313 The Accounting Firm Workflow Hack: Postponement

Workflow hack alert. Okay. We think too linearly about capacity and about how we get the stuff done. We do it from start to finish, beginning to end, and then we ship it out the door. But people that make tons of things, like world, like global scale, like millions and millions of things, they don't make things that way. They lean super hard into a concept called postponement. It is a big brain way to optimize your capacity. And today we're going to talk about eight ways that postponement should impact how we approach work flow. And accounting firms, both for accounting firms, for tax firms, situations where doing like the obvious thing, the work from beginning to end is actually a less efficient way to get it done. How's that for a tease? K, come on in. Don't postpone. Stupid joke. Okay, postponement. What it is, Jason, Kind of the kind of the dictionary definition, more or less. Postponement is a strategy where the final steps of a process are delayed until the last possible moment, allowing for more flexibility, customization and accuracy. So a real life example, you have a manufacturing facility that ships say Nike clothing. They will wait until the last possible moment to finalize the thing that they are creating to, to ensure that they don't have like excess inventory and waste and create a bunch of things that didn't need to be created because people didn't end up wanting them. But what they do to enable that is they take the raw materials, they take that stuff as far as they possibly can so that the moment that order comes through, there's the least amount of customization that needs to happen possible. And so I mean this, this goes without saying, but it is amazing how far they push this. It goes without saying that they're not harvesting T shirt raw materials from the earth. When you make a Nike order and then are like scrambling to make the whole thing from scratch and then they send it to your house. But the opposite end of the spectrum also isn't true. It's very risky to produce a mountain of inventory that you may never be able to sell or may not be able to sell at like the optimum price. And so how do they enable this? Well, they chunk out these processes into their common components. So if you think about all the T shirts Nike sells, what do they all have? Well, all the materials are, are cut to a common size. Regardless of what shirt, what sweatshirt, whatever it is. All of those sizes are standardized. So the material itself, you may use the same material across 500 SKUs. That material is going to be cut into a common Size, the front part, the back part, the sleeves. I don't know if dying happens before or after cutting, but then they'll, they'll go next, the next step, they'll sew as much as they could possibly. So and maybe by sewing it all together, that like sort of modular product is relevant to 250 SKUs instead of 500 SKUs. And there's like a balance there where via postponement in that facility, they get it as far as they possibly can before like printing on that final thing or doing the die or whatever that last step is that customizes it into the specific SKU that somebody buys. But if we think about how we deliver our accounting services and you compare the amount of pre work we do on accounting services to the amount of pre work that goes into fulfillment and traditional manufacturing, they're very different and in some cases for good reason. But there's many opportunities that arguably we might be missing by not leaning further into pre work, particularly as most firms struggle with cyclicality. That is, there's one point in the year where you've got way more work to do than you can possibly ever get done. And this gets really expensive. You're paying everybody overtime. People aren't like working to their best kind of mental capacity. Like you're definitely not doing your best work when you're working 80 hour weeks. And for all the focus that the spikes in our workflows get, the busiest seasons and how we try to mitigate those, we don't think enough about the troughs. The opposite end of the spectrum. Because if you run a firm where all of your staffing is not elastic, right? Like in a perfect world, everyone would just work infinite hours when there was work to do and then not work at all when there wasn't work to do. And most of us like our staffing setup is not that flexible. So when you have slow times, people just don't have as much to do. Or normal work takes twice the amount of time because you have access time. See months for your tax firm. See months April 16 onward May, June, July, August and September 1through September 5. The work is expanding to fill the time available, right? Because you're, you're well under capacity during that period. And it's worth acknowledging that literally any amount of time that you can spend in a slow season where folks are otherwise going to be working that takes the, the tiniest wee bitty bite out of your busiest season is time well spent. If you can sink 10 hours into slow season, that buys back one hour in busy Season again, assuming everyone's gonna be working either way, whether there's stuff to do or not, which is unfortunately the case in most firms, then it is a worthwhile trade to trade that 10 hours during slow time for that one hour in busy time. Now, there's a hundred different ways you could, like pick that apart, right? Kind of goes without saying. But because most