Building blocks outsourced accounting

#Solutions14
The Sleeter Group
Session P10 – The Building Blocks
of Outsourced Accounting
Services –Tom Gawne
#solutions14 #solutions14
1
Thomas R. Gawne, CPA
@ThomasGawneCPA

Thomas Gawne, CPA
Director, CPA.com
• 28 years in the tax and accounting technology sector
• Speaker, Facilitator, Consultant
@ThomasGawneCPA #solutions14

Our Topics Today
Outsourcing Technology Trends
Four levels of Outsource Services
Pricing Strategies for the Outsourced Service
Designing Outsource Workflow
Designing your Staff Structure
Outsource Solutions

AICPA & CPA.com
Transforming how firms deliver Client Accounting Services as
they transition their practices to be more efficient and productive
by leveraging innovative new technologies and services.
Empowering CPA’s and businesses for the digital age

CPA.com Firm Solutions Portfolio
Practice
Workflow
General
Ledger
Professional
Services
LMS
Mobile Apps
CPA.com
Services
AICPA Store
Audit
Confirmations
Payroll
Bill Pay
Training

Transformation of Client Accounting
1990
2000
Today
Today’s opportunity
 Cloud-based
 Integrated
 Paperless
 Dashboards
 Real-time
Small businesses push work
back to firms to focus
more on their business
Role of firms reduced,
QuickBooks introduced
to small businesses

Four Levels of Client Accounting Services
Virtual
Controllership
Collaborative
Advisory Services –
Virtual CFO
Bookkeeping
Business Process
Outsourcing
Advisory
Transactional
Specialize in Client Industry Verticals
 Healthcare
 Not-For-Profit
 Technology
 Professional Services
 Property Management
 Government Contractors
 Retail
 Franchises

Geoffrey Moore

Whitepaper Released
APPS
http://www.cpa.com/conference

Three Mega-trends
Digitization Virtualization Transformation

Digital Disruption in Accounting
Three Mega-Trends that Matter
• Digitization
• From Paper to Paperless
• Cloud Computing
• Overcoming barriers of productivity
• Virtualization
• From Physically Present to Digitally Present
• Systems of Engagement
• Overcoming barriers of location
• Transformation
• From compliance vendor to trusted advisor
• Business Intelligence
• Overcoming barriers of commoditization

The Evolution of Accounting Services
Necessary Evil
Establishing
the Practice
Expanding the
Practice Deepening
the Practice

Stage 1 - Necessary Evil
• Paper intensive, Place specific
Defining
Characteristic
Reason to Do • Courtesy to clients, no risk
• Lack of profitability, digital disruption
Reason to Move
On
• Migrate IT systems to the Cloud
Investment
Required

Stage 2 - Establishing the Practice
• Paperless workflows
Defining
Characteristic
Reason to Do • Profitable business model
• Desire to grow
Reason to Move
On
• Online Systems of Engagement
Investment
Required

Stage 3 - Expanding the Practice
• Online communication & collaboration
Defining
Characteristic
Reason to Do • Reach & frequency of service delivery
• Expand into higher margin services
Reason to Move
On
Investment
Required

Stage 4 - Deepening the Practice
• Trusted advisor status
Defining
Characteristic
Reason to Do • High-margin project work
• Expand into new target markets
Reason to Move
On
• New target market initiative
Investment
Required

The Evolution of a Practice
A High-Value Practice
A Viable Practice
A Necessary Evil
A High-Growth Practice

21st Century Darwinian Dynamics
Automation
Commoditization
Specialization Differentiation
Optimization

Why Target Market Focus?
• Clients aggregate into market segments
• Communities with shared interests
• Self-organized around industry, geography, & profession
• Who talk to each other before making buying decisions
• Two lessons from Marketing 101
• Cost-effective growth is impossible without target market focus
• Tipping point dynamics accelerate your success
• Target marketing success factors
• Participate in the segment’s relationship network
• Develop domain expertise relevant to the segment
• Over-deliver to create strong reference accounts
• Encourage word-of-mouth referrals

Action Plan
• Select a target market focus
• Big enough to matter
• Small enough to lead
• Good fit with your skills and interests
• Create “new client” onboarding
• Paperless standard
• Systems of record in the cloud
• Document exchanges in the cloud
• Other facilities as needed
• Migrate existing clients opportunistically
• Take the early adopters when they are ready
• Eventually end-of-life paper-based services

