493 The 5 Ways Accounting Firms Around The World Differ

The last couple years I've talked with accounting firms around the world. I've traveled to conferences, not on every continent, but close. And there's some interesting differences across accounting firms. Like there's a lot of things that you would think would be more different than they are when in reality like whether you're a firm in the States or somewhere else, it's the exact same. But then other things that are like behaviorally different about how clients make buying decisions with their accounting firm. Some of it is driven by the differences in compliance by region and others are totally driven by like own sort of self limiting beliefs based on where we are. And so I've, I've come to some interesting realizations here about what constraints like truly are geographic based on where you are and what are kind of just made up in our head. I want to run some of those ideas by you today. Let's do it. Difference number one biggest thing worldwide is everywhere you go, the client relationship is shaped by compliance requirements. In the US we have a notoriously hairy income tax system that is very unique. Way more work than anywhere else that I've seen most would argue unnecessarily. But even in places where the compliance environment is much more simplified, it still is a forcing function for, for entrepreneurs to get their accounting in order. So for example, in Australia you have quarterly reporting requirements that is like a basic, like P and L balance sheet, like basic reporting. And this is generally pushed from the accounting software like, like the filings actually originate out of there and are, are filed if you're in the States, you know, similar to how the accounting system will file like your quarterly payroll tax filings. And we hear that and we're like yeah, you, they're doing income tax filings just being pushed from your accounting software. Like that's unthinkable, right? And it's a hard, it is, it's a hard comparison to make. But in short, this quarterly reporting that is required means that the books have to be correct each quarter, right? And there's a perception of Australia, New Zealand always being ahead of the curve on sort of tech and the sort of accountant advisor relationship. And in some ways that's been true. They were definitely early to cloud stuff, but the nature of that relationship being different in my opinion is largely driven by that quarterly requirement. And so in the States we have a huge percentage of entrepreneurs that basically just want what we call compliance books. That is they only really care about the books because they have to have the books organized and able in order to file a tax return. And it's very hard to get these folks to graduate to valuing bookkeeping year round or any sort of advisory conversation more than once a year because they're just, just anchored in. Well I, I've never really understood the books in the past. I know I have to have them to file a tax return and I, I don't yet see the value in paying for anything more. In Australia when you're doing that every three months you are very much like more embedded into that person's business than if you only talk with them once every 12 months. And I think oftentimes it's discussed as like the folks in this part of the world, like they've got to figure it out, like they've figured out how to be better advisors. I think maybe this is true, but I think a lot of this is a product of the compliance environment looking different. In the uk Historically this reporting has been annual, but as part of making tax digital, which you may have heard of, they're in the process of phasing in quarterly reporting requirements. And these aren't like, it's not like quarterly payments, it's like quarterly sort of high level financial reporting that then still gets trued up at the end of the year. But similar to Australia. This totally changes the relationship that an accounting firm has with their clients then. Right. So you can imagine if you're a UK firm historically you probably had a lot of what US firms have, where you have a lot of small businesses that just have annual basically compliance books. But this new requirement to have the books all nice and tidy every single quarter, that changes what you need from your professional help. So accounting firms in the UK like the cadence of your year is going to look completely different because it's going to be much more hands on as a result. And I think something about that frequency of every three months, while it starts as a conversation around like here's how we have to have the books in order. I think it actually leads to something more like, I think it probably drives more sort of general advisory conversations just organically throughout the year. And it's why, it's the main reason that I think in like the Australian market you usually see the accounting firms framed as like more of an essential throughout the entire year, sort of advisor to the client. Whereas in the US like I mean selling advisory, it's almost stigmatized. It's something that for companies below a certain size is very hard to do to get folks to pay for. But it's something that we all do whether we're Charging for it or not. Actually, I was at an event yesterday. Sean Duncan runs a firm in the Dallas area. He was on a panel and they hold their firm out as, as an advisory practice. And someone in the audience asked, what is advisory work like? As simple as that, which is such a great question. Sean's framing, he said, advisory is anything that I'm telling the client that they don't already know. And that was like one of the best, most succinct framings of advisory that I've ever heard. And he gave an example of how a client really wanted to hop on a call with him and they were going on some trip and he gave him all this basically Disneyland advice that had nothing to do with the sort of advice you would think we would dispense. But by the end, the client was like floating out of the room like they were so excited. They'd gotten