Earmark CPE

Earn CPE Anytime, Anywhere

Podcasts

The Two-Question Framework Every CPA Firm Owner Needs for Strategic Decision-Making

· ·

CPA firm owners are constantly bombarded with new opportunities, from taking on new clients to investing in cutting-edge software. But how can they decide which opportunities are worth pursuing and which will only lead to headaches and wasted resources?

In this episode of the “Who’s Really the Boss?” podcast, hosts Marcus and Rachel Dillon dive into a powerful framework for making strategic business decisions. By consistently asking two key questions – “Does this simplify my life?” and “Does this increase the value of my business?” – CPA firm owners can cut through the noise and focus on opportunities that will truly move the needle for their firms and their lives.

Introducing the Two-Question Framework

Marcus introduces the two key questions that form the foundation of the decision-making framework: 

  1. Does this make my life easier? and 
  2. Does this increase the value of my business?

The questions are meant to be widely applicable to various life and business decisions. Rachel refines the first question from “Does this make my life easier?” to “Does this simplify my life?” to emphasize the importance of long-term simplicity over short-term ease.

Applying the Framework to New Client Prospects

Rachel and Marcus discuss how the two-question framework can guide the evaluation of new client opportunities.

First, ask, “Does this make my life easier?” In other words, can the work be delegated across the team, or does it rely solely on the owner?

“We would only bring on prospects as clients if they were going to be served by a team approach, where any one person isn’t the full service provider for that client,” Marcus emphasizes.

Then, ask, “Does this increase the value of my business?” When considering taking on a new client, that question could become, “Is the engagement a profitable long-term relationship or a one-off project?”

By applying the two-question framework, CPA firms can focus on clients that will simplify operations and contribute to long-term firm value.

Using the Framework for Software Investments

The two-question framework can also help cut through the hype around new software and determine if it will truly add value to the firm.

Marcus and Rachel discuss their experience of moving away from over-engineered reporting tools that clients didn’t value and focusing time on client conversations instead. They highlight the importance of considering the ongoing support and future team’s ability to use the software.

Regarding the latest trend, AI chatbots, Marcus says, “I am not on the forefront of use of AI. I am not an early adopter, but I’m an adopter somewhere in that cycle. The reason why is I just don’t have enough time in the day, or I don’t enjoy investigating the use of AI in multiple different ways. That doesn’t give me joy. That doesn’t simplify my life.”

The framework helps firms invest in technology to streamline operations and enhance client service rather than chasing shiny objects.

Evaluating Potential New Service Lines

In the episode, Rachel challenges Marcus to apply the two-question framework to adding wealth management as a new service line.

While adding a new service line could increase firm value, Marcus notes that it may not simplify operations in the short term due to the learning curve and client acquisition needs. He emphasizes assessing if a new service line aligns with the firm’s overall strategy and client base.

“If I’m going to add wealth management, does that make my life simpler? Probably not in the beginning because we would maybe have to go out and acquire a different type of client,” Marcus explains.

The two-question framework brings rigor and structure to evaluating any potential new service offering, ensuring strategic fit and long-term value.

Embracing the Power of “No”

Of course, using this framework also means being willing to say “no” to opportunities that don’t pass the test. This can be challenging, especially in the early stages of building a firm when every client and every dollar of revenue feels crucial.

However, as Marcus and Rachel’s experiences illustrate, learning to say “no” to the wrong opportunities is just as important as saying “yes” to the right ones. By being selective and strategic, you can free up time and resources to focus on the clients, projects, and initiatives that will truly move the needle for your firm and your life.

A Roadmap for Strategic Growth

At the end of the day, the two-question framework is a powerful tool for CPA firm owners who want to build businesses that not only thrive financially but also support the lifestyle and well-being of their leaders.

By consistently asking, “Does this simplify my life?” and “Does this increase the value of my business?” you can cut through the noise of endless opportunities and make strategic decisions with clarity and confidence.

So the next time you’re faced with a shiny new prospect, a cutting-edge software tool, or a potential new service line, take a step back and put it to the test. Your future self – and your future firm – will thank you.

For more insights on navigating the challenges of running a CPA firm, listen to the full episode of “Who’s Really the Boss?” and subscribe to the podcast for future valuable discussions.

