cpa judy trepeck explains why client accounting services (cas) should really be called client accounting and advisory services (caas).
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if providing value-added services is the motivating factor, then why not identify, define and structure it so cpas understand what they can deliver and so clients will understand what to expect from their cpa?
with steven sacks
the new fundamentals
key takeaways:
1. much of the profession cannot define what cas is, although they claim to provide this type of work to their clients.
2. client accounting services are essentially what the profession has been doing for years, but promoting something the cpas have been doing for years should at least include some new activities that provide value.
3. the small to larger-small firms are doing the bookkeeping part but have neglected the 360-degree view of the business. they’re not talking to the client about kpis. they’re not talking about what those numbers mean. they are just providing financial statements.
4. if you don’t have an engagement letter that specifies exactly what you’re going to do in for the client, you create a risky situation. if you’re taking on the client, then that’s your job. be specific and clear about what you put into an engagement letter, specifically, what you will do and will not do so you can manage the client’s expectations.
5. in getting more involved in client accounting and advisory services (caas), you may discover you have a goldmine in your staff. however, if you are not talking to them about their goals and interests and what they’re interested in and then train them, you’re doing yourself a disservice.
transcript
steven sacks 00:02
hello, i’m steven sacks owner of solutions to results llc, a consultancy that assists professional membership associations and professional service firms in the areas of culture, communications, education and training. today, i’m here with judy trepeck. judy was former senior vice president of customized training with the michigan association of cpas. judy previously played a critical role with the aicpa in both domestic and international matters, and was also a state and local tax judge in the state of michigan. she has also served on numerous boards, task forces, and such providing financial expertise as a cpa and cgma. particularly relevant to our discussion today, is judy’s experience as a nationally known law firm consultant. welcome, judy.
judy trepeck 00:55
thanks, steve. great to be here.
steven sacks 00:58
we’ve talked about this offline and online in the past, and that was this whole notion that is in the mainstream of the accounting profession today. and that’s client accounting services, otherwise known as cas, what is your take on this?
judy trepeck 01:17
so it’s interesting, you use the name for it is cas. so i think that — we’ve talked before about what comes around goes around, what goes around comes around. and we talked about the growth of accounting services, the delivery of accounting services, to businesses, especially small medium businesses, who maybe can’t afford everybody on staff to do what they need to do. so, the cpa has this opportunity. and for many firms, they would set up a separate company, where they hire a couple of quickbooks experts, and they deliver accounting services to companies and even have the technology talking to each other from the client. so that this can go on in a separate room, and i don’t even know what’s going on over there, right? so the client is sending the information over. my quickbooks expert, is putting it all together and recording it and sending it back to the client. that to me is client accounting services, formerly known as cas. but now this whole, this whole new layer has been put upon that called client advisory services. funny, it’s cas. so i, i would like to think about this whole delivery, from bookkeeping, and accounting services, to advisory as caas: client accounting and advisory services. because that’s what the profession seems to be talking about. take the accounting services that you perform, and take it to the next level with the client, and let the client hear from the cpa firm. let the client hear your expertise. get to know the client. get to know what their priorities are. get to know what their growth initiatives are. obviously, get to know their business, and on a monthly basis, really step up on top of that accounting layer and give some advisory services. so i’d rather call it caas. to be clear, when we’re talking about both services.
steven sacks 03:37
it’s interesting because as part of the research that i was doing, the client accounting services definition is — or advisors who provide the specialists in industry, and they offer you specific strategies and insights that focus on key challenges and opportunities. it also talks about accounting data, and meshing that into relevant kpis. and that you have to advise the client on that. but that seems to — that sounds like the next level up, as you describe. but it was nestled in under the definition of cea. so, do you think the profession at large understands what cas is about?
judy trepeck 04:29
no, i don’t think they do. and i think so many small and i don’t even want to say medium — but small to larger small accounting firms got into the delivery of accounting services. you know, the bookkeeping part of it, and have neglected what you just read. they’re neglecting the 360-degree view of the business. they’re not talking to the client about kpis. they’re not talking about what those numbers mean. they’re just letting it happen, charging a monthly fee to the client, and not really doing what as a small practitioner was always the fun part. and that was helping the client understand what the financial statement meant. when, when i was starting out in public accounting, i worked for a very small firm. it was three partners and myself and a secretary. and every month, right, this was before technology, we go out to the client, we would do the bookkeeping, and then we’d sit and we talked to the client. and that’s what we did every month. and some of that gets lost, if all we’re doing is the accounting. so what you read to talk about kpis and talk about what — how does last month fit into the goals of the owner? i mean, isn’t that the essence of what we have to offer as certified public accountants?
