Stephanie Otero, the vice president, small firm advocacy, at the AICPA, talks about the issues and opportunities that face the smaller firms that make up the backbone of the profession.
Transcript:
Dan Hood (00:03):
Welcome to On the Air with the Accounting Today. I'm editor-in-chief Dan Hood. The overwhelming majority of accounting firms in the profession are really small. They're sole practitioners. They're two to three to four partners at most. Yet oftentimes the focus in the spotlight seems to fall on the big four and the very largest firms who often have very different concerns and priorities than all those many, many, many, many main street practices. Here to help us redress that balance a little bit, get some of the spotlight back on small firms is Stephanie Otero. She joined the AICPA as vice president small firm advocate last September. Stephanie, thanks for joining us.
Stephanie Otero (00:33):
Thanks for having me, Dan.
Dan Hood (00:35):
As I say, we don't talk often enough about the small firms that really are the vast majority and sort of the backbone of the profession. So I'm psyched to have you here to talk about them. Maybe we could start by talking about some of their challenges. When you talk to small firms, you run a small firm. When you talk to them, what are some of the big challenges you see them facing?
Stephanie Otero (00:54):
I would say probably the top challenge is capacity. And of course, yes, that means staffing, but not just in the terms of staffing. While staffing is a challenge, I think capacity is more broad. They're seeing an increase in regulatory compliance. And so that's creating an increased burden and there's not often capacity to stay up to date and current with everything. And also just in terms of client expectations are increasing, client demand is increasing. So I think capacity across the board is the main challenge that small firms are experiencing.
Dan Hood (01:27):
Right. And again, it's not necessarily even lack of people, it's just that workload just keeps piling up.
Stephanie Otero (01:31):
Exactly. New expectations, new demands all the
Dan Hood (01:33):
Ones to do.
Stephanie Otero (01:33):
The burden just keeps growing and growing.
Dan Hood (01:35):
Right. And no one will stop. Sorry. I mean, I know it feels that way. A lot of times when we talk to accountants, they keep saying all the things you mentioned. It just keeps planning up and none of it gets ... And even if tools pile up, just do technologies come along to help with it, but they bring their own burdens and their own learning curves and all that sort of stuff. So makes a ton of sense. Let's take the flip side of that in terms of opportunities for small firms. Anything there you see specific to the small firm universe?
Stephanie Otero (02:03):
Absolutely. I love talking about opportunities because I'm a positive person by nature. So I love always spinning everything into what the opportunities are. So I think we're in busy season right now. There are so many opportunities for small firms because small firms have the benefit of having close client relationships. And with those relationships, you get such a big overview right now. You get visibility into your clients that you don't the rest of the year. So right now they're preparing tax returns. They're meeting with clients. They're reviewing financial information. That creates an opportunity to see where you can really provide additional services to those clients where you could expand into advisory services for those clients. So I think one of the great opportunities is tax season and having those close client relationships. And also just how agile small firms are. They can adapt and change quickly.
(02:52):
So if things aren't working, they can adapt much more quicker than a larger firm could. So plenty of opportunities in that space as well.
Dan Hood (02:58):
Excellent. You mentioned advisory services. I wonder if we could dive a little bit into that because sometimes when you talk to smaller firms, particularly really small firms, sole practitioners and so on, the shorter notion is how can I do that? One, I don't have time for it. We talked about their capacity constraints that are on them and the increased demand for compliance work that's coming down, regulatory changes and the like. But there's also sort of across the profession, there's a notion of whether we should be doing more advisory work. And there's obviously the degree to which accountants of all sizes already advise their clients. They're sort of always giving them advice. The question is, how do you make that an actual service line that you're charging for and that you can change for? Is that a problem do you see for smaller practices to figure out how to make that move to advisory or how to expand their advisory footprint?
Stephanie Otero (03:43):
I think yes, it is. They do struggle. Some small firms struggle and not quite sure how to step into that space. And that's where I use busy season as a perfect time to do that. And it doesn't necessarily mean big steps. Advisory, as you mentioned, they're already doing advisory and many of them don't even realize they're doing it. I think it's just learning to expand beyond compliance, beyond just doing a tax return and doing tax planning for a client. How can I assist this business client year round? And how can I build that into my pricing so that I'm servicing them year round and not just one part of the year? And I think they can start just with a few clients. They don't have to build a whole advisory service into their firm right away. They can start with a handful of clients and build that in and see how it works so they could work out the kinks and see what doesn't work before they expand it across the whole railroad their firm with all of their clients.