Evolving CAS: Change Management
When and How will You Make the Transition?
CHASM
EARLY
MARKET
TORNADO
MAIN
STREET

Three Proven Approaches
• Visionary
• Go ahead of the herd for competitive advantage
• Spend big to secure top-notch team & great support
• Drive change from the top down
• Pragmatist
• Go with the herd to reduce risk
• Spend moderately to secure market-leading solutions
• Manage change around specific use cases & bellwether teams
• Conservative
• Go after the herd to reduce cost
• Spend frugally to secure basic services
• Manage change around vendor-led training sessions
No right answer—your call

Key Takeaways
• Model for Evolving a CAS Practice
• A Necessary Evil
• A Profitable Practice
• A High-Growth Practice
• A High-Value Practice
• Enabling Technology Investments
• Digitization
• Virtualization
• Transformation
• Change Management Strategy
• Visionary
• Pragmatist
• Conservative

Before
Transactional
Today
Advisory
Changing Landscape

Key Drivers of the Movement to the Cloud
A New Era of Capabilities:
• Collaboration
• Anytime, Anywhere Access
• Scalable, More Efficient
• Simplified IT Infrastructure

Bookkeeping/Write-Up
Jan Dec
Client
Firm

Bookkeeping/Write-Up
• Who’s Involved?
• Client and/or Accountant Firm’s Clerk
• What data is available?
• Transactions, bank statements, etc.
• Key Deliverables
• Bank reconciliation, general ledger, profit & loss,
financial statements

Bookkeeping Services Value
•Reconcile your bank account
•Generate an income statement
•Generate a balance sheet
•Clean up the general ledger
Value is compliance, historical value

Business Process Outsourcing (BPO)
Jan Dec
Client
& Firm

Business Process Outsourcing (BPO)
• Who’s Involved?
• Client or Accounting Firm’s Clerk or both
• What data is available?
• Bill and receipt real time transactions, real time
reconciliation
• Key Deliverables
• General ledger, profit and loss, pro forma
information

Business Process Outsourcing (BPO) Value
• Simple, easy business processes delivered
through the cloud
• Provides greater security and internal controls
• Smart client/accountant collaboration

Who’s Involved?
Virtual Controller
• Client
• Accounting Firm Controller
• Additional BPO staff
Virtual CFO
• Client
• BPO staff
• Virtual Controller
• Virtual CFO

What Data is Available?
Virtual Controller
• Day to day financial
information
• Budgeting
• Forecasting
Virtual CFO
• Real time financial
reports
• Key Performance
Indicators
• Consultation on future
business scenario
planning

Key Deliverables
Virtual Controller
• Financials: actual vs.
budget (target)
• Forecasting
• Dashboards
Virtual CFO
• Prospective financial
management insight
• Consultation on evolving
market conditions and
trends

Provide Key KPI Dashboards

Virtual Controller Value
• Direct day to day insight delivered to keep
connected to the business
• Experienced financial professional “in the
trenches” ensuring cost containment and
revenue growth attainment
• Ensures quality controls are in place and
functioning properly

Virtual CFO Value
• Future oriented financial insight delivered
• Experienced financial professional providing
guiding the organization equipped with proper
information
• Provides insight to ensure entity meets future
growth goals

It’s getting more complicated...
What is your strategy?
Transactional
Using technology to
support transaction
processing
Workflow
Build digital
workflow and
standardization in
processing
Digital CPA
The operating model of
the TRUSTED
BUSINESS ADVISOR
It’s not just about technology!
“Digital Trusted
Business Advisor”

How do you calculate your
value price?

Variations in pricing services
• Cost “plus” pricing
• Fixed Pricing
• Results Pricing
• Value Pricing
What is your pricing strategy?

“Most business owners regard their
accountant as their number one business
advisor – a status rarely applied to their
banker, their insurance advisor, their lawyer, or
even members of their own family!”
David W. Cottle, Bill What You’re Worth

Rear View Mirror vs. Front
Window Approach
• Prospective vs. historical value to clients
• Change perspective and advise forward thinking
How does this change the value of your services
in the eyes of your client?

