35: From Surviving to Thriving: Rethinking Accounting Practices

In this episode I share my journey and passion for transforming the traditional CPA firm model. I discuss my motivations for wanting to be available for my family and empowering my employees, while still providing excellent client service. I delve into the challenges of the old school model, which emphasizes billable hours, mandatory overtime, and a rigid hierarchical structure that negatively impacts not only accountants but also their families and clients. I explain the gradual steps I took to build a different kind of firm, from adopting fixed price billing and subscription models to limiting overtime and shifting to a part-time workforce. This episode outlines my innovative approach to creating a healthier work-family balance, improving client service, and attracting new talent to the industry. If you're in public accounting and seeking inspiration to break away from the norm, this episode is for you.

Chapters

• 0:00 Introduction and Personal Motivation
• 1:30 The Old School CPA Model
• 5:21 Challenges of the Traditional Model
• 11:41 Beth's Vision for Change
• 20:26 Implementing a New Model
• 28:36 Benefits of the New Approach
• 42:37 Conclusion and Call to Action

Transcript

Hi, and welcome to Accounting with Confidence, the podcast. I'm Beth Whitworth, your host, and I am here today to talk to you about something that I am extremely passionate about, which means it'll probably end up being a fairly long episode, but it stems from a place of me. Recognizing myself as not your typical accountant and what I mean by that and why I talk to people,  and express that to them because I am not your typical accountant.

So, the title of this episode is Shattering the Old School Model. I don't know that everybody knows what I mean by the old school model. It is that old school model of certified public accounting firms (CPA firms). How I started in the industry back in the mid-nineties, it was definitely a model, and it was, most firms did things the same way. They were typically billing by the hour, so you're trading your hours for dollars, tracking time in six-minute increments, billing monthly, sometimes annually.

There was mandatory seasonal overtime for all departments. If there's a tax season and there was an audit department, the auditors were working to get the books ready so that then the tax return could be done. If there was an IT department, they might be tasked into moving over and helping the tax department.

There was mandatory overtime whether or not you had anything to do. They just were kind of was making it fair across the board that everybody started working overtime on January 15th, and you continued that until after April 15th. The typical structure, you've got your partners at the top and then you've got managers, and then you've got seniors, and then you have staff, and then you have admin.

Really the structure was so that there was really no way for someone who wanted to work part-time to advance, which meant if you were thinking at all about having a family, you really had to consider what that meant to you. There was a big focus on billable hours over outcomes.

What I mean by that is, you were required to hit a certain percentage of billable hours in a week, a day, a month, a year. What happened is because you needed to hit that, you sometimes could, make sure that the project took you longer so that you would hit your number of billable hours, even if the outcome could have been achieved in a shorter amount of time.

Then vice versa, you needed more time to have a better outcome of the situation, but you were concerned that you were taking too much time/over budget and so you went too fast and maybe didn't do as good of a job. There's definitely this mentality around the entire industry at that time that everything is put on hold for tax season and not just for the employees who were busy having to work overtime.

You made sure you didn't plan a vacation, you didn't plan a wedding, hopefully you're not having a kid. Also, as a firm, they're adding new clients. That wasn't a pursuit, you just put everything on hold and say, okay, I'll schedule you for May, and then we can take you on in the meantime, we'll just take an extension for you.

That was what the old school model was. My very first public accounting job was in a regionally/mid-sized firm that was growing very quickly and that was their model for sure. So what was wrong with that, I kind of explained it here, what things could be wrong with that?

One of the main things as a business, you were limited to growth by the number of hours that were available to be billed. Typically what would happen, instead of adding more people to keep the workload evened out, that was expensive so instead, that's when they would require everybody to work more hours.

The only way to bill more hours is to have people working more hours. Whether that's by adding employees or by making existing employees go from 40 hours to 50, 60, 70 plus hours in a week. Really, if you think about it, you had to add staff in order to grow your revenue at some point.

That was one thing that would be wrong with that model. The bigger thing that has come out over the last 20 years is that no one wants to come into this industry. We have very few people going into accounting programs nationwide to get an accounting degree to get their CPA because the industry standard was to work people to the bone every tax season. That's just not a good model. It's something that people did because that was expected and everybody knew about it. Now everybody knows about it and doesn't wanna do it, they want to find something different.

