No one wants to think about death, much less how much it will cost. But as the population ages and life expectancies rise, it is likely that your clients will need to think about and prepare for their later years, including the possibility of age-related illness. End-of-life care is a financially and emotionally complicated topic, but starting the conversation with your clients long before they might face age-related illnesses is an important first step.
As we head into the second part of the 2015 filing season (with the 2016 season not far behind), some thoughts come to mind. Many practitioners felt as though recent tax law changes and related guidance was vague, late and not well supported. As a result, the 2015 filing season was more demanding than previous seasons, with uncertainty surrounding the final “repair regulations,” complex financial products and late receipt of client 1099s and brokerage statements.
The National Football League’s Denver Broncos will have a new head coach in the upcoming season, Gary Kubiak, a former quarterback and later assistant coach for Denver who most recently was offensive coordinator for the Baltimore Ravens. Kubiak brings a new offensive playbook featuring zone blocking schemes and play-action passing to his new team.
Broncos quarterback Peyton Manning has been playing at an All-Pro level for the vast majority of his career. Now he will need to learn Kubiak’s system – and quickly. It’s a challenge for Manning, but he knows that his new coach’s system has proven successful and can improve the Broncos’ chances of winning games.
Despite its lack of physical aggression, the accounting profession has quite a bit in common with these developments in the world of professional football. Consider this: Like Manning, you’ve been doing your job as an accountant at a high level for quite a while and you know what you’re doing when it comes to compilations and write-up work at your clients. Now Statement on Standards for Accounting and Review Services No. 21 has been issued and represents a new playbook for accountants in public practice who prepare financial statements.
Health care coverage issues are continually evolving and are extremely complex. Clients turn to their CPAs for advice when choosing a health care plan that suits their needs. With the Supreme Court’s recent ruling ensuring that the Patient Protection and Affordable Care Act is here to stay, CPAs should take this opportunity to explain three key areas of Medicare and the Affordable Care Act to help their clients avoid missteps. These areas include enrollment periods, provider networks and qualifying events.
I recently attended the AICPA’s Spring Council session in Washington, DC where I had the pleasure of going to a fascinating session on fueling the accounting profession pipeline. I’ve had some time to reflect on what I think the research means in terms of active steps that CPAs and state CPA societies should take to ensure there is a bright, talented and diverse applicant pool available for new and experienced hires.
Below are three main areas that research indicates impact an individual’s decision to commit to a career in accounting, as well as suggestions for how we can leverage these areas to help foster the greatest number of young professionals entering the accounting field.
Roughly 10,000 Baby Boomers will turn 65 every day for the next 14-and-a-half years. And many of them are preparing to retire. For some, this prospect is daunting—how much money do they need to maintain their current lifestyle? Can they afford to retire? The answer, very often, is “it all depends.”
From an asset perspective, these are trying times to retire. Yields on bonds and forecasted returns for equities are low, significantly affecting the safety of a withdrawal strategy. Many financial planners note the safety of the “4% Rule,” in which a retiree withdraws 4% of his or her initial balance upon retirement and then increases the amount of each withdrawal over 30 years—while factoring in inflation. The market has shifted, however. If we use a model that better approximates our current market and incorporates forecasts, a lower initial withdrawal rate—3%, for example—would be necessary to achieve the same financial outcome.
With the rising prominence of social media, becoming an influencer isn’t as hard as it once was. Social media levels the playing field, giving everyone an outlet to speak their minds.
In the past, LinkedIn had a restricted number of users permitted to publish articles to LinkedIn Pulse. These elite few were named Influencers. Recently, however, LinkedIn has opened this experience to anyone with an account, calling it Long-Form Post Publishing.
Taking advantage of long-form posting can establish you as a thought leader or influencer in your field. It gives you the opportunity to share your professional expertise without taking on the responsibilities of starting a blog or using other publishing platforms.
In less than a decade, Millennials (born 1981-1996) are expected to make up 75 percent of the U.S. workforce. Simultaneously, nearly 65 percent of CPA Baby Boomers (born 1946-1964) say that they do not expect to retire at age 65, but will work beyond that age, according to a 2012 AICPA poll.
As a result, these groups will likely work side by side for the foreseeable future. Because of this, it is critical for Baby Boomers and Millennial CPAs to find common ground in order for their organizations to succeed. One key to developing a strong relationship is focusing less on differences and more on understanding each other’s unique skill sets.
