There is some question about whether business plans are a good use of your time and energy. They do eventually go on a shelf and there they gather the dust. I don't know all the answers, but I can share my story. I started my firm on October 15, 2007. For the months of July and August, I spent every spare second working on a business plan. I started with a template from http://www.score.org/ and went from there.
I have always been a creative writer, but the template I used would not let me skip around the parts where I was most weak. Marketing, marketing, marketing. I can sell a client on what I do, but can I identify who that client is and make them come to me? Truth be told, I have been fortunate in referrals, but without the plan, I would have been less focused and really gotten myself in trouble early on with some work that came my way that was not in the "plan". As it was, I turned some of those jobs down, and actually earned some respect from my peers who thought I was really "brave". I look back now and laugh - it was a risk, but I had a plan, and it is in my head and I stick to it. As an aside, I did end up hiring a marketing consultant who was really helpful and who kept me on track. Hire to your weaknesses!!!!
I think the point of the business plan is the process of figuring out what you can do and what you are going to need to buy. I also believe that the discipline required to write the plan is an important indicator of your commitment to the business. Running a business is not easy - I often consider it my second marriage. In the business plan stage, I was planning the wedding - with so many things to think about and do, and yes, a lot of trepidation about what this type of commitment would mean going forward. But on the day I left my "job" and woke up, I knew what to do first because I had the plan. And just like in my marriage, we just went forward and did it. And we keep going.
Oh, and the important information - I did secure funding with my plan, and the loan officer relayed his supervisor's words, "They have to have a comprehensive plan or they have NO chance." I am not sure that is true, but it sure helped me.
Tuesday, September 29, 2009
Wednesday, September 23, 2009
Employee Turnover - Only Cost or Possible Opportunity?
I was at lunch today with my husband who works for another CPA firm as their IT Director. As often happens when we lunch, our discussion turns to firm management (yes, we are an exciting couple). One of the things we discussed was the companies we know that appear to be "overpaying" for audit and tax services. In each of those cases, the CFO at the company is alumni from a Big Four firm that "gave" the work directly to their old firm. Sometimes without a bidding process. I wondered aloud how many firms are seeing a return on their former employee's new companies?
There are many reasons that former employees are so loyal to Big Four firms. One is the clubbish atmosphere that there are certain things only a Big Four firm can accomplish. Even large local and regional firms can successfully push this atmosphere. In real life, there are small firms everywhere that specialize in various industries and transactions that can also get the job done, but until you have seen that in person, it is easy to believe that if you want quality service you have to go to a Big Four firm. (I am not going to get into all the reasons that your actual experience may differ from this assumption - under-trained staff, inadequate supervision, etc. Conversely, in some cases, it may absolutely be true.)
Another reason the big firms engender loyalty is the on-going offering of CPE to alumni, the alumni phone books and the general attitude that once you are family, you are always family. Whether or not they do it on purpose, these firms seem to plan that people will leave and work towards having them as walking marketing people even after they go. You can hate public accounting, but you don't hate Deloitte. Ever.
Other large firms that I know of don't do this well. When they turn over their staff, for whatever reason, they choose to be wounded that the individual would choose to leave the firm and they "cut all ties". Firms like that do not seem to pick up as much business from former employees as they should or could. The lesson here seems to be that public accounting, as great as it is, is not for everyone and in your marketing plan, you should determine how you can turn the employees that leave into future business for your firm. Turnover is always a cost, but I believe that there is also opportunity for recovery in future business.
There are many reasons that former employees are so loyal to Big Four firms. One is the clubbish atmosphere that there are certain things only a Big Four firm can accomplish. Even large local and regional firms can successfully push this atmosphere. In real life, there are small firms everywhere that specialize in various industries and transactions that can also get the job done, but until you have seen that in person, it is easy to believe that if you want quality service you have to go to a Big Four firm. (I am not going to get into all the reasons that your actual experience may differ from this assumption - under-trained staff, inadequate supervision, etc. Conversely, in some cases, it may absolutely be true.)
Another reason the big firms engender loyalty is the on-going offering of CPE to alumni, the alumni phone books and the general attitude that once you are family, you are always family. Whether or not they do it on purpose, these firms seem to plan that people will leave and work towards having them as walking marketing people even after they go. You can hate public accounting, but you don't hate Deloitte. Ever.