So, maybe they are gonna get an accounting degree, but they're gonna go straight into a corporate setting instead of public accounting and that has caused us to lose talent. There are fewer and fewer people coming into the industry because they look at that model and say, gosh, that doesn't sound like fun.

So younger people don't wanna get into it. It's really hard on families. It's a really hard type of situation where every year for three and a half months, at a minim say from January 1st till April 15th, that a member of the family is not around. They are stressed out. They're exhausted. Likely they're overwhelmed. They're missing holidays, they're missing birthdays. I've told a story before about that in my first public accounting job, the woman who hired me was a manager in that first tax season, when the mandatory Saturdays rolled in. I remember someone saying, oh Joan, isn't it your son's birthday? She was like, yeah, his birthday party's today, but I won't be there. Her son was like five years old, and she was working instead of attending her own son's birthday party. That was a trigger for me.

At that point, I probably may or may not have been engaged yet. I wasn’t even thinking about starting a family at that point, but it did make me say, wow, okay, so she's been here 10 years at least, and she's expected to still, still sacrifice those types of things for her family. That hit home and I did not want that.

I think the model creates a hardship on families. It is tough on mental health. It is something where, there's a lot of burnout. There's a lot of employee churn. Everybody after tax season, there's a big mass exodus out of the industry, after someone has survived, that is how it's termed, you survived tax season. Well, I think that having to survive your job is probably not a good outcome. That is not something that you want to be focusing on, is just surviving. In turn with all of that, that kind of mentality, the client service suffers. So when the employee who is working on the account is exhausted, when all they're worried about is they've gotta get this this done, they've gotta get this out on time, they've gotta get these billable hours turned in, the client isn't getting the best of the team. They are getting what they can get done and to me that is a terrible way to prepare somebody's tax returns, to prepare somebody's financial statements, to do anything that is so detail related and expect somebody to be doing that in hour 50, 60 or 70 is not good for the client.

I can guarantee you in places I've been, I know clients got overbuild because when you're working in that environment and you're expected to track your time, it is hard so you're gonna go back at the end of the day after you've just worked for 12 or 14 hours and say, who did I work on? What did I work on today? You're gonna go guess how long it took you and so some clients might have gotten a deal, and some clients probably got over billed. So, the whole model is not client service focused and that's not a good thing. That's what's wrong with the model. Even if it didn't impact the owners and the employees directly, it definitely impacts the client.

So, why did I want to be different? Why do I say I'm not your typical accountant, and why do I strive to not be the stereotypical accountant? It took me a long time to actually understand where this was coming from. Not just when I was younger, first in the industry going, wow, this is hard.

This is unequal in a lot of ways. It was a male dominated field when I started in the mid-nineties and was starting to shift from that, but it was very slow. Very slow to shift into having female role models, to having female mentors that didn't have to work longer to get to where they were than their male counterparts.

A lot of this was because there was no place for someone to step back, especially females, and to go start a family. Have a baby. There's no, I mean, nobody wants to return to work within a week of having a child. I don't, I don't recommend, and I didn't have to do it because I had already made changes by the time we started our family.

The reason why it was so hard for women was because you were expected to come right back and if you missed any time, you missed those promotion windows. You missed those because you were kind of pegged as well, now you're a mom and you're not gonna be as reliable or whatever.

I know it has changed, but for me, I came into it and said, okay, I haven't started a family yet. I definitely won't be able to start a family if I continue in this path, but I love public accounting. I didn't want to work in the industry. I'd had a couple of jobs before I got to public accounting, but I'd always, always wanted to be in public accounting, and I actually from high school on, had wanted to have my own business. So, it made sense for me to start building something that was what I wanted, which is public accounting, and supported what I wanted to do in my life. Which ended up being, yes, I wanted to be a mother. So, years and years later, I managed to figure out that yes, take enough personality assessment tests and I realized that I'm not your typical Coca Cola accountant. Not just because I didn't fit into that model, but because I'm a visionary. So, when I look at the predictable success that Les McEwen has a book called Predictable Success and it tests and assesses leadership styles, and there are four types: there's the visionary, the operator, the processor, and the synergist.