of us, whether we actually use hourly billing or not, because most of us still have like that hourly billing in our DNA, it was, it was the abusive father that raised us in this profession. We are hesitant to sink hours into anything because it feels like you're blowing up a project, it's going to go upside down or something like that, even if you don't bill hourly. Like, this is just how we're wired. So these eight tips, these are examples of where burning time in a way that hourly billing would frown upon, where burning time is probably the right thing for the overall profitability of the business. So first example of this, pre accounting for month end closes. If you are an accounting firm, I cannot stress enough how important your pre accounting process is. We did a whole podcast about it, I don't know, nine months ago now maybe I've been talking more about it on social media lately. We can link that, that pre accounting episode down in the show notes. But what pre accounting says is we're going to make an explicit list of every single item that we're going to need to close the books every single month. And we're going to pull that thing the moment it's available. Not my professional staff, my admins, however far I can de skill that fetching act. Assuming that fetching can't be automated. If the credit card statement's available on the 25th, you better believe we're gonna grab it on the 25th. If the checking statement's available on the 1st, we're gonna grab it on the 1st. Because if you don't, you end up with your professional staff who's looking at a month end close that's due on the 15th and they rock up on the 13th and they're like, okay, time to get started. And they have none of the information that they need. Half of their logins are busted. You have to ask a client for something who is, you know, now on vacation or gonna take a week to get back to you. And. And you're like, ah, crap. I'm so close to the deadline that now I feel like a dummy for, for even asking this late. We've all been there and this will always be the Case, I'm convinced if you leave it to your professional staff to just go out and get those things when it's time to do the work, that's not the way to do it for a number of reasons. And as we explored in that other podcast episode, beyond the benefits of deskilling, the act of gathering all of that stuff and it happening sooner, you'll find if you pull lower skilled people into gathering that stuff, the next step is like, well, they may as well like put it in the workpaper file where, where it will go, right? Like the final destination. Well, they may as well like number the workpaper according to that convention. They may as well may as well name it according to our convention. And why don't they just annotate it? Like just look at last month, like the number that you highlighted on the, on the document, that sort of thing. You may as well do that. And before you know it, you're looking at things like, well, well, that number that you annotated, you can hop into the balance sheet real quick and make sure that that ties out. Like before you know it, you've got admins doing 70% and close compared to a professional person coming in on the 13th of the month and then gathering a bunch of docs and not having what they need. This episode is sponsored in part by cloud accountant staffing. Hey, you want a tax firm? You struggle to find good tax talent. Yes. Yes you do. Let me tell you, the world's getting smaller every day and cloud account staffing will help you find mega talented accountants in the Philippines who already have tax experience. Actually, hang on, how's this sound? 2 years tax experience using Intuit Pro Connect or Uproconnect User. Sounds good, right? Before that they did audit. Bless their hearts for getting out of there experience with RC reports, Core v Tax planning and last actually oversaw a team of other preparers. 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Doesn't hurt to start the process just to learn. If for nothing else, check out Cloud Account Staffing. There's a link down in the show notes. This episode is sponsored in part by liveflow. Hey, so I was recently at Zero Con in Nashville and you know who else was there? Live Flow. Because they recently launched a Xero integration. It's a big deal. It means whatever your favorite spreadsheet app is. Excel, Google Sheets. Wow, edgy. Whatever your favorite spreadsheet app. You can use Live Flow to pull zero reports into your spreadsheets. Pull them in one time, pull it like auto sync it on an ongoing basis. You got a little button now in your spreadsheet app that'll bridge any data from any old client, QuickBooks or Xero file into your spreadsheet app of choice. Bunch of ways you can use this, from giving like fractional access to accounting data to stakeholders like members of the team, the marketing lead, an investor, maybe even the business owner, because you don't want them in the accounting file. Give access to the spreadsheet instead of the accounting file could save some headache. Also have a growing number of firms that use LifeFlow for month end closes. Like they have this big old workbook template. They pull in a whole ton of reports from the accounting system with the click of one button. And then you got this giant workbook where you can manage the close. It's got all the actual ledger data but in and like a spreadsheet file rather than running umpteen PDFs or something like that and having