502 Accounting Firm Service Breakdown: Business Tax Preparation

Today on the summer systematization series, we're talking about entity tax prep. Specifically, what are all the items that you need to define in an engagement to hand this work off to your fulfillment team, the folks doing the work, and make the expectations of what we're doing for that client as clear as possible. Because the way most accounting firms run is we get the work in and then we just kind of do it. We rely upon like the collective expertise of those people rather than like building systems that will run on rails, make us less reliant upon expertise, but then also create upsell opportunities with our clients. That's another thing we're going to talk about is how do we dress up entity tax prep in a three tier proposal on a spectrum of how premium that return delivery is to capture. Like the willingness of the Mercedes driver to pay more for greater access to expertise, faster response time, stuff like that, make the project twice as profitable without really being any more work. Today we're digging into entity tax prep. Let's do it. Okay. If you haven't seen it yet, check out the service library resource linked down in the show notes to contextualize this whole conversation. Basically, we're trying to solve the problem of client engagements taking on a life of their own. If the goal is like always to get back to what are the tasks in my practice management system where if a member of my team can come along and follow all of these tasks, the project will be done to the client's expectations. Like, like that's the goal. Not like every single client coming in, we tell them all something different. And so you have to look at whatever we did last year to figure out, well, what does this client expect? That's exactly what we're trying to avoid. What are all the variables in service delivery that need to be defined to ensure we're delivering on what we promised for the client, but also then to unlock upsell opportunities, like ways to sell a more premium version of the same thing that the client will opt into. So I'm going to cruise you through what my variables were and how my team delivered entity tax prep. You'll notice this doesn't include accounting or bookkeeping cleanup, which is frankly over half of small business tax prep time, like the time that goes into it is usually actually book cleanup. But in our firm that was an entirely different service. And I think it's actually valuable to think of it that way because some clients will come to you with no books, other clients will come to you with relatively clean books. But cleanup, bookkeeping, that's an entirely separate service. In fact, it's a service we probably don't even want to be doing during tax season. And oftentimes your tax staff are not the people to be doing the cleanup bookkeeping work. You want to get a bookkeeper all hopped up, start talking with them about tax pros cleaning up books. They can do it, but oftentimes it isn't pretty. A lot of brute force posting ajes. Right. So business tax prep. I'll walk you through all the variables that I recommend you define to sort of create an internal language for how you deliver this service to your clients. Eight service items here. I'll run you through each. We've got return type, intake expectation, intake method, accounting platform, accounting method, jurisdictions, delivery expectation and complexity score. So first one here, return type. Pretty straightforward. Is this an S Corp, C Corp. Partnership. 1041999 5500. You get the idea, right? This variable drives what the task template ought to be in my practice management system to define the work that needs to be done. Second service item, intake expectation. This is how the project will be kicked off the options here. Email. Is the client going to email me something? Mail. Is the client going to mail something? And that's then our signal that we need to start working on it now. Next option, in person. Will the client expect to have an in person meeting? Next option, zoom. Will they expect to have a virtual meeting? Option 5 app. If we use like an app with a portal, will the client submit their stuff there? And that tells us that we need to begin work on it. This is, I mean, you could tell in my firm we did, I don't know, 7, 7 or 800 business returns a year. And the way the projects got started was just a product of whatever the client stumbled into with their partner at some point. And it was, it was a hot mess of all sorts of different stuff. And so if you take 20 projects and you try to give them to a, to a tax preparer, they would have no idea, like, should I start this project yet? Is the client expecting me to? Are they going to mail something? This is why we define all this stuff on an, on a engagement, by engagement basis. And that was the starting point, was like wrangling the hot mess to a framework like this. But then over time, we can steer everybody in a common direction so there's less variability in every single one. Okay. Third service item intake method. How do we get the documents? So the previous one, intake expectation, that was how do we know when to start work? Third is intake method how do we get all the information? First option, firm access. This is another problem. Oftentimes if you pick up a business tax prep project, you may not realize the firm has access to their QBO or something like that. And the