Five Factors that Affect your Prices
• Demand for your services
• How easily you can be replaced
• Ability
• Return on investment of resources
• Courage to demand what you are worth

Factors Affecting Value
• Special capabilities, skill and professional expertise
• Degree of risk and responsibility assumed
• Value of services to the client
• The amounts involved
• The results obtained
• Priority and importance of the work to the client
• Acceptability of the price (for both)

The Virtual Controller/CFO Value Struggle
• Most firms struggle to bill at the level of Controller
or CFO
• Median National for Controller $90K (Glassdoor)
• Median National for CFO $145K (Glassdoor)

Steps in the Prospect-to-Client Process
Qualification of prospect / analysis of existing client opportunities
Prospect Qualification
Phase 1 Prospect Questionnaire
Client Needs Assessment
Phase 2 Initial Client Needs Assessment (firms are charging between $2,000-6,500+ for
this). May be accompanied by financial clean-up and/or other services.
Short Term CFO/Tech Consulting
Phase 3 Data File Clean-Up, Staff Training, Management Report Package
Preparation, Process Implementation (CFO)
Ongoing Services
Phase 4 Monthly recurring virtual accounting and Controller/CFO services
(Firms are charging $1500-$10,000+ monthly fees for this)

Client Needs Assessment
The Client Needs Assessment process can be used in
different ways, each with tremendous benefits.
• Helps ensure taking on “right fit” clients
• Helps them implement the improvements summarized in the
“before-and-after” comparisons

Pricing Your Value
• Difficult areas to master is pricing Client Accounting
Services
• Set a monthly value-packaged fixed fee for the
ongoing services
• Billing system in place that provides timely,
accurate and relevant financial information
regarding your current operations

Cost-Estimating Tool
Recommend a Job Estimating Worksheet including
• Average # of transactions per month
• Labor costs
• Contingency/“Scope Creep Buffer” of _____%
• Annual training/development fee for special skills required –
____%
• Additional fees that need to be accumulated to provide
superior service to the client
• Additional mark-up based on savings you will be providing to
the client vs. their prior solutions if they have been paying
significantly more in the past.

Re-evaluating the Timesheets
Once you have restructured your billing practices and moved
to a fixed fee, you may consider reducing or eliminating the use
of timesheets.
Common steps toward that goal include:
• Measuring profitability with existing and with new clients in
each key process area for a 12-month period
• Running a “Pilot Program” of eliminating timesheets for a
small number of clients for 4-6 months
• Expanding this practice to more clients over time, with
ongoing periodic sample testing

Value of Your Fee
Your fee will come down to how well you understand
the value you will provide to your client.
• worth of the skills of each person from your firm that will be
involved in the engagement,
• your commitment to ongoing training and education,
• the fee you need to earn to feel positive about working with
that client for the long-term, even during the stressful times in
the engagement.
“Cheap” does not ever need to be, and generally cannot
successfully be the model/approach for a superior practice.

Selling the Value
Our firm is different… For the growing, profitable
client, we are the Trusted Advisor and the “in-the-trenches,”
MVP on their team.
We will be a key contributor to their continued
growth and long-term success, and we do not
undervalue what this is worth!
We realize and accept that we are NOT the right fit
for every client. We are always prepared and
content to walk away from a prospect.

Designing Optimal
Workflow

To Transform Restaurant Accounting
Today: Disconnected Systems Ideal: Connected/Holistic
Consistent
Processes
Restaurant
Group
Cash Control
Consolidated
Financials
Multi-Entity
Reporting
Cloud Based
Systems
Full Financial
Visibility
QuickBook
s
POS Payroll
Manual
Processes
Restaurant
Managers
Many
checkbook
s
Several
locations
Bookkeepe
r
Inventory

Order-to-Cash: Before
STEP III:
Shipping manually
checks stock for filling
orders across
warehouses
Step V:
Accounting manually
reviews customer
accounts for accuracy
and collections
Business Impact
Patchwork of:
Process Problems  Revenue loss
 Data entry/re-keying
 Lack of controls
 Manual tracking of inventory
 Errors/inaccuracies
 Fragmented, cumbersome reporting
 Auditing issues
 Extended DSOs
 Customer dissatisfaction
 Inventory carrying cost
STEP I:
Sales enters
order in legacy system
Step IV:
Accounting re-enters
order information
into legacy system
for invoicing
STEP II:
Sales operations
processes order
through shipment
 Systems with
limited
functionality
 Data silos
 Spreadsheets