Rachel and Marcus Dillon, CPA own a Texas-based, remote client accounting and advisory services firm, Dillon Business Advisors, with a team of 15 professionals. Their latest organization, DBA | FIRM, supports and guides accounting firm owners and leaders with free resources and education.

AI’s ‘Killer Function’: Personal Agents That Work for You

· ·

Sam Altman, the creator of ChatGPT, says that helpful agents will be AI’s ‘killer function,’ integrating deeply into our lives and acting as extensions of ourselves.

It sounds like science fiction, but you can start doing this now! In this clip from Episode 383 of The Accounting Podcast, I demonstrate how to create an AI agent using Central, a new feature of Zapier.

AI agents are a massive leap over today’s AI chatbots. Most popular chatbots can’t act autonomously. If you sign up for ChatGPT or Claude, you have to prompt it for everything you’re doing – copy-paste between whatever’s in your life and the bot. It’s a big hassle and wastes a lot of time.

But if you turn a chatbot into an agent, you give it the ability to act independently. Imagine a virtual assistant who can automatically respond to all the daily routine questions you get bombarded with.

For example:

| Hey, can I get an update on my tax return?

| When can I expect my financial statements?

| Please send a copy of your W-9 (or we won’t pay you)

Your AI agent has you covered, firing off personalized responses faster than you can say “accounts receivable.”

Or imagine an AI agent with access to your calendar that responds to meeting requests with the best times for you to meet based on your detailed instructions.

Sure, we have apps like Calendly, but these apps are limited and impersonal. For instance, I like to bunch my meetings, and Calendly doesn’t do that. I could tell my AI agent always to try to fit new meetings before or after an existing meeting. And it could do this by replying on my behalf to emails rather than me sending a link.

This is a big deal. Think about it – how many hours do you spend each week on repetitive tasks or answering questions? Now, you can start to automate them.

Zapier has built a tool, Zapier Central, where you can create your own AI agents triggered by the thousands of apps that already connect to Zapier.

I’ve been experimenting with having Central draft emails for me. I built an agent called “Email Assistant” and gave it access to my Gmail account. Then, I created a “behavior” with instructions to monitor my inbox for emails from our podcast contact form.

We get daily emails from listeners of The Accounting Podcast, and I read and respond to every single one. There are a few things that are annoying about the process.

  • The email comes from a different email address than the listener’s, so I have to copy/paste the listener’s email into the “To” field.
  • I have to add my co-host to the CC field so he’s in the loop.
  • I have to draft the email, which typically includes similar phrases. For instance, I start by thanking the sender for listening and writing in.
  • I tend to sign off in the same way every time, but I still need to type it because I don’t always use the signoff, and I don’t want it in my email signature

To get the Email Assistant to do all this for me, I gave it the following instructions:

When I receive a new email from TAP Contact Form, do the following:

– Create a draft reply in the same conversation thread
– Find the submitter’s email in the body and add it to the “To” field of the reply
– Draft a reply in the voice of Blake Oliver
– Start by thanking the sender for listening and writing
– Sign off with ‘Best, Blake’

Only draft replies to emails from the Tap Contact Form. Ignore emails not related to this.

Here’s what that looks like in Zapier Central:

When I do this task manually, after sending my reply, I copy the sender’s original email into my database of potential stories for my podcast (so I don’t forget to read it during our Listener Mail segment). Fortunately, my database, Notion, connects to Zapier. So, I added the instructions for my Email Assistant to get the AI to do that for me, too:

Then, please create a new database item in Notion. For the item’s name, make a name for the item that represents the topic of the message. Briefly summarize the listener’s question or comment in the notes field, and then put the listener’s name, email, and message in the body of the page.

This behavior triggers when I get a new email from the contact form. Then, it can create draft replies and database items in Notion through actions I’ve configured. Those are the only two things it can do – it can’t send the email to me. But it could if I wanted it to.

Here’s the agent thinking through what to do with a test email:

It worked!

Using AI Agents in Public Accounting

That got me thinking about how you could use AI agents in an accounting firm.

Let’s say that you’re tired of responding to requests from clients for information on how their tax return is going. You could create an agent with a behavior that says, “Every time I get an email asking about the status of a tax return, draft a reply letting the client know the status.”