client's expectation is you're just going to go in there and start work. Maybe because all your other clients send you an email. You're waiting for this client to send you an email. But, but this other client, their expectation is we're just gonna hop in there, grab the goods and start working on it. A second intake method. They may send stuff on paper. Third option, submit via portal. Fourth, they may send us an email. Fifth, they may send us a fax. Had a couple of those six. They may tell us in an app or. Sorry, they may submit their information in an app. Third one here, intake method. It's very similar to the second one, intake expectation. The problem was in our firm, knowing when to start work was not always the same thing as like knowing where we're going to get the information. That's why we had these carved out as two separate things. Okay, so we've had a return type, intake expectation and intake method. Fourth variable here, accounting platform. What do they use? QBO, QBD0. Excel intact, you know what that means. But also infinitely helpful for the preparer if it's their first year in the project, knowing where to go find that stuff. Fifth variable, accounting method, cash accruer hybrid. Six variable jurisdictions. And there isn't a perfect way to do this. What we did was basically in our system we had a multi select here. So you had federal presumably, but also you could pick states, you could pick like local jurisdictions. That's the stuff that usually falls off, right? You forget, forget about that one little dumb local filing that you got to do. That all needs to be defined as part of a tax prep project so that we know we're filing all the right returns. The seventh variable here, delivery expectation. How does the client expect us to deliver it? That can be totally across the board, right? Or it looks a little different for each client. My options here, email, mail, on site, zoom via app or off site. I think that's like in my office versus in the client's office. Last one that we had here, complexity. We use this as like a catch all for how hairy a return was. Because all the variables above could be the same for two returns, but the work and how hard it was could be like wildly different. So our returns had complexity scores from 1 to 5. We would use this to define like what staff were allowed to work on it and what staff were allowed to review it. You could take or leave this, but this was a helpful, like internal variable for us for our workflow. Now other potential variables here, whether or not you'll report a balance sheet on the return, Itty bitty companies, sometimes maybe you won't do that. I know folks get super upset when you don't, but we didn't do that because we, we did the balance sheets on, on all returns. Now almost always your business tax prep service is paired with bookkeeping cleanup because you can't do the company's tax return without clean books. Right. So in my firm, the evolution of how we tracked all these projects, it started with a big hot mess where we said like, what are all the hundreds of different ways we're doing this stuff? And we found that these eight variables captured 80% of what we did uniquely across all those different projects. But the reality was we would have like these eight different variables for how we delivered the service. But then always a catch all at the end. There's always a catch all. And the job of that is just like an, an open text field is to say what are any other oddities about how we do this work that haven't been captured in those variables? And in the beginning when we first do this, like, yeah, we're doing all of our work differently, but at least we have a more clear snapshot of how it's done. And then the magic is over time they start trending to be more similar because we have this language for how we want to do the work. Let's get to the juicy stuff though. The juicy stuff is how do we put this on a three tier proposal in a way that will ensure that we're making more buck rules for every project. I would encourage you, as we're going through these services, share this stuff with the people on your team who are maybe helping do renewals at year end or maybe building out task templates in your practice management system. It can be like a bit arcane in the abstract, but send them through that service library resource that we've got linked in the show notes and then have them like kind of do this deep dive that we're doing here of thinking through each of the different variables for us because for you they're probably going to look different than they do for me. But it's these variables that drive like what those task templates would look like inside of your firm. So that when a client says yes to a proposal that has, you know, entity tax prep 3 on it or S Corp entity tax prep 3, then the collection of tasks that gets pushed to your practice management system that's now well defined. Like we've defined what entity tax prep three means, how the return is delivered, how we gather information. All of that stuff is dictated by these sort of variables that we're talking about here. Okay, how to set this up in a three tier proposal. Again, my take on three tier proposals, that is, you know, putting a bronze, silver and gold option in front of a client. That proposal will be a collection of a bunch of different services. So almost certainly, in addition to business tax prep, there's cleanup