But, perhaps there’s something even more important than that—understanding the motives behind why each group does what it does.
For instance, Baby Boomers may be aware that many Millennials are delaying marriage, and believe it is primarily because attitudes have changed. However, 34 percent of Millennials say financial reasons are holding them back. Additionally, most Baby Boomers are aware that many Millennials carry a heavy student debt load. But they may not realize college tuition and fees have increased 559 percent since 1985, making it nearly impossible for most students to fund their education without assistance.
No dessert is more time and energy intensive than ice cream hand cranked in an old fashioned, salt-lined churner. When you’re making it at home using this method, a gallon of ice cream is an all-day event made with love and a small gang of helpers. Now, imagine producing more than 12 million gallons. Those making ice cream on such a large scale have a number of additional variables to consider and may choose to incorporate sustainable practices into their business model.
Many companies are embracing the triple bottom line. Rather than solely focusing on financial information, organizations committed to sustainability are taking social and environmental aspects into account as well. Under this model, success is not only defined by a business’s annual profit. The well-being of employees, the environmental impact of the company’s activities and contributions to the community are also part of the overall equation representing the organization’s value.
Rich or not-so-rich, running out of money in retirement is a major concern for 57% of clients, according to results of the inaugural quarterly AICPA Personal Financial Planning Trends Survey. Initiated by the AICPA’s PFP Division, the new survey seeks regular insights from CPA financial planners, provides valuable feedback on client emotions related to finances and the future, and helps trusted advisors understand where their expertise can best address client concerns.
High levels of concern over adequate retirement funding, as indicated by the first quarter 2015 survey, suggest demand is up for retirement peace of mind--a priceless service that CPAs offering personal financial planning services are uniquely qualified to provide.
While companies that most effectively use disruptive technology continue to make headlines -- and profit -- many organizations have a heightened interest in innovation. Their staff are being asked to focus on future growth opportunities rather than defending the status quo; embrace failure through small and quick learning experiments; and reinvent business models to create value for their customers and themselves.
My colleagues and I on the AICPA’s Innovation team seek to drive member value by encouraging staff to work collaboratively to convert ideas into new services. We’re here to help foster a culture of innovation across the profession.
Throughout the year, I talk with practitioners from around the country to understand their pain points. They’re often relieved to hear that other firms are grappling with similar issues and the challenges they face are among the top concerns for the profession as a whole. These discussions help inspire the solutions my team -- the AICPA Private Companies Practice Section (PCPS) -- creates for our firm members. Another important source of information for practitioners and the AICPA is the PCPS 2015 CPA Firm Top Issues Survey, which gathers information from practitioners nationwide to identify the concerns at the top of firm leaders’ agendas.
Many CPA financial planners have had the heartbreaking experience of seeing a client, or a client’s loved one, end up in an assisted living, skilled nursing or memory care facility due to cognitive decline. Although this is a difficult time for the patient’s family, CPA planners and tax practitioners are in a unique position to help them understand the tax treatment and possible deductions for expenses incurred at these facilities.
Alzheimer’s, a type of dementia and a degenerative disease that leads to death, is one of the most common examples of cognitive decline. At advanced stages, the patient can no longer live safely on his or her own, and may have to move into a care facility. If certain conditions are met, the cost of living at the facility, including room and board, is deductible as a healthcare expense. For those aged 65 and older, medical expenses must exceed 7.5% of adjusted gross income in 2015 and 2016 in order to be deductible. The threshold increases to 10% in 2017.
According to IRS Publication 502, qualified long-term care services include “… maintenance and personal care services that are 1) required by a chronically ill individual, and 2) provided pursuant to a plan of care prescribed by a licensed healthcare practitioner.”
This year, taxpayer identity theft took a maliciously clever turn: phony tax returns were filed that looked very much like the taxpayers’ previous years’ returns. Standard pattern deviation software would not catch this type of filing. How could this happen?
It turns out that rather than just using stolen names, birthdates, street addresses and Social Security information to file tax returns with made-up numbers, criminals used the stolen information to access the taxpayers’ previous returns to make up believable numbers to file for tax refunds. The criminals were successful in about 100,000 out of approximately 200,000 attempts to acquire taxpayer information on the Get Transcript section of the IRS website, which requires other personal verification questions that only the taxpayer is supposed to know.