But how would the AI agent know the status of the tax return? By connecting it to a spreadsheet – or perhaps your practice management software, if it’s sophisticated enough to work with Zapier.

Zapier lets you connect multiple data sources, such as Airtable, Google Sheets, Google Docs, Notion, etc.

Imagine if you had a Google Sheet where you tracked every tax return and the status of that return – not started, in progress, expected delivery date, any issues, etc.

You could then connect that data source to this AI agent and instruct it: “When a client asks about the status of their return, check the tax return spreadsheet and draft a reply with the status, who is working on it, and when we expect to complete it. Also, if the spreadsheet says we’re missing information, reply with a list of what we still need.”

You may need to add more detail about what columns to look in for each piece of information, but you get the idea. You’re programming the AI agent in plain English.

Using AI Agents in Corporate Finance

Here’s an example of how you could use an AI agent in corporate accounting. The Accounts Payable team. How often do they get the same email inquiries from vendors or customers?

Let’s say a vendor is asking about the status of the payment. Your email agent could watch for those emails and then automatically draft replies, letting them know when they will get paid or if something is holding up payment. You just have to connect your AP system to Zapier or sync the data to a spreadsheet that Zapier can watch.

You could create another behavior where if a customer requests a W-9, the AI agent sends an email with the signed W-9 attached. That’s one you could consider fully automating because it is low risk. You could choose to allow the agent to send the email without review.

Potential Uses Go Way Beyond Email

An important thing to note is that you don’t have to use this for email. This is just how I’ve been playing with it. You can trigger these agents with actions in thousands of apps. And these AI agents can then do stuff in thousands of apps.

There’s also a scheduling feature. This means triggers can be time-based, not just based on what happens in another app. You could schedule a behavior to run every day, every hour, every month, or every week.

Maybe that behavior is asking for a status update from your team on a particular project. For example, “If I haven’t received an update in so long, email the project owner and ask for an update.”

Now that I think about it, my own CEO job might be the first thing I automate.

AI Agents Are Happening Now

I don’t want you to think these AI agents are perfect; they are far from it. It’s brand new, so there will be things that don’t work right.

This behavior I showed you here is the one of three that worked well. The other two had some issues. So, don’t lose hope if you create an AI agent that doesn’t work exactly right. It’s going to take some time for these agents to work perfectly.

The important thing to take away from this is that AI agents aren’t just some far-off, futuristic concept – they’re a reality already starting to transform how we work right here and now.

I’ll keep sharing what I learn about AI agents, so subscribe to The Accounting Podcast and follow our LinkedIn page to see what I come up with.

How Auditors Can Bridge the Expectation Gap and Provide More Value

· ·

The audit profession faces significant challenges, including evolving business models, high staff turnover, and a growing “expectation gap” between auditors and clients. The expectation gap refers to the difference between what clients believe auditors should be delivering versus the limited insights they often receive from traditional audit approaches.

In a recent episode of the Earmark Podcast, Alan Anderson, a renowned audit innovation leader, discussed the pressing need for a paradigm shift in the audit profession to address these issues.

Alan’s message is straightforward: In order to bridge the expectation gap and continue playing its crucial role, the audit profession needs to move away from its conventional compliance-focused approach. Instead, auditors should adopt a more proactive, insights-driven methodology that prioritizes comprehending clients’ businesses and offering timely, actionable recommendations.

The Expectation Gap: A Chasm Between Auditors and Clients

The current audit approach often fails to meet clients’ expectations. Auditors tend to focus on validating ending balances rather than understanding the entire transaction flow. For example, Alan described a client where 100% of transactions were based on container barcodes, but the auditors didn’t test the barcode system. They just traced numbers between reports without understanding the business.

Alan points out, “The expectation problem is that audits start at the end after the year-end has closed, and they start with those ending numbers, those aggregated amounts on the balance sheet or income statement. And then they test some of those items. The real gap is auditors don’t understand how the transaction even got into the general ledger.”

The expectation problem is that audits start at the end after the year-end has closed, and they start with those ending numbers, those aggregated amounts on the balance sheet or income statement. And then they test some of those items. The real gap is auditors don’t understand how the transaction even got into the general ledger.

