reinforce the teaching in every experience.
by alan anderson, cpa
transforming audit for the future
another method for ingraining a business-mindedness attitude into the culture of the firm is to treat every experience as a learning opportunity. partners take staff accountants to lunch with clients all the time, and the three of them talk business. but most partners never do anything with that experience. a better approach is to have a follow-up meeting where the partner asks the staff accountant questions about what they heard and what they learned during the conversation. this could even be on the car ride back to the office.
more: meet your client all year, not just during audit | give your audit teams tasks that increase business acumen | stop mixing up your v’s and losing your best people | how to upgrade c and d clients | can a service center model solve audit staffing shortages? | move to advisory and assurance with relevance | use eight audit exit items to deepen client relationships | know your three audit w’s | planning lays the foundation of audit relevance | are you correctly identifying the relevance intersection? | traditional audits don’t deserve premium billing
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business-mindedness means we take seriously the development of the talent in our firms so that what we reward is business acumen, having great conversations with clients and with the team, and coming up with valuable advice for the clients. but instead, what many firms value is the chargeable hour. they don’t want to take the time out of chargeable hour budgets to have those conversations or to reinforce the learning from meetings with clients.
providing extra insights is only possible if your people have the bandwidth and the intellectual curiosity to do so. the people who possess that intellectual curiosity will leave if they’re not given the platform to utilize that curiosity.
what else can you do for your clients?
if you’ve taken the time to understand what’s keeping your client up at night, and to understand the challenges and risks they face, you’re in the perfect position to provide additional services that would help them. don’t think that just because they haven’t asked for those services, they don’t want them or need them.
too often our clients don’t ask for services because they don’t know what else a cpa firm can provide. they’re familiar with audit, taxes and bookkeeping, but that’s only a fraction of what we can do. having regular conversations with the controller and cfo can open their eyes to the breadth of services a cpa firm can provide. here are just a few ideas of additional services that can easily surface when your team establishes a close relationship with the team at the client:
- should i buy or lease an asset?
- what are the strengths and weaknesses of my bonus plan?
- can you help us with our backlog problem?
- can you offer us suggestions for streamlining our processes?
- what are the tax consequences of this transaction we’re considering?
- if i buy this company, should i structure it as a stock purchase or an asset purchase?
during the spring of 2020, many enterprising firms were busy helping clients with paycheck protection program loans and the sba’s economic injury disaster loans. they’re helping clients figure out how to staff their businesses in the post-pandemic era.
another big area these days is cybersecurity, which nearly every business needs to pay attention to. some cpa firms are building out the talent and expertise to consult in this area. cybersecurity is another of those areas that can be hazardous to dabble in, but that does not mean that if you don’t choose to specialize in it, you shouldn’t ask the question. in that case, you find someone you can trust that you can outsource that work to.
then there are all the big changes in accounting standards that went into effect recently. many firms missed out on a huge opportunity to consult on the impact of the changes to the revenue recognition and lease accounting standards. instead, they got stuck doing the analysis while they were doing the audit, and so they couldn’t bill for the additional work.
all these extra services, by the way, are a great way to keep the smart people engaged in your firm. instead of cranking out audit after audit, these extra services make the work more interesting. it gives them the opportunity to look at businesses from a different viewpoint and to acquire a knowledge base that makes them a better auditor.
focus on the big picture for your client
auditors tend to focus on the tasks they do, and on just getting the audit complete. very few stop to think about the big picture, and what the client is trying to do. they don’t take the time to understand the client, and what drives them.
what makes the client get up in the morning? why are they in this business, and not another one? what are they trying to create with this business? do they want to create a great livelihood for their personal life? do they want to keep people within a community actively employed so their community remains vibrant?
we never sit down and talk to the client about these questions, or about what keeps them up at night. these are just simple questions, but these business owners and leaders don’t really have anyone to talk to about these questions, so many of them will love to have their auditor ask these questions so they can share. that’s how you build a relationship that becomes more than the transaction.
it may take some time to break down these walls that clients build up, and before they become less guarded in their word choice and more willing to share, as they get to know you. it may be one to two years. you can break down those walls faster if you understand their industry and what the pressures on them as owner or leader of that business are.
you won’t break down that wall of careful word choices when you send a third-year senior accountant in to talk to a seasoned owner who’s been in the business for 30 years. they will sense that greenness and the wetness behind their ears, and the senior doesn’t have the breadth of knowledge or experience to even know what’s going on. that senior is just focused on getting the answers to their questions. they won’t even think about the answer.
i’ve used this example all the time. the staff person goes in and asks the cfo, “what color is the sky?” and the cfo says orange. the staff person writes down the answer and moves on. they don’t stop to distill or try to think the answer through even though what they heard makes no sense.
