Modern accounting firms have evolved into places where clients can access extensive knowledge base
Local experts say the scope and scale of modern accounting work will continue to evolve, as will the demands of clients.
A consultative approach
Dan Smogor, a CPA with Kruggel, Lawton & Co. LLC, is an industry veteran and has seen firsthand how the profession has become more hands-on. While business owner clients do consult with his firm about matters related to tax planning and cash flow, he said, that’s just the tip of the iceberg.
For instance, last year they assisted with preparing materials for the Payroll Protection Program and other CARES Act programs.
“Now we’re spending a lot of time with them on employee retention credits,” he said. “Some businesses that were disrupted — or their chain was disrupted — they might be eligible for employee retention credits.”
In other words, these types of assistance go outside the realm of the day-to-day accounting work of debits and credits and looking at balance sheets. They also regularly consult on succession planning for businesses.
“Mom and dad want to sell, and son or daughter wants to buy, “he said. “We help them determine the proper valuation, and the right way to buy them out.”
In other cases, there might be an occasion to advise on a sale of enterprises as well as mergers and acquisitions. In this case, the small business owners need to be informed of the tax implications, how to best structure the sale and other variables.
Smogor says he’s working on an account where one they’re acquiring and another they’re selling.
“But in both instances, the owner that has 100% wants to still be part of the other business … so, we’re looking at how to best set up the transaction,” he said.
In addition to acting in these capacities, Smogor said he plays the role of student sometimes to act in the best interest of the client.
“Certainly, tax laws get more complicated every day,” he said. “When I first became an accountant, it was really all about debits and credits and some of the basics, but it just keeps evolving.”
And as the tax code evolves, so do the demands of his client base.
“I would say, as our firm (has) grown, the needs for some of these services just keep ramping up,” he said. “And it’s great to really be part of providing those services as the clients mature or lead into other different businesses.”
He said clients are sophisticated enough to really challenge you to go beyond the debits and credits.
That education goes both ways. For instance, sometimes the client needs to be brought up to speed on issues that might affect them operationally or financially.
“It is crucial the client is informed on the concepts of not only income tax but also ideas on how to plan for retirement, estate planning and business succession — where it is applicable,” said Terry McMahon, CPA with McMahon & Associates in Munster.
The onus is on the professional, however, to articulate the finer points.
“It is important to have good communication skills to clearly help the client to be successful and minimize their tax burdens,” McMahon said.
Speaking of success, Smogor believes small business owners will have more insight in the future when it comes to managing their day-to-day accounting affairs. In his estimation, the industry will continue to be transformed by trends like technological tools.
“We’re seeing so much more automation of some of the menial tasks, if you will, for more labor-intensive tasks,” he said.
Still, this doesn’t mean that the human element will be eliminated. In fact, in some ways there’s room for a closer working relationship in his estimation.
“The profession will be more consultative,” Smogor said. “And you strive to do the numbers well, but you have to keep up with the automation.”
He believes accounting firms will have to be more of a consultant in the future.
“I think as heavy compliance continues to disappear, we get more efficient with automation,” Smogor said.
Chuck Taylor, a CPA with CliftonLarsonAllen LLP, can relate. He said, despite his firm’s large size and stature, they’re known for maintaining intimate relationships with their clients.
“While we’re performing our traditional services of audit accounting and tax, it only made sense from an efficiency and value perspective for us to begin to offer other services,” he said. “And as a firm, ours is probably unique compared to others in that we’re the eighth largest firm in the country. And, I think, the only national firm with an office in Northwest Indiana footprint in Northwest Indiana.”
According to Taylor, they have a team of 7,400 people between all their locations.
“Our model is to bring all of those resources and services to bear to smaller and mid-size type business when they need them,” he said. “So oftentimes our role in managing relationships at the local office level is to help a client identify the right question first, and then help them answer their question.”
CliftonLarsonAllen’s structure also reinforces their approach.
“We work with just about every industry — construction and manufacturing, for example,” Taylor said. “Banking is a separate industry; retail is a separate industry … our model is to focus on specific industries, and in some offices, we may not have all the expertise, but we’ll have the relationship and then bring the industry expertise in.”
Regardless of the industry, Taylor said there are a few key themes in their work.
“A big part of our practice is exactly an exit planning or transaction planning, private equity, growth,” he said.
Taylor said there’s a lot of capital in the markets right now.
“There’s a lot of interest from private equity and other types of buyers,” he said. “And so, our clients are getting solicited by investment bankers, private equity firms, other types of buyers interested in investing or acquiring their businesses.”
That means a lot of what they do relates to helping the client determine their ultimate goals and lay out a roadmap to get there.
Taylor said oftentimes it comes down to life decisions when family-run businesses are concerned. For instance, clients must decide whether they wish to continue to manage the business or do they want to keep the business in the family? Or do they want to sell 100% or part of it?
“And so, while we try to quantify the financial implications, we also try to understand that this is a person’s life and advise them in a way that keeps these considerations in mind, because it’s a very emotional process,” he said.
A seller’s market
Despite the psychological weight, Taylor said there’s been an increased interest in recent months in selling.
“Historically, I always have one or two clients in that process, “he said. “Right now, I probably have 10 clients going through it.”
Taylor attributes that fact to the stock market’s high valuation. The influx of cash from COVID-19 relief bills and stimulus payments for restaurants help the cause, too.
“Most of these restaurants got three rounds of essentially grants, and (owners) are looking for spots to invest,” he said. “And so, there is a seller’s market in terms of private companies, and the money’s getting funneled in one way or another.”
He said private equity venture capital firms are looking at smaller and smaller businesses to invest their capital.
Taylor and his team are up to the challenge of assisting in the tax side of such transactions. And if they’re presented with a question or concern that’s outside their scope of practice, they can act as connectors.
“We may be in a position that we know the client needs it, but we can’t offer it either because it’s not a service we offer or it’s a conflict of interest,” he said. For instance, they might refer clients to an attorney or banker to assist with a specific matter.
Other times, Taylor’s firm may be qualified to offer tax advice, but the individual accountant or CPA might lean on colleagues to provide a more exhaustive answer or approach.
“It could be a situation where I have a relationship with a client because I live down here in Northwest Indiana, but in that particular industry, I don’t have that much experience,” he said. “We have folks in the firm I bring in to do the work.”
In this case, Taylor will manage the relationship while benefiting from a collaborative and team approach.
“Everything we do — because we’re CPAs — gets a second set of eyes,” he said. “Every tax return that goes out has been prepared and looked at by a second person before it goes out. But the idea is that … once we know the question at hand, we have a whole team of people who have different answers.”