Earmark CPE

Earn CPE Anytime, Anywhere

CAS

The Blueprint for Turning Your Accounting Practice into a Private Equity Magnet

· ·

Private equity investment is changing the accounting industry in a big way. In the past three years, five of the top 26 accounting firms in the U.S. have received financial support from private equity firms. This marks a notable change in how these businesses operate. As more money comes into the industry, smaller to mid-sized accounting firms are feeling the pressure to either grow larger or focus on specific areas of expertise to stay competitive.

How can we ensure our practices thrive in the face of ongoing challenges? Dave Bunce, Director of Partnerships at interVal, has extensive experience in accounting and mergers and suggests that companies willing to change and adapt their operations can achieve remarkable growth and value. This applies whether they are looking for investment from private equity firms or choosing to operate independently.

On a recent webinar, Dave shared three critical transformations that can help position your firm for success:

1. Moving beyond compliance work
2. Building sustainable recurring revenue
3. Creating scalable operations

Beyond Compliance: Redefining Value

When looking to buy a business, buyers pay close attention to two main things: the people you serve (your clients) and the skills of your staff (your talent). It’s important to remember that it’s not just about how many clients or employees you have; what really matters is the quality of your relationships, and the unique value you bring that goes beyond just meeting basic requirements.

“What they’re going to assess on that client list is how long they’ve been with you, how well you’ve grown or retained them, how well you’ve sold your other services to them, and how you’ve moved beyond the commodity of compliance,” Dave explains.

Offering high-profit advisory services can significantly increase the overall value of a firm. While accounting firms usually sell for a price that is about half to two times their revenue, where you fall on that scale largely depends on how well you provide valuable additional services. Top firms often group their clients into three categories—A, B, and C—based on how much growth potential they have and how open they are to receiving advisory services. This approach allows these firms to concentrate their efforts on the clients who are most likely to benefit from these expanded services.

Great opportunities for offering advice can often be found in the information we have about our current clients. For instance, analyzing $15 billion worth of client businesses, Dave’s team discovered that there was $4 billion sitting in working capital that businesses weren’t using efficiently. This finding opened up immediate chances to have important discussions with clients about smart ways to handle their money, plan for the future of their business, and improve how they manage their financial resources.

Finding new opportunities is only the beginning. Companies need clear methods to effectively offer these services on a larger scale and truly make the most of them. This is why creating strong Client Advisory Services (CAS) is so important.

Building Recurring Revenue with Strategic CAS Development

Many firms looking to increase their recurring revenue often begin by considering CAS. However, they must make an important choice: What kind of CAS do they want to provide?

“Are you looking at being a fractional CFO and bookkeeper? Or are you aiming for a high-margin, value-add CAS practice where you guide business owners through strategic planning exercises?” Dave asks. These are completely different ways of running a business, and each one needs unique strategies for hiring people, using technology, and providing services.

To build a successful CAS practice, Dave recommends a four-step approach:

  1. Define Your Scope: Determine whether you’re pursuing a high-volume bookkeeping model (starting around $500 monthly per client) or a high-margin advisory practice focused on strategic guidance.
  2. Validate the Market: Test your proposed offering with existing clients, understand what competitors charge, and ensure your pricing aligns with market expectations and cost structure.
  3. Build the Processes: Develop standardized workflows and procedures to ensure consistent delivery and scalability.
  4. Assemble the Team: Hire and train professionals suited to your chosen model—process-driven staff for bookkeeping or experienced advisors for strategic guidance.

Creating Scalable Operations

The foundation of a valuable, scalable firm lies in well-documented processes. Yet many firms make the costly mistake of implementing technology solutions before mapping out their core business processes.

“Map those things out—current state. Identify the gaps. Build the process the way you want it. Then identify where technology can fit,” Dave advises.

Start by documenting your key business cycles:

  • New Business to Cash Collection: From acquiring a client to receiving payment.
  • Resource Allocation and Delivery: Managing how work is assigned and completed.
  • Talent Lifecycle Management: Recruiting, training, and retaining staff.

This documentation is important for several reasons: it helps maintain stability when employees leave, ensures that services are provided in a consistent way, and shows potential buyers that the company operates at a high level of professionalism and readiness.

Think about the issue of employee turnover. Firms often invest a lot of time helping new employees learn their roles without having clear instructions or guidelines to follow. By creating standardized processes and having everything documented, the onboarding experience for new team members becomes smoother and quicker. This not only helps maintain a high level of service but also boosts the firm’s overall efficiency and profitability. Additionally, a well-organized business is more appealing to potential buyers.

Only after mapping these processes should you evaluate technology solutions. By mapping out how things work and noticing where there are gaps or inefficiencies, you can make better choices about which digital tools and automation will truly help your business succeed.