steven sacks 06:01
that’s very true. and i think what i found interesting in doing some of the research was, according to the survey, that accounting firms were not providing cas were perceived as client accounting services. so how does the profession handle something like that?
judy trepeck 06:24
so in my research, and talking to practitioners about it, you have to create a team that’s dedicated to this. you know, this is not about, well, let me pick somebody on the staff, and have them do this with me. you have to have a partner who’s dedicated to this advisory layer on top of accounting services, and then you have to pick people that they may not, they’re not gonna, they’re not going to know how to do this, maybe coming right out of the box. you have to train them. you know, so when i was developing my specialty, in law firm management, the least important part of our service was the monthly accounting. the important part to us was using the information to understand if the business is going in the direction that the owners wanted to go in. and so, our advisory services included my attendance at all of the monthly executive committee meetings at the law firm. and when i would go to that–because you can’t bring your whole team–when i would go to those meetings, i’d come back to the office and i write up a memo to the staff about what happened at that executive committee meeting. so in that process, i’m training them about law firms. and i’m training them how what we talked about at that ec meeting fits into the overall goals of the of the law firm, and in essence, teaching them law for management. so, this is not something that that you know, you know, let’s take carrie, and let’s take sally, and let’s put them on this. they’ve had a couple years of experience doesn’t work like that. i mean, you have to create, you have to do, in my opinion, an assessment of the client so that you understand what the kpis are not from necessarily just your perspective, but from the client’s perspective. is it getting that client, develop the kpis, so it gets a client where they want to go. develop this 360-degree view of their business, so you understand how last month fit into the overall goals of that client. there are a number of small firms and maybe sole practitioners, i’ll go so far as to say, who are providing accounting services to companies. and, they’re thinking that it’s just this well-oiled machine, and they’re not talking to the client. and in some ways, i have found a couple that get pretty lazy about looking at the output from the accounting services before it goes to the client. i’ve seen several sole practitioners who will just let the bookkeeping or let the accounting staff, in essence, manage the whole thing. and that accounting person who’s doing quickbooks only doesn’t know what they’re looking at. so they’re doing all the accounting, and they’re sending what looks like a financial statement back to the client. and, i think the client assumes that the cpa they hired is reviewing it before it gets to them. i think there’s like a whole valley there of problems that can come up and not only get you in trouble as a cpa, but they don’t, they don’t serve what we’re really here for — it’s meaningless and troublesome. so, as an example, the person doing the accounting, doing the quickbooks is looking at all the deposits for the month. and they take all the deposits from the bank statement. and because this client may be filing their tax returns on a cash basis, they take all the deposits, and they–if they don’t know any different–they put it into revenue. and all of a sudden, this income statement is quite inflated, because maybe the deposits weren’t at all from client work at your client. they weren’t about customer service. it didn’t have anything to do with that. and so one of the examples that i had was somebody that i know who loaned their company money. so the person doing quickbooks looks at the deposits and puts the amount into revenue that was deposited in the bank. so all of a sudden, we’ve got these inflated revenue numbers, because it includes a loan from the shareholder. and over a period of like two years, this kept going for this business owner. and so their income, the net income, was inflated. the gross income was inflated. and if the cpa was looking at it, the cpa would have looked at it and said, wait a minute. that revenue last month, that seemed awfully high. you know, why? why is it revenue so high? that’s not in keeping with the pattern of, of your delivery of service. but nobody asked the question. and the business owner was this, this is why they come to a cpa. you know they’re not trained to look at it that way. they just get the financial statement. and then what if they gave that financial statement to a bank, or to somebody else, you know, as proof of the success of that small business. boy, you got a real can of worms, and you got a lot of trouble.
and let me put another layer in there. if you don’t have an engagement letter that specifies exactly what you’re going to do in that going to do this is a real mess. and that’s the cpa’s job. if you’re taking on the client, then that’s your job. get paid for it, put it in the engagement letter, and let the client know exactly what you are and are not going to do. if you don’t, you know, like i was saying before, it just becomes like a machine in the next room that you’re really not paying attention to. and the cpa’s going to get in hot water. and the client is– could get in a lot of trouble. because they don’t understand how to look at it.
steven sacks 13:15
don’t you think then that cas, or as this discussion is heading toward, is caas, don’t you think there has to be a clear definition of what it is — think firms will be doing in terms of hiring then if by definition, there’ll be specialists in industry or specialists in in certain types of processes? what will the hiring be? will it head toward more of the cpas or non-cpas?