books here or you know, cleanup bookkeeping. Maybe there's 1099 prep. Maybe there's business personal property tax Prep. There's probably 1040 prep here on the same proposal. But when they look at that three tier proposal, what's the difference between bronze and gold? A lot of people set this up for it to be scope so that on bronze, you're doing the least work. On gold, you're doing the most work. I don't approach it that way. I approach it in terms of how premium the delivery is. Gold is first class on the airplane. Second, Silver's business class. Bronze is the main cabin. I'll pay 2 or 3x as much for a first class ticket, but the airline only pays like 1.2 to 1.5x to fulfill that seat. But the reality is people will pay more to feel like they're in the first class seat. We're creating a first class seat for your clients if they want to pay for it. Because if we only ever give one price to all of our clients, and maybe just learn this by doing it. But if you only give one price, you're losing money on practically every engagement. This episode is sponsored in part by Ignition. Come, come, come, come, come. Here's the thing. Here's the thing about client billing. You can't bill for the time you spend billing. You can't. You can't. It is pure waste. And we're bad at billing. Cause it's. It's icky. You let things slide. You don't get paid. You waste time. Waste time chasing people for money. The. That's not what I did. I would just. I didn't want to waste time chasing them. And so I would just. I just eat it. Don't do that. This is where Ignition comes in. The leading revenue generation platform for accounts and professional services. When I was running my firm, Ignition wiped out our ar. It's true. And significantly reduced the time spent billing clients, saving our partners over a thousand hours in the first year because they didn't have to bill all that stuff manually. Man With Ignition, we won more business with impressive online proposals. No more hustle and hustle and PDFs and Word docs. We automatically pulled payment upfront or at the end of a job when it was done. No more dialing for dollars. We transitioned our firm to more recurring revenue and better managed scope creep. No more leaving money on the table. Ignition is making thousands of firms more money and genuinely made us more profitable. Check out why over 7,000 of the smartest businesses run on ignition@ignition app.com I'll put a link in the show notes Today's episode is brought to you in part by Team up who helps you hire talented accountants in the Philippines. Did you know you can just hire someone in the Philippines? That's the thing that you can do similar to hiring cross country. Like most of us run distributed teams these days. You can hire somebody that's in the Philippines. Now oftentimes big question if you haven't done this before is security. What about security? To which I'd say what do you do for security for your on short team? If I hire somebody in in North Carolina or for goodness sakes Florida, what do we do for them? Well, probably ought to give them a specific work device. Have like on device encryption, the ability to disable the machine remotely. All of those things. Important things to do for any hire. Exact same things you do when you hire somebody in the Philippines. Only real difference for US firms is you have 7216 disclosures if you do tax work. Actually if this person will do tax work and for most firms that is best. Two disclosures that you got to put in front of the client. Not a big deal. Team up. They've let loads or they've worked with loads of firms that have navigated all this. Can give you the verbiage recommendations. I did it myself in my firm disclosures and everything. Wasn't as big of a thing as I built it up to be. And I went 4 for 4 on my Philippines hiring and I had never gone 4 for 4 with onshore hiring. Maybe I got lucky. I didn't get lucky. There's like a different attitude towards work with folks in the Philippines. Literally three days ago somebody at an event, we're talking about their team and they're like man it's, it's like refreshing. Anyways, if it's something you've ever considered, chat with the folks at Team Up As I think this person had, they actually hired those folks through Team up as well. It's one of those things that seems more spooky until you actually do it. Learn more about Team up, check out the link down in the show notes. So if you got a proposal with business tax prep in here, how do we make it feel more premium without it being a bunch more work? Well, one thing that works well with tax work is when they give you their information, are they going into a queue or, or are we going to get the work done according to a schedule? So for example, does the client get to pick when we're going to do that work? If they want it by the end of March, do they get to pick a week where we're going to work on it that week? And so they have to have all the information in the previous week or something like that. Or when they give you the work, do they just get slotted into a queue and it's like fifo and we just get to it when we get to it. This is an example of how doing the exact same volume of work but doing it in a different order can actually be vastly more profitable. So if we have a gold option here and there's you know, 12 spots available in the Admirals Club and the most, the most premium tier, and maybe those folks get to pick when