339 The 3 Things Accounting Firms Need To NAIL Before Year End

Gang. Oh, that year end. Do we want to talk about this is a terrible idea for an episode. The year end is going to come up fast. We all know that. Today we're running through three things we need to be working on now before that year end sneaks up on us. And they are all things that are going to lead to a more profitable firm, to better clients, to solving the real problems in an accounting firm. Not just playing house, not like making these little itty bitty changes. Like they're the things that will actually enable you to run a lighter staff, make the same money and working less time. They are the big things and we're digging into them today. All three. Come on in. Let's do it. Number one, it is 2x project season. Let me explain. So we always talk in this content, wherever it is about. You can kind of boil down running a professional services firm to how do I find the next client that will pay me 1.5x what my C and D clients do today, like all of this, capacity issues, not being able to hire, working too many hours. Everything is solved by somebody paying you 11 and a half to 2x what your worst client's paying you right now. And being willing to drop a couple of those legacy projects, it is no harder than that. What's hard is all the little uncomfortable things you gotta do to make that a reality. And proving to yourself that you can do this and that people will pay you for this. Starts by doing higher paying work. And that's why I call this 2x project season. I'll give you a tax firm example and I'll give you an accounting firm example for tax firms. You've heard me rail on plenty about tax advisory work. It is far and away the most profitable thing that you can sell inside of a tax firm because we can position it around deferred tax, around tax savings rather than whatever they think the market price is for a tax return for their type of business. And to this day, 95% of entrepreneurs, I would argue, have not actually had good proactive tax advisory. And there's a version of this that a lot of us do that we might call tax planning or something like that. That is like, are they, are they maxing out retirement contributions? It's like very rudimentary. Is their s corp Owner comp where it needs to be. And it is almost more communicated as administrative than it is an opportunity. And opportunities are what people buy. Opportunities are something I didn't do before that I can do now. And we take for granted all of the things that we know, and oftentimes we aren't good about actually packaging the things that we do know into frameworks that will make like the act of helping people to save money a little more turnkey. But we need to get serious about the fact that tax advisory work and my bar for projects this time of the year are like, it's got to be 2x as, as profitable as our core work and that that works out there. In fact, you probably look on your client list of examples of projects where it already is. But we have to realize that that's the most important thing in your firm. You may have all these obligations of month end closes or tax returns you gotta get done in tax season, whatever. Those are the things that usually come to our mind first. But that's totally backwards. The most important thing is that next 2x project and now is when we kick those off. The traditional core work in many cases ought to become secondary. That almost ought to become administrative. Not almost. It should become administrative as we lean more into value valuable work. Because if we've done all the tax planning, we more or less know where the tax return's gonna go out, right? Like, we just need to get some signatures. That's just gonna happen. That becomes administrative when we're having like advisory conversations with our bookkeeping clients when they're on, we're on top of their tech stack and all that. The month end close, that just happens. That's happening every single month. We got a team of really talented people making it happen. Not to like cheapen how valuable that is, but absent the more valuable project, then all you do is that other thing. So if you're getting into tax advisory, honestly, the big thing for me, like, what was the big driver for me figuring out how to do this well, was actually buying tax advisory software for the first time. And we'd had BNA and like Planner CS and like all of the quote unquote planning softwares from the tax platforms. But those all sucked at the same thing that I sucked at, which was communicating my value. The big players here right now are our core V, our tax plan IQ and our holista plan. We in most cases are just scratching the surface of like, what we can optimize for our clients because we're usually just like shooting off the top of our head different things that we can do. And then when we do things, we don't actually show them, like, here's what we just saved, or here's what we just deferred. Similarly, I want to give you an example for accounting firms. I'm a, I'm a, I'm a tech nerd. In fact, most of you listening to this, you are tech nerds. I ran a little survey in my newsletter because I've been sharing a bunch of AI stuff and I said, tell me how you're feeling about AI stuff right now. Like, give me all the AI stuff. I'm fine. I'm kind of middle of the road. Or I want no AI stuff. Hundreds of responses. One person said, chill with the AI stuff. Of those responses, like almost 80% said give me all the AI stuff. So I know you are nerds just like me. And I say that in the most loving way possible. Actually, funny story, at 0con in Nashville this year, I was in a talk like being