Monthly Archives: December 2014
Now is the time to use your social media contacts to save your clients taxes and pull in some new clients.
Below is an example of one accountant using LinkedIn to coax clients on how year-end tax planning can save them taxes. The cost is essentially zero. The reality is that most small business owners don’t realize that year-end tax planning is critical to lower taxes. You can argue that it’s deferring taxes but either way, it’s a smaller check to write next year.
Please use your contacts in LinkedIn, Facebook and Google+ to raise their awareness. If you do this once a week in December, you will get some new business from it. Incorporate a picture into the post so it catches their eye.
As we look ahead to 2015, most of us would like more high quality leads so we can become more selective about the new clients coming in the door and become more adept at screening out marginal clients.
The vetting process is critical to the success of all professional service firms, whether it’s accounting, law, management consulting or architecture. The most successful professional service firms strategically identify what types of clients they want more of, and which types of engagements they want to avoid. After completing this process, the next step is to target the engagements that deliver higher fees.
Below is a multi-partner CPA Firm that is moving down this path using a multiple website strategy. By all means, internet marketing is just one facet of their marketing plans but it’s easy to see how multiple websites can create a compelling message to segmented audiences of prospects while still branding the firm holistically. In each case, the website is designed to create an aha moment for the prospect who feels that their needs are complex while not compromising the brand imagery of the overall firm.
As background, the firm below is an established CPA firm in Miami with three partners. The roots of the firm trace back 65 years.
CPA Accounting Firm – Main website positioning them as a generalist accounting firm serving all types of clients.
Using a four (4) website approach enables Canner Brody and Yan CPAs to change their message and go into much more depth on each of the niche accounting services they provide, thus enabling them to compete with much larger CPA Firms for prospective new clients.
If you’d like to maximize your lead generation from the internet, give Build Your Firm a call. You’d be surprised how impressive we can make your firm appear on the internet.
Many of the accounting firms that we work with have relatively modest growth goals for gross sales and are very concerned about the quality of the work they produce, which is understandable. However, most don’t focus enough on improving the bottom line and look at all clients equally. To us, this makes no sense.
If this rings true at your practice, here are some quick suggestions:
1.) Invest in growing your higher profit margin services now. In many cases, savvy accountants will strategically invest into concentrations (aka niches, areas of specialty) to enhance their overall profit margins. I think of this as margin blending in the right direction. In other words, they will invest their limited marketing investment into niche areas that yield higher hourly realization rates so they can offload lower profit margin sectors (or clients).
Here are some examples of accounting firms proactively investing in niches to improve overall hourly realization rates and average firm profit margins. Keep in mind, each of these firms also have regular clients and a generalist website too.
2.) Cull Out Lower Margin Segments – Rather than “fire” less desirable clients, we suggest that you package them up and sell them. Over the past year, we’ve had several clients package up their payroll clients and sell them off recognizing that the hourly realization was much lower than the niches above. Others have packaged up individual tax clients so they could focus more on higher value clients.
Now is the time to invest a little into your higher value segments so you can cut loose some of the dead wood (lower margin) after tax season. Just saying….
As we all look ahead to 2015 and beyond, it’s time to seriously ask the question about:
- Who does our marketing?
- Have we differentiated our accounting practice within our local market?
- Are we gradually improving the quality of our clientele?
- Is our hourly fee realization rate improving?
- Are we generating more referrals than years past?
- Has the reputation of our firm improved locally?
Be honest in your assessment.
If you don’t like your answers and want to become serious about improving the overall quality of your accounting practice (e.g., sales, profit margins, clientele quality, branding, etc.), then give some thought to BYF’s Outsourced Marketing Program (OMP). The OMP starts as a three year program and about 50% of participants continue beyond the initial three year plan because the client acquisition costs are attractive and results are easy to measure quantitatively. The first six months take work on both sides but after things get rolling, it works like clockwork.
Participation in the program is limited and application is required.
When Peter Freuler took over his father’s Orlando, Florida CPA practice in 2005, it was highly dominated by 1040s, which included filing 700 individual returns and 125 business returns. At that time, his firm’s revenue was approximately $245,000. Today, his firm has more than doubled its revenue and profit margins are much more attractive.
How did Peter change the direction of his business and grow revenue? The first step was to hire Build Your Firm (BYF) for outsourced marketing and lead generation in 2009. The second part was to restructure how work was processed in the practice and third, he culled out a portion of the practice and sold it to another firm, thus freeing up capacity and enabling the firm to focus on higher value clients. Today, Peter outsources all of his marketing to BYF and views them as an extension of his practice.