we deliver the work and to be clear, we then work backwards from there to say, well then you have to have all your information in by this like period, right? Gotta have all the goodies to be able to do it. But maybe that gold tier they get to pick, maybe, maybe that gold tier they're just like first in line. So when they get into the queue they get to jump the line. This is a thing that happens like all around us, everywhere we go, but because it requires a little bit more sort of administration and like workflow planning, people don't generally do it in professional services firms. Like it's, you know, unfair or something like that. And I don't know, maybe, maybe that does feel unfair to you. But that is one way to give folks a more premium path. Other stuff, transcript verification, reviewing transcripts to see like that state excise tax payment, like does it actually show up in the state system? Even transcript monitoring, like year round, like reporting each month or each quarter. This is something where we've got systems that will do some of it for us really that most of the systems are more geared for 1040. So it's it. We did some of this and it would just be an admin like hopping into systems each month or each quarter and pulling that stuff into a folder and then we would send a templated email to the client. Folks that are like especially spooked about the tax boogeyman and being aware of anything that could be in the works, they oftentimes appreciated this so that they would know if there was anything maybe that I don't know they didn't get mailed or something like that. Early renewal access is always a good one to have in your silver or your gold tier when there are limited seats at the upper end options. If there's only 12 seats in the Admirals Club, then don't you want to get like two weeks early access to be able to renew next year to make sure you get another seat in the Admirals Club? That is a great example of a perk, something people will pay more for that is no extra work for you. And like those are the very best things to have on your gold tier is something that you sort of just pay to have access to but doesn't even require you really lifting a finger. Always worth thinking about in this bronze to gold spectrum, the level of expertise that they have access to. Is it a partner? Is it a staff level person? Is it a manager? Is it a cpa? Is it an ea? Is it somebody with no credential? Do I have access to, you know, a calendar booking link so I can schedule a call with this person? Do I have access to the VIP booking link where I can book a call within 24 hours instead of 72 hours? Every single one of these things, if we think about like what we are selling in a comparison feature grid on a three tier proposal, every single one of these things has value. And if, if we deliver client services and set the turnaround time based on vibes just kind of shooting from the hip, we missed the opportunity to triage client support according to like our folks on kind of our more premium packages or the more basic packages. And by the way, if that, if that feels hard for you, like that feels unfair or something like that, let's remember that the folks that get the most attention in that situation, they're the ones that are paying you the most. And the folks that don't opt into silver or bronze, they're the ones that are already complaining about your fees. And so if there's anybody shorted by this, it's the C and D clients, it's the folks who are like already irritated at how much they have to pay you. We're giving the, the great clients who Will happily pay us more, the opportunity to pay us more and in return we're giving them a higher level of service. Is that something that we have to feel bad about? I don't think it is. Now one thing more firms are doing a dedicated client concierge. And so maybe there's a tier here where you have access to a single person. You can call, email, text, whatever, you get very quick access to them. And it's that person's job to then take that request or whatever it is back to the team and sort of liaison for the client in many ways advocate for the client to ensure that that gets seen through and then they report back to the client. So rather than having a bookkeeper or tax manager, whatever, they just have a single client concierge they can talk to. You can even put like boundaries or extended boundaries around their availability where like that person could be available and extended hours. Certain industries where folks are, are working or tied up during normal business hours, this can be really helpful because now they can call somebody after hours, before hours, something like that. Something to consider that isn't a huge amount of work. I mean this is the sort of thing where you give them access and that may be a couple calls in a year or if it's monthly bookkeeping, like maybe that's a call a month or two calls a month, but it's something that you can still charge more for. Another one here that we often sell short or give away. A lot of these are things that we would just normally give away professional network access. So in the, in the course of delivering this service, are there ever like other like preferred service providers that you would love that client to go to? Oftentimes we just give these recommendations away. I've definitely had the experience of giving these recommendations away and then that person like