interviewed by a0BP and I referred to all the people that came and turned out like for that talk as all, as a. Just a bunch of nerds. And there was like a visual like, like almost like a shudder like from the Zero folks. Like a. What did he just say? Is probably one of those, probably one of those examples of if they're used to the shtick, they get it. But if you're walking into like a normal accounting crowd, you may put some people off. It doesn't matter. You got to be you. You know, I'm just being me. Anyways, for accounting firms, I know you're tech dweeb. Even if you don't identify as a tech dweeb just by doing this stuff for a ton of clients. We are incredibly well positioned to do a bit of tech advisory and tech these days. Never been as big of an opportunity as it is today because we see into our clients, businesses, just how much time and effort can be waste with the wrong tech stack. And you look at the state of SMBs coming to you and what that tech stack is, oh my gosh, is it not hard to save them a ton of pile and effort? Honestly, it's not unlike tax advisory work where there is well and truly found money to be had in getting that tech stack right. The amount of effort people put into like bill pay solutions when we're seeing a growing number of like really good AI enabled accounts payable stuff, simply getting apps that will talk to each other and eliminate the huge volume of unnecessary keying and, and like syncing of data between systems. We stumbled into a bit of a niche of working with religious organizations. We actually got in with one that was like a group of five, schools and church and like something else. And it was exactly what you'd expect and like those groups have their own limitations with the tools that are available for their industry. But the back of house for that group was pretty much exactly what you would expect it to look like. And when we look at stuff like that, for us it was like, like there's an arbitrage opportunity here. We can come in, propose better tech. They had some folks retiring, they had some folks that they wanted to repurpose into different work. And we can show them this work is like 2 1/2 ftes for you right now. We're going to come in, you're going to pay more or less the same thing, but not have to find anybody to hire, not have to manage anything. We're going to take it off your hands and do it better than it's ever been done before. Arguably, maybe we ought to be charging more for that. But that is where a conversation that started with tech advisory leads to a much bigger engagement. It doesn't have to necessarily because just that advisory work can be very valuable. But what I actually found is when we would wade into that tech, tech advisory work, it would lead to really high leverage solutions we could provide for clients. We would see the opportunity and we're like, well, what do you want? Do you want us to help get on this platform or do you just want us to take this part of their, your business over for you? And almost always they would be like, I would happily not have to manage it myself. Can you manage it for me? We're like, sure. We come in, automate the heck out of it. And that's a super profitable engagement. But it only happens when you're willing to have that higher level conversation about the tech stack. And this is a great time to do it. If you are a bookkeeping practice. I mean, don't act like you're going to go out and get W9s right now. What else are you going to do? You're not going to do that till January, right? Is that too, that was, was. That might have been mean. That was too personal. Okay, I'm sorry. This episode is brought to you in part by Live Flows. So you've been around. You probably already know what liveflow does. It connects your accounting ledgers to your favorite spreadsheet app, Excel or Google Sheets QuickBooks. But we're on kind of an AI theme lately with this new OpenAI model coming out. You want to know a wild hack that Live Flow can enable. How about syncing selected data out of your accounting system that a language model can interact with? So in the AI tests I've been running lately with this new OpenAI model, you can't upload files to it, it's all text. And so I'll like drag and select the text from these big financial reports, paste it in there. Fine. But what liveflow lets you do is build whatever custom reporting you need to even like reference the cells in one sheet to the cells in another sheet to roll up all this data in totally customizable ways, even across different companies, because they support consolidations as well. But let's say I wanted to augment that with AI Buddy. How about creating all of the context in one view that your AI needs to do some sort of job, Quality, quality assurance, whatever it is. I set up those sheets in Live Flow. One big select copy pasta into my language assistant. It's got all the data it needs to do the review or anything else. And then because with liveflow you can template all these reports, you simply change the company that is connected to that spreadsheet. Boom, you've got all the live data for the next company. Obviously loads of useful ways that you can like pull all of your accounting ledger together. And that's kind of the beauty of Live Flows. You can pull whatever you need out of the platform, organize it however you want. And if you're exploring using AI for like quality assurance and technical review, stuff like that, boy, LifeLow could be your best friend there. It's actually a pretty cool idea. Learn more about Lifelong down in the show Notes this episode is sponsored in part by Team up, who helps you find super talented