Procure-to-Pay: Before
STEP III:
Accounting matches
vendor invoice to
purchase order
Patchwork of: Step IV:
Business Impact
Process Problems
 Data entry/re-keying
 Lack of controls
 Manual tracking of vendor performance
 Errors/inaccuracies
 Fragmented, cumbersome reporting
 Purchasing variance
 Auditing issues
 Discounts not recognized
 No true vendor relationship
 Inventory out of stocks
STEP I:
Purchasing manually
creates P/O
Step V:
Vendors get paid with
no visibility between
accounting and
purchasing
STEP II:
Receiving manually
matches purchase order
with packing slip
 Systems with
limited
functionality
 Data silos
 Spreadsheets
Accounting obtains
proper approvals for
paying vendors

Example: Current Workflow
Current A/P Process – Vendor
Invoices
Current A/P Process – Patient
Reimbursement

Example: New Workflow
New A/P Process
Vendor Issues
Invoices for
Goods/Services
Invoice Received
at A/P Processing
Center
Invoice Scanned
to Bill.com
Invoice entered
into Bill.com
Disbursement
Issued
Check clears and the
bank or e-payment
reference number
noted in system
Invoice approved
by the Site
Manager for
Payment
Invoice approved
by finance for
Payment
Recommended Vendor Invoice Processing
A/P Vendor
Client
Site Manager
Asst. Controller

The Standardized Practice
• Consistent/standard Chart of Accounts (COA) as one package price.
Premium fees for a custom COA
• Standardized services by industry vertical and by type of service
• Standardized Internal Management Reports/Services
• Procedures Manuals for each client
• Service Order Requests for services outside of the engagement agreement –
retainer always on account for these requests and for “concierge” services
• Dedicated client-service staff to provide top client experience, while sheltering
our production staff

Solutions

• Principles
• All Digital, all in the cloud
• Designed for timely “prospective” insight
• Collaborative

Signature Functions Signature Solutions
• A/P – Bill Pay
• A/R – POS
• Payroll
• Inventory Control
• Accounting – G/L
• Document Management
• Tax System
• Other Industry Specific
• Bill.com
• Industry Specific
• Paychex, ADP
• Industry Specific
• Intacct, Xero, QuickBooks
• Sharefile, Box, etc.
• CCH, Thomson, Etc.
• As needed

Workflow Effects
Digital Core
Transaction
Capture
Information
& Insight
Delivered
Prospectively
Intelligent,
Timely
Business
Decisions
Made

Collaboration Solutions
• Video Conferencing – Skype, Zoom,
etc.
• Web Conferencing – WebEx, GoTo
Meeting, etc.
• Social Media – Linked In groups,
Twitter feeds

Management Tracking - Solutions
• Workflow Management – XCM
• Contact Management – CRM
• Internal KPI trackers

Staffing
Strategies

Staffing Strategies
• Outsourcing approaches
• Client/Accountant collaboration
• Workflow standardization in the cloud
• Education Training Approaches

Assembling your Team

Skill sets
Client
• Bookkeeper
• Accountant
• Business Owner
Firm
• A/P, A/R Payroll
• Accounting Manager
• Implementation Services
• Virtual Controller

Outsourcing Strategies
• Outsource Client Accounting Services (7216)
• Implementation services such as cpa.com
Professional Implementation Services
• Leverage other firms to offer BPO, Virtual
Controller, Virtual CFO

Accounting Services Today
• The Opportunity
• Ride the wave of demand for outsourcing
• Leverage cloud technology to achieve productivity
• The Challenges
• Commodity practice
• Low margins
• Hard to scale
• Hard to upsell to higher value “virtual CFO” services

Higher Value
& Future Focus
Firm Value Chain
Input
Data
Assemble
& Verify
Report
Analyze &
Interpret
Advise &
Consult
Lower Value &
Historical Focus

Defining Your Service
76
Input
Data
Assemble
& Verify
Report
Analyze &
Interpret
Advise &
Consult

Resources

Reference Material
• “Accounting Services: Harness the Power of the Cloud”
• A Whitepaper based on research by Geoffrey Moore
• “The Power of Real Time Financial Data & Analytics to Penetrate the
Restaurant Niche Market”
• A case study whitepaper by Dixie McCurley of Trusted CFO
Solutions available at CPA.com
• “Leveraging the Cloud to Start or Grow a Vertical Niche Practice”
• A Whitepaper by C. Keith Willis CPA.CITP, Cohen & Company
available at CPA.com

Staying Connected
• @CPAcom
• @ThomasGawneCPA
• @PetePotsosCPA
• @pwhitmo

Thank You
Enjoy the remainder of the
Conference!

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