to figure out how to organize all that into your file storage system. And they also do consolidations. So you have to like roll up a bunch of that reporting every single month. I had a dental group I worked with, it was 26 entities. We'd have to do this consolidation and we would only do it once a quarter because it was so much freaking work. It was like a full day to do all that stuff. With Liffe, we could have mapped that and ran it pretty near instantly. We would have to do some eliminations, but we would have taken an eight hour thing to like maybe an hour tops. And the big News is recently they just shipped that zero integration. So whatever your ledger of choice, life flow is going to work out for you, check out the link down in the show notes. Now, if you purely looked at this through the lens of like what is the fastest way to do a project from beginning to end? It is probably one person sitting down and trying to do the whole thing from beginning to end. As opposed to somebody pulling a credit card statement on the 25th and a checking statement on the 1st and emailing the client for the stuff that we need on the first. Maybe that's a little more lumpy, but I can tell you when our bottleneck is is the 15th, maybe the 5th through the 15th, and your bottleneck is the professional staff. Maybe that's the bigger bottleneck. Then if your professional staff is the bottleneck, virtually any time that your admin team can sink into saving the time of your professional staff is helping the business. That's an accounting firm example. Let's talk about a tax firm example. This is one we've railed on quite a bit. How about document request lists? The old DRLs. And thankfully we now have more automated than ever before ways to generate DRLs. Tools like Sorban, like Stanford Tax, like Safe Send. I think True Prep may even do this. I hate making lists because the moment I start making a list I know I'm forgetting people. But there was a time where all you could do is generate a PDF of last year with pro forma amounts. Now we finally have ways to get explicit lists of things from the pro forma data. Either a backup file or you give the PDF of the organizer and it extracts a list of pro forma items. From there, getting explicit about what things I'm going to need from somebody when it gets into tax season, building that list and staging requests in your software that will automatically follow up until clients give you that information. Doing that in November and December and January. You want to talk about whittling away at busy season. When we don't do this or we just mail out a bunch of PDF organizers or something like that, then we are shifting the work of figuring out what what do we need to ask for and what do we need to follow up on. We're doing that work in our very busiest season. This is a great example of postponement. We're actually doing more work before the busy season is better for the business. And depending on your metrics, if it's like total hours into a project, maybe it's worse because a lot of this stuff can be done by lower skilled people. But again, like it is, it is the right thing for the firm. Third example, back to an accounting firm example here. How about not waiting until the end of the month to start classifying transactions and asking clients questions? Increasingly I'm seeing firms, accounting firms move to like weekly bookkeeping where they're in there every single week asking clients more kind of on the fly. And there's a lot of firms that still live and buy die by just doing this monthly. In fact, I've shared before, like we had a big partnership with Bench where we would refer a lot of work to them and Bench just stood by this like that they, they would die on this. Nobody was allowed to do interim like within a month bookkeeping in Bench, they would only let them do it a month at a time. Cause they thought that was faster, knock it out all at once. But then they still had the bottleneck. Now Bench, at least at the time, the standard turnaround time for month end delivery was 25 business days. So they had set the expectation in the service delivery that it was literally an entire month. The following month, any time in there they might get their financials. And so for them, because this was such a delayed delivery, I think that's, that's probably fine. And they probably do save a bit of time by doing all that work a month at a time. Most of our clients, they won't put up with that. Right. Like the notion of getting a set of financial statements delivered on the 28th, somebody's going to be at the end of that bus, like the caboose on that train, and they're not going to be happy about it. So most of your clients are getting financials delivered by the 15th, then the latter half of that month, we ought to be doing the bookkeeping for the following month. And even though I think in total that probably takes more time, I think it's better optimized for the constraints of the business as a whole. Because it means in your busiest time, from say the 5th to the 15th of the following month, you got less to do because you've already knocked out some of those questions. You're not doing all of the classifications, you're only doing some of them. Number four, another tax firm example, how about gathering tax prep docs and asking questions at year end instead of during tax time. And this makes a lot of sense if you're doing a tax planning engagement is like one more argument for why