accounts in the Philippines to hire directly. We've been talking a lot about AI recently and this new open AI model and how that could unlock some really, really cool efficiencies for accounting practices. And a big misnomer when it comes to offshore hiring is one, that you go low skill when you hire offshore and two, that AI is like going to replace offshore. When I hired offshore people into my team, they were, I mean they were just like anybody else in our team. I didn't use them in my firm and client facing roles, although a growing number of firms are doing that. But man, they were like at all levels of the skill spectrum, I think oftentimes because we interact with offshore workers in like low skill context, like support and stuff like that, that makes us think that offshore people can somehow only do low skill things. And it sounds ridiculous to say out loud like, no, they're going to do whatever you need on that value ladder. And we got big four firms hiring tens of Thousands of people all over the world, so you can find skill anywhere. But interestingly, these language models as we talked about with the studies they're doing on how AI UP levels people, the biggest impact is on the low to mid level folks and bringing them up to a more standard senior level. And this is where I hired in my firm I was hiring like 20 somethings, which is usually what I hired, both onshore as well, like folks that I could kind of build from scratch. But these were the folks I was hiring in the Philippines and what I'm seeing with AI right now would have taken them to senior accounting level so much faster. By having AI as this like dream assistant. It would have made my junior bookkeepers so much higher output. It would have improved the quality of what went to the senior's desk. Absolutely would have impacted how I was running my firm, but I would still be hiring offshore AI or not. I don't think that really changes the calculation. If you want to do direct hiring in the Philippines, check out Team Up. I've talked with a bunch of listeners on the POD lately who have done hires through Team up working with Isaac. They every time I ask them how's the experience, are they doing a good job? They absolutely love Team up saying that say they're doing great. So if you want to explore that, check out the link to Team up down in the show notes. But that tech advisory work is an example of a 2x project where that ought to be the focus. That is too often put on the back burner until all the core stuff is done. That ought to be the core stuff. Like that's taking your firm to what you want it to be. Remember as we've been talking about value ladders lately, value ladders being all of the different offerings that people can come and get from you. At the bottom of the value ladder is the free stuff, is the stuff you put on social media, the stuff that's on a squeeze page. On the flip side of that, most accounting firms, their value ladder doesn't go high enough. If you've got a whole bunch of people in your most premium offering, you better believe there's a subset of those people that would go to the premium offering. And if your firm is like mine, where we had maybe 300 people and like our most premium offering, man, there were easily 50 people within that group that would have paid 2x their annual fees for another level up of support like there just would have been. And it's honestly it's this time of the year when you probably ought to be capturing that. But the reason we don't is because all the normal stuff, right, and the normal stuff is like, it entrenches you in the here and now, in the, in the state of things now, rather than being like, no, the most important thing is what's the better thing we're going to do. That's what we got to focus on. Okay, second thing, you got to be working on big software change. If you do any tax, and I'm speaking to US firms here, if you do any tax, there are two times of the year you need to go through core system change. And that's not the peripheral patty cake stuff. That is like the core stuff, your practice management stuff, your tax workflow stuff, two times of the year you can do that after 10:15 and after 4:15. And after 4:15 is way better than after 10:15 because I don't, in most cases I don't want to be rolling into Q1 with something new. But doing it now, doing it in Q4 is still better than waiting another six months to do it. The earlier you can make that change, the better because if you do it now, you're going to know so much more by the time you get to next April, May, and you're probably going to be changing something else, probably going to be making some other improvement that you wouldn't otherwise be able to make. How do you not make that change right now? So best time for change after April 2 best after October, but don't push after October stuff to April for that reason. Biggest thing is your practice management system. Accounting firms live and die by their practice management systems. I know, I've been teasing. I'll have a tool for this to give you what my recommendation would be. My recommendation being built on social proof, you think about like, who are the people out there in this space that can actually give you independent recommendations? I know very few communities or consultants or anything who is not partnered with a solutions provider, who doesn't get affiliates, stuff like that. I don't take any affiliates. I've been offered it by every practice management system out there that I recommend. All we do is sponsorships and the only people I do sponsorships with are those who I recommend. In fact, these PM recommendations, they're