so much value from this conversation. And so how do you put something like that into a box to say like, well, this is how we package our advisory. You want to hop on a Disneyland call, here's how we do. X, Y, Z. We're all dispensing advisory in many forms. The problem is always, it's kind of like tax planning. The problem is always how we sell it, how we package it, how we get people to pay for it, their perceived value of it, and whether or not they're willing to pay for it. But in the US where you largely have annual tax filing commitments, getting someone from a once a year engagement to a 12 months a year engagement, that's, that's, that is a hard sell. You go to Australia where they already know they have to work with you every single quarter. Getting them from a quarterly engagement to a monthly engagement, or even just doing quarterly advisory calls like that's infinitely easier for the business owner to get their head around and almost happens just as a buyer byproduct of having to be in touch more frequently. So I would say those compliance requirements and very similar to how for whatever reason in the US like the tax accountant for most small businesses is per is almost the person that kind of dictates how the accounting gets done, which probably shouldn't work that way, but lots of stories of like bookkeepers being frustrated because the tax accountant can come in and say this, this, this and this. And for whatever reason, the client will listen to the tax accountant but not the bookkeeper because there's this perceived expertise of the tax pro. When oftentimes what the client really needs is more like controllership sort of CFO advisory. But that is interesting around the world compliance maybe because it's kind of spooky because entrepreneurs spend a tremendous amount of money on tax compliance, at least for small businesses, really shapes the annual cadence of what the relationship looks like. I will say one thing that's unique about the US is in other regions where compliance is not as complex. More of the engagement and more of the conversation is around the accounting department around the month end close. Whereas in the States oftentimes it's tax first and then how the accounting gets done after that. It's also in the States like two very different levels of expertise. Whereas even going up to Canada it's very rare that you, or at least much more rare than in the States that you would have someone that didn't do both, both the compliance and the accounting. So that's that. Number one, that compliance kind of worldwide from what I've seen, sort of dictates the default sort of advisory relationship you have with your accounting. By the way, I would love to get Yalls commentary, especially non US folks on this episode. Number two, I've seen this to be true worldwide. People in rural locations have self limiting beliefs. The number of times I hear people who are like well our firm is, is here. So it's not realistic for us to be able to charge those sorts of prices. Whether it's in the us, whether it's in Australia, it's even in the uk I hear the same thing. Like folks that live in rural places think that they're constrained by where they are. And 2025 man, you just aren't. Of all the reasons someone might work with you, your location pretty low on that list. I mean in some ways it's like a credential where I tell people if a client's making a buying decision based on a credential, you've already lost the battle. Like I want to be one of one. Like I want to be, I want to be held out as someone for whom there aren't many substitutes because the way that I serve people is so specific and I'm, I'm the guru, I'm the expert, we are the shop for this type of person. Rather than being like I'm going to get my CPA and then I'm one of tens of thousands of CPAs, that's not being one of one. Right. But similarly where you are, if they're choosing to work with you because of where you are, that's a tough, that's a tough premise to win on. So today if your client Base is like this small local client base. Know that you have just as much power as anybody else to reach anyone in the world to work with. I heard the framing the other day that it has never been easier than it is today to build connections worldwide. But then the flip side of that is that less than ever before or more than ever before, people aren't building connections locally. So you could take two approaches there. Then you're like, okay, cool, I can serve a very specific type of person worldwide because I now have this incredible amount of reach that's enabled by today's technology, which think about the history of civilization. What a wild, you know, even five years, this is for how connected we now are worldwide. And it's almost surprising it hasn't changed the world more. I think it probably, I think it probably, in hindsight we will see how much smaller it makes the world. I also think AI is actually going to be a great unifier when it comes to like curing disease and new medicines and stuff like that. Like, if the US quote unquote wins the AI race, we're not just going to solve our cancers, right? Like, that's, that's gotta be a global thing. I know language barriers. AI is tremendously useful. Like we, we basically have this like universal translator where we can talk with anybody. It's just a matter of time before that's a real time thing. And my airpod will pipe into my ear in my native language, whatever it is that it's hearing. We're probably within five years of like language barriers almost going out the window. And then like cultural differences, I would argue those are becoming less and less as the world gets smaller. And you know, a lot of folks consume Western media and even in the west, you see like Korean media becoming really popular. And it just like everything about the world is almost, I don't want to say getting homogenized because that has negative connotations and you maybe lose like what is special about folks, unique cultures and all that. But that's the world that we live in. And so if you're in a small