FINALLY! This is the year that we get tax reform done. More than 26 years since the last tax reform, the stars are finally aligned: the Democrats and Republicans in Congress and the Administration all agree the tax code is too complex and needs to be fixed. Oh wait, that was 2012, and surprisingly (not) tax reform did not happen, but Washington will get it done in 2013. No, of course that did not happen either. Clearly tax reform would not happen in 2014 because it was a mid-term election year, but just wait until 2015, that will be the year for comprehensive tax reform, because after all, we now have one party leading both houses of Congress. OK, maybe not comprehensive reform in 2015, but you just wait until 2017…that will be the year!
It’s 7:05am and I just popped into my local Starbucks for my regular morning fuel: a venti iced chai tea latte. At this hour, the only thing “green” I am looking for is the Starbucks logo on my coffee cup. However, if I pause to take a look around the coffee shop, I notice there are actually quite a number of “green” initiatives happening all around me. Trash cans are split down the middle with half designated for landfill and half for recycling, the wall is covered with options for reusable mugs and the cup in my hand has the recycling logo on it.
Starbucks, like many other dominant players in almost every industry, has taken significant steps to make its business model more sustainable and records these steps in its Global Responsibility Report. Unlike U.S. GAAP-directed financial statements, these reports—often called “sustainability reports” have limited guidelines for form or content. They can include nonfinancial factors ranging from environmental stewardship to employee health initiatives, community involvement and ethical sourcing in supply-chain practices.
Many retirees see their home as a symbol of comfort and independence that they want to keep as long as possible. However, far too often, reality turns out differently. Most conventional homes present accessibility problems that impair the comfort and independence of elderly people, requiring expensive modifications or an unplanned move to an assisted living facility caused by a health crisis.
Whether you’re advising clients ten years into their retirement or helping middle-aged clients plan for their golden years, you’re doing them a disservice if you don’t bring up the sometimes uncomfortable discussion of retirement housing and end-of-life care.
There are roughly 1.5 million nonprofit organizations in the United States. Many of them are grassroots organizations run by well-meaning volunteers who are committed to the group’s mission, but who may not have knowledge of the numerous complicated rules governing not-for-profits. I learned of these complexities when I joined the board of an all-volunteer sports league in my community. I'm sure many practitioners can relate: because I am a CPA, of course, I was elected treasurer. In this role I gained a deeper understanding of not-for-profit finances. As a result, I've learned three things not-for-profits need to understand about their finances in order to run a more effective organization.
We all know that staying current and embracing the latest trends in business are key to running a successful CPA firm. Years ago, accountants relied on columnar pads and general ledger books, while working from 8-5 in the office. Today at most firms, those tools and practices are replaced by accounting and cloud computing software, with flexible schedules and virtual offices. CPAs continue to implement new tools and strategies to optimize the changing professional environment to best meet client and staff needs. Interested in learning more, I sat down with two trailblazers to hear firsthand about their experiences.
Alan Long, CPA, CITP, CGMA, is the managing member of Baldwin CPAs, based in Richmond, Ky. Alan explained that his firm has been an early adopter of technology. For example, the firm has been paperless since 2002, in the cloud since 2004 and has supported a multiple monitor environment for nearly a decade. Baldwin CPAs uses electronic signatures for all engagement letters and consent forms, saving the firm both time and money. Additionally, all professional staff are given iPads, allowing them to be accessible while offsite.
One of the most important decisions working parents will make is deciding who will get the honor of taking care of their little one during the day. My husband and I decided to hire a nanny to watch our sweet little boy, Henry. We liked the idea of Henry getting excellent one-on-one care from an experienced caregiver, and daycare can present challenges for us in terms of picking up and dropping off our son each day – we may be parents, but our career demands still exist. Hiring a nanny worked well for our situation, but there are certainly administrative and tax responsibilities to consider when making this decision:
Nannies are household employees
Though most families want to consider their nanny an “independent contractor” to avoid costly payroll taxes and the associated administrative duties, nannies are household employees. The instructions for Form 1040, Schedule H are pretty clear on this matter.
Ready for some peace and sunshine in your life? In a recent blog, we speculated about TV characters who would make truly awful clients (Walter White, members of the Walking Dead, you get the picture). Now we are focusing on fictional clients who could really take the stress out of life. Which one of these would be your dream client?
The AICPA is committed to ongoing evaluation and improvement of the CPA Examination. Thoughtful enhancements help maintain the relevance of the exam for the current practice realities for newly licensed CPAs. Last year, the AICPA launched a practice analysis, a comprehensive research project to inform the development of the next version of the CPA Exam.