Dan Hood (04:31):
Right. Oh, that's a great idea. I mean, one of the things that a lot of firms are talking about is the desire to sort of narrow your focus among your client base or to say, who are the clients who really work for us? Who are the clients who really don't? And I know a lot of small practices are loathed to fire clients. They have long-term relationships with them. Even if you don't really like them, it's still a long relationship, you don't want to fire them. And you don't want to lose the business necessarily. But that notion of saying, "Hey, well, let's single out our best clients and offer them this new service." I think that's a great approach to it.
Stephanie Otero (05:00):
Absolutely.
Dan Hood (05:02):
Yeah, because it is, like I said, a lot of people are saying, "Hey, move to advisory, move to advisory," and not often saying, "How do you move to advisory when you have all this other work to do? " I want to jump to another big, big, big topic we hear a lot about in the profession, which is artificial intelligence. There's a lot of concerns about it. There's a lot of interest in it. There's a lot of opportunities represented by. I'm trying to taking your approach. I like the taking the positive approach because there are some challenges with AI, but there are also some tremendous opportunities. I think it's often seen and maybe seen as an opportunity for the big guys. If you've got a billion dollars to invest in AI, yeah, you're in good shape. That's great. But if I'm a small practitioner, can I build my own version of ChatGPT in- house and have a team of a hundred people build around?
(05:45):
Obviously not. But when you look at AI, do you see opportunities there? Do you see a big impact on smaller firms? Is this something that could happen now or is it maybe a little bit further in the future? What's your take on that?
Stephanie Otero (05:56):
I think AI is impacting our profession. So small and large firms, whether we're ready for it or not. And what I love about AI and technology is it levels the playing field. Small firms may not have millions of dollars to invest, but there are so many tools that are cost effective. So that barrier to entry is no longer there for small firms. So to me, AI is an advantage because it creates an opportunity to create capacity within their firm. And that doesn't necessarily replacing people. It could just mean creating efficiencies. Maybe some of those communications, client communications they're doing right now that are manual, AI technology could help with that. That creates capacity to then have those deeper advisory conversations that we were just discussing. So I think AI levels the playing field. And to me, it's an exciting time to be an accountant to really see where you could take advantage of those opportunities.
Dan Hood (06:44):
Right, right. Well, and it ties back to everything you've talked about so far, is that from capacity to the move to advisory. And it is a capacity, that's a way to start for smaller accountants to get into it. It's in that capacity issue of helping you automate the work you're doing, the ever increasing burden of compliance work that's coming down using AI to automate that and it's getting built into a lot of tools. So it's already the software vendors in some cases are taking care of it for you. I think that we could piece together, just from what you've said, a sort of laundry list of things small firms need to be thinking about or doing to take advantage of the opportunities you've outlined. But maybe we can just give them a sort of overview of things you think small firms should be doing to thrive in the future as they go forward.
(07:25):
How do they make sure that they're going to be able to get the most out of the opportunities you've described?
Stephanie Otero (07:29):
Sure. I think it's about perspective, really changing their perspective and their mindset, the way that they approach things. So I think intention is really important, being strategic about how they want their firm to look in the future and how they want it to be sustainable. And it's no longer about volume. It's no longer about the number of tax returns that we're issuing. Now it's about value. So I look at it as how can you do more with less clients and how can you build in higher and deeper level services as we've been talking about advisory. I think that's the key to it. I think it's embracing AI and technology and really seeing how you can use that within your firm to build capacity, to create efficiencies. I also think it's about, you don't necessarily have to choose a niche, but small firms often, and I'm guilty of it, we often try to be all things to all clients, right?
(08:17):
And what ends up happening is we spread ourselves too thin, we're overwhelmed. It's hard to stay up to date with everything that's happening if you're doing tax and auditing and bookkeeping and payroll. It's a lot to track. So I think choosing a niche, you could just choose an industry that you'd like. You could choose a special service that you like. Maybe it is just auditing, maybe it is just taxes, maybe it is just cash services. But I think really determining how you want your firm to look and feel so that you're not burnt out and that it's something sustainable and that you can grow with, I think is really important. So for me, I think it's about intention and really changing the perspective going forward. Right,
Dan Hood (08:54):
Right. And I think this ties into some of the other things you were mentioning earlier, it doesn't need to be all at once, right?
Stephanie Otero (09:00):
Exactly.
Dan Hood (09:00):
Small steps. Yeah. You have the intention, you build it out over a course of several years. You talked about moving advisory for just a few clients at first, right? Having to be your favorite clients. At the same time, you can also say, these are the clients we really want to work for in the future. So we won't take on any new clients who don't look like this group of people. They don't fit the niche that want to go into the industry niche we want to work in, whatever the case may be. So it can be a time thing if you phased in over a long period of time, doesn't have to be a big all at once cold turkey kind of thing. Exactly.