that's actually beneficial for your firm. But hot take, hot, hot take what if you did it and it wasn't even in the scope of a tax planning engagement. What if you just started asking before year end, huh? You got that document request list ready. What are some of those items you could start gathering like as soon as 1231 hits or even earlier. If we go back to the example of pre accounting, gathering information for the month and close the credit card statement, oftentimes that's going to be ready before the end of the month because it's not on a calendar cycle. Certain other things, like basically as much as possible there, we're, we're pulling the gathering process forward. Now are there some benefits to batching the things and the requests that we make of clients? Probably, but I would at least start with the folks that you're doing tax planning for, like beginning to build out the tax prep file. And if you already have the DRLs, the explicit requests ready that you're going to need for the following tax season and your team can complete part of that DRL before you even get to the end of the year, that is a huge win. That is work that's coming out of your busiest season. The constraint of the entire business and managing these explicit items, these lists in total it is probably more work. I don't know. In that case it might not actually be because in busy season, figuring out what work that you need to ask for and then refiguring it out when the client only emails you half and you're circling back to it two months later, that's actually a lot of work. So this one may actually be a wash in terms of total time. I will tell you, DRLs and request management can definitely be deskilled. It can take stuff away from your professional staff, particularly in tax firms. I think we're over reliant on tax expertise because it's kind of the way that it was always done. You had somebody that could answer a phone, you had partners and then you had tax professionals and that was kind of it. But think about the percentage of it's going to be different engagement to engagement. Think about 1040s, the percentage of your normal 1040 project that is just information gathering. It's, I mean in many cases it's over 50% of the work that goes into it. Particularly if you're using something like I don't like a sure prep or something like that. That's extracting information from government forms and putting them into the tax software. Now that's, that's a very basic 1040, but the requesting of information and the gathering of it all, you know, the Pushback is, well, an admin is never going to do that as well as a tax pro. And yes, there's like a last 20% where a tax pro would know, oh no, we actually need this too when they see it. But that's not a reason to stick tax Pros with the 80% of the other work. So as much as we can gather of that, actually before we even get to year end, in some cases it's going to be more work, but it's still worth doing because year end isn't the constraint of your business. The following tax season is the constraint. Number five for accounting firms. How about not reconciling on like bank statements and instead reconciling on what the online banking shows? You know, like if, if you have the scenario. And these days, like with small business accounting, the reconciliation process is not that onerous. But there are other more client specific situations where reconciliation is actually really hairy and a whole bunch of work. And if that's the case, why wait for this arbitrary document to give you some balance when you have online access and you could do any version of that on the fly. Do it up to two days before the statement and then the statement drops and you've got just a tiny bit more work to do. But like we are super fixated on the statement for some reason when we have other sources of information, we're talking about bank statements and bank transactions here. There's a bunch of different versions of that, like intercompany tie outs and all sorts of things that are not just banking transactions where we can do a like more postponement, sort of take it as far as we can sort of approach, even if it takes more time in total to get it out of the busiest time. Bunch of examples of that. Like even beyond banking, Today's episode is sponsored in part by Team Up. How do you hire people that aren't mediocre? How do you avoid just attracting like the middle of that normal distribution? Right, we want exceptional people. Well, the answer is recruiting is framing your firm and your role as here's what we do. Like we have something to say. We're opinionated on the right way to do this stuff and being specific enough to attract an exceptional person who that specific role resonates with. And it is easier said than done and not unlike how we can attract very general clients. If we don't get specific about this and we don't do the work of recruiting, you can end up with generic results. Not to be mean about this or inhuman, but without putting in the effort, it's just going to be less likely that you find those exceptional people. Right. Just how many people should you be going through? According to Team up, you got to be looking at inviting between 2 and 300 people to apply, getting between 50 and 75 completed applications, getting between 10 and 20 people to complete kind of an introductory test like establishing a technical bar, do five to 10 interviews and end up with two to three fantastic candidates. Sound