An important part of the practice analysis was an Invitation to Comment called Maintaining the Relevance of the Uniform CPA Examination. The ITC was designed to address the changing landscape of the CPA profession and asked a wide range of stakeholders to weigh in on possible changes to the next version of the Exam. In September 2014, the ITC was issued to members, boards of accountancy, firms, academia, standards setters and regulators, and business and industry.
As with any service-oriented profession, it is considered a best practice for accountants to stay in touch with clients and provide solutions to their most pressing problems. CPAs can do this in a number of forward-thinking ways, even when their assistance doesn’t necessarily fall within the realm of services the firm provides.
For example, last summer, my firm, Gelman, Rosenberg & Freedman staged a learning and networking event in partnership with the president of a not-for-profit industry group that was driving significant change within not-for-profit business operations. The area of change did not have anything to do with the audit or accounting services our professionals provide to hundreds of nonprofits annually. Rather, the purpose was to help not-for-profits face an emerging industry issue--one for which we had the right connections to allow for an informative and helpful session.
Not surprisingly, more than twice the usual number of clients and friends attended the event, including several from prominent not-for-profits we had never met before. Our audit and accounting events always bring a respectable number of participants, but this event delivered more because our approach meant caring less about whether the topic was a fit for our firm and more about whether it simply provided helpful information about a pressing industry need.
As Financial Literacy Month draws to a close, it’s important to reflect on the essential role CPAs play in helping improve the financial knowledge of Americans. Educating consumers about their finances is the volunteer cause of the CPA profession. Through the AICPA’s 360 Degrees of Financial Literacy program (360), thousands of CPAs from all over the country volunteer their time to speak with consumers of all ages about their finances. Increasing our citizens’ financial education is critical to our country’s financial success, and the AICPA is leading the way for the CPA profession.
During my tenure as chair of the National CPA Financial Literacy Commission, CPAs across the country achieved much and celebrated many milestones in financial literacy. I have been involved with developing and releasing several rounds of creative from Feed the Pig, the AICPA’s PSA campaign with the Ad Council, and, along with the rest of the Commission, participated in releasing the AICPA’s first consumer publication, Save Wisely, Spend Happily, authored by Commission member Sharon Lechter, CPA. Commission members promote 360 and its related programs, and represent 360 before the media and national organizations. Our members are essential in promoting 360 with AICPA leadership, committees, state society leadership and key accounting organizations. I am proud of the work Commission members do and the leadership they provide.
CPAs in public service have also played an important role in the profession’s financial literacy efforts. On April 22, U.S. Representative and Congressional Caucus on CPAs and Accountants member Michael Conaway, CPA (TX-11) gave a speech on the House floor highlighting April as Financial Literacy Month. Representative Conaway noted the important role that CPAs across the country play in improving the financial literacy of Americans, and how, for over 10 years, the AICPA, members and state CPA societies have worked together through 360.
Have you ever accepted a new project even though your plate was already full? Many of us have been in this position. We are so driven to succeed that we say yes to these new assignments without much thought. As a result, we find ourselves stretched thin, making us overwhelmed, discouraged and ineffective. This in turn affects our productivity, negatively impacts the firm or company and derails our priorities.
If you are a young CPA with aspirations—whether your goal is to take on a leadership role, move into management or simply make your current role align more with your vision of the future—there is an approach you can take that will help you get ahead without having to say yes all of the time. It’s called “managing up.”
As you transition from tax season and begin thinking about new business, you may find that some of your highest quality leads are right in front of you. Many CPAs tell me they want to begin offering financial planning as part of their practice, but just don’t know how to get started.
One of the best places to start is probably right in from front of you – your clients’ federal individual income tax returns. The return is your easily-accessible roadmap to their financial planning needs.
Yesterday we asked CPA Letter Daily readers: “How do you celebrate the end of tax season?” More than a majority of the respondents stated that they would celebrate by either taking time off or planning a staff dinner, happy hour or party. Another 32 percent plan to continue working by moving on to the next task on their list. Here we share tips for how to rejuvenate, plan and prioritize the next steps for your practice.