Stephanie Otero (09:30):
And I'll just share that when I had my small firm, I took every client that came through my door because I thought I had to. You think you need all the business that's going to come your way. It's scary when you're starting out on your own. And I remember about five years into it, I was filling the burnout. I was feeling tired. I was doing everything under the sun and I thought, I can't keep going this way. This is not sustainable. And so I just manually back then, we didn't have the tools we have today. I sort of analyzed my client base and I realized I am specializing in nonprofits and I didn't even realize I was specializing in nonprofits, but the majority of my clients were nonprofits. So I decided from that point forward, I was only going to take nonprofit clients and I became sort of the expert in nonprofits within my area.
(10:12):
So I think it's just something as simple as that as after tax season, analyzing, taking a look at your clients to see, you may already have a specialty or a niche and not even realize it.
Dan Hood (10:22):
Right. No, that's great. Well, and as you say, I mean, it makes some sense. You're working with some nonprofit clients, they recommend you to others, et
Stephanie Otero (10:28):
Cetera, most
Dan Hood (10:29):
Around that kind of thing. And as I think a lot of firms might discover they have this unexpected niche focus already, then it's just a matter of making it intentional and pursuing it intentional. I keep using the word intentional in various
Stephanie Otero (10:43):
Forms.
Dan Hood (10:43):
Yeah, it's a good word. Yeah. And it's important. And I think for a lot of firms, a lot of firms haven't been intentional, but just, well, I'll just be an accounting firm. And an accounting firm takes whatever clients comes along and does whatever work they need to do and then takes some time off in December and then goes right back and does a lot of it again. So very cool. I want to talk a little bit more. I want to talk about more of your back background and how you got into accounting and your practice and all the sort of things you've done. But first we're going to take a quick break. All right. And we're back talking with Stephanie Otero, vice president of small firms. Sorry, I was going to say vice president of small firm advocacy, but as we discussed before the show, it's a vice president, small firm advocate at the AICPA.
(11:24):
Is that right? Did I get that right?
Stephanie Otero (11:25):
That's correct. Good job.
Dan Hood (11:27):
Excellent. Excellent. Obviously focusing on all kinds of things related to small firms. You came yourself from a small firm. You talked a little bit about that. Maybe we could dive a little bit more into your background because I think it'd be interesting for our audience to get a sense of where you come from and why it makes sense for you to be sort of the face of small firms at the AICPA. Maybe to start with telling you, what got you into accounting? How did you become an accountant?
Stephanie Otero (11:51):
Sure. So I can't say when I was little, I dreamed of being an accountant. I don't think I even knew what an accountant was back then. I'm aging myself here, but there was a show called Solid Gold. Do you remember that show? Sure. Okay. Okay. And so I thought I wanted to be a solid gold dancer. That was what I was dreaming of being. And then the show got canceled and my dream sort of went down the toilet with being a solid gold dancer. But I took my first accounting class in high school and I was just so hooked. I loved the balancing of it. I loved that the debits and the credits were equal. I love that accounting is sort of fundamental to all businesses and organizations and that it tells a story. The numbers tell a story. So once I took that accounting class, I just majored in it in college and I was sort of hooked.
(12:37):
I also grew up in poverty. So knowing that accounting provides such stability was also a draw to me knowing like what I thought to myself back then is I will never be without a job because every business and every organization needs an accountant. So for me, it was like, I'm going to be on solid ground. This is the way to go. And I got my career started at a small firm in Palm Springs, California, and I was there for many years. I left to start a family and I had my daughter and realized I do not want to go back to work. I can't imagine anyone else taking care of her. So I didn't intend to start my own small practice. It sort of just happened by chance. My firm started, they hired me as a consultant when I didn't come back and they were letting me do some of their client work.
(13:19):
And then other clients were getting referred to me. And before I knew it, I had a full blown practice happening working from home. So I had my own small firm for about 13 years. I was a sole practitioner for many years, I would say probably the first five years. I eventually hired some teams, so we became a team of five. We moved to the LA area after 13 years and I just didn't have it in me to do the commute nor to start a new firm. So I ended up sending my clients off to many other CPAs that I really trusted. And so when I moved to the LA area, I wasn't quite sure what I was going to do, but as I mentioned, I specialized in not- for-profits within my firm. So Feeding America in Southern California was hiring a CFO at the time.