like a lot of work. It is. And that's why partnering with somebody to help you with this will actually increase the likelihood that you get really high quality hires. So Team Up. They'll help you find really talented accountants in the Philippines. Not just like pulling in whoever's walking by, but like doing outbound. Like they have a team of recruiters that are putting a bunch of legwork into this to increase the likelihood that you actually get really, really good people. Learn more about Teamup. Check out the link down in the show notes. The most important software decision. Oh. That you'll ever make in your accounting firm. It is your practice management system. Oh. This episode is sponsored in part by ClientHub. Good way to think about it. The four Cs. Cut, carrot, cut, no capabilities, client experience, clarity and community. I've already told you about the first three Cs. Today we're talking about community. ClientHub is particularly suited here because they got a co founder that was a former firm owner and pro top 100 pro advisor. Not just a pro advisor top 100 that knows how accounting firms actually work. Imagine that software people that actually know how this stuff works. When you adopt Client Hub, you don't just get a practice management system, you get a community that is aligned around their simple vision. Happy clients, happy firm. That's nice. As part of Client Hub you can ask questions, get advice, share your perspective, all with a welcoming community of small firm accounting professionals. So at Software with Client Hub, they're actually going to deliver a service to you that is sharing the value of what all the other firms that are using Client Hub are figuring out. Just the other day we were talking about how we have this divide between workflow tools and the client experience. If any practice management system was built from the ground up around the client experience, arguably it's Client Hub. It's basically like a two sided task management system where the client logs in just like you do and you've got like a shared space to knock out those tasks. That is Client Hub. To learn more, check out a link down the Show Notes Number 6 for tax firms Templatize more of your work papers and your calculations. So let's say you've got kind of like a process yard. You always do for 199A or, or whatever. The various things you double check are either double check or like have to do calculation to optimize or something like that. How much of that can be built into a template with as few of inputs as possible. Like kind of doing the pre work on something that has to be done on all of your projects or. Or on half of your projects. I used to be very anti work paper template because I was like that's just like making up more documentation that isn't even like what auditors call it, first primary source or something like that. It's like we're just making that up. That's not valuable. Now I see more the value of that being doing a bit of postponement on like an initial review, like that sort of thing. If we can just plug a few things into this work paper that somehow like makes our life easier or reduces the amount of legwork or manual tapes you got to run for X, Y or Z. Those templates are totally an example of like doing some pre work, taking some work out of that busy time. Okay, two more examples. These ones are a little hotter. Takes number seven, it's for accounting firms, could also be for tax firms. Document advisory insights that you come upon. Whether it ever gets sold or not, whether you ever sell them advisory or not. Document the things that you're discovering. Now you don't want to give this stuff away for free if you do. Like clients have no reason to to pay you for advisory, but oftentimes the blocker to get someone to pay you for advisory is the client doesn't even know what the upside of that is. And the really good example of this is number eight, my last example here, tax planning work. Nobody understands the benefits of tax planning until they've experienced the benefits of tax planning. And so that's a really hard thing to explain to a client until you've gone through some of the work of doing it or at least calculating an estimate. And to be totally honest, my version of tax planning is like doing 80% of the tax planning before anybody ever even agrees to let me do it for them because I want to pitch them on doing tax planning when it's actually worthwhile for them. This is another one of those situations where it's like we are doing work that we might not get paid for and it feels wasteful. But if we can do this work during Our slower seasons, particularly around stuff like advisory, where it's going to be way more profitable than our other work. And it's absolutely worth doing super simple mental exercise on advisory work. And the same applies for accounting firms doing more traditional VCFO advisory work. But for tax firms, I just really want to keep hammering on the value of tax advisory. A really, really basic example for you. Let's say you run a firm that is on 50% margins. You have a $1,000 a year tax client, not a huge client, but you're making 500 bucks a year on them, right. If you can illustrate to that client why they should pay you another $2,000 a year for doing tax advisory. And this is usually like, I can show, you know, five grand or more in tax savings or some other variable that is, that is peace of mind or knowing exactly what they're going to pay ahead