Figuring out how to rest can be stressful in itself, especially if you have a larger than expected backlog of work either from returns that still need to be prepared or non-tax work postponed until “after April 15.” Consider the following ideas to get your groove back:
The Reinventing Mi Retirement initiative was introduced by Governor Snyder in June 2014, and it focuses on providing financial education to help Michiganders better prepare for retirement. The initiative officially kicked off in October 2014 with eight locations in Michigan offering free informational sessions for community members. CPA members participated at locations across the state to provide free financial checkups, helping attendees gain a better understanding of budgeting and financial preparedness. Attendees also received an incredibly thorough financial toolkit, which our members contributed to as well. The event came together in just a few months due to the strong partnership we have with the State of Michigan and the incredible commitment of our member volunteers. We look forward to new initiatives planned in 2015, including events targeting younger people who maybe aren’t thinking about retirement yet, but need to be!
In the world of social media, new applications come and go every day. With all the different sites and apps out there, it can be hard to figure out which ones to use and how to use them. Instagram has taken the social world by storm and created a footprint that rivals big names like Facebook and Twitter.
When Instagram launched in 2010, it was unclear how successful it was going to be. In December of 2014, Instagram announced that its worldwide user base passed 300 million accounts, putting it ahead of Twitter and proving that it isn’t going anywhere anytime soon. It’s especially popular with Millennials, with 53% of people aged 18 – 29 using it every day.
Our hours get longer as we approach the downhill stretch of filing season, and it gets more tempting (if not mandatory) to file an extension for many clients. The proper preparation of an extension involves more than the entering of numbers on the extension form. And, the demands of filing season sometimes take over and quality control procedures and professional standards are overlooked in an effort to get everything filed.
This year will be especially complicated with Affordable Care Act items, a late start with extenders, many late documents from third parties and a culture that expects convenience and increasingly instant results. But the AICPA Code of Conduct, Circular 230, AICPA Statements on Standards for Tax Services (SSTSs) and the Internal Revenue Code (IRC) all still need to be considered in the preparation and filing of extensions for clients. The applicable standards include:
Ever heard of Chicken & Waffles potato chips? What about Dulce Almond ice cream? Frito-Lay and Ben & Jerry’s came up with these unique flavor ideas by soliciting opinions and contributions from large groups of individuals, a process known as idea crowdsourcing. Idea crowdsourcing is an excellent method to gather collective knowledge and gauge market interest.
Future-focused companies are increasingly turning to idea crowdsourcing to gain insights, gauge market interest and ignite innovation. They see organizational enhancements as well as external benefits like improved customer satisfaction. Here are a few more:
1. Foster knowledge and solutions
Two heads are better than one, right? What about 20 heads? Or 200? Idea crowdsourcing taps into collective knowledge -- the wisdom of many individuals, teams, and communities -- to create a deeper understanding of issues while gathering tremendous insights. It diversifies cognitive and creative talent, providing better ways to solve problems.
The Affordable Care Act is here to stay and continues to challenge CPAs with many unanswered questions and some mind boggling confusion. Every time I think I understand the ACA, rules change and interpretations contradict themselves. Despite the high frustration level, our own firms, our companies and our clients depend on us to guide them.
As a CPE discussion leader for the AICPA and others, I am continuously challenged by participants who complain about leaving class with more questions than answers on ACA. This situation is not about to resolve itself.
When the law was passed in 2010, the knee jerk reaction for many employers was: “We'll just cancel our health insurance plan and pay the penalties.” This is not a good answer. Take my own CPA firm as an example. We employ about 35 people and do not have to offer affordable health insurance since we have fewer than 50 full-time equivalent employees. Although Full-Time Equivalent Employee is defined three different ways in the ACA, our firm is definitely exempt from penalties.
Taxpayers often have a large percentage of their wealth tied up in a single stock, but a single stock portfolio is unfavorable for two reasons. First, it is risky to bet your financial future on the performance of a single company, and second, the volatility associated with a concentrated portfolio could be expected to substantially reduce returns.
In the research report The Enviable Dilemma: Hold, Sell or Hedge Stock, for example, the authors found that from 1984 to 2003, the annualized compounded return on the S&P 500 was 13%, while the annualized compounded return for the average stock was only 9.9%, nearly a 24% reduction.
Editor’s Note: Last January, Janet Hagy, CPA (and AICPA Tax Section volunteer) wrote a popular blog about her concerns regarding new rules for health reimbursement arrangements and their impact on her staff. We asked Ms. Hagy to give us an update and also discuss the Affordable Healthcare Act compliance concerns she has as a practitioner for the current tax season.