“We’ve steadily and strategically grown more business- focused,” he said. “We don’t turn down individuals, but we are not trying to be H&R Block, either.” Our mix of revenue is primarily business oriented, which is the opposite of what the practice was in 2005 and my work-life balance has steadily improved.
Focus on Niches
Peter recognized a need to market his firm to attract more clients. He knew that targeting just anyone with the need for CPA services would not work, so he decided to create industry niches to differentiate his practice, attract a certain type of client, and gradually strengthen our firm’s knowledge of that particular industry sector.
“Our original niche in dental and medical accounting started with just one client. This part of our business has stabilized as the healthcare industry has gone through regulation changes and some hospitals are now buying medical practices,” he said.
As a result, the need for another business evolution occurred. Peter decided to augment his medical practice accounting niche with a real estate accounting niche. About 2-3 years ago, the local real estate market started to turn around so we decided to create a niche within the real estate sector amongst commercial property owners, residential property investors, and even non-resident property owners, which there are many in the Orlando area.
“Around 2008, the drop in the property value of vacation real estate dropped in the Orlando area,” said Peter. “Individuals and investors started buying vacation condos as investments and called our practice, asking questions. Pretty soon we were able to answer those questions easily; and our second niche was born!”
Peter’s clients include international investors who have purchased property in Orlando, as well as brokerage firms, property management firms and individuals who purchase the property as an investment.
“Some of our clients receive an easy 15% to 20% yield on rental property investments, but they need help with some of the more complex tax issues they face,” he said. That’s where we now excel.
The Niche Advantage
As Peter can attest, establishing a niche helps accounting firms and other businesses market themselves. The niche differentiates you from the competition, establishes you as a subject matter expert and enables you to reach your target market more easily. Over time, these type of business clients become easier for our entire staff to manage because of repetition.
Yet, creating a niche alone does not necessarily increase your business unless you complement it with marketing that effectively reaches this target audience. In Peter’s case, he uses a combination of print newsletters designed specifically for real estate businesses in conjunction with direct mail letters to generate new leads amongst local businesses. He also has a website designed specifically for real estate businesses that targets local businesses and non-resident property owners who may reside in Europe, South America or throughout the United States. The Orlando area is very unique in that it has many residential property owners who come there periodically for vacations and manage it remotely as a rental property.
About 60% of our new business comes from Internet leads, which more than offsets the cost of maintaining three websites. The nice thing about internet leads is that the prospect has been hunting for a particular accounting firm, is ready to buy, and then takes the time to call us with their specific questions. And often, they are more than willing to work with us remotely, so they are more efficient to service over the old fashioned hand holding client.
“A lot of clients call us because their former CPA could not answer their real estate tax questions, so they start searching and find our website,” said Peter. This puts us into a consultative type situation, which we enjoy, and is very easy to close.
Peter added that CPAs need to understand that achieving measurable results takes time and a continued commitment. “I’ve often been asked about the ROI of my marketing. I tell people it is a long-term investment and I rely on BYF to generate quality leads. Interestingly, I recently got a call from a prospective client who received a direct mail piece from me three years ago!”
While the spotlight shines brightly over large retailers (e.g., Home Depot, Target, etc.) that get hacked for credit card information, not so much attention has been paid to accounting firms using email during tax season. One of these days, we will see a highly reputable CPA Firm go through the ringer and lose their reputation and get fined beyond belief for not complying with Sarbanes-Oxley, Gramm-Leach-Bliley, and other federal/state laws concerning identity theft and handling of personal information.
I remain shocked at the number of accounting firms which are using standard email to send and receive information. All the personal information you handle — including client income data, social security numbers, EINs, retirement accounts, payroll accounts — is wide-open to interception by third parties when sent via regular email.
Types of information that hackers love to find:
- 1099 forms and W-2s
- Bank statements, credit card statements and voided checks
- Entire tax returns loaded with social security numbers and birthdates
- Payroll information for entire companies
- QuickBook files
- Online banking accounts
- Retirement accounts and investments
Any tax preparer or accountant who accepts or transmits these documents over normal, unencrypted email could be penalized heavily and/or sued.
Going forward, please ensure that all inbound and outbound email is encrypted and secure so you are in compliance.
There are plenty of commercial tools on the market that encrypt email so you can inexpensively comply. For example, all Build Your Firm websites provide Secure File Sharing with 256 bit encryption (bank grade encryption). It’s as easy to use as email, but is secure.