(14:00):
So I interviewed for that. I got the CFO position. I was their CFO for all about a week. A week into my position, the CEO at the time had a heart attack. He's fine. I just want to say that. He's totally fine healthy now. But that then led me to be the interim CEO on my second week on the job. And then I became their permanent CEO. And I was a CEO for about seven years. And then we moved again to a small town in New Mexico. And I live in a very remote town, less than 5,000 people here. So I thought, what am I going to do for my profession? We moved here to take care of our parents. And the AICPA just happened to be hiring and it was a remote position. So I started off as the director of the not- for-profit section.
(14:40):
And then two years later, this role opened up and I just thought it was perfect. It's full circle to me. It gets me back to working with small firms again, which I love so much. So that's my story.That's
Dan Hood (14:51):
A whirlwind. You pretty much touched every part of the profession.
Stephanie Otero (14:55):
I had some moms up
Dan Hood (14:56):
Point or another. I wonder what your career would've been like if you'd become a solid gold dancer. I
Stephanie Otero (15:01):
Know. I don't think as exciting a
Dan Hood (15:03):
Solid
Stephanie Otero (15:03):
Gold
Dan Hood (15:03):
Dancer,
Stephanie Otero (15:03):
Right? Yeah.
Dan Hood (15:05):
The only thing that would've made this more perfect if you had become the accountant for the solid gold production company, that would've been. But it's fascinating. There's so many things in there I would just want to briefly touch on, but there's so many people in accounting who say, "I took a class sometimes in high school, sometimes in college, and it just clicked. It just made sense to me. " There's so
Stephanie Otero (15:24):
Many
Dan Hood (15:24):
Accountants who say that. The others all say, "Well, my father was an accountant, or my mother was an accountant, or my uncle was an accountant." But it's either one of those. Those are the two ways people get in. It's just the class just speaks to you. And I am fascinated by that because I don't think people realize how important that class is, that initial class that introduces people to accounting and how important it is to shaping so many future accounts. So I just love to always point that out because I'm fascinated by the two paths that people take to get into the profession. But then you did everything else. Like I said, you started your own firm and as you said, you did all the things, you take the clients because you're afraid if you don't have enough clients, then you can't pay your bills and that sort of thing.
(16:01):
And then you're afraid to let them go because, well, what if I don't ever get another? And so on and so forth. Exactly. Working in an industry, discovering a niche, it wasn't intentional, but I think if more firms thought about that, how do we get to that position intentionally? They can get there faster and so on. And then come to the institute or come to the AICPA and work in there and giving back to the profession. Fantastic.
(16:26):
Maybe tell us a little bit about what you do at the AICP. I think that might be a useful thing for a lot of people who are not necessarily familiar with the role and your role serve as an intermediary back and forth between the AICPA and the profession.
Stephanie Otero (16:39):
Sure. So as the VP small firm advocate, my goal is to really be the eyes, ears and voice for small firm practitioners to really ensure that they have a seat at the table at the AICPA. So the majority of my job is spent listening to small firm practitioners, hearing feedback from them, hearing what their pain points are, where their challenges are, bringing that insight and information back to the key stakeholders at the AICPA to determine where we can better support them. One of the things I have heard most often in my role is we don't feel like there's enough support for small firms. We don't feel like the AICPA thinks of small firms. And so my whole goal is to change that perception and to make sure that they are heard, they are seeing, we are thinking of them, we want them to be supported, they're important to our profession and they matter.
Dan Hood (17:25):
Well, tell us, I mean, maybe you can make the case now to them. What is the AICPA doing for small firms or what can they bring to them or what should small firms know? I know there's a ton of resources at the AICPA. Maybe you can tell them a little bit about what the AICPA has for that.
Stephanie Otero (17:40):
Yeah. Most small firm practitioners are surprised to know that the majority of the resources at the AICPA are really geared for small firms. Big firms don't really need those resources. They have their own internals. So the majority of our resources are really made for them. So they have me in my role. I'm traveling. I meet with practitioners year round. Right now it's a little bit quiet time because it's busy season for the practitioners. So it's time for me to sit back and do things like this podcast. But since I have taken this position back in September, we have launched a small firm newsletter that comes out bimonthly. And the goal of that is really to keep them informed and up to date with what they need to know what's happening within the industry. If new standards come out, if there's exposure drafts, which I think will impact their profession, I really promote those so that they can issue comment letters because their voice is really important.
(18:29):
So we want to make sure they're heard. I'm on town hall quarterly representing small firms to make sure that everything they're experiencing is voiced, that they're knowing that we hear them, I hear them and I'm sharing that. We're doing round tables with state societies. I launched that in the beginning of this year. So I've held three in January and there's a lot more coming up in May and June and in the fall. So lots of round tables. My goal is to reach every single state, maybe not within this year. That's a hefty goal, but my goal is to reach every single state to make sure I touch every single state and speak to as many practitioners as I possibly can. My inbox is always open. I answer every single email that comes to me. I love hearing from practitioners. I always invite them to schedule time with me so that I can get more insight from them and really dig deeper into what they're experiencing.