What I have learned in the last year about the ACA adds extra concerns to this already complicated tax season. We have two major compliance challenges right now – coverage documentation and standalone health reimbursement arrangements (HRAs). Otherwise, penalties, higher fees and more frustration could be waiting for many of us.
The first issue is that we as CPAs have sign-off on whether our individual clients had the required health insurance for each month in 2014 for all household members. We are probably not going to receive any 2014 forms 1095-B or 1095-C from employers or insurance companies substantiating what our clients tell us about their coverage, since these forms are voluntary for 2014 and do not become mandatory until 2015.
Do you remember a time when sending a note meant writing a handwritten letter? When speaking on the phone always meant calling a landline? Today, email and smartphones often replace those forms of communication. Don’t get me wrong – it is great to be able to reach someone in a moment’s notice, but there is something to be said about the personal touch associated with those other methods of communication.
With all my reliance on digital communications, I sometimes have to remind myself of the value of returning a client’s call rather than sending them a quick email. Although the latter is more efficient, a phone call can make a world of difference in clarifying any issues and developing rapport.
Below are 10 simple but significant tips that I follow to help strengthen my relationships with clients:
Imagine your firm’s future if your monthly partner meetings become challenging. What if everyone offers different ideas about what your firm should be spending on office space or disparate opinions about compensation, billing and utilization rates going forward? What if you’ve got a merger, a retirement and the buy-in of two new partners on the table? Sounds like you need sound benchmarking data to help you make some important decisions
Fortunately, results of the 2014 National Management of an Accounting Practice (MAP) Survey conducted by the AICPA Private Companies Practice Section (PCPS) and the Texas Society of CPAs (TSCPA) can provide you with the information you need to make the right choices. The survey’s comprehensive benchmarking data on firm finances and practice management options allow you to compare your firm to those in the same market and of the same size. The survey can be a vital tool in your strategic planning and decision making, and the new platform enables survey participants to see their own confidential data pre-populated beside the comparative benchmarks. Watch this video for details. (The results provide rich data that all firms—even those that didn’t participate—will find useful. If your firm didn’t participate, you can still access survey reports, but you’ll need to compile your own firm’s data for comparative purposes. This video provides a tutorial.)
This year’s social media trends forecasts are buzzing over innovations such as the integration of ecommerce with Facebook and Twitter, wearable technology and sophisticated analytics that report return on investment. While it will be interesting to see the development in these areas, there are additional trends that can significantly impact your firm’s success on social media. Here are five trends to consider as you go about implementing your firm’s social media strategy for 2015.
I’ve always thought the world would be a better place if only there were more professional accountants working throughout organizations. Each and every day, we bring transparency and accountability to businesses and governments around the globe. We promote financial integrity, expose wrongdoing, and lift the veil of uncertainty to shine light on the truth. When you think about it, we are much like the Swiss-Army knife for modern business—equipped to bring solutions in countless ways.
Tax work? We do that. Financial statements? We do those too. Interpreting human capital and supply chain implications of the latest regulatory standards? Your CPA has you covered.
If CPAs are like the Swiss-Army knife, then transparency is the Master Key that unlocks good business practices; transparency holds decision-makers accountable, leads to better management decisions, and provides the reliable, actionable information on which investors and the free market rely.
CPA financial planners are always looking for ways to help clients and their extended families realize their dreams and provide for future generations.
There are plenty of financial advisors in the marketplace, but not nearly as many as there are CPAs who work with individual clients and understand their needs from a tax and accounting perspective. That’s the edge we have that makes a difference. CPAs are well positioned to offer holistic financial planning services – ranging from traditional tax and estate planning to retirement, investment and risk management planning.
Last month, as part of the AICPA’s PFP Section’s CPA Financial Planning Thought Leadership series, I moderated the webcast, “Outlook for the Financial Planning Profession.” Panelists shared their perspectives on trends that affect their clients and the CPA financial planning profession, as well as how they integrate financial planning into their firms. While there are many different approaches that can be successful in this area, the key is to focus on your clients and what you do best for them.
Have you ever performed an in-depth comparison of your firm’s standing against other firms of the same size? The 2014 PCPS/TSCPA National Management of an Accounting Practice Survey provides some new and valuable ways to assess where your firm stands and plot your future course. If you participated in the survey this year but haven’t really delved into the results, which became available in November, you definitely want to check them out. Thanks to a new online platform, it’s much easier to take a peek at how firms like yours operate. And even if you didn’t participate, the survey offers some valuable information that will help your firm plan.