gets up to their capacity and I can't keep referring folks to them. But what I have sooner referred my more premium like best paying clients to that referral. Probably it's also part of our value that we don't think to charge for or that we part with maybe a little too readily our network, which is a product of meeting a lot of people and seeing who's good at this stuff and who isn't bad at this stuff. Well, I'm going to, I'm going to recommend that person in the future, but not that other person being able to proactively make some of these connections for your more premium clients. That could definitely be something that we gate behind like a more premium tier. And then last we've got a growing number of sort of tax analysis platforms. So ones that come to mind. A core V C O R V E E tax plan IQ Holista plan. These platforms have like a whole bunch of built in tax strategies where you can run somebody's client situation through it and it will automatically determine if there are any of these sort of strategies that would apply or not. You could run it through these programs, you could build something of your own. This is something that honestly you can do to a degree with AI as well with some sort of custom prompting, maybe building your own GPT or something like that. But this is almost like a last double check to ensure that nothing's been missed. You can make an argument that it's like shouldn't we use this on every single client? Maybe like maybe you can make that argument or maybe that's something that we're giving away too cheaply. Definitely in the case of like using some of these other bits of software to do that, I think oftentimes you will pay per client. So like there's a cost for you to do that and the output may be like an executive summary of like things to consider in the future. And it's almost like a double check for your expertise. And in some ways like the best of both worlds, like signing off that we're doing absolutely everything that we can to find any potential tax savings idea, tax saving idea, yes, you are going to do your best to try to come up with anything but we're going to go as far as running this other system as well just to make sure that we didn't miss anything. But running this other system has a cost and if you're a member of the Admirals Club, we're going to do that for you. I can tell you the way that like if this is the your first time, maybe thinking of it this way, I, I think at first lands feeling maybe a little bit slimy because this is a different level of sales and like optimization than we've done before. But what I always came back to is right now I've got D clients for whom I mark their bill down 50% and they still complain. But I've also got a clients who will never complain about the bill. In fact they're tickled about what they pay me and they would probably pay me more. And so if I instead give everybody different options from the bronze to the silver to the gold, it lets those people self select, it lets the C and D clients pick the bronze, it lets the really good clients pay more and then I'm, I'm, I'm prioritizing them. I'm prioritizing the very best people, which is probably what we should be doing anyways. This whole thing and, and one of the blockers, as you're getting into this is like, well, geez, here's what I've done to date. How do I transition this to something different? Because clients have this set of expectations today. Part of the upside of this is the expectations are much more explicit. How quickly will we respond to them? Who am I working with and what is that person's expertise level? When we handle this on like an annual renewal basis where all that stuff is locked down next year, you can still change it. In fact, because we are setting it up to be explicitly defined, it is now easier to change in a future engagement rather than right now where it's all just kind of done on vibes and there isn't really any super clear expectation. Right. My goal for everyone that listens to this podcast is that you absolutely crush this renewal season. We did some pretty good content around three tier proposals late in the year last year, but I think it might have been a little too late. But I've heard from a number of folks who leaned harder into this last year where they're like, we like our projects were 40% more profitable just because we, we did three tier proposals and we were more thoughtful about how we presented those to let people like self select into a more premium version that wasn't really that much more work. The traditional way of selling this work is just like so unoptimized where we just kind of guess. We look at what they paid their last practitioner and we're just like, ah, I think they'll pay this. And you throw a number out and they say yes or no. Like in no world is that maximizing what folks will pay us. So we've covered bookkeeping, we've covered entity tax prep so far. Next couple of weeks we're going to dig into a number of these different services Again. Anybody on your team that's involved in the renewal process, in the delivery of these specific services, I'd encourage you to pull them into these episodes, into the service library resource. We've got into the show in the show notes, as you lock down exactly how you're going to deliver these services, but also how we're going to set them up to be 30% more profitable next year. Thanks for being here. I'll see you in the next one.