going to burn, burn some former sponsors. So we're going to put this stuff out and I like, I genuinely think it is as independent as it can be. And even the way in which we're recommending some current sponsors, they're probably going to be bent out of shape. But like that's up to them to decide if they have a beef with that or not. So I will give you my recommendation, but there's no more important piece of tech in your accounting firm than that. And that's because it dictates what all the other tech decisions around it ought to be. If your PM does something really well, if you give me an example, Canopy rolled out proposals maybe nine months ago now. Super, super bare bones implementation of proposals Taxdome. They did this a year or two ago on day one, you're like, I see what you're trying to do here and appreciate the effort, but I don't know that this is something that I can put in front of my clients. And so you may go to an ignition or something like that. That's like a dedicated proposal tool that does that really well. Well, the decision of whether or not to pick up that peripheral tool now needs to first come down to does my core system do this well enough to get by, yes or no? If the answer's no today, then maybe I go out and I pick up that thing. I tell people, never buy technology based on the promise of what it will do in the future because you will almost always be disappointed by that. The number of people who will be like, I think Thompson Reuters is gonna get the whole PM platform sorted out. I think cch, I talked with a salesperson and they're pushing hard to get some new stuff, live by this. And that's don't do that when somebody else has got a solution. That's killer today. That is your solution. Doesn't mean you can't change down the road. But first and foremost you got to look at the PM and then build tech around that. So if you have a big like workflow decision that you have to make, now's the time to do it. Other sort of big, it is still big tax workflow. Interesting thing happening in the tax base. Tax software tools, they're not changing. But tax workflow, what's happening before it goes into the tax software and even delivery after the tax offer. Getting a lot of cool innovation there right now actually in the last 12 months. If you're going to be making changes to that, like this is the time to start nailing that stuff down. We have similar resources on the way as we're developing for PM stuff for that tax workflow. I know everybody's been asking like, oh, you said 1040 steps going to change. I'm going to have some information out to try to make that as clear as possible. But if you're making those big workflow changes, like, now's the time to get that stuff nailed down. Last thing we need to be thinking about is renewals. And we're not quite there yet. But now is the time to be planning for renewals. Because for me, even though we added quite a bit in new client work every year, is this a. When I came of age, like, the point of pride in a small firm was being the type of person that could add six figures and work every year. Is that like. Is that like a standard thing in small firms? That was what was always held out in our firm is like, oh, that's really cool. And I know there's, like, exceptional people that'll do, you know, add a half millionaire and kind of all these crazy things. But in a traditional firm, it was like, oh, yeah, he's a. He's a rainmaker because he can pull in this and that. In reality, what that usually was was the whole like, yeah, I close every deal. I. I've never sat across the table from somebody and not gotten them. Which. Boy, if you can't see the flaws in that, what does that mean? You're giving away unnecessarily? If you are selling your goods, like, imagine, imagine how low the girl Scouts would have to go for every single person rolling out of the grocery store, avoiding eye contact to be like, oh, that's the price. Okay, I guess I'll do it. We should not be trying to close every single person. I digress. There was this notion that, like, 100k was this magical threshold of new revenue every year. And that was a. A great accomplishment, but it totally missed the point of actually what our greatest source of revenue was after I bought in, which was renewals from existing clients. You go down the list of the people who are really happy with you, there's probably more stuff that you can do for them that they'll happily pay for. And that ended up accounting for, like, 2x as much as, like, net new client revenue. And the way that you really hack this, we talked about this in that week that we spent on kind of designing your service library is, is you find the associations between services that are like peanut butter and jelly. So that may be, you know, if you do bill pay for a client, maybe cash planning goes hand in hand with that because now you've got all the information that you need to do some really good cash advisory. It's honestly really easy once you've collected all that info. But you can sell that cash advisory work at top dollar. You got s Corp owners, maybe. Maybe doing payroll makes sense. If you're doing payroll for a client, maybe an advisory package around building an accountable plan makes sense. And like maintaining that if you do payroll, maybe benefits admin makes sense for you. If you do bill pay, maybe getting into invoicing the AR side, maybe that makes sense. And oftentimes you won't want to do these things for everyone, but maybe you just do it for a specific vertical. Or maybe you just hand pick the clients that you're willing to do this for. This episode of Sponsored in part by Financial Sense. You want