So, the synergist is the one that has equal traits of all of them, kind of is that rah-rah can kind of rally people together. The processor is your typical accountant. They want to go head down and get stuff done.  Which I thought, I would've assumed that what I was, because I always wanted to be an accountant. I must be a processor. Then the operator is more of that manager. They're the ones that say, okay, let's figure out what the process is and keep it moving. Let's keep going. Let's get it done. A lot of times those are salespeople, a lot of times they are ones that are managing the team. They say okay, here's what needs to happen, and we need to get it done by. Then there's the visionary. Typically, that's the entrepreneur, that's the leader, that's the owner, that's me. What skills that has is, is to have lots of great ideas. I'm always having, Ooh, let's do this and that's shiny thing, but not a lot of follow through.

I'm not a process person. I am someone who looks at it and says, I wanna do it differently, does it mean I know how to get there or what that process is gonna look like? Not always, but I did know and I see it now looking back, that that visionary trait inside of me is what was driving me to say I need to create something different. I don't want to have a team of people that turn over that are burnout, that are having stressful relationships with their partner or their family because they are not around, and because I didn't want that. I wanted to be available for my family. I wanted to empower my employees to manage themselves and still feel like one. They were contributing to something bigger than them, as in serving clients and having some sense of accountability and instead of surviving tax season, they were thriving through tax season.

That it was, we've got this and we can do this and we're gonna do it together, and it's not gonna be, so, so stressful. The side effect of that is typically your personal life is much more stable. That's why I wanted it to be different. I knew early on that, once I got married and we decided to have children that I didn't want to be missing out on all of the things that my daughter was gonna get to do. For us, we decided to only have one child. so everything was the first and last time that it was happening with Sam. So, I did not want to be in a position where I was either working for someone who had expectations of me to be available off hours to be working all weekend to be sacrificing volleyball tournaments or girl Scout troop meetings or whatever it was I wanted to do. I didn't want that pressure and I in turn didn't wanna put that pressure on anyone else. 

So, what I did to shatter what I call shattering this old school model. It took a lot of time. It was not overnight. It was not all at once. It was gradual because there was not a map, there was no book that said, here's how you put together a firm that is so different than the old public accounting model that people wanna jump into it. I actually had to, I still have to in ways have to sell the benefits of how we work because the stereotypical CPA firm is so ingrained. Well, what's your hourly rate? We don't have hourly rates. We don't charge by the hour. We don't charge for our time. That creates quite the conversation, with clients, with peers, with potential employees, because that is still a very new model. My firm's been around long enough that it has morphed. I mean, that model is less than a decade old.  There might have been some firms on some cutting edge of saying, yeah, we don't bill by the hour. We bill for the outcome. We bill, we value bill, we value price. but there are still people out there that bill by the hour.

The first thing that really started was when I went out on my own in about 2007. One of my motivating factors was that I was available to help clients, even between January 1st and April 15th. So, at the time I was very, very heavy into QuickBooks, setting them up, cleaning them up, getting people squared away and trained and all of those great things.

Anytime someone called between those dates, and I was with my previous firm, they would say, well, don't schedule anything with them until May. Well, most people are calling you in January or February because their current accountant cannot help them, and they have a filing deadline of March, April.

To make them wait, makes them not continue to be a potential client for you. They're gonna go somewhere else, somewhere that they're not gonna make 'em wait. So that was my first thing, was that, okay, I'm gonna design this so that at least I can continue to take new clients during busy season and help those people who are ripe, who change accountants.

That is the time, if you put them off, you're gonna lose them. I have gained some fantastic long-term clients by opening up those doors during busy season because most of those people feel defeated. They have a hard time finding anybody willing to help them. They may have been coming from a situation where they didn't have a good experience with the prior accountant, or the prior accountant fired them or died, closed their business, retired, sold, there were a lot of reasons that people suddenly are like, Hey, I need an accountant. Including starting a new business so I wanna be able to help those people too. So, that was the first thing I did, was left the door open to getting new clients.

