Building blocks outsourced accounting

The Sleeter Group

#Solutions14

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Session P10 –The Building Blocks of Outsourced Accounting

Services –Tom Gawne

1

Thomas R. Gawne, CPA

@ThomasGawneCPA

#solutions14@ThomasGawneCPA

Thomas Gawne, CPA

Director, CPA.com

• 28 years in the tax and accounting technology sector

• Speaker, Facilitator, Consultant


Our Topics Today

Outsourcing Technology Trends

Four levels of Outsource Services

Pricing Strategies for the Outsourced Service

Designing Outsource Workflow

Designing your Staff Structure

Outsource Solutions


Transforming how firms deliver Client Accounting Services as

they transition their practices to be more efficient and productive

by leveraging innovative new technologies and services.

Empowering CPA’s and businesses for the digital age

AICPA & CPA.com


Practice

Workflow

Professional

Services

CPA.com

Services

AICPA Store

LMS

Mobile Apps

Audit

Confirmations

Payroll

General

Ledger

Bill Pay

CPA.com Firm Solutions Portfolio

Training


1990

2000Today

Transformation of Client Accounting

Today’s opportunity

Cloud-based

Integrated

Paperless

Dashboards

Real-time

Small businesses push work back to firms to focus

more on their business

Role of firms reduced,QuickBooks introduced

to small businesses


Four Levels of Client Accounting Services

Virtual Controllership

Collaborative Advisory Services –

Virtual CFO

Bookkeeping

Business Process Outsourcing

Advisory

Transactional

Specialize in Client Industry Verticals Healthcare

Not-For-Profit

Technology

Professional Services

Property Management

Government Contractors

Retail

Franchises


Geoffrey Moore


Whitepaper Released

APPS

http://www.cpa.com/conference


Three Mega-trends

Digitization Virtualization Transformation


Digital Disruption in Accounting

• Digitization• From Paper to Paperless

• Cloud Computing

• Overcoming barriers of productivity

• Virtualization• From Physically Present to Digitally Present

• Systems of Engagement

• Overcoming barriers of location

• Transformation• From compliance vendor to trusted advisor

• Business Intelligence

• Overcoming barriers of commoditization

Three Mega-Trends that Matter


Necessary EvilEstablishing the Practice

Expanding the Practice Deepening

the Practice

The Evolution of Accounting Services


Stage 1 - Necessary Evil

• Paper intensive, Place specificDefining

Characteristic

• Courtesy to clients, no riskReason to Do

• Lack of profitability, digital disruption Reason to Move

On

• Migrate IT systems to the CloudInvestment

Required


Stage 2 - Establishing the Practice

• Paperless workflowsDefining

Characteristic

• Profitable business modelReason to Do

• Desire to growReason to Move

On

• Online Systems of EngagementInvestment

Required


Stage 3 - Expanding the Practice

• Online communication & collaborationDefining

Characteristic

• Reach & frequency of service deliveryReason to Do

• Expand into higher margin servicesReason to Move

On

• Business IntelligenceInvestment

Required


Stage 4 - Deepening the Practice

• Trusted advisor statusDefining

Characteristic

• High-margin project workReason to Do

• Expand into new target marketsReason to Move

On

• New target market initiativeInvestment

Required


The Evolution of a Practice

A Necessary Evil

A Viable Practice

A High-Growth Practice

A High-Value Practice


Automation

Commoditization

DifferentiationSpecialization

Optimization

21st Century Darwinian Dynamics


Why Target Market Focus?

• Clients aggregate into market segments

• Communities with shared interests

• Self-organized around industry, geography, & profession

• Who talk to each other before making buying decisions

• Two lessons from Marketing 101

• Cost-effective growth is impossible without target market focus

• Tipping point dynamics accelerate your success

• Target marketing success factors

• Participate in the segment’s relationship network

• Develop domain expertise relevant to the segment

• Over-deliver to create strong reference accounts

• Encourage word-of-mouth referrals


Action Plan

• Select a target market focus• Big enough to matter

• Small enough to lead

• Good fit with your skills and interests

• Create “new client” onboarding• Paperless standard

• Systems of record in the cloud

• Document exchanges in the cloud

• Other facilities as needed

• Migrate existing clients opportunistically• Take the early adopters when they are ready

• Eventually end-of-life paper-based services


Evolving CAS: Change ManagementWhen and How will You Make the Transition?