to talk about software companies that have stepped up their game in the last few years. Financial Sense, they are right at the top of the list actually. Really like intelligently breaking through some assumptions we have about category tech, like tech in the accounting space being more expensive than general tech. If you are a solo firm operator right now, Financial sense has a $9 a month plan. It's stupid, it's frankly wrong and they shouldn't be doing it. It's irresponsible. But solo firm runner, look me in the eyes if you're listening, look me in the ears. Solo firm owner, I see the spreadsheet that you're using to manage projects. Okay. I see those stanky old lead sheets. Stop it. You know, you know you shouldn't be doing this. No amount of analysis paralysis. Well, it's working for now, makes that okay. All right, Financial Sense going to unlock a whole bunch of stuff for you. Like automated requests, having a system that you can actually pull other people into and scale a client facing portal so clients can self service and like grab copies of stuff, you know, the niceties of a practice management system. And if you are not a solo firm runner, I got a deal for you. I'm drop. I'm gonna drop a little coupon code down the show notes, then get you 10% off the big boy plans from Financial Sense. Okay, one thing I've always loved about Financial Sense, anybody can head over to their site, literally click a button and start using it. And that is the signal of a product that believes if you can touch it, you'll like it. Maybe don't trademark that one, but they wouldn't be letting you use it for free if they didn't believe that once you got in there, you were gonna like it. Okay, Solo firm peeps go out get Financial Sense on the cheap. Bigger firm peeps grab that coupon code down below and learn more about financial cents. This episode of Sponsor in part by Core v Gang. You run a tax Firm. Can you hear it? Can, can you hear, can you hear the end of the year coming? Choo choo, big boy. It's gonna be here before you even know it. And I know that you are still tired from the deadline. You're still in the thick of another deadline, but you know what's about to come up and punch you right in the mouth. Oh, about, about six weeks after the deadline there where you're like, everything is good, nothing is ruined. I probably have to make some software changes, but it is chill mode. Then you gotta start Christmas shopping. Then you're into that whole thing and before you know it, you're straight back into January 1st. Well, if you do that, gang, what you're gonna miss out on is the biggest opportunity opportunity in building a profitable tax practice. And that is tax planning slash advisory. We used to call it tax planning. Seems like the cool kids called advisory. Now you can charge top dollar for this stuff. And the way you charge top dollar is by demonstrating the value to accounts. To me, truly right now the easiest platform to do this with is Corvi. Generates reports that show like tax deferral, like visualize things in a way that the client can actually understand to where even if I was doing honestly the exact same work in my tax software, the platform to me is worthwhile simply to sell the engagement. And the way I would do this is actually a bunch of like doing like half of a planning engagement for a bunch of clients, estimating the savings of us following through with the engagement, putting that in front of them. And for this I'm usually charging at least 2x what I charge for prep. So it ought to at least 3x the annual engagement. On a whole, it is not any more work than the prep is. In fact, it makes the prep way easier because we're doing some more work upfront. Also got the benefit that they're paying in tax by year end. So it takes the pressure off a busy season. I only let companies sponsor my content that I would actually be a user of. We turn most of them away. Core V. That's how I would be getting my tax advisory work done. It's not the cheapest tool to get started. If you got sticker shock with Core V, I would say it's because you're not charging enough for for tax advisory work sort of thing that like your first two or three engagements ought to cover the cost of for the rest of the year. Learn more about Corby. Check out the link down in the show notes to zoom out on service libraries A little bit as a refresher. Your service library is not a thing that you hold out externally as like a menu of services that you present to your clients. But it is how on the back end, how internally you have a shared vernacular with your team about exactly what it is that you do for different people. It is a prerequisite to standardizing how the sausage gets made. Because until you have that common language of oh, we're doing bookkeeping two for that person or payroll six for this person, or benefit admin three for that person, until you have that shared language of what it is you're doing for them, you can't make a turnkey, you can't get that machine going and you end up being over reliant upon expertise and tribal knowledge. Who just knows what we normally do for Steve in order to get that work done. But a fantastic benefit of having this sort of service library nailed down is you have an explicit list of here are all the things that we're doing for this client and here's this complimentary thing that I know would plug in really, really well. It's a big opportunity. Like renewals are a massive money making opportunity. One other thought, for tax firms, this is an opportunity also to kind of mine your client list for certain situations, stuff like R and D credits, the, that we usually