554 Let’s Solve Your Accounting Firm’s Greatest Constraint

The greatest workflow headache in any accounting firms altogether. Now, bottle bottlenecks. Bottlenecks. What were you going to say? The seasonality, the cyclicality, the fact that all your clients want their financial statements on the 1st of the month, that all your tax clients want their returns on the February 10th. Imagine running a fireworks store. At least in the land of the free, everybody buys their fireworks like within a week of January 4th. Otherwise nobody cares pretty much the rest of the year. At least we don't have it as bad as them. Right, but it means we basically have to staff our firms like for the ceiling for the most work that we have to do at any point in the year. But then what do you have people do the rest of the year? The rest of the month when we're not still ship a month and closes. So we're talking about today how to mitigate the spikes, the peaks, the valleys, to turn you firm into a, into a smooth operator. Okay, all right, let's get into it. Smooth operator. Okay, four tactics here to beat the peaks down and lift those valleys up. Yikes. You know what I'm saying? For each of the four, I'm going to give you what I would say is the solution for the bookkeeping shop and the solution for the tax shop. I'm an American, so when I say tax stuff, I'm talking US tax deadlines. You probably have your own version of that. But know that we're talking American standard deadlines, not, you know, metric, International Roman Catholic. I don't know, whatever tax deadline setup you've got going on, okay. Whatever tax deadline setup you've got going on outside of America. Okay, first, this is my easiest tip, is you don't let another one in the door. That makes this constraint worse. This is the great thing about new clients is they're like innocent little babies that don't know anything. You can just tell them stuff and they'll believe you. You can be like, no, all of our clients financials go out on the 20th of the month. All of our tax clients, we just extend them all. You didn't know that Weird. Your weird. Your last guy didn't do that. I don't know, but that's just normal for us. This is the case with this sort of bottleneck problem, but also with any sort of change you're trying to make in your accounting firm. First things first, just stop the bleeding. Don't keep letting clients in under how you used to do things because you don't yet have a solution for how to migrate. All the people that are under the old regime. And like the pushback here is like I'm going to have all these different systems that I'm tracking for all these different clients. I'm not going to do it for different, for every single one. You know, using this example, client comes in with the expectation of they'll be extended or bookkeeping. Client comes in with the expectation of we'll get it done on the 25th or the 20th. All these things are, is just like properties to track in the project what the client's expectation is. And there's no world where that expectation should be the same for everybody. At no point should we ever tell clients our clients all get done by the 15th of the month. You know why? Because somebody has to be done on the first and then on the second and then on the third and the fourth and on the 20th and on the 21st. I'm oversimplifying, but you know what I mean, they have to be done in an order where why not charge for what that order is? Because there are people on your client list who will happily pay more to go out the door on the 8th of the month versus people who will pay less to go out on the 22nd of the month because they have to be done in an order, why not charge for what that order is? So to me, the optimized approach to this is never saying across the board that everybody goes out by the 15th. So everyone in your firm, they should never have the same expectation for when that thing will get delivered. Which means, especially for new clients, that expectation is something that we just set from day one. After all, like that what makes change management hard with our clients is just getting them from A to B. Getting them out of one set of habits into a new set of habits. New clients coming in the door, they don't have that problem, man. And that's great news. Now this doesn't mean that we shouldn't ultimately uproot how we're doing it for the client base we already have. Just don't let it get any worse. Set a new expectation for the folks coming in. Second suggestion here. Like how commonly are you asked this question? This is might be the most common question that you get in your accounting firm. When will my stuff be done? And we answer it a myriad of different ways, but, but just over and over and over again. This is a great opportunity to put together like a single blog post, a one page PDF explainer of when stuff gets done. This is also a great place for you to build in your propaganda for you know, your opinions on when things ought to be done. In fact, by this. Maybe I should have put this one last because a lot of this is in like building your language for when should stuff be done. And as we'll actually talk about clients, fixating on when a tax return is filed or when the month end financials are done really takes your eye off the ball of the more important thing. And so however you feel about these deadlines, put it all into one place. This is your company's place to have an opinion about all this stuff. And this could go as far as the deadline. Maybe it doesn't. Maybe we're just speaking more general. But on the bookkeeping side here, we're digging into like if there's different packages, different plans that get different deadlines, we walk through that. We walk through the things that they can do to ensure that we get this stuff over to them as soon as possible and acknowledge probably just very simply, like the business challenges of well, here's why everybody can't go out the door on the first of the month. On the