CHASM

EARLYMARKET

TORNADO

MAINSTREET


Three Proven Approaches• Visionary

• Go ahead of the herd for competitive advantage

• Spend big to secure top-notch team & great support

• Drive change from the top down

• Pragmatist

• Go with the herd to reduce risk

• Spend moderately to secure market-leading solutions

• Manage change around specific use cases & bellwether teams

• Conservative

• Go after the herd to reduce cost

• Spend frugally to secure basic services

• Manage change around vendor-led training sessions

No right answer—your call


Key Takeaways

• Model for Evolving a CAS Practice• A Necessary Evil

• A Profitable Practice

• A High-Growth Practice

• A High-Value Practice

• Enabling Technology Investments• Digitization

• Virtualization

• Transformation

• Change Management Strategy• Visionary

• Pragmatist

• Conservative





Virtual CFO

Bookkeeping


Advisory

Transactional


Not-For-Profit

Technology


Property Management


Retail

Franchises


BeforeTransactional

TodayAdvisory

Changing Landscape


Key Drivers of the Movement to the Cloud

A New Era of Capabilities:

• Collaboration

• Business Intelligence

• Anytime, Anywhere Access

• Scalable, More Efficient

• Simplified IT Infrastructure


Bookkeeping/Write-Up

Jan Dec

Client

Firm


Bookkeeping/Write-Up

• Who’s Involved?

• Client and/or Accountant Firm’s Clerk

• What data is available?

• Transactions, bank statements, etc.

• Key Deliverables

• Bank reconciliation, general ledger, profit & loss,

financial statements


Bookkeeping Services Value

•Reconcile your bank account

•Generate an income statement

•Generate a balance sheet

•Clean up the general ledger

Value is compliance, historical value


Business Process Outsourcing (BPO)

Jan Dec

Client

& Firm


Business Process Outsourcing (BPO)

• Who’s Involved?• Client or Accounting Firm’s Clerk or both

• What data is available?• Bill and receipt real time transactions, real time

reconciliation

• Key Deliverables• General ledger, profit and loss, pro forma

information


Business Process Outsourcing (BPO) Value

• Simple, easy business processes delivered

through the cloud

• Provides greater security and internal controls

• Smart client/accountant collaboration


Who’s Involved?

Virtual Controller

• Client

• Accounting Firm Controller

• Additional BPO staff

Virtual CFO

• Client

• BPO staff

• Virtual Controller

• Virtual CFO


What Data is Available?

Virtual Controller

• Day to day financial

information

• Budgeting

• Forecasting

Virtual CFO

• Real time financial

reports

• Key Performance

Indicators

• Consultation on future

business scenario

planning


Key Deliverables

Virtual Controller

• Financials: actual vs.

budget (target)

• Forecasting

• Dashboards

Virtual CFO

• Prospective financial

management insight

• Consultation on evolving

market conditions and

trends


Provide Key KPI Dashboards


Virtual Controller Value

• Direct day to day insight delivered to keep

connected to the business

• Experienced financial professional “in the

trenches” ensuring cost containment and

revenue growth attainment

• Ensures quality controls are in place and

functioning properly


Virtual CFO Value

• Future oriented financial insight delivered

• Experienced financial professional providing

guiding the organization equipped with proper

information

• Provides insight to ensure entity meets future

growth goals


It’s getting more complicated...

Transactional

Using technology to

support transaction

processing

Workflow

Build digital

workflow and

standardization in

processing

Digital CPA

The operating model of the TRUSTED BUSINESS ADVISOR

It’s not just about technology!

What is your strategy?

“Digital Trusted

Business Advisor”


How do you calculate your

value price?


Variations in pricing services

• Cost “plus” pricing

• Fixed Pricing

• Results Pricing

• Value Pricing

What is your pricing strategy?


“Most business owners regard their

accountant as their number one business

advisor – a status rarely applied to their

banker, their insurance advisor, their lawyer, or

even members of their own family!”

David W. Cottle, Bill What You’re Worth


Rear View Mirror vs. Front

Window Approach

• Prospective vs. historical value to clients

• Change perspective and advise forward thinking

How does this change the value of your services

in the eyes of your client?