Alan Anderson

To narrow the expectation gap, auditors must shift their focus to understanding transaction flows from inception through the system, providing more timely insights and value to clients. Addressing this gap is crucial for the audit profession to maintain its relevance.

Turning the Audit Upside Down: The Bottom-Up Approach

Auditors must adopt a bottom-up approach to understanding transaction flows to provide more value and timely insights. Alan emphasizes, “We need to think about turning our audit upside down. Rather than starting at the top, at the balance, and working down into the items, we need to start from the bottom up. When we start from the bottom up, we can be much more timely. We can be much more understanding of what’s happening to business.”

We need to think about turning our audit upside down. Rather than starting at the top, at the balance, and working down into the items, we need to start from the bottom up. When we start from the bottom up, we can be much more timely. We can be much more understanding of what’s happening to business.

Alan Anderson

This contrasts with the traditional “top-down” approach of starting with account balances and working backward. The bottom-up approach involves:

This bottom-up approach involves:

  • Starting with understanding transaction flows from the beginning
  • Working up to the financial statements
  • Providing real-time insights and understanding of the business
  • Offering greater value to clients

By adopting this approach, auditors can level out their workload, reduce the intensity of busy season, and deliver more meaningful insights to their clients.

The Power of Industry Specialization

Audit firms must specialize in specific industry segments to avoid commoditization and provide unique value to clients. As Alan notes, “When you try to be the pure generalist, doing any type of client of any type of industry, you’re just going to be a commodity provider. But I do believe that we can provide relevance in what we do if we set our mind to it, and our clients will see value.” 

When you try to be the pure generalist, doing any type of client of any type of industry, you’re just going to be a commodity provider. But I do believe that we can provide relevance in what we do if we set our mind to it, and our clients will see value.

Alan Anderson

Firms that specialize in specific industry segments and perform data-driven audits are more likely to:

  • Survive in a competitive market
  • Provide valuable insights to clients
  • Understand their clients’ businesses better
  • Offer more relevant advice

Generalist firms risk becoming commodity providers, unable to differentiate themselves or deliver unique value. Industry specialization is key to the paradigm shift needed in the audit profession.

Leveraging Technology and AI

Emerging technologies such as AI and blockchain have immense potential to enable the transformative, bottom-up audit approach Alan advocates. These tools can automate routine tasks, flag unusual transactions for auditor review, and continuously monitor systems.

For example, Alan describes putting an “audit bot” on a client’s system to analyze transaction flows and remove outliers. The auditor then interprets if flagged items are errors or fraud. This frees auditors to focus on understanding the business and providing valuable insights.

However, firms must approach technology purposefully. As Alan cautions, many firms have thrown technology at audits without rethinking their underlying processes. Technology should enable a fundamentally transformed audit methodology, not just a way to digitize existing checklists.

Potential Challenges and the Path Forward

Shifting to a bottom-up, data-driven audit approach is not without challenges. It requires significant investments in training, technology, and developing industry specializations. Staff may initially resist moving beyond familiar checklists. Firms will need to overhaul long-standing practices and fee structures.

However, the benefits are clear. Auditors will provide more value, gain deeper business understanding, and enjoy more engaging work. Clients will receive timely insights to improve their operations. The profession can reverse high turnover by making audits exciting again. 

 Alan shares, “I worked with a firm experiencing turnover at levels equal to that of every firm in the country. They worked with us for a year, and their turnover went to zero. Three people left and wanted to come back. Those staff were having fun. They were enjoying what they were doing. And guess what? Their quality went up.”

I worked with a firm experiencing turnover at levels equal to that of every firm in the country. They worked with us for a year, and their turnover went to zero. Three people left and wanted to come back. Those staff were having fun. They were enjoying what they were doing. And guess what? Their quality went up.

Alan Anderson

Transforming Audit: An Imperative for the Profession’s Future

The audit profession stands at a crossroads. Maintaining the status quo is not an option in a rapidly changing business world. Forward-thinking firms will abandon a narrow compliance focus and transform their approach to deliver valuable insights and thrive in the future.

Auditors have a clear choice: cling to an outdated model and slowly becoming irrelevant, or seize this opportunity to reimagine their role and secure their position as indispensable business advisors. The future of audit is exciting – for those bold enough to create it.