Shortly after that, I mean it, it was probably within three or four years, I started playing around with fixed price billing, especially for my business clients. Actually, mainly for my business clients, you come to me, and you say, I need my tax return done. I want you to work on our payroll, and could you send us closed books once a month?

Okay, instead of billing for the hour for that, when you hourly bill, that means someone has to do the billing and, in my world, it was me. Instead of that I said, okay, let's take still based on hours, estimated hours, but divide it up into equal monthly payments. We'll review that each year or sooner if they need to add services, but let's at least get it to where it's a flat fee. It's billed monthly, which helps cash flow and solves a lot of the billing problems in the bottleneck and gets it a little bit away from keeping track of time. Although at that point we were still tracking time, I was still looking to see were we upside down, did we spend more time than we should have? I spent a lot of time analyzing that data and, but it was better.

The next thing I did was work with the team and limit overtime, especially during tax season. If I had full-time people, they were working 40 hours. A couple of reasons, I was pretty new and not very big yet but had a team and couldn't really afford to pay overtime. They were salaried and I also did not wanna pay a whole bunch of comp time. Then when we have even less cash flow in the summer months and in the fall, people were taking time off. That's our slow time and so I was concerned. So, that was really cashflow driven, but it stuck for those people to be able to say, yeah, I don't, I'm not working anymore during tax season than I am during the rest of the year.

So that was great. That was something that definitely was different. I will admit, I was probably still working quite a bit of overtime at that point, but that was more to do with that visionary thing, probably lack of processes. After that I spent a lot of time figuring out who I wanted to work with as far as a team, who I wanted to serve and how. That allowed us to attract the kind of employees we wanted, the kind of clients we wanted, and start to create the culture of we were different. By spending some time kind of outlining that and leaning into it and tweaking it and doing all those things,  it really gave us something to say.

It started to put into words what this is why we're different and we're different because we believe that you can do this job in public accounting without ruining your life, your life balance. It's a work-life balance. It's a very coined phrase and people use it quite a bit. I call it work family balance, because whether you have children or you just have your spouse or you have parents or whoever is family to you, that is what you're trying to balance.

That is who is hurt by you are being exhausted, your mental health suffering, you are not being around. so that's, that's kind of where we are. We're at a work family balance. So, I worked on that, which helped to attract the right people. 

Then I moved our business clients to subscription pricing. What I did with that is it's no longer based on time; it's based on outcomes and the different size of a company can make a difference on how much they're billed. They were monthly subscribers. It went on until it was renewed at a different rate. I try to do that annually now. I did that, I rolled everything into those subscriptions for my new business clients first and then went back and rolled it in for all of my existing business clients. At that point, that got me probably, I would say 90% of my business clients were no longer on any type of hourly annual bill.

That was huge one, it gave me cash flow throughout the year, which is huge. In the old model, you earned a huge portion of your revenue between January and March or April 15th, and then you lived off that for the rest of the year. By having the fixed prices and then moved into the subscription prices, it became a guarantee of how much cash flow we were gonna have.

From there, I moved to a hundred percent part-time model, and what I mean by that is I don't hire full-time people anymore. What I found was that one my size company didn't really lend itself to needing somebody working 40 hours a week. I was always stressed out about needing to make sure that that full-time person had enough work. It was hard to manage that because you also then get to that well I'm supposed to work 40 hours. I don't really have 40 hours’ worth of work, but I'm gonna stretch some of this work out instead of working towards the best, fastest outcome. So, meaning you don't care about how billable you are, you just get the project done in whatever time it takes. If it means it takes 10 minutes and you still have to fill the rest of your day, I still want it done in 10 minutes. 'Cause if that's all it took to do a good job, then do it, but that didn't work with full-time people because you really have that expectation that you needed to get 40 hours and there's not always 40 hours exactly.

So then what are they doing? They're non-billable. What do you do when you're non-billable? Well, you're training, which I definitely promote, but you're also stretching and you're stretching projects, and you're stretching time, so I realized that full-time employees were a stress for me.

So, I went to a hundred percent part-time model, which everybody works between 20 and 30 hours a week. They're hired to work between 20 and 30 hours a week, 52 weeks a year. There may or may not be maybe a handful of hours above their regular working hours during tax season, but never, I would say nobody's ever worked more than 35 hours, unless it was some special circumstance.