town or in Wales or you know, in the sticks in Northern England or something like that, if we're only working with small market people, that's a choice. Today's episode is sponsored in part by Cloud Accountant Staffing, who helps you find talented offshore accountants, but now also nearshore accountants. So Cloud Accountant Staffing, it's actually run by former accounting firm owners. They started hiring in the Philippines, had great luck, ended up hiring some local recruiters and the Rest is history. But now they're expanding to Latin America and South Africa. And the main benefit of this if you've worked with folks in the Philippines, is having folks in different time zones makes it easier to align with the your work schedule. Particularly if these are folks that are going to be either part of a pod that like needs to really be able to work like live shoulder to shoulder and also if you're going to have these folks like serving clients directly in client facing roles. Now cloud accountant staffing has helped hundreds of accounting firms build teams in the Philippines. But now I've got more flexibility than ever to learn more. Check out the link down in the show notes gang. We're coming down to the wire on a limited series of live events that I'm running in partnership with Kids Canopy. By the way, this episode sponsored in part by Canopy. We're running the events in Austin and Dallas, in Minneapolis and in Boston. Super fun half day events. You're gonna get a pile of cpe, some free lunch, fill that tum tum. I'm gonna be doing a keynote, I'm doing a Q and A at those. We're gonna have something like 70 firms out hanging out. You're gonna meet some other smart folks, we're gonna get to hang and you're gonna leave with some new local friends. Nothing better than in person stuff. Like online special stuff is great but man like in person stuff just lands totally different. If you are anywhere near there, I would love to see you check out the links down in the show notes for all of those events and let me know if you're gonna make it. Number three. Third thought here, people in tier one markets, the big markets, you would think that they have all the confidence in the world, right? If you're a small market person looking at the big market people, they have their own self limiting beliefs because in those tier one markets you have the big four, you have the mega firms and that's. I live in New York now and that's something that maybe I wasn't quite ready for before I moved here. Whenever I talk with folks in the city who work at, you know, run companies of any size, it's really funny. They will talk about like, yeah, who do you use for audit? Who do you use for tax? And it's basically you just pick one of the big four. Like that's every single one of them uses some combination of the big four and that's just the default. It's like you wouldn't even, you wouldn't do anything besides that. Everybody does that. And so for folks in those markets, they see the big old firms and they're like, oh man, we can't, we can't compete with that stuff. When the path into competing with that stuff is the path into, you know, any sort of boutique firm, it's being the guru for a specific type of client. That's how we punch above our weight. Was talking with someone this last week who's thinking about leaving a big firm firm was part of a roll up. The clients already told this person like, hey, if you go and do your own thing, like let us know. They're like, this is like a, I've got several like 30 to $50 million a year clients that may come with me. Imagine those being your first clients. But at the end of the day, the folks who decide what advisor we're going to work with it, it all just boils down to how much faith they have in you being able to get the job done, like being able to deliver for them. And so even folks in the big markets, they also have these self limiting beliefs around the things the big firms can do that they can't do. Thought number four here. What differs around the world is generally the appetite for serving international clients. And this one, I mean the US is probably the big standout here where we are, we are self sufficient while simultaneously being self absorbed in a way that I don't think any other country globally is a big part of that is we manufacture and consume all of our own media. So you see any media from other countries and you're like ew, what is this? Like this isn't, this isn't for me, this isn't mine. Whereas the rest of the world is consuming other countries media as well as like US media. That, I mean the statistic that like I don't even know if this is true. You always hear it thrown around. The 60, 60% of Americans will never leave the country. That's a very uniquely American thing. I'm sure there's other like third world examples of this. But like developed countries that is a very unique to the US thing. And so it's uniquely American that we generally will just serve clients within the US that only do business inside of the US and this is one aspect of AI making the world smaller where I think there's actually an opportunity for US firms because everybody. You talk like I talk with loads of software companies, right? And the destination for software companies is always trying to get into the US market if they're not starting in the US market, getting to The US Market is almost always on the roadmap. And that's not just a software company thing. That is a just about any type of company thing. And so as the world gets smaller and more companies come and sell into the US the opportunity then for US Firms is to be like the US Support, showing those companies how to do that. And that's a, honestly, a tricky thing. Like, that's a very specific type of expertise, but a very big opportunity. And I think over time we, we kind of saw this with, with E Commerce. We're like, E Commerce initially was like this specialty, this unique thing. Increasingly, more and more businesses are doing some version of selling online. I kind of see it like that, where we're almost on this inevitable path