Take the case of a single owner firm like mine. We have a boutique corporate tax practice. In addition to myself, our permanent staff includes one CPA and one CPA candidate, but we add an administrative person and per diem help in busy season. When I’m planning for the future, I often wonder what a top performance single-owner firm looks like, but it’s tough to find more than anecdotal information.
When explaining the principles, the first thing I usually mention is that they are not a prescriptive set of rules. They are principles-based, comprehensive, best-practice guidance designed to help organizations (and specifically finance leaders, CEOs and boards) benchmark and improve their management accounting functions.
The Global Management Accounting Principles encompass four core principles focused on four outcomes:
Influence - Communication provides insight that is influential
Relevance - Information is relevant
Value - Impact on value is analyzed
Trust - Stewardship builds trust
The principles outline the fundamental values and qualities that represent management accounting. Application of the principles, combined with talented people and robust performance systems, will help drive effective management accounting functions.
The document is most impactful in section five, where the core principles are applied to 14 management accounting practice areas. Here, extensive good practice guidance is provided in key areas such as treasury management, financial strategy, cost transformation, budgetary control, investment appraisal and risk management. The guidance can be used to self-assess existing processes. A diagnostic checklist is available to facilitate the review.
A complimentary resource to the management accounting principles is the CGMA Competency Framework, which is designed to help management accountants understand knowledge requirements and assess skills needed for current and desired roles. In addition to technical areas, the Competency Framework addresses business, people and leadership skills.
The Global Management Accounting Principles are focused on the organization. The Competency Framework is directed at the individual. Combined, they are powerful tools that we hope you and your team find useful.
Paul Parks, CPA, CGMA, Associate Director- Business Industry and Government, American Institute of CPAs
With the issuance of the AICPA’s Audit Data Standards, the Institute has introduced what promises to be a significant disruptive technology – data on demand. ADS were designed to bridge the gap between disparate Enterprise Resource Planning systems and apps (tools and technologies) that analyze a company’s data. Until now business information consumers had to rely on IT personnel to either develop customized extraction routines or develop applications within the ERP system to do what users were asking for. But, as many business information consumers know, that process is often expensive and time-consuming. All that is about to change.
The business environment has changed profoundly over the past few years. New regulations, developments in technology and global expansion have altered the way we work with one another. The AICPA closely monitors each of these factors and considers how they impact the future of the accounting profession.
Given this constantly evolving landscape, we need to take a closer look at how changes in the environment affect those who plan to enter the profession – the newly licensed CPAs. Experience and education requirements for licensure vary by state, but passing the Uniform CPA Examination is a must for everyone.
Have you received a survey asking for your feedback on what content should be tested on the CPA Exam? (Remember to check your spam folder!) If so, your input – which directly reflects your experience in practice – is instrumental in helping us understand exactly what topics the Exam should include.
CPA firms are at an important turning point. We have a choice: we can stick to the practices and procedures we know—ones that have admittedly helped us build the success we enjoy today—or we can take the kinds of bold steps that will ensure our future relevance and prosperity. This will be an understandably tough decision. To prosper over the long-term, though, firms must address the radical changes taking place in the domestic and international marketplace, including increasing market and technical complexity facing CPAs and their clients, as well as the expectations of a new generation of professionals. The profound transformation in so many areas requires a similar alteration in the way we manage our practices. If our firms don’t identify the obstacles preventing us from affecting meaningful change, we risk being left behind. In particular, there are three pitfalls that will make it challenging even to get started on the road to transformation.
Entrepreneurism is on the rise. With start-up fever igniting the Bay Area to the Chesapeake Bay what CPA hasn’t considered—even for a moment—starting his or her own firm? We each started our own firms and know firsthand about the advantages and challenges of venturing out on our own. A few months ago we participated in a live Facebook chat on how to start your own practice. Many of you joined us and asked great questions such as: What prompted you to start your practice? What is the best way to get your name out there? What were some of the unexpected challenges you encountered?
What’s our advice? Here are seven tips for starting your own firm:
CPA financial planners and others who advise clients on healthcare and estate planning issues will want to know that the Medicare annual open enrollment period runs Oct. 15 through Dec. 7, 2014.
Many people understand they can switch from their 2014 standalone Part D prescription drug plan to a new standalone plan for 2015. Medicare beneficiaries can also drop their Part D coverage altogether, although this is not a good move unless you are moving from traditional Medicare to a Medicare Advantage plan with a prescription drug feature.