Other large firms that I know of don't do this well. When they turn over their staff, for whatever reason, they choose to be wounded that the individual would choose to leave the firm and they "cut all ties". Firms like that do not seem to pick up as much business from former employees as they should or could. The lesson here seems to be that public accounting, as great as it is, is not for everyone and in your marketing plan, you should determine how you can turn the employees that leave into future business for your firm. Turnover is always a cost, but I believe that there is also opportunity for recovery in future business.
Monday, September 21, 2009
10 Rules to Surviving Your First Year in Public Accounting
The first year for a public accountant can only be described as extremely difficult. (It sucks!?!?!?) An over-acheiver with excellent grades and superior intellect is the type of person that is going to land in public accounting. And then they are going to find out that they don’t know much. And they are not going to like that part. And even if they are doing really well for a first-year professional, they are going to become depressed, stressed and angry. They will question their intelligence, their career choice and the sanity of all these other idiots who have somehow risen to the top of this “profession”.
While the profession is attempting to change the “hazing” of the first year, unfortunately there are people like me. My heart is in the right place, but unfortunately, in the middle of busy season (aka tax season), there will be a stressful moment. And in that stressful moment, I might revert to how I was taught. By screaming, irrational idiots who didn’t think I knew anything. Hey, it made me good at what I do, didn’t it? No excuses, it is just tough to turn that ship around and behave better in the heat of the moment. Sorry.
Which brings me back to my original point. You have decided to enter the public accounting profession. Maybe you are just here to get a license and get out. Maybe you think this is your career. Maybe you have no idea why you are here and you are looking for a quick exit. The stress, drama and trauma your head and physical body are experiencing may be helped by taking some time to understand the term professional. You are in a world that requires a lot of education AND a lot of experience. You have the education part done and done well and we are truly excited to have you in our profession, but now you have to dig in and get the experience. You will succeed if you learn how to get along with who you are working for and who you are working with and work will be rewarding. Both spiritually and financially.
While the profession is attempting to change the “hazing” of the first year, unfortunately there are people like me. My heart is in the right place, but unfortunately, in the middle of busy season (aka tax season), there will be a stressful moment. And in that stressful moment, I might revert to how I was taught. By screaming, irrational idiots who didn’t think I knew anything. Hey, it made me good at what I do, didn’t it? No excuses, it is just tough to turn that ship around and behave better in the heat of the moment. Sorry.
Which brings me back to my original point. You have decided to enter the public accounting profession. Maybe you are just here to get a license and get out. Maybe you think this is your career. Maybe you have no idea why you are here and you are looking for a quick exit. The stress, drama and trauma your head and physical body are experiencing may be helped by taking some time to understand the term professional. You are in a world that requires a lot of education AND a lot of experience. You have the education part done and done well and we are truly excited to have you in our profession, but now you have to dig in and get the experience. You will succeed if you learn how to get along with who you are working for and who you are working with and work will be rewarding. Both spiritually and financially.
Here are 10 rules that will help you to not only survive your first year of public accounting, but to succeed:
- Use last year’s workpapers. If they found the number last year, you can find it this year. (This rule will be reversed in a later year.)
- Do not try and finish the whole project perfectly. This is an unattainable goal and will only keep it from ever getting finished.
- Do EVERYTHING you know how to do, even if there are other items on the very same workpaper that you don’t know how to do.
- If you have reached a question that is stopping you in your tracks, let your in-charge know. Trust me, if you can get a hold of 50 friends at any moment in time, you can get a hold of your in-charge if you are truly stopped.
- If you have reached a question that is not stopping you in your tracks, put it on a list.
- Check in every day and let someone know what is going on.
- Do not check in with every single thing that you do.
- If you have questioned a client on a complex accounting transaction or some such item, document it immediately. You will not remember it in one week or even the next day. You will not have time to write it next week or even the next day.
- Shut up and listen when someone with more experience is sharing information. Sorry to be so blunt, but over-acheivers are usually pretty bad at this one, myself included.
- If that person is telling you something and you have absolutely no idea what it has to do with anything, write it down! You will need that information later.