judy trepeck 13:50
i think that it’s a combination of both. and some of that depends on the kind of clients you have. and what are their needs. if you have clients that are — you know, where a lot of their business depends on, or the bulk of your business depends on information technology, then maybe you need to hire somebody who has that deep knowledge of information technology. but, you could have a goldmine in your staff at the present time. and if you’re not talking to them about what their goals are, and what they’re interested in, and then train them to that and help enhance their knowledge, then you’re doing yourself a disservice. because eventually they’ll go someplace where they can be a value. you know, young people want to be of value. and, you may have them sitting in next room, these young people. just like i had when i was starting out on the law firm management area. i had two people who were particularly interested in learning how to do advisory services, and so they didn’t know anything about law firm management, but i taught them. and it taught them how to learn about an industry. you know, how do you gain that knowledge from an industry. and one of them went on to be a great tax consultant, and the tax manager, and he’s now a managing partner at one of the major firms in the detroit area. i mean, i’m really proud of him. but, you know, it doesn’t mean that that’s where they’re going to be forever. but that’s where we started out, because we talked about how to analyze information from a client. that’s our responsibility. that’s why we’re there,
steven sacks 15:39
do you think that will provide firms with a greater ability to attract and retain talent because the, the younger people are getting more immersed in, in blended work?
judy trepeck 15:54
absolutely. and when we were doing it in law firms, i mean, we got paid. you know, we had a law firm assessment process. i’m not telling you that we got, you know, the highest billing rate on those. we did it at a flat fee. but the goal was, you’re going to learn about a new client, no matter what. it’s gonna take you time to learn about a new client. so why not get paid for it, call it what it is, and do an assessment on it and get paid some money for it. and then it catapults these other services that you have
steven sacks 16:29
consulting is more innovative, creative and three-dimensional thinking. don’t you think there should be more value pricing in into that type of work?
judy trepeck 16:43
well, maybe, you know, for me, we’re drawing a distinction here between client accounting and advisory services, where you have this advisory on top of the accounting services, versus just doing consulting. and i believe in doing consulting somewhat at a value and a value rate. but for this, you know, one of the reasons that a small business will come to a cpa for accounting services is because they want to know that succinctly, what’s going to be done, how much is it going to cost, and for those clients to, to add the advisory on top of it, i personally would do it at a fixed fee. i think that’s attractive to the smaller business. and you’re still assuring them that you’re going to look at all this information that you’re creating in your accounting services, and you’re going to talk to them about it. so that’s what we used to do, right? in the old days. i mean, i learned a lot by doing that, because i may have gone and done the accounting services, but the partner and i — i got to sit in on the partner talking to the business owner. and i learned so much from being able to do that. so i just, i just think that there’s nothing wrong with a monthly fee when you’re talking about this kind of service. when i was doing the law firm advisory services, that consulting service, that was by the hour, you know. or it was like, i’ll attend all the executive committee meetings, and there’s just one a month and the fee for that–no matter how long that meeting is–will be this, you know, such and such a fee. but, something else like a special project that we’re going to do, or helping them analyze something, you know that might be at a variable fee, depending on how much time it takes. but i think for a small business, there’s some security and some adding to the calm of how amazingly hard it is to be a small business owner to know that every month, the accounting gets done, and a cpa looks at it. the cpa is going to talk to me. and i think it’s good. it can change the way you train people, which is really what you’re saying. you know, there’s different types of training for different talents within the firm and different needs within the firm. not everybody is going to be trained the same way. and you’re not going to train somebody who’s — who wants to learn about kpis or wants to learn about, you know, these different measurements the same way you’re going to train somebody who’s wants to be an it specialist in some way, and want to help a company grow by technology. those are those are two different things. so we can’t train people the way we used to train them. the people aren’t the same, you know. there were so many similarities between us when we first got into the profession between you, between me, between all the people we knew. it’s not like that anymore. these staff is very different. so this — like you say, it’s also recognition of that differentiators and how do we use those talents to deliver advisory services.
steven sacks 20:09
based on what you’ve said, in terms of all the skill sets and the different thinking that cpa firms will have going forward to hire and to nurture their talent going forward, that the acronym cas really is limiting.
judy trepeck 20:30
just the term cas, you have to be clear about what that is. is it accounting services, or is it advisory services? and i’m saying there’s satisfaction for clients, and you know, this opportunity for deliverables when we talk about caas.
steven sacks 20:53
okay, well, i think that pretty much puts a ribbon on it and i want to thank judy, for taking part in today’s discussion on really what cas is and isn’t, but what caas is all about. so i want to thank you, judy, for taking the time.
judy trepeck 21:12
thanks, steve, it’s always a pleasure, and you always stretch my thinking and i really appreciate the time together.