Five Factors that Affect your Prices

• Demand for your services

• How easily you can be replaced

• Ability

• Return on investment of resources

• Courage to demand what you are worth



Factors Affecting Value

• Special capabilities, skill and professional expertise

• Degree of risk and responsibility assumed

• Value of services to the client

• The amounts involved

• The results obtained

• Priority and importance of the work to the client

• Acceptability of the price (for both)



The Virtual Controller/CFO Value Struggle

• Most firms struggle to bill at the level of Controller

or CFO

• Median National for Controller $90K (Glassdoor)

• Median National for CFO $145K (Glassdoor)


Steps in the Prospect-to-Client Process

Qualification of prospect / analysis of existing client opportunities

Ongoing ServicesPhase 4

Monthly recurring virtual accounting and Controller/CFO services

(Firms are charging $1500-$10,000+ monthly fees for this)

Short Term CFO/Tech ConsultingPhase 3 Data File Clean-Up, Staff Training, Management Report Package

Preparation, Process Implementation (CFO)

Client Needs AssessmentPhase 2 Initial Client Needs Assessment (firms are charging between $2,000-6,500+ for

this). May be accompanied by financial clean-up and/or other services.

Prospect QualificationPhase 1 Prospect Questionnaire


The Client Needs Assessment process can be used in different ways, each with tremendous benefits.

• Helps ensure taking on “right fit” clients

• Helps them implement the improvements summarized in the “before-and-after” comparisons

Client Needs Assessment


Pricing Your Value

• Difficult areas to master is pricing Client Accounting

Services

• Set a monthly value-packaged fixed fee for the

ongoing services

• Billing system in place that provides timely,

accurate and relevant financial information

regarding your current operations


Cost-Estimating Tool

Recommend a Job Estimating Worksheet including

• Average # of transactions per month

• Labor costs

• Contingency/“Scope Creep Buffer” of _____%

• Annual training/development fee for special skills required –

____%

• Additional fees that need to be accumulated to provide

superior service to the client

• Additional mark-up based on savings you will be providing to

the client vs. their prior solutions if they have been paying

significantly more in the past.


Re-evaluating the Timesheets

Once you have restructured your billing practices and moved

to a fixed fee, you may consider reducing or eliminating the use

of timesheets.

Common steps toward that goal include:

• Measuring profitability with existing and with new clients in

each key process area for a 12-month period

• Running a “Pilot Program” of eliminating timesheets for a

small number of clients for 4-6 months

• Expanding this practice to more clients over time, with

ongoing periodic sample testing


Value of Your Fee

Your fee will come down to how well you understand the value you will provide to your client.

• worth of the skills of each person from your firm that will be involved in the engagement,

• your commitment to ongoing training and education,

• the fee you need to earn to feel positive about working with that client for the long-term, even during the stressful times in the engagement.

“Cheap” does not ever need to be, and generally cannot successfully be the model/approach for a superior practice.


Selling the Value

Our firm is different… For the growing, profitable client, we are the Trusted Advisor and the “in-the-trenches,” MVP on their team.

We will be a key contributor to their continued growth and long-term success, and we do not undervalue what this is worth!

We realize and accept that we are NOT the right fit for every client. We are always prepared and content to walk away from a prospect.


Designing Optimal

Workflow


To Transform Restaurant Accounting

Restaurant Group

Consistent Processes

Cash Control

Consolidated Financials

Multi-Entity Reporting

Full Financial Visibility

Cloud Based Systems

Today: Disconnected Systems Ideal: Connected/Holistic

QuickBooks

POS Payroll

Manual Processes

RestaurantManagers

Many checkbook

s

Several locations

Bookkeeper

Inventory


STEP III:Shipping manually checks stock for filling orders across warehouses

Order-to-Cash: Before

Data entry/re-keying

Lack of controls

Manual tracking of inventory

Errors/inaccuracies

Fragmented, cumbersome reporting

Process Problems Revenue loss

Auditing issues

Extended DSOs

Customer dissatisfaction

Inventory carrying cost

Business Impact

STEP I:Sales entersorder in legacy system

Step IV:Accounting re-enters order information into legacy system for invoicing

Step V:Accounting manually reviews customer accounts for accuracy and collections

STEP II:Sales operationsprocesses order through shipment

Systems with limited functionality

Data silos Spreadsheets

Patchwork of:


Procure-to-Pay: Before

Data entry/re-keying

Lack of controls

Manual tracking of vendor performance

Errors/inaccuracies

Fragmented, cumbersome reporting

Process Problems Purchasing variance

Auditing issues

Discounts not recognized

No true vendor relationship

Inventory out of stocks

Business Impact

STEP I:Purchasing manually creates P/O

Step V:Vendors get paid with no visibility between accounting and purchasing

STEP II:Receiving manually matches purchase order with packing slip

STEP III:Accounting matches vendor invoice to purchase order

Systems with limited functionality

Data silos Spreadsheets

Patchwork of: Step IV:Accounting obtains proper approvals for paying vendors


Example: Current Workflow

Current A/P Process – Vendor

Invoices

Current A/P Process – Patient

Reimbursement


Example: New Workflow

New A/P Process

Vendor Issues Invoices for

Goods/Services

Invoice Received at A/P Processing

Center

Invoice Scanned to Bill.com

Invoice entered into Bill.com

DisbursementIssued

Check clears and the bank or e-payment reference number noted in system

Invoice approved by the Site

Manager for Payment

Invoice approved by finance for

Payment

Recommended Vendor Invoice Processing

A/P Vendor

Client

Site Manager

Asst. Controller


The Standardized Practice

• Consistent/standard Chart of Accounts (COA) as one package price.