just think about the city of dixon, illinois, where the comptroller and treasurer embezzled over $53 million, and the audit firm didn’t notice the theft for more than two decades. what boggles my mind is how you can audit federal or state grants for thousands of dollars for street paving when the streets aren’t paved. that to me sounds like just going through the motions and not stopping to think what this is all about.
your clients will never leave
by looking at the big picture of the relationship, not just as the audit as a task, you set yourself and your firm apart from the competition. when you build a strong relationship with the client like that, they will never leave, like the nonprofit that my colleague denise works with as a board member. the other board members keep telling denise how much they love their auditor. they cannot imagine finding anyone else with such an in-depth institutional knowledge base of their business, their goals and their achievements. this happens when the auditor takes the time to discuss how the business is doing in comparison to others in their industry, and really understands the drivers of a business.
how remote audit is making audits better
it’s a sad state of affairs when the most knowledgeable person at the audit firm is the one who spends the least amount of time with the client. the way audits have been done for years, it’s not the partner or manager – who have the greatest depth of knowledge about the client and the industry – but the rookies who spend the most time with the client. those newbies are out there to get the tasks done, not to talk to the client.
the client doesn’t see any value when it’s just the rookies out there. those new staff people don’t benefit when there’s not someone out there encouraging them to take the time to understand the business, and when the seniors or managers are putting pressure on them to just get that section done. the cfo doesn’t get any value out of talking to someone who’s just going through a checklist of yes-no questions and who didn’t prepare for the meeting and who doesn’t know much about the business or the industry.
perhaps the best thing to come out of the covid-19 pandemic is that firms are being forced to do remote audits. all the ticking and tying that didn’t need to be done at the clients’ offices is getting done remotely. the meaningful conversations dealing with the tough issues are being done face to face or at least on a video meeting with the partner. that’s what the client appreciates. they know the partners are busy – just like they are themselves – but there’s more value in a conversation when the person they’re talking to has the knowledge base to offer insights, rather than checking off items on a checklist.
firms are being forced to be creative about how they do their audits. some firms are doing inventory observations with facetime right now. this makes inventory observation more than just a task that has to be completed. as a minimum, i would have a video recording of a walkthrough, and even go up into the rafters, and wide angle it so you can see what the shop floor looks like. is it organized? are there boxes off in a corner?
this is a much better approach than picking 10 items from the floor, and tracing them to the perpetual inventory, and taking 10 items from the perpetual and tracing them to the floor and saying that you observed inventory with that. that’s just going through the mechanics, but where does the client get any value from an approach like that?
good clients will seek you out
when you become known for a skill set in a particular segment, clients and, maybe even more importantly, their bankers will reach out to you. bankers will refer you when they see you do a good job with their clients on audits. the good companies talk with other good companies when you provide them with more relevance and insight than just an audit report.
another way to develop a reputation as the audit firm for a specific industry is to attend industry association events and speak at those events. just attending those events will set you apart from the rest.
become the trusted advisor
another piece to think about in business-mindedness is the total relationship with your client. do you think of your client as an audit client, or do you think of your client as a relationship? as an accountant, you have the awareness of how you can help your client with their business in many areas. beyond the obvious services of audit and tax returns, there’s tax strategy and planning, financial planning, succession planning, and many other areas you can help them with.
you don’t have to have it all inside your firm, but you can be like one of my former partners who told me he was getting out of audit to be the client quarterback. he would be so close to that client that he would know everything the client would need and would pull in the resources to make it all happen. he was going to be the amazon of client relationships where he could provide anything in the professional services base without the overhead of having it all in house. through his existing relationships with all the experts in the area, he’ll be able to connect his clients with exactly what they need to achieve their goals.
now keep in mind that in football, the quarterback is the one who calls the plays. so if you want to stay in audit – unlike my former partner who got out of audit – and help your clients connect to all the professional services they need, you need to set up parameters that ensure you’re not making management decisions and you’re not implementing ideas, whether by appearance or by fact.
make your promises of value a reality
our clients have never really wanted just an audit report. while they have needed audited financials that they can share with their banker or another stakeholder, what they have always wanted – but maybe never really asked for – are insights and ideas to make their businesses stronger and to support their long-term goals for those businesses.
the outward focus of business-mindedness means your focus as a firm is broader than just the audit. your team isn’t just trying to get through the work so they can move on to the next audit, but they’re working to fulfill the promises of value on your website and in your proposals. not every client will be a good match for this added value. but those that are good matches will benefit through improved performance in their businesses, and they will make the work more enjoyable for everyone.
cultivating these mindset shifts and putting even a few of these practices in place will move your firm along the axis of improving customer service and out of audit and accounting to assurance and advisory.