don't lean into enough. There's a ton of R and D out there that is not software like AG rnd. We went pretty hard on R and D and found a whole bunch that we weren't actually taking that we could have Entity selection, that old chestnut, Accountable plans are something people don't do enough of, I don't think. And remember, for each of these things, for each of that better version, we're framing it as an opportunity and we are presenting this as like your framework for how to solve this pain or for how to lean into this opportunity. So if you're trying to sell air like invoicing, this is how to put patient billing, you know, on autopilot for your dental clinic. It's you know, how to, how to stop having to, to dial for dollars. It is some sort of, you know, three, four, five step framework for how you get this done. And when people buy into that, just like we talked about earlier, where you have this, you know, kind of arbitrage opportunity, doing tech advising for, for a company when you get into the weeds with that person on it and they're like, yeah, no, yeah, okay, you actually know a lot about this. I can see that because you do it For a bunch of other people, I'll just happily get out of the way. Like, can you just actually carve out this part of my business and manage it for me? They'll happily let you do that. And because you can frame this service in terms of the replacement cost of the client, having to pay somebody to do that work for them internally and manage it and all that stuff, the headache that comes with it, because you can frame the value of what you're doing through that FTE relative cost, yet you're doing this for a hundred clients and automating the heck out of it and like pooling that because you have that advantage, you're able to do it in a really profitable way. If there's a blocker here, if there's a thing that we really struggle with, I think it's probably like having the ability to package our service services in terms of frameworks that may be something that we circle back to and spend a little bit more time on. Like, for a given accounting firm with a pretty traditional set of services, how could you go down through their entire service library and build a quote unquote framework that is how you solve for that thing? And some of the steps of those frameworks may be DIY things the client does. Some of them may be things that you have to do for them or things that you can do better for them. Like, you know, giving away an accountable plan template, as we know, is probably a great way for you to take on accountable plan work. Managing that for people when they try to do it themselves and they're like, I don't want to fuss with it. And that sort of thing can be automated with like approval systems and automated follow ups to employees when they need to submit documentation, stuff like that. So done right, it could be a really profitable thing. But I think what a lot of us are probably stuck on is like, what's the best way to communicate that in a way that doesn't feel salesy? Where we're like, our firm, like has the position that this is the right way to do it and if you want us to help, we will help. We have this squeeze page where I can go out and get this resource to help you diy it's. But if you don't do it yourself, we'll also do it for you. So I think we may circle back and like go through the whole service library for a normal firm and like build out a framework for each of those to give us a way to confidently talk about them. As you develop those frameworks, we're looking also for a story that we can pair with it. Like the framing of the value of it is so much about the story. I used to frame the value of our accounts payable services for dentists through just a really powerful story of a dentist getting stolen from. Which is kind of the biggest fear for many dentists is you're trying to be chairside and just focus on like production. But you've got all these people that you think you can trust, but not always, but you're trying to delegate more and more to them because you're being told like, no, you need to be chairside. That's what's making you money. And then you end up getting stolen from. But you're in this tough spot where you're like, well, I'm the most senior person here. My time's extremely valuable and so I'm supposed to delegate. But I don't have like a trusted person that I can send this stuff to. And we became that for, for dentists, like we were that trusted third party that they could move a bunch of that work to and they didn't have to manage it. We would do it better than their office staff would do it. And we could, we could tell them that in a logical way. But what would ultimately get them to buy is the story of what this person went through and how rough that was and how it cost them hundreds of thousands of dollars and how it went on for about eight months. They didn't realize it and that's where all the cash was going. And just like that they're like, yep, like take it off my hands. Like I should not be doing this in house. I totally get it. So what is the framework for each of those services and what is a story that we can tell that will get people connected with your solution? Let's do some more digging on that. Are you got any thoughts on that or what would be helpful how we elaborate on these things, whether it be dipping into 2x projects, making those big software changes, the scary ones, preparing for renewal season. Anything more we should dig into there? Enhance. Drop a comment below because I'm sure we'll be talking about it more as we close in on year end. Thanks for coming and hanging. I'll see you in the next one.