To learn more about the need for a paradigm shift in the audit profession and how auditors can adapt to provide more value to their clients, listen to the full episode of the Earmark Podcast featuring Alan Anderson. 

To learn more about transforming your audit practice, read Alan Anderson’s book Transforming Audit for the Future from CPA Trendlines.

Accounting’s Wild Ride: Private Equity, Burnout, and AI

· ·

The accounting industry is in the middle of a wild ride! Private equity money, work-life balance drama, AI taking over – it’s enough to make your head spin. Blake Oliver and I dug into all these topics in our latest episode of The Accounting Podcast.

Through all the craziness, one thing’s clear: accountants have got to stay on their toes to make it in this business. Embrace the new, take care of yourself, and sharpen those skills – that’s the trick.

Will Private Equity End the Partnership Business Model?

You know it’s serious when a heavyweight like Grant Thornton gets gobbled up by private equity. New Mountain Capital swooping in shakes up the partnership model that’s been the foundation of accounting for decades.

In partnerships, profits end up lining partners’ pockets instead of getting pumped back into the firm. Private equity cash could be just what’s needed to drag firms into the future. Blake nailed it on the show: “The argument in favor of this sort of investment is that private equity can invest in modernizing technology, modernizing the firm in a way a partnership doesn’t.” 

But here’s the catch – private equity folks want their dough, which could mean partners’ paydays take a hit down the road. Accounting firms have to thread the needle – get that sweet private equity money but keep the partner track golden so that staff want to work hard and stick around to get there.

To Attract Talent, Firms Must Improve Work-Life Balance

Speaking of incentives, our discussion on working hours and job satisfaction in accounting was eye-opening. According to a report by Big 4 Transparency, a crowdsourced compensation website, the big cheeses – equity partners – are grinding 50+ hours a week on average.

“Could this be part of the problem with convincing people to stay in accounting?” Blake pondered. “You would think that the longer you stick around, the better off you’d be. You make more money. But you also work more hours, so it doesn’t add up.” 

Could this be part of the problem with convincing people to stay in accounting? You would think that the longer you stick around, the better off you’d be. You make more money. But you also work more hours, so it doesn’t add up.

Blake Oliver, CPA

And get this: No accounting firm had an average workweek of 40 hours or less.

Accounting firms have to tackle work-life balance head-on to keep top talent from running for the hills. Flexible work schedules, using tech to work smarter, not harder – firms need to get creative. Young people want a life outside work, and if we don’t get with the program, we’re going to lose out on the best of the best.

Artificial Intelligence Could Help

AI is about to shake things up big time in traditional accounting. ChatGPT and tools like it paint a wild picture – AI-powered insights transforming how we crunch numbers and dazzle clients.

Blake shared a great example: “When I met with clients as a manager, going over their financials, clients would have a question. And in the meeting, I couldn’t answer their question right then and there because I would have to go and do some research. But if I could use a chatbot to ask the question, I could review the answer real quick and then maybe give them the answer right then and there, rather than saying, I’ll do some research and get back to you. That saves a lot of time.”

The trick is using AI to make us accounting pros look good, not put us out of a job. With AI doing the heavy lifting on numbers and insights, we can focus on the high-value stuff clients need. But to make AI work for us, accountants must carve out time to level up their tech skills.

Navigating the Future

Accounting is at a fork in the road, juggling private equity plot twists, work-life balance meltdowns, and AI’s world takeover. It’s a wild ride! But every stomach-churning dip is a chance to throw our hands up and holler. Stay loose, take care of your crew, and always be first in line for the latest tech – that’s how we’ll come out of this ride, grinning.

To stay updated on the latest in the accounting profession, listen to me and Blake Oliver ride the accounting roller coaster every week on The Accounting Podcast.

QuickBooks Online Advanced Unleashes AI-Powered Financial Forecasting

· ·

Imagine having a crystal ball that could predict your clients’ financial future with unparalleled accuracy. With the introduction of AI-driven financial forecasting in QuickBooks Online Advanced, that dream is closer to reality than ever before.

In this Unofficial QuickBooks Accountants Podcast episode, hosts Hector Garcia and Alicia Katz Pollock dive into the exciting world of AI and advanced features in QuickBooks, focusing on the potential for improved financial forecasting and decision-making. While these innovations offer exciting opportunities, they challenge maintaining transparency and trust. 