tax side, there's probably more to say here specific to your taxing authorities and why you do or don't recommend doing XYZ in the U.S. i mean, I can tell you as we're now getting corrected brokerage statements like into April, it sure makes it tricky to run a business that relies on getting all your tax turns out by April 15th. Realistically, you've got like, I don't know, three weeks, maybe four weeks now where your clients actually have all of their tax documents. Are we really going to run a business where we have a month to get all the tax work out the door? Like, no. And this is only to me really an issue for very simple filers where it's harder to justify extending because they don't have other moving pieces like a business if they're just filing a return based on government forms. I mean, for one thing, why do they need a professional like tax pro to do that for them? And those are, I mean, those are the hardest clients to serve. Those are the clients that most firms, not most firms, many firms are cutting the once a year, 10, 40 work where you really can't justify extending all that much. And it just squeezes out our more premium clients and being able to talk to them during that busy season. But what I would always come back to, like when I'm talking with my tax clients is at the end of the day, there's virtually never a benefit to filing earlier. And the very limited exceptions are, you know, they need the tax return for a mortgage, for financial assistance on a college application, something like that. Those are the exceptions to the rule. There's virtually never a reason to file earlier, but there's very often a reason to file later. And that is because we're now further into the year and we can make some different strategic decisions based on how how the year's developing. We know more about the following year's tax law. There's very rarely a reason to file early and very often a reason to file later, especially if you own a business. So just file later. In fact, just get the h out of my way because I'm your tax pro and I've got you covered. Don't worry about it, brother. The tax is paid. Why do we care when it's getting filed? Now, again, the ones that clog up the works here are the simple 1040s where they it's hard to justify paying for tax planning at the end of the year to know what they owe. It's hard to justify extending because you're just plugging in numbers off of government forms. And that's what makes those people really hard to serve. So first suggestion, the new clients that you're letting in, don't let it make the problem any worse. They don't know what normal is, so don't be afraid to set a new normal for them. Second suggestion, round all this information up into a blog post, into a one page PDF, an explainer that you can send to people because they ask over and over and over again and centralize kind of the best explainers from your entire team into this one place. Ooh. You know one thing, I may have shared this the other day. Chat GPT can really help here. I think I stole this from Geraldine Carter. Put the thing you wrote into Chat GPT with the prompt that says make this sound like it's great news for your for your client, like it's good for them. Put it through their lens, explain why it benefits them. It's very easiest for us sometimes as accountants talking about what we do for it to be like, me, me, me, here's what I'm doing. This, that and the other thing about our firm. The reality is nobody cares. They're like, how are you helping them? So we should write anything that we're going to put in front of them through the lens of how does this benefit them? That blog post, it will definitely land better if we're explaining why our approach to scheduling is the best thing for them. Two more suggestions here. Number three gate the order that things get done by proposal tier. So not everyone will have the same level of motivation to have their tax return filed earlier, have their financial statements filed earlier. Some folks are more fee sensitive and again, it has to be done in an order. So why not let your clients pay for what that order is? Now, beyond that, you can either let them opt into like, you know, a specific date, maybe it's a week for tax filing. You can either let them have some say in when it gets done, or you choose for them. It's probably more relevant on the tax side when you're talking about, you know, a span of three February to October. On the bookkeeping side, they're probably opting into like kind of a bracketed date range. And I There's no like universal right answer here. On simple cash basis stuff, you can get pretty aggressive because when everything comes through the bank, you kind of got what you need. And so like the 5th of the month isn't that big of a deal. But for more complicated companies where you're usually reliant upon other outside stakeholders that you may not have control over setting a super tight delivery date if it's a lot of work or outside your control, that isn't always a good idea. But either way, within reason, like as long as you can deliver within the timeframes that you're proposing, gate this stuff by proposal, like the tier that the client opts into. Because not everybody will have the same appetite for getting that stuff fast. In fact, in some cases there's very real like big dollar business incentives for them to get that stuff as fast as they can so they can justify paying more. In other cases you got people who are like, honestly I only care as long as I got my books by the end of the year. So for those folks, not that big a deal. Hey, real quick attention. If you have clients that do project work, do ugly stuff like manufacturing, like inventory, construction stuff, anything where you got hairy itemized bills that have to go to specific destinations. When it comes to bill pay, there is a new sheriff in town. It is this episode's spot sponsor Makers Hub. Even if you don't do bill pay, this is something that is worth