The relationship between the professional service provider and client is built on trust, respect and timeliness, yet why do so many CPAs and accountants have a seemingly difficult time asking for, and receiving, payment for their own services?
Do they push off back-office and operations-related matters so they can concentrate on more billable activities? Are they afraid they’ll fracture the provider-client relationship and the client will go elsewhere once he or she is asked for payment?
Every firm is different, and while there’s certainly not a definitive answer to these questions, the problem isn’t necessarily why the accountant has a hard time coming to terms with payment; it’s more about the process the firm uses to actually collect its money.
In most professional service business such as legal and consulting firms, the client pays a significant portion of the estimated fee upfront as a retainer. It’s not unusual that 50% of the projected cost will be paid when a project begins, yet accountants typically don’t request payment until after the service has been rendered. The invoice is then mailed out and payment may not be received for 30 to 60 days later, sometimes even longer. According to a study published by Accounting Today, 30% of invoices are paid 31-90 days after the service has been provided and another 5% take over 90 days to receive payment. Essentially, 35% of invoices that go out will become aged.
What % of Your Invoices Are Paid
Within These Periods?
Within 30 days 65%
45 days 15%
60 days 10%
90 days 5%
Over 90 days 5%
Source – Accounting Today Executive Research Council, July 2013
In today’s electronic age, this is absurd. Can you imagine ordering a book from Amazon and paying for it 35 to 60 days later? If that’s the case, then why should accounting firms wait to get paid? In other words, why does the accountant get paid only after a business owner covers payroll, overhead expenses, and miscellaneous expenses? Is it because they often know their accountant won’t complain as loud and won’t ding their credit scores?
In discussing this issue with many accounting firms around the country, here are three fundamental ways to obtain more control and speed up your payment processing system.
The implications of hourly billing on cash flow can not be understated. Professional service firms that elect to bill hourly create conflict and uncertainty in their billing practices and this makes it harder to process payments in a timely manner. Think about it, how many times have you received a bill from a professional service firm and cringed at the hours billed and corresponding bill, sat on it, maybe even complained about it, and then took your time to request payment as a silent protest. It’s common practice and is guaranteed to slow down your ability to get paid promptly.
By adopting a value billing (fixed fee) system, your accounting/tax fees become well understood and part of the stack of bills which do not get scrutinized closely. They are budgeted in advance and paid regularly like the rent payment.
Billing Processing is Addressed Upfront
At the onset of each new business engagement, it’s absolutely essential to discuss billing processes as part of any expectation of doing business. While many accountants are apprehensive to do this, this is the best time to agree upon the form of payment and particulars to avoid issues. Often, accountants that use ACH payment processing (eCheck) are surprised at how easy it is to obtain agreement from the business owner if this is addressed along with the engagement agreement. Think about it, small business owners realize that you are not performing this service gratis and are more than willing to provide their checking account information to their trusted accountant if the fee is fixed and known in advance. And, it will be one less bill they have to cut a check for.
Use Payment Technologies
Just like there are technology applications to increase your efficiency for accounting, tax and payroll tasks, there are also apps to process payments with more control and efficiency. Incorporating these apps into your payment processing will make it easier to receive payment and gain control over getting paid faster. For example, we have been advocating that our accounting clients to offer BizPayO to receive prompt payment by eCheck, credit cards, debit cards and bank wires while stopping the practice of waiting for a paper check to arrive in the mail. That’s right, one app integrates payment right into your business bank account.
BYF has developed a payment processing app that is designed to address this fundamental issue, which is vital to running any successful business. Think about it, all successful businesses have the ability to control getting paid. It’s a basic requirement. Anyway, we have designed a payment processing app that integrates eCheck, credit card, debit card and bank wire payments into one easy to use payment system so you can collect fees faster, and less expensively while lowering accounts receivable. And, it’s secure.
This payment app was designed by Allan Ratafia, tested in his accounting practice, and is ready for accounting firms around the United States. In fact, this payment processing tool is so innovative that Paychex is now selling BizPayO as a standalone app.
Get More Control Over Accounts Receivable
These are just three fundamental ways to get more control over accounts receivable and dramatically reduce the amount of time it takes to get paid. Personally, waiting 30-60 days to get paid after working your buns off for a client is out of control.
To learn more, BYF will be hosting two free webinars next week. One session is designed for existing users of BizPayO and the second is designed for non-users of BizPayO who would like to get paid faster.
Using BizPayO Properly – Dec 16th – designed for users of BizPayO on how to optimize the use in your practice
Boosting Cash Flow – Dec 17th – provides 1.5 CPE credits – designed for non-users of BizPayO