(19:15):
So I hope that answered your question, Dan, but that was a lot of information.
Dan Hood (19:19):
Absolutely. That's a lot of stuff. I mean, and it's worth, I mean, I sort of pointed out at the beginning, there is a tendency at all points to either think that the profession is focusing on, or in some cases it actually is focusing on the larger firms, the big four firms, the sort of firms, everyone whose names we all know. But so much of the profession is the core and the heart and the backbone of the profession are in smaller firms that it's worth spending some time talking about them and focusing on. So very cool. I'd sort of like to just wrap up with one sort of question. We talked a little bit about what firms can do during tax season, particularly in terms of building folks in advisory, taking some time to talk to your clients about other things you can do with them other than just getting their tax return out of the way.
(20:01):
Any other thoughts for getting through tax season? It seems like it's just getting more and more compressed and more and more complicated and more and more crazy all the time and that it never ends now. It just sort of extends out to October 15th without watching a break. What thoughts for small practitioners getting through the season?
Stephanie Otero (20:18):
Absolutely. So what I love about small firm practitioners too is they're innovative. They have to be, right? They have to think of creative ways to help them build capacity and so forth. So I have met with a practitioner, her name is Brenda Cannon, and she came up with this system where she schedules out tax returns, not just during busy season. They're scheduled throughout the year. I love this because this has given her her life back. So tax season isn't just January through April for her anymore. She's able to take spring break. She's able to spend Easter with her family. She schedules us out. She has trained her clients. So I schedule tax returns. I think her calendar goes out at one day and they have limited time to fill up that calendar. They have to have all their information in by that due date. And so she has created a way in her firm to have her life back.
(21:04):
And I love that. I often remind small firm practitioners that extensions are a tool. They are a tool to help build capacity in my mind. There's no reason returns can't be put on extension. And I know we have to do better communication with the public because a lot of clients think tax extensions are a bad thing. So I think we need to do a better job with that. But I just remind them that you can use extensions as a tool to prevent burnout and help you create capacity during tax season and just hang in there. And I think just after every tax season, it's a great time to go back and reflect on what could you change and what could be better for next year. You want to do it while it's fresh and while everything's in your mind, because if you wait, tax season will be here again before we know it.
(21:47):
So it's a great time to reevaluate your clients and look at the clients that are no longer a good fit for your firm. And I know we don't ever want to say we want to fire our clients, but sometimes there are clients that just no longer are a good fit for your firm. And after tax season is a great time to do that. And a way to do it nicely is increase your prices. I have found a lot of small firm practitioners increase their prices and that just helps them eliminate maybe those clients who are no longer a good fit.
Dan Hood (22:12):
Right. And even if you don't, at least you're getting paid more for the trouble.
Stephanie Otero (22:16):
Exactly,
Dan Hood (22:16):
Exactly. But it's fascinating. It all goes back to that sort of the intentionality of thinking about your tax season, thinking about your schedule, thinking about what you want it to be, and then just saying, this is what it's going to be. I think firms are always surprised by the number of clients who go, "Oh, sure. Okay, that's what you charge. Okay, then I'll pay it or I'll leave." Or, "You're not going to get my tax return before April 15th. Is it a problem?" No. Okay. Then whatever you say is fine. The trust they have in their accounts is enormous and accountants, I don't want to say they don't take advantage of it. That's not quite the right word for it, but they don't necessarily leverage it the way they should
Stephanie Otero (22:50):
To
Dan Hood (22:51):
Have a better life for themselves and a better outcome for their clients.
Stephanie Otero (22:54):
That's absolutely right. I have found that more and more often than not that small firm practitioners undervalue their services and their expertise. So I feel like there's lots of room for opportunity there as well.
Dan Hood (23:05):
Yeah. Excellent. All right. Stephanie Otero, thank you so much. Any final thoughts for small practitioners for the profession, for anyone out in our audience?
Stephanie Otero (23:13):
No, I thank you for putting a spotlight on small firms. I appreciate it. And just if there are small firm practitioners listening to this podcast, please know that I am here to help and support you in any way that I possibly can.
Dan Hood (23:24):
Excellent. All right. Stephanie Otero of the AICPA, thank you so much for joining us.
Stephanie Otero (23:28):
Thank you for having me. This was fun.
Dan Hood (23:30):
Yeah, good times. And thank everyone for listening. This episode of On The Air was produced by Accounting Today with audio production by Anna Mints. Ready to review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guests and thank you for listening.