showing your clients. Actually, we've done a number of videos on my channel. You can start sharing my videos with your clients. What fun. Gang, we are light years beyond what the old guard like bill ever did with automated bill extraction and get like getting these things through the approvals process which is oftentimes much more complex than just is this bill over $10,000 or under $10,000. Man. I worked with a church that had this like multilevel, like just this crazy hairy combination of approval approvals that was dependent on like a mountain department, all these different things and they had this physical thing that had to get passed around for every single total nightmare. You probably got a bunch of clients with situations like this and you can absolutely be the hero with Makers Hub. It is seriously good. Worth checking out. Learn more about Makers up at the link down in the show notes. Hey, real quick. We recently did an updated demo day of of one of this episode's sponsors. Client Hub over On the main YouTube channel ran through the really cool stuff that they're doing for bookkeeping and accounting services firms building sort of the centralized brain where you manage and oversee all of the work. But also Client Hub is getting more into like the doing of the work, the actual workflow itself, doing some really cool stuff around like AI month end club close review and doing so with a deep integration into QBO and Xero. So like pulling all the transactions into Client Hub so you're able to do more of the review from inside of the practice management system. And it happens right now at a time where it's kind of annoying. We've got these really cool workflow tools redefining how efficient we can be with getting the work done. But then you've got your practice management system which is like disconnected from all of this workflow and seemingly just overseeing like this, the status management of the work. Client Hub, they're kind of trying to do both of those things in one platform. It's been really interesting to follow if you are a bookkeeping firm or client accounting services firm. Client Hubs, one of those platforms that I think you just kind of have to check out. Like I said, we just did a new demo of it on the YouTube channel. I think you like it. To learn more about Client Hub, check out the link down in the show notes. Last suggestion here. Number four is make it not about when the thing is being delivered. And there's ways to do that both on the bookkeeping and the tax side to to stop your clients from fixating on when am I going to get it in my hands. So the way to do this on the bookkeeping side is to move more towards like real time reporting that could look like weekly reporting, but also requires understanding exactly what KPIs and what metrics they're paying attention to. When you send over your financial statements to the client, it is very rare that you have a client that will painstakingly go through every single number. What they will do most likely and is hop in and look at like two numbers or six numbers. They're like very specific things that they just wanted to see. They're not taking in the whole thing the entire month end close. And when that's the case, oftentimes the better alternative is to give them those numbers on a near real time or on a weekly basis. So if it's specific types of spend, let's focus on turning around the reporting for those specific types of spend as fast as we can. Then they're getting that number much, much faster. I mean, at the end of the day, even a fast Turnaround on the 8th of the month, you got information this 38 days out of date, right. This is all great stuff to put into your blog post around like, you know, we actually don't talk about it in terms of the month end closing the delivery deadline because we want to work with you on more of an advisory basis. Understand what are the metrics, metrics you're closest to and then those metrics we get to you as fast as we can, week over week. And you'll find the more that you can get them that information in near real time, the less pressure it puts on the overall month end deliverable. You still have to do it at some point, but it takes, I really need this on the 5th of the month to like, yeah, like not a big deal as long as it's done by the 15th, you know, because they've got the information that they need at their fingertips to be able to make decisions. Now what's the equivalent on the tax side? As long as you can justify doing tax planning for the client or when the tax return is filed, doesn't matter. It is absolutely like an administrative step that honestly should not be what the conversation is about. The conversation ought to be proactive, happening before the year ends and then at the end of the year you know exactly how much tax they're going to pay. Filing the return is just a matter of like crossing the T's and dot IN the eyes and getting a couple of signatures, getting your client out of the mindset of when the return is filed being this important thing or them even having a say in it or even being concerned with it. That usually means that we are like piling too much on the act of filing the return rather than the focus of the conversation being on like how have we planned for this? Because at the time that we're filing the return, we ought to be talking about the calendar year that we're in and like, how we're optimizing that year. And again, this does boil down to what are the nature of the clients that you're trying to serve. If it is a client that is largely filing a return based on government forms, they're not itemizing stuff like that. Very hard to make the case for it being worth their while to pay for tax planning. Now, if they super, super stress about this stuff, maybe they will. But it's hard to frame it through the lens of roi, which is where you can command much, much better planning fees. If someone's going to pay $100,000 in tax a year, I mean, almost certainly there's