Medicare beneficiaries can also do the following:
1. Change from traditional Medicare to a Medicare Advantage plan.
2. Go from a Medicare Advantage plan to traditional Medicare, although the choices may be limited when it comes to finding a Medicare Supplement plan.
3. Transfer from their current Medicare Advantage plan to a new Medicare Advantage plan for 2015.
4. Move from a Medicare Advantage plan without prescription drug coverage to a plan that offers prescription drug coverage. Note that the Medicare beneficiary can also move from a Medicare Advantage plan that offers prescription drug coverage to one that does not.
In all of my dealings with employers on Affordable Care Act (ACA) matters since 2010, I’ve reached a few reasonably sound conclusions. Here’s one: employers are faking it! They are doing so when it comes to how IRS controlled group rules influence the ACA’s “Applicable Large Employer” (ALE) determination. It is this determination that serves as a foundational component of the ACA’s Employer Shared Responsibility (“pay or play”) mandate. To recap, employers of 50 or more full-time equivalent employees (100 or more for 2015) are expected to offer ACA compliant coverage (play) or pay assessable payments. The amounts of these payments are based on factors that include the number of full-time employees and how many of them qualify for Exchange-based premium subsidies.
Over the past three decades, a growing number of CPAs expanded their service offerings beyond tax compliance to help individuals and families address and plan for all aspects of their financial lives. These aspects might include paying for children’s education, transferring wealth, protecting assets, funding retirement and more.
As CPA financial planners help their clients realize their long-term goals, this expansion of service offerings opens up new revenue streams and deepens client relationships.
Earlier this year, as part of the AICPA’s PFP Section’s CPA Financial Planning Thought Leadership series, I moderated the webcast, “Being an Advisor of Choice.” Panelists shared their perspectives on working with individual and closely held business clients, the benefits of this expanded business model to the practitioner and firm and the outlook for maintaining this model. (See the note at the end of this blog post about how to download a recording of the webcast.)
During the webcast, we discussed a great deal of information. Here is a quick rundown of eight ways you can become your clients’ “advisor of choice.” How many of these are you already doing and how many would you like to accomplish?
1. Add Financial Planning to Your Practice
Tax compliance is becoming a commodity. Integrating financial planning into your practice offers a chance to make a deeper connection with clients, requiring you to give objective advice and keep clients’ best interests at the forefront.
2. Determine Your Value Proposition
When you add financial planning to your practice, you also add value, but you figure out what kind of value you want to add in order to grow your bottom line. The last thing you want to do is become just another firm offering the same services as everyone else.
3. Avoid Becoming a One Trick Pony Advisor
Clients are outgrowing the services of mono-line advisors. If you were simply a specialist in tax or investments, your clients will grow beyond your services.
4. Know Your Strengths
Position yourself as the advisor of choice. You have an excellent professional reputation, offer high quality professional advice and possess transferable skills that are diverse and applicable to various client situations.
5. It’s all About the Relationship
Deepen and enhance the relationships you have with existing clients who already understand your role as their advisor of choice. You may even need to reposition yourself with existing clients, particularly CFOs or controllers who retain you just for audit work or corporate compliance.
6. Listen to Your Clients
Competent advisors do their best work when they sit down with their clients to let them voice their concerns about the current financial world they live in. Listen for issues you can help understand and solve.
7. Build on Your Three Distinguishing Qualities
As a financial professional, you are competent and objective and maintain the highest integrity. Remember these qualities and seize the best opportunities you can.
8. Break the Mold
Advisors who are willing to address the wide range of issues that come into play and work with their clients and other specialists to serve their needs will be in a great position to be a strong, key resource.
AICPA PFP Section’s Thought Leadership Series
Access the free webcast recordings and presentation materials from the AICPA PFP Section’s Thought Leadership series featuring forward thinking from CPA financial planners advising their clients in tax, estate, retirement, risk management and investments. Two panels will host free thought leadership webcasts on November 12th and 13th covering investments and the outlook for the CPA financial planning profession.
Lyle Benson, CPA/PFS, CFP®, President and Founder, L.K. Benson & Company. Based in Baltimore, Lyle’s firm specializes in personal financial planning, tax and investment advisory services for high income individuals and families, as well as corporate executives and entrepreneurial, closely held business owners across the country. Lyle is chair of the AICPA’s PFP Executive Committee.