to like borders becoming less and less of a thing, more people selling internationally. I don't know that it necessarily gets any easier to do all that stuff, especially not under this administration. And that that might be one of those things where it's like, we look at AI and all that and we're like, man, a lot's going to change about the work that we do over the next five years. The tasks we're doing will almost certainly change. But what are the new things that will be different about the world in five years that are things we're not doing today that we'll have to do in five years. And some of that may be like international compliance stuff. What does it look like for many companies, five times as many companies to be international companies rather than just like domestic US Companies? Last one, last thought, number five. This is. I consistently see this everywhere. There's a vast divide between quote, unquote, local firms and whatever the other version of that is, progressive firms, firms that are serving folks either nationwide or around the world just outside of their local market. You have the vast majority of accounting firms, I could say, in the States. And this actually holds up elsewhere as well. I think the folks who are offline, the folks who are just serving their local clientele, there's a completely different level of sophistication, might be too extreme of a word, but I think if you are like under a rock and you don't see all the things that are happening in the profession and tech developments and the way that folks are sharing best practices with each other and all that. You just inevitably behind, like you just. You're not plugged into the zeitgeist word of the day. Zeitgeist Z I G E I G S T Zeitgeist. And so the first time a client goes from Working with a local firm to, like, a firm that's great for taxidermists or a firm that works with clients nationwide. Oftentimes that's like a 3 or 4x price increase. They're like, Whoa, buddy, I've paid like $350 for my business tax prep for the last 15 years, and you're trying to charge me 1800 bucks, like, help me get my head around that. Like, that divide is almost getting bigger. Bigger. I will say the folks that are on that lower end of the spectrum are running themselves into the ground. And these are a lot of the firms where they're, you know, years from retirement and they're like, I want to sell this thing. And then everybody else is like, anybody really wants this thing. Oftentimes there's offspring in the mix. You've got the kids who are like, oh, they'll take over the firm, and dad's dad will phase out in the next few years. And so then you're. You're passing that gift on to your children. But, like, worldwide. And this is kind of a small market thing too. Like the folks serving the local community in those small markets. It's a different way of running a business. And I wouldn't go as far as to say, like, this small market where it's like, there's not a lot of money in that market. I'm not saying the solution is we got to charge all these people top dollar because somebody still needs to serve these folks. But the divide between the progressive firms and what they're doing almost seems to continue getting bigger, while those local firms in some ways are kind of standing still, kind of anchored in the past the way things have always been. And I don't know what the solution is to that. What, what did I hear? Somebody said something this last week, some about change management. Like, the only way change happens is when enough people die. There's. There's an element of that in accounting firm running, I think, which is kind of savage. But we all know, at least in the U.S. like, the demographics of the number of aging accountants who, a decade from now aren't going to be practicing. Where do all those clients go? I mean, all those, all those clients, honestly, are also aging clients. So some of those clients may just phase out. And by phase out, I don't mean, like three to beam down, shuffle off the mortal coil. Although some certainly will. I just mean the, like, the older firm owners that have worked with older entrepreneurs. Those folks are going to be retiring, too. So some of those clients just may not need the same level of professional help anymore. But there's a lot of staff at those firms and I hope those staff, man, I hope they're tuning into this stuff so that they realize like what a cool opportunity it is and what a great time it is to run an accounting firm. Sat next to a guy on a flight last night and both his kids work for, I think both of his kids work for kpmg. And he's asked me about what I do and I'm like, I'm, I'm who your kids find and then they get red pilled to going out and running their own firm. Instead of pumping in 75 hour weeks for the man, they, they pump in 75 hour weeks for themselves. And that's just sad in a different way. No, no, no, no. They go to work for themselves. They figure it all out, they put boundaries around it and they live a happy and fulfilling life. Right? That's what we're all doing. Right? Right. Non Americans. And I know there's many of you that listen to this. Roast me in the comments, tell me what I got wrong. Other markets as well. South Africa, we got some folks in Latin America. I know. I would love to see that stuff in the comments. What's different about sort of your compliance setup? Does that dictate the advisory relationship you think? It's been interesting to learn from other folks. It kind of puts in perspective like the default advisory relationship that I think we've settled into in the States. Gang, thanks for being here. Got two events this week. If you're listening to this as it's coming out, going to be in Minneapolis and Boston Thursday and Friday. Check out jasononfirms.com events to learn more and grab tickets. I think we're running low. I would love to see if you're anywhere near there. I've genuinely met like four or five hundred podcast listeners in the last three weeks. It's been amazing. Don't be shy, come out and hang and I'll see you in the next one.