The Promise of AI-Driven Financial Forecasting

QuickBooks Online Advanced is set to introduce enhanced cash flow forecasting for balance sheets powered by artificial intelligence. This AI-powered forecasting considers factors like seasonality, customer attrition, and location to provide more accurate predictions. As Alicia Katz Pollock notes in the podcast, “I think they listened to our episode about the QuickBooks, about the cash flow forecasting, because every single thing that we said that we wanted it to do is here: seasonality, customer attrition, which is what I was calling customer churn, and then also location, being able to look at your region versus other regions.”

These factors contribute to more accurate predictions in various ways:

  • Seasonality: By analyzing historical data and trends, AI can help businesses anticipate and prepare for seasonal fluctuations in cash flow.
  • Customer Attrition: AI can identify patterns in customer behavior that may indicate a churn risk, allowing businesses to take proactive measures to retain clients and maintain steady cash flow.
  • Location-Based Data: Comparing financial performance across different regions can help businesses identify areas of strength or weakness and make more informed decisions about resource allocation.

The advanced features have the potential to revolutionize how accounting professionals provide financial advice and make decisions for their clients.

The Importance of Transparency and Trust

While the promise of AI-driven financial forecasting is undeniably exciting, it raises important questions about transparency and trust. Hector Garcia says, “As an accountant, I want to know what logic you’re applying to it. This whole thing of ‘don’t worry, it’s AI’ is black magic. ‘We are suggesting this out of nowhere.’ That’s not going to fly with us. I want to know what your AI is doing and the justification for suggesting this thing or that thing into the forecast.”

To fully leverage the benefits of AI-driven forecasting, accounting professionals must balance embracing new technologies and maintaining the trust and confidence of their clients. This means:

  • Understanding the logic and methodology behind AI-generated predictions
  • Being able to explain these predictions to clients in clear, accessible terms
  • Ensuring that AI is used as a tool to enhance human expertise, not replace it
  • Maintaining a critical eye and verifying AI-driven insights against other data sources

Accounting professionals must collaborate with technology providers to ensure that AI tools meet the industry’s specific needs and prioritize transparency. By finding the right balance, professionals can harness the power of AI-driven forecasting while still providing the human touch essential to building strong client relationships.

Preparing for the Future of Accounting

As AI continues to shape the future of accounting, professionals must stay informed, adapt their skills, and find ways to leverage these new technologies while prioritizing transparency and trust. This means:

  • Staying up-to-date with the latest developments in AI and machine learning
  • Investing in education and training to develop skills in data analysis and interpretation
  • Advocating for transparency and explainability in AI-driven accounting software
  • Maintaining a critical eye and verifying AI-generated insights against other data sources

By taking a proactive approach to integrating AI in accounting, professionals can position themselves at the forefront of this exciting new frontier.

The Bottom Line

The introduction of AI-driven financial forecasting in QuickBooks Online Advanced marks an exciting milestone in the evolution of accounting software. By considering factors like seasonality, customer attrition, and location-based data, AI can help businesses make more accurate predictions and informed decisions.

However, the success of AI in accounting relies on maintaining transparency and trust. Accounting professionals must understand the logic behind AI-generated insights and be able to explain them to clients. They should also view AI as a tool to enhance their expertise rather than replace it.

To thrive in the age of AI, accounting professionals should prioritize continuous learning, advocate for transparent AI tools, and collaborate with technology providers. By doing so, they can harness the power of AI-driven forecasting while continuing to provide the human expertise and judgment that is essential to their work.

To learn more about the future of AI in QuickBooks and how you can prepare your practice for these exciting changes, listen to the full episode of the Unofficial QuickBooks Accountants Podcast. With hosts Hector Garcia and Alicia Katz Pollock as your guides, you’ll gain valuable insights and strategies for navigating the brave new world of AI-driven accounting.

Alicia Katz Pollock’s Royalwise OWLS (On-Demand Web-based Learning Solutions) is the industry’s premier portal for top-notch QuickBooks Online training with CPE for accounting firms, bookkeepers, and small business owners. Visit Royalwise OWLS, where learning QBO is a HOOT!