Recommender and referral programs are hard to resist. Over the last few years, company after company has introduced some kind of effort under which CPAs will steer clients to their product.
|Annual Tax Software Edition|
October is the time for the annual Tax Preparation Software Edition of Accounting Technology magazine as professional preparers gear up for the next season.
Accounting Technology staffers Carly Lombardo and Richard McCausland give readers a look at 15 of the top packages and the changes that are ahead for each in the next software release.
Meanwhile, reviewer Wayne Schulz takes a look at leading trial balance/workpaper software applications in a market that is increasingly focused on document management.
Finally, Editor Robert Scott examines the emergence of online payment services for the B-to-B market. Is this a capability that’s ready for prime time?
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A substantial number of CPAs who refer customers to product don’t want commissions. Some do, obviously, but there are enough resisters to call into question the chances of success for any vendor who thinks that commission-based referrals is the doorway to riches. (By commissions, I don’t mean product margin, which for some strange reason often gets dumped into the commission definition in the CPA world. Commission and margin are two distinct things.)
Referral fees were one of the original propositions of CPA2Biz. CPAs would bring their small business clients to the site (which is looking increasingly like the old AICPA).
Similarly, Microsoft plans to use CPAs in steering business to its Small Business Manager, the stripped-down version of Great Plains Dynamics that it heralds as a package for the masses of small business that need more robust accounting software.
Many referral programs do not seem to make much financial sense. Remember Finance Manager, the online accounting package from Microsoft that was going to be offered via CPA2Biz, before the service was subject to a mercy killing by Microsoft? It was going to be sold at a $30-per-month subscription. Suppose a CPA got 10 percent commission (a high figure, but the math is easy). That’s going to be a small reward. How many successful referrals does it take to equal the income from one new tax or write-up client? Raise the product list price to $3,000 and assume a 5 percent commission, which is Microsoft’s current fee on many of its products. For a lot of firms, that is not worth the effort, risk, or opportunity costs.
Most CPAs prefer to get referrals in return because a new client represents a recurring revenue opportunity, not a one-shot payout.
The return on invested effort is only one of the problems. Many risk-averse practitioners worry that referring a product that does not work (to be fair, there aren’t many of those these days) will harm their reputations.
And frankly, supposing you refer a payroll client. Aren’t most firms better performing their own payroll services and controlling the client and getting a foot in the door to sell more services, instead of sending the business to someone else? The smart firms often see it this way.
Of course, many firms still have ethical qualms about accepting commissions. (However, we never seem to hear about the same reluctance about referring clients to products a practitioner does not really use or understand.)
There’s no doubt referral programs can work. Intuit is doing a bang-up job with its Advisor programs. But it does not rely exclusively on paying commissions. It gives participants the chance to accumulate points that can be redeemed for product, fees, whatever they want. And it gives them the high-touch they need.
CPA referrals can work. But the vendor really has to work at such programs.
Robert Scott — Editor