a way to justify a $5,000 tax planning fee. A lot of folks are going to spend more money in their lives on tax than anything else. Don't go cheap on your tax help. But for somebody that's paying $5,000 in tax a year and they've got a W2 and a retirement account and some investment earnings, I mean, you probably shouldn't be getting out of bed for doing tax planning for less than a thousand bucks. And that's already 20% of what that person's going to pay in tax. It's hard to make that argument, which means they're only really working with you in the heat of busy season around filing time. And that's just. That is a hard business to run. That's where you want retail tax, your Jackson Hewitt, H and R block, that sort of thing, and TurboTax to step in to do most of the heavy lifting on those returns. By the way, those services get more expensive by the year, man. Getting pretty tricky to justify doing 10, 40 work for less than a thousand bucks for a tax return anymore. And you know that the trouble is all those people you've had on the client list forever that are paying you 300 bucks, right? The Little league coach, the very first clients that you had, really cool thing actually happened. So we're. I'm just on the heels of all these workshops that we did. Thirteen cities across five weeks, had over a thousand accounting firms out to these events. And one of the cool things that happened in the room is, you know, we, we had a lot of conversations around, like, proposal optimization and moving on from those clients that you just know you need to do something new with. And I would ask, like, who in the room has those clients that, like, they're legacy clients, you know, you gotta do something more, something new with them. Over 50% of people raise their Hands like we are. So many of us have those folks kind of weigh on us. But then I would also say the folks in the room here who are trying to build their client list for the first time and need clients to put food on the table still early stage, ask those folks to raise their hand. It's like 25% of the room. It is wild how many folks are going out and starting accounting firms right now. And I love seeing you all out at these events. It's really cool. But the infinitely better way to fire a client is, is to send them to someone for whom they will be an A client, someone who's still starting out. That super needs those clients. Those hand me downs are incredibly valuable to them. And to be clear, if these are jerk clients, just cut them. Like, don't refer those out to somebody else. But the whole accounting firm ecosystem, it is a food chain. Like everybody is sitting somewhere on that food chain and no matter the price, there will be somebody bigger that just balks at that rate and would say, we would never touch a tax return for $100,000 for a million dollars. And then at the other end of the spectrum, you'll have people below that that are like, I can't imagine anybody actually charges that much for that type of work. We are all on this huge spectrum. Maybe you've been the beneficiary of a larger firm, like increasing their minimum, you know, and then all of a sudden you got like clients that are happy to pay eight grand a year just falling into your lap and you're like, I will take these people all day long, wherever we're at on that sort of ecosystem, rather than just firing folks and being like, sorry, we're just not that well suited for you anymore. The way better thing is to be able to refer those folks to someone else for whom you have a higher level of confidence and you're kind of paying it forward because they need those clients. And like at these workshop events which are like, these are all people that only found their way there through the content. So it's a crazy high context group. People in the same city that, you know, listen to the podcast and all that. Can you imagine someone better to refer those clients to? Like, you're, you're just starting out with so much more in common with that other practitioner, a common vision for kind of how to run an accounting firm and those clients that you're just struggling to be excited about, that's the best thing you can do with them. Send them to someone who is looking for that type of work once you got that referral network, makes it much, much easier to shuffle along those clients that you're no longer excited about. And you'll find that the faster you can move those folks along, the more focused your firm is on your A clients and where you find the next one. So many of us were just weighed down by these clients. We're not excited about these hard decisions that have just been looming over us for years. And it stops you from building the firm that you're excited about. The best solution, man, sending that stuff to someone else who really needs the work in the way in a way that you do not. Hopefully you pulled something from today around how to manage kind of those constraints. One of my favorite books actually called the Goal. I'll drop this in the show notes. Pretty old book now, but introduced kind of the theory of constraints that at any point a business is bottlenecked by one thing and the most important thing you can work on in the businesses. How do I solve that bottleneck workflow wise? I mean, I would big picture. For an accounting firm, there's nothing more important than pricing. But workflow wise, how we manage when get when work gets done. Nothing bigger than that. But this book was a fun read. Not like a technical business book. It's written in like a fictional narrative form, like a story of someone running a business. I'll drop that down in the show notes. Any other ideas on overcoming these kind of bottlenecks, these constraints? Pop that stuff down in the comments. It was great to see you today. You're looking great. Holidays treating you well? Hey, I'll catch you in the next one. Holidays treating you well, huh? Thanks for being here today. And I will. I'll catch you in the next one. Sa.