Art of Accounting: Rip Van Winkle effect for small CPA firms

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Last month a colleague called asking me what I knew about a certain brand of workflow software. He said he was thinking about using it for his tax calendars.

Before I told him what I thought, I asked him a number of questions and found out his office wasn’t paperless, did not use smart scanners for tax preparation, was using QuickBooks Desktop for his client services — which was the main part of his practice along with an extensive number of 1040s — and he used a convoluted Excel worksheet for his tax calendars, thus necessitating the call.

Two primary issues came out of our discussion that I want to share and address here.

1. He was running a successful practice as a sole owner with a dozen employees. He was happy, made quite a bit of money and had low turnover. With that in mind, I did not want to suggest anything that would upset his applecart but felt that I could somewhat bring him up to date.

2. He seemed unaware of the many changes that have occurred in the accounting business over the last 20 years. It’s almost as if he fell asleep and just woke up, similar to Rip Van Winkle’s situation. My thought was whether it was necessary or important for him to adapt and, if so, how to go about it.

I believe it is important to change, adapt and grow. True, he was successful, but he was in his mid-40s and not even close to thinking about retiring, with many more years ahead of him. Changes occur slowly until they become overwhelming if they are not recognized and then there might not be much of a choice.

I am reluctant to tell anyone who is successful that they need to change, but feel that by him not adapting, he could end up with a declining practice. At some point that could cause more consternation than the inconvenience of making gradual changes as he is able to make them. I don’t need to report the litany of changes that have taken place over the last 20 years.

Things are changing rapidly. At some point they could create a wave too strong to swim against and the result would not be good. Today is a fine time to appreciate all the good things we have and enjoy and do, creating a desire to maintain the status quo. Today is also a fine time to start to make small changes to move away from yesterday and into tomorrow. Here is what I suggested:

1. Rather than start with the workflow software — which would keep track of his tax calendars, but also provide a fully integrated practice management system — I suggested he start with making his firm paperless. That is the first step. If he started now, he could be fully functional and ready when tax season starts. I told him not to spend time transferring any old or existing files, but to start with all new work.

2. He should consider smart scanning software for next tax season. He should contact his tax software company and find out what software would work with their system and ask for the names of a couple of practitioners in his area he could speak to about it.

3. The third thing he could do would be what he called me about. Assuming the first two things are working well, he could then get the workflow software after tax season, say around July 1. I also suggested he look at a couple of other products and speak to practitioners who are using them.

4. He should consider switching to QuickBooks Desktop Online, but only after everything else is working smoothly, possibly in two years. This is how he makes his living and I do not want him to risk screwing it up until everything else is in place and he’s comfortable with it, so this would be the last step. Note that QB Desktop Online is not the same product as QuickBooks Online, and from the feedback I have gotten, the desktop version seems to work better for many smaller practitioners.

Things change, and change can be upsetting and unsettling. I think this is a reasonable plan that would not be too disruptive and could make his practice run smoother. Each of the first three things I suggested has proven to be effective in managing a practice. He would not be venturing into untried grounds.

Don’t be a Rip Van Winkle!

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions.

Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. Ed is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 743-4582 or emendlowitz@withum.com.

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Workflow software Practice management software Ed Mendlowitz QuickBooks Small business