What this is, is everybody's hourly, no salaried, no comp time. However, they're earning paid time off. They are eligible for retirement plan. If they're working 30 hours a week. They are eligible for health insurance. They are part of the team. They can work towards advancement. They can come on the team and if you want to be a manager of something someday that'll work. There are opportunities for promotion because everybody's part-time, What I have found is that when they're not working, they're not getting paid. And when they are working, they are getting paid. That is a motivator you have to hire well. You have to make sure that you have people, because we are a hundred percent remote, that they can self-manage, that they aren't taking advantage of you.

That's culture so that is something that you have to really work at and work on your hiring process and just kind of ingrain those requirements and expectations into it. Once we went to a hundred percent part-time, I kind of worked towards elevating that team that I had that is part-time, by educating them and working towards having them understand that culture and being self-managed.

That alone is a little bit of a reward that in the old model, you never felt that you were self-managed because of the layers. We have layers, now I'm the owner and I have a manager, and I have a team. There's still review process, but we're still small enough and we've built the team strong enough, they're responsible for their client load. They're responsible for communicating with their clients. For the getting the client what they need or responding to them if there's something extra that they need or asking questions if they don't know the answers and getting back to them. That responsibility breeds that self-management rather than that micromanagement, which is really how I felt the old structure was, is very micromanaged. 

You do the work, you pass it up one level, they review it, they send it back down to you, you fix it, you send it up a level that level reviews it and then sends it up a level and they send it back down, I mean, nothing leaves our office without someone looking at it. In the old structure, it never came back to you with any type of feeling like you were responsible for it. You were responsible for fixing those points, but you were never part of the client relationship. You were more of a compliance officer, data entry clerk, so that's where you started.

Then as you moved up, you still had so much oversight that you didn't get to really think outside the box or manage yourself, your time, your workload.  Right now, we've got people who wanna go to the kids' party at the school because it's Halloween, then they know what their workload is, they know how to communicate with their clients and they can go do that.

While they're there, I'm not paying them or worrying about if something's not getting done. So that's where we went, where we started: took new clients, did fixed price billing, we stopped overtime, we figured out who we wanna serve, we moved businesses to subscription pricing, we moved to a part-time model and started elevating the team. Not even a year ago, so last summer, we stopped tracking time completely. We do not track time by client anymore because we weren't billing clients for time anymore, and I wanted to be true to that. I wanted to be able to honestly say to the clients, we are not tracking time on you.

This is not hourly billed and what that allowed was for the team to no longer have to spend time tracking time. I know that's a lot of time being mentioned there, but the process of keeping track of time hasn't changed in the 30 years I've been in the industry. You get through your day, and you go back and say, what did I work on?

You have to remember, okay, well I'll put 15 minutes there and 20 minutes there and ooh, I think that took about two hours. So, time wasn't accurate by everyone. Some was probably to the minute, some was so vague you knew it couldn't possibly be right and so to be true to what I was saying to the clients is that we don't bill by the hour.

To take that administrative burden off of the team members, we were able to stop tracking time. Completely. Now you still have to clock in, and you have to clock out 'cause you're hourly and you wanna get paid, but that's it. You just clock in and you clock out. You don't have to go in where we used to change client for every task you work on, and for some people, especially during tax season, you could be changing your tax status and your tax time tracking on 15 or 20 clients in a day and. We removed that and I believe it is saving us time and making everybody more efficient, more productive, because you're even saving clicks. So we stopped tracking time last summer.

Then this fall we moved the rest of the tax return only clients that were just showing up during a tax season, and we would just bill annually. That was still heavily based on hours. So up until last tax season, not this just past one, but the one before, we were still tracking time and I was still billing clients for those annual tax returns. I'd look at it and go, oh, okay, yeah, we spent a little more time, I could probably bump it up 5% this year.