of time. Some other thing that they assign value to. If we can get them to pay $2,000 a year for tax planning, Tax planning generally will not be any more work than tax prep. So let's say we're 500 bucks in costs into getting that work done. Then we're taking a $1,000 a year, $500 profit client and turning it into a $3,000 in revenue, $2,000 in profit client. So we're doing twice the work and we've gone from $500 to $2,000 in profit. The amount of work you're doing for them, like the time it will take now doubles, but the profit quadrupled. Somebody want to do the math on how many clients we can fire then? What does that mean? What does that work out to? Classic don't do math while other people are watching situation. It's hard to say, actually. It's. It's actually unknowable. But you could get rid of some clients then probably, and still be just fine. It's that sort of change that lets you, like, do half of the work and make the same money. And so is it worthwhile to do some tax advisory work and not know if you're actually going to get paid for it or not? Man, if it leads to one more client being 4x as profitable with twice the work? Yes, I would say that it is, but it is one of those things that would get like, squashed by the traditional hourly billing model, right? Because the notion of sinking time into something if it's not an A to B linear, like absolute least possible time we could possibly spend on that project to get it done. Any other approach than that like has been thrown out for eons. Meanwhile we have these firms which are complex machines with a bunch of people working in them. And these massive fluctuations in availability, like tax firms are obviously the big perpetrators here. But accounting firms have the exact same issue. Because in an accounting firm the constraint inevitably becomes the month end close and how quickly everybody wants their books to get done. So you have the same issue just a whole bunch of times all year long. And don't even get me started on what January looks like. Yikes. So we shouldn't be measuring success on what the total time or total inputs on a project ought to be. And many of us, we know this. But there's going to be very real situations where pumping more time into something, doing this sort of postponement approach, doing as much pre work as possible is actually better for the business as a whole. And it may break some of your metrics. Oftentimes you throw out a, A, a big idea like that. And it's, it's not to say it's resistance, but the biggest question people will have is like well what does that do to like our WIP metrics or this or that KPI that we have and that'll make it look like we're going backwards. And it's like yeah it does. It just means you need a new metric, I guess. Like, like metrics proxies can't get in the way of making the business better. Right. What you'll find in that case I think is that your team, like if you're organized into pods, your team will be higher output. It may mean getting a team more admin support, which is almost always the right thing to do because everybody in the team is then upskilling the more support they have. I push like firm owners and leaders and stuff like that. Get an assistant. Don't be the kind of person that I don't, I don't need an assistant. I would never do that. Just get over that. Sooner you can the better. Cause it lets you get to more, more like higher value tasks. But the same applies for everybody in your business. Not that they need an assistant, but when they have someone who can support them that's more junior to them, they grow way faster because their time has sunk into more valuable things. And I would actually argue that the junior person grows faster as well. When you have a stagnation of tasks on a person like they're not growing as fast as they could, like the very real version of growth for someone. If you want them to get from A to B, you have to find a way to migrate the tasks to them that will enable B. So anytime I would sit down with my team and do a review, we would say here's where you want to go. But it means 50% of these tasks need to be completely different next year. Like the evolution of tasks throughout your team members is a very real, very tangible way to think about a person's real growth rather than another year going by where they're largely doing the same things. And senior people unfortunately in most firms are mired in a whole like just crap ton of admin, Asking clients for documents, following up when that stuff is missing, taking a pile of documents that a client sent them and having to organize them into where they go properly. That is not the job of a professional. And it can be as simple as being like this person, this admin, this junior. They are your go to person for helping you with all this stuff now and along the way they're going to learn delegation, they're going to learn how to better communicate to people what their expectations are. All super, super powerful skills for folks that are trying to like move up that value ladder and do more impactful work. So some things to think about that are like kind of counter to many efficiency yardsticks, but it's probably going to lead to a higher output firm. Got any cool hacks? Drop them in the comments. Would love to see them. Any of these things that you've tried and had good success with or not like traps to avoid that stuff's gold as well. Would love to see down in the comments. I'll see you next time.