Premium fees for a custom COA

• Standardized services by industry vertical and by type of service

• Standardized Internal Management Reports/Services

• Procedures Manuals for each client

• Service Order Requests for services outside of the engagement agreement –

retainer always on account for these requests and for “concierge” services

• Dedicated client-service staff to provide top client experience, while sheltering

our production staff


Solutions


• Principles

• All Digital, all in the cloud

• Designed for timely “prospective” insight

• Collaborative


• A/P – Bill Pay

• A/R – POS

• Payroll

• Inventory Control

• Accounting – G/L

• Document Management

• Tax System

• Other Industry Specific

• Bill.com

• Industry Specific

• Paychex, ADP

• Industry Specific

• Intacct, Xero, QuickBooks

• Sharefile, Box, etc.

• CCH, Thomson, Etc.

• As needed

Signature Functions Signature Solutions


Workflow Effects

Digital Core Transaction Capture

Information & Insight Delivered Prospectively

Intelligent, Timely Business Decisions Made


Collaboration Solutions

• Video Conferencing – Skype, Zoom,

etc.

• Web Conferencing – WebEx, GoTo

Meeting, etc.

• Social Media – Linked In groups,

Twitter feeds


Management Tracking - Solutions

• Workflow Management – XCM

• Contact Management – CRM

• Internal KPI trackers


Staffing

Strategies


Staffing Strategies

• Outsourcing approaches

• Client/Accountant collaboration

• Workflow standardization in the cloud

• Education Training Approaches


Assembling your Team


Skill sets

Client

• Bookkeeper

• Accountant

• Business Owner

Firm

• A/P, A/R Payroll

• Accounting Manager

• Implementation Services

• Virtual Controller


Outsourcing Strategies

• Outsource Client Accounting Services (7216)

• Implementation services such as cpa.com

Professional Implementation Services

• Leverage other firms to offer BPO, Virtual

Controller, Virtual CFO


Accounting Services Today

• The Opportunity

• Ride the wave of demand for outsourcing

• Leverage cloud technology to achieve productivity

• The Challenges

• Commodity practice

• Low margins

• Hard to scale

• Hard to upsell to higher value “virtual CFO” services


Firm Value Chain

Input Data

Assemble & Verify

ReportAnalyze & Interpret

Advise & Consult

Higher Value & Future Focus

Lower Value & Historical Focus


Defining Your Service

76

Input Data

Assemble & Verify

ReportAnalyze & Interpret

Advise & Consult





Virtual CFO

Bookkeeping


Advisory

Transactional


Not-For-Profit

Technology


Property Management


Retail

Franchises


Resources


Reference Material

• “Accounting Services: Harness the Power of the Cloud”

• A Whitepaper based on research by Geoffrey Moore

• “The Power of Real Time Financial Data & Analytics to Penetrate the

Restaurant Niche Market”

• A case study whitepaper by Dixie McCurley of Trusted CFO

Solutions available at CPA.com

• “Leveraging the Cloud to Start or Grow a Vertical Niche Practice”

• A Whitepaper by C. Keith Willis CPA.CITP, Cohen & Company

available at CPA.com


Staying Connected

• @CPAcom

• @ThomasGawneCPA

• @PetePotsosCPA

• @pwhitmo

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http://www.google.com/url?sa=i&source=images&cd=&cad=rja&uact=8&docid=3LTVBTaCB-E50M&tbnid=TW40P_3a4vVnfM:&ved=0CAgQjRw&url=http://theinspirationroom.com/daily/2012/twitter-logo-redesigned/&ei=uRhQU-CPGajKsAT9soHACA&psig=AFQjCNFPIFQ9FSMyf0hbpvo6bvBARncJHA&ust=1397844537477992


Thank You

Enjoy the remainder of the

Conference!

Building blocks outsourced accounting

Business

Transcript of Building blocks outsourced accounting