I believe these 10 rules will get you through the first and most of the second year in public accounting. Before you know it, 3 or 4 years will have passed and you too will be the idiot who somehow managed to rise up through the ranks to make life miserable on first years. Hopefully, you will do a better job than I am doing. And hopefully I am doing a better job than those who came before me.
A final note (warning): If you do really well or even kind of well, you will not get an A as you are accustomed. No, you will only get more work. Good luck!
NOTE: Originally written in October 2006.
Thursday, September 17, 2009
How Much Should You Pay for Bookkeeping?
How much should you pay for a bookkeeper? And how do you find a good one? A quick look at Craigslist will show a "million" bookkeepers with rates from $25 per hour to $50 per hour. In my mind, I think $35 per hour is average. But there are a lot of factors here.
First of all, you know you can hire an employee for a rate of between $12 and $20 per hour for basic bookkeeping services. This is less, but the other costs of an employee have to be factored in - basic employer payroll taxes will average about 11% (in Oregon), if you have benefits that has to be added in, but you also should not forget the other costs of an employee. They take time off, some of which you pay for - they need to be trained; you need to be available to deal with whatever comes up in their lives and if you turn over the position regularly, well, it starts all over. This is all time consuming and your time is definitely worth more to your business than $12, $20 or even $35 per hour.
Now, contractors have their problems also - the most important one being accountability. I can not even count the times I have gone into a new client and heard their prior bookkeeper/accountant say, "No one told me about that, so I did not book it." Another draw back to a contractor is that you are subject to their schedule - you may not get something done today, but rather when the next bookkeeping packet goes out. Finally, are your records at your location, at their location or a mix of both? Who knows what is really going on in your business from the dollars side? And which software are you going to have to use?
Okay, back to the $35 per hour average. I think it is important to point out that you get what you pay for. Right now, the better bookkeepers that I have sub-contracted with from time to time are actually charging $50 per hour. I have one that I pay $65 per hour and at this point, you are probably thinking, WHAT??? $65 per hour??? Well, frankly, she is really fast, really good and I very minimally have to supervise her. She gets it done and she is worth every penny. 2 hours of work at $65 per hour is $130. Another less efficient, less experienced bookkeeper might take 4 hours to do the same work, which would be $140. And I still have to spend time answering basic questions and providing extensive supervision. This exponentiates as the job gets bigger.
Having said all of that - we have all been burned by an accounting person during our careers. We have overpaid for someone who just sold themselves but have no practical ability. There is just no way to tell who "gets it" and who doesn't. Experience, education and/or personality don't seem to actually factor in to the person who just understands numbers. When I hire bookkeepers for my staffing needs, I have actually gone to "working interviews", so that I at least know what I am getting into in terms of software capabilities and accounting knowledge. That has really helped and I recommend it if hiring an employee is your preferred method of getting the books done. See one man's perspective on this at http://www.arboristsite.com/showthread.php?t=31486.
Okay, let's switch over to what you can do. I think billing by the hour is actually really tricky and not very useful when dealing with regular bookkeeping activities. It is much more useful to use a "value" billing approach that contemplates what this work is actually worth. Bookkeeping is a fairly consistent activity. There are busier times - usually in January when 1099's have to be prepared and other times that your business may have natural cycles, but it is much easier to forecast cash flow if you know what you are going to pay each month. It is also easier for the bookkeeper to deal with cash flow if they know how much they are going to receive - less billing headaches and a consistent flow of cash - a win for everyone.
Let's take an example: what if you were to pay $1,000 per month for a bookkeeper? Does that sound like a lot? That works out to $12,000 per year, all in all, less than an employee, but maybe more than you wanted to spend. But what if you get an amazing person that takes accountability seriously and who really gets how numbers work? What if your experience with your tax accountant is both much more timely and much less stressful? What if your tax fees actually go down? What if you never had to worry about finding another accountant again (no transition pains)? Would it then be worth $1,000 per month? What about $500 per month? What price makes sense when you actually get the headache of bookkeeping off your plate in a competent and useful way?
Pricing is always negotiable and when I come to this point in the proposal process with a new client, I try to find a price point that gives the client value and at which I can still make money. Because that is my job. To figure out how to make money at the price the client is willing to pay. Isn't that your job when you set prices for your products and services? We are all running businesses here.
