize everything themselves. Like when things are just humming and happening in the background there, the prospect of changing that whole setup like that finance and tack kind of professional stack, you don't want to do that when things are humming. So if you can actually get that right and get everyone working on the same team that just serves to benefit everybody ought to save you a whole pile of time. And if you get like tactical about it, can actually help you build your business in the direction that you actually want to go by surrounding yourself with partners who are knowledgeable and experts in the same thing that you want to be perceived as an expert in. So we talk about the kind of internal blocker of like, well, I want to be the go to tax pro for golf caddies, but am I really an expert in this thing yet if I haven't done it much yet? Meanwhile, most golf caddies will go and work with random firms that have no expertise in that and they will be the one golf caddy that, that they're serving yet we're afraid like, oh, I don't have that expertise cause I don't have a bunch of Those clients. How about surrounding yourself with a bunch of other pros who serve that space? If you can find them, they will actually be happy to work with you because they're doing the same thing. They've made the same trade offs by investing in this space. And to find other pros that are very specific and complimentary to what they do, they're going to be pumped about that. So you're not like, this isn't like a hard cold sell of like, oh, you should give me all this stuff. It's like, oh man, you're doing this stuff. I'm doing this stuff too. We could totally be helpful to each other. If that bookkeeper is doing some marketing efforts, if you're doing some marketing efforts, that is like the tide raising. That is all the ships coming in with the tide. That's all the boats going up, you know, everybody's boats. But at its worst, it is like this whole relationship is just a drain on, on your workflows. From the tax pros perspective, there is a few things as frustrating as getting work from a, a quote bookkeeper. And it's like none of the accounts are reconciled. You look at the balance sheet and it's complete dumpster fire. And you're like, really client? You're telling me that a professional put all of this stuff together and you're in your busiest season and the last thing you need is one more cleanup job when you're trying to get tax returns out the door. I tell you as a, as a tax pro, like, that is the really, really frustrating version of working with a bookkeeper when you are a tax pro. But this is not the work that you're getting from like professional bookkeeping shops. It is the folks on the other end of the spectrum who are either super early on in their journey or, or someone that the business owner said, you're a bookkeeper now, like their office manager, their spouse, their nephew. And I think this, this, it's this framing that has a lot of tax pros not valuing a good bookkeeping partnership as much as they should be. But if we can flip that on its head, maybe even more intentionally seek out those relationships. Because tax pros are often asked by their business owners, like, you got a bookkeeping referral for me? And they're frankly really hard to find because bookkeepers don't have a ton of capacity right now, just like tax pros don't. But if you can go out and find some bookkeepers you love working with or those that are serving a similar space to you, there's an opportunity there for you to bring more work to them so that once you got that machine running, it's just that much easier each new tax project you bring in. But then if you are serving more specific clientele, extending that network is, is additive for everyone also. Right? I think the big enemy here is like that tunnel vision of just becoming total a holes when we are super busy and we never make time to get back on top of those problems, get back on top of that seven year rolling plug that goes into the company's books every single year. Like at a certain point we have to dig ourselves out of that. And of all the bookkeepers in the process, I'm sure you've got thoughts and I love to see them down in the comments. The worst version of this for tax bros is feeling like you're having to train a, a junior bookkeeper on a bunch of stuff when they're just not up to snuff. And I can for sure relate to that. Like that is not a job that you want to take on. The problem is professional bookkeepers. They're like, stop projecting that on me because that ain't, that's not me. Like we're capable of working with you, so let's be collaborative. And it's, it's, I don't know, that's like, I guess the hard thing to navigate here. Because if we want to be lazy, we can just be like, nope, not my job, right? Not my job to bring everybody along and teach you how to do this or that. Because some of the bookkeepers you work with may just may just not know how to do that stuff. But I think if we totally close ourselves off to that, we miss out on the upside of working with professional bookkeepers who can be additive to our firms. Let me know your thoughts in the comments. I think I called this out yesterday. Nancy McClelland, listener of the of the podcast, she runs a community that is kind of built around this, like helping bookkeepers collaborate better with tax pros. I'll put a link to that down in the show notes. This was a super fun conversation on social media. Got a little testy as you might expect. I feel like whenever we wade into the testy stuff on this pod though, we do a pretty good job in the comments and everybody's kind of coming at it with a pretty reasonable perspective. But anything we missed here, any biases that are, you know, I've got, I am more tax pro leaning than, than bookkeeping because I did that for 15 years compared to like 3 years, but feel free to call that stuff out. Thanks for coming and hanging today. I'll see you in the next one.