I was handling the billing on every individual client. Since we stopped tracking time. That was going to force us to stop billing individual tax returns by the hour or by the minute, or by any of that. I knew I wanted to, but it took a long time for me to roll it out and just kind of push the button, which was to move all those clients to a subscription. It was a significant price increase. It was moving us away from just doing an annual tax return to putting us in a situation where we would be doing planning for every client in some capacity, whether they take advantage of it or not. That's up to them. but we feel that any tax return we do, we should not just be seeing it when they drop it off. do it. and give it back to them and not see them for another year.

It's very stressful when you get somebody's stuff and you haven't talked to them all year, and they failed to mention that they quit their job, started a whole new business or someone in the family died and they inherited a whole bunch of money that they didn't have tax withheld. There were so many situations, and we put a significant price increase in place, but we also standardized the pricing and what you get and gave them tears and that stuff.

I knew when I did that was one of the last steps in being able to remove myself from billing. To elevate the level of service we're giving to our clients and to know what work is coming. We did not have anybody that could show up in the last week and we say, oh gosh, we thought maybe they wouldn't show up and it would be an extension or people who were we were counting on not showing up because they just decided to change preparers and didn't tell you. There's a whole lot of reasons to move to that subscription model for those legacy clients. I believe there were some, I would say, growing pains inside there, but that is a thing that makes us different.

That is, I’m setting a price that I'm saying we can do this return and planning for you for this price. You're not gonna get any other billing for that. Are there times when we probably, if we really costed it out, that we might've lost money on a client and others that we made a ton, yeah probably, but it was set high enough that it felt very much like; one, they valued us, and two, we could get the work done and still make money. Then the last thing, I think that's probably the, the most important, I touched on it a little bit, was that having this model was able to create opportunities for the team to grow or grow as people, learn new skills, advance if they want to move into management and still focus on their family.

I've had employees with me, who I knew before they were married, before they had children, now they've got teenagers.  I've worked with people who their kids are graduating from high school. Their kids are graduating from college. They have worked through illnesses with a spouse, a parent, or a grandparent. They're able to feel like they are present for what is important to them. That is what drives me to be able to really believe that this is the model that it should be. So it's not old school. It is sometimes hard to convince people that this is something that makes sense. Telling people that you're gonna be on a subscription plan for your accounting services seems a little weird to them.

For me, it's lovely because I really did not like doing billing, but my thought about this (kind of winding it up and in conclusion here) is what would our industry be like if this was the norm.  Who or what kind of talent would we attract? What kind of level of service could we give to our clients as a whole? If the entire industry looked at it and said, you can make money in this method, you can make more money in this method. You don't have to create that sense of surviving tax season. I just wish it was more prevalent. I wish that I could, preach from the mountaintop that you should try it. I mean, it works for me, and I see the benefits and I still will have people tell me, oh, well, managing a bunch of part-time people is too hard. Well, that all drives back to your hiring process, your structure, and your culture.

For me, I don't want full-time people anymore. That works for me, and that works for the size I wanna be and the growth I wanna have. So, it really does make me happy to see it succeed. It does make me feel a little discouraged that it is so uncommon among accounting organizations to see that doing something different can be beneficial to yourself, your team, your business, your clients. It's so hard to break away, to say, I'm going to be different. In an industry that is designed to follow rules, tax rules, financial statement rules, we've got GAAP, we got the IRS, we have a lot of rules to follow so we're a lot of processors.

I think it's gonna take those visionaries out there that get into the industry and realize that something needs to change. It is changing. It's just very, very slow. So, if you're out there and you're in public accounting and you have any questions at all and want to know more about how I did anything to shatter the old school model, reach out to me.

I will be happy to talk to anybody who finds this remotely doable. I mean, if you think that this is something you would like to try, I can tell you the pitfalls. I can tell you things I would've done differently. I can tell you things that I would've done first had I known that it was gonna end up like this.

So please, please, reach out to me, send me an email or a fan mail where you're listening to this. You can always get to me at Beth@wlxco.com and I will get back to you for sure. Thank you for listening to me step up onto my soapbox about, how I am so opposed to the old school public accounting model and wish that we had this new model and mine probably is not the only model it's just a different, it is not old school, and I hope that it's something that we can change so that we can attract new businesses, new talent, new accountants into the industry. Okay everybody. Thanks for listening. I will talk to you next time and remember that you are the only one who can build a business that you love.

Thanks everybody.