Value billing lets you know that you are getting what you are paying for and not worrying about how many hours someone is working and what their rate may be. Try this out with your contractors and see how it works. Understand that you will be billed separately for extraordinary activities, but that the regular work just is what it is. And enjoy the feeling that you can actually call your advisors once in a while without pausing to think about how it impacts your monthly bill. Wow.
First of all, you know you can hire an employee for a rate of between $12 and $20 per hour for basic bookkeeping services. This is less, but the other costs of an employee have to be factored in - basic employer payroll taxes will average about 11% (in Oregon), if you have benefits that has to be added in, but you also should not forget the other costs of an employee. They take time off, some of which you pay for - they need to be trained; you need to be available to deal with whatever comes up in their lives and if you turn over the position regularly, well, it starts all over. This is all time consuming and your time is definitely worth more to your business than $12, $20 or even $35 per hour.
Now, contractors have their problems also - the most important one being accountability. I can not even count the times I have gone into a new client and heard their prior bookkeeper/accountant say, "No one told me about that, so I did not book it." Another draw back to a contractor is that you are subject to their schedule - you may not get something done today, but rather when the next bookkeeping packet goes out. Finally, are your records at your location, at their location or a mix of both? Who knows what is really going on in your business from the dollars side? And which software are you going to have to use?
Okay, back to the $35 per hour average. I think it is important to point out that you get what you pay for. Right now, the better bookkeepers that I have sub-contracted with from time to time are actually charging $50 per hour. I have one that I pay $65 per hour and at this point, you are probably thinking, WHAT??? $65 per hour??? Well, frankly, she is really fast, really good and I very minimally have to supervise her. She gets it done and she is worth every penny. 2 hours of work at $65 per hour is $130. Another less efficient, less experienced bookkeeper might take 4 hours to do the same work, which would be $140. And I still have to spend time answering basic questions and providing extensive supervision. This exponentiates as the job gets bigger.
Having said all of that - we have all been burned by an accounting person during our careers. We have overpaid for someone who just sold themselves but have no practical ability. There is just no way to tell who "gets it" and who doesn't. Experience, education and/or personality don't seem to actually factor in to the person who just understands numbers. When I hire bookkeepers for my staffing needs, I have actually gone to "working interviews", so that I at least know what I am getting into in terms of software capabilities and accounting knowledge. That has really helped and I recommend it if hiring an employee is your preferred method of getting the books done. See one man's perspective on this at http://www.arboristsite.com/showthread.php?t=31486.
Okay, let's switch over to what you can do. I think billing by the hour is actually really tricky and not very useful when dealing with regular bookkeeping activities. It is much more useful to use a "value" billing approach that contemplates what this work is actually worth. Bookkeeping is a fairly consistent activity. There are busier times - usually in January when 1099's have to be prepared and other times that your business may have natural cycles, but it is much easier to forecast cash flow if you know what you are going to pay each month. It is also easier for the bookkeeper to deal with cash flow if they know how much they are going to receive - less billing headaches and a consistent flow of cash - a win for everyone.
Let's take an example: what if you were to pay $1,000 per month for a bookkeeper? Does that sound like a lot? That works out to $12,000 per year, all in all, less than an employee, but maybe more than you wanted to spend. But what if you get an amazing person that takes accountability seriously and who really gets how numbers work? What if your experience with your tax accountant is both much more timely and much less stressful? What if your tax fees actually go down? What if you never had to worry about finding another accountant again (no transition pains)? Would it then be worth $1,000 per month? What about $500 per month? What price makes sense when you actually get the headache of bookkeeping off your plate in a competent and useful way?
Pricing is always negotiable and when I come to this point in the proposal process with a new client, I try to find a price point that gives the client value and at which I can still make money. Because that is my job. To figure out how to make money at the price the client is willing to pay. Isn't that your job when you set prices for your products and services? We are all running businesses here.
Value billing lets you know that you are getting what you are paying for and not worrying about how many hours someone is working and what their rate may be. Try this out with your contractors and see how it works. Understand that you will be billed separately for extraordinary activities, but that the regular work just is what it is. And enjoy the feeling that you can actually call your advisors once in a while without pausing to think about how it impacts your monthly bill. Wow.
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