Positioning Your Firm for Success

Changing a traditional compliance-focused accounting practice into a more scalable business takes careful planning and a step-by-step approach. By moving beyond compliance tasks, firms can develop regular income sources and create clear, documented processes, which can lead to both immediate profits and lasting success.

Whether you choose to seek investment from private equity firms or decide to stay independent, making these changes can help your firm thrive in a competitive marketplace. Successful firms will focus on building efficient operations and offering valuable services.

Anyone looking to build an accounting firm that’s ready for the future should consider watching the full webinar recording. You’ll get practical strategies, pricing ideas, and tips based on Dave Bunce’s wide-ranging experience in both public accounting and private equity.

Are Your Remote Accountants Thriving? Learn from This Firm’s Game-Changing Approach

· ·

Marcus and Rachel Dillon, hosts of the “Who’s Really the Boss” podcast, have transformed their virtual accounting firm, Dillon Business Advisors, with innovative strategies for motivating remote teams. Their approach reimagines compensation, leadership opportunities, and team engagement in a virtual team. 

In a recent episode, they offered valuable insights for CPA firm owners and accounting professionals looking to thrive in a remote environment.

Incentivizing the Right Behaviors

The Dillons recently overhauled their bonus structure to align more closely with client expectations and give team members more control over their compensation. Previously, bonuses were tied to bringing in new Client Accounting Services (CAS) clients. While this structure helped the firm grow its CAS engagements, the system had limitations. As Marcus explains, “There was some disconnect. People could not calculate what their bonus was going to be at any one point, and they didn’t have control over the sales process.”

The new structure offers each team member a $25 bonus for every client whose financials are delivered by the 15th of the following month. With teams of three serving each client, that’s a potential $75 bonus per client per month. This system directly rewards the timely delivery of financial data, a fundamental client expectation.

The impact was almost immediate. In a client meeting, a Client Service Manager proactively addressed the new system: “We’re going to change up what we issue to you because we’ve got this new incentive plan at DBA, and I get a little bonus if we issue the core financials by the 15th. But some of the budget reports might go out after the 15th, but as close to the 15th as possible.”

To help increase buy-in and address potential concerns, the Dillons used an “optimist/pessimist” activity during the rollout. Team members were paired up and asked to share positive and negative aspects of the new structure. This approach encouraged open dialogue and allowed the Dillons to address concerns directly and immediately.

Fostering Leadership and Expertise in a Virtual Environment

Recognizing the need for clear career advancement paths and leadership opportunities in a remote setting, Dillon Business Advisors introduced two innovative programs: Subject Matter Expert roles and an Onboarding bonus system.

The Dillons designated subject matter experts in three primary areas: accounting, tax, and payroll. These roles come with an additional stipend of about $900 per year. As Marcus explains, “That’s the person. If you’ve got a tax question or an accounting question or a payroll question, that’s who you go to. I’m not saying they know all the answers, but they’re going to help find them. And they’re also going to help educate the team throughout the year.”

The Onboarding bonus system incentivizes efficient client onboarding. Teams can earn up to 50% of the onboarding fee as a bonus, with the percentage decreasing on a sliding scale based on how quickly the onboarding is completed. This encourages team members to streamline the process and quickly get new clients up and running.

The impact of these changes was immediate. In a test run before the full rollout, team members began proactively analyzing new client data and preparing recommendations before the kickoff call. Marcus notes, “What came out of the conversation was, ‘Well, I’m going to go ahead and go into their QBO file and really look at it, really analyze it first. And then I’m also going to proforma their tax returns and look at those ahead of the client kickoff call.’ Then we can make recommendations at the kickoff call versus saying we’re going to look them over in the next few days.”

Investing in Team Engagement: The Power of Strategic Retreats

While innovative compensation structures and career development opportunities lay the foundation for a high-performing remote team, the Dillons recognized the importance of face-to-face interaction. Their solution? Strategic team retreats that complement and reinforce their other motivational strategies.

Dillon Business Advisors’ recent retreat in Florida included a team meeting to roll out new bonus structures and leadership opportunities, followed by group activities like a boat trip to Crab Island. The investment is significant—the recent domestic trip cost about $6,000 per couple or $3,000 per person. However, the Dillons view this as crucial for team performance and retention.

The benefits of these retreats align perfectly to create high-performing remote teams:

  1. They strengthen team bonds and company culture, which is crucial for collaborative remote work
  2. They provide face-to-face time for meaningful discussions and feedback on new initiatives
  3. They increase employee satisfaction and retention, supporting the firm’s investment in talent
  4. They offer a tangible reward for meeting company goals, reinforcing the performance-based culture

At the final dinner, Marcus highlighted each team member’s contributions in front of their colleagues and spouses, reinforcing the appreciation culture. He also provided handwritten cards to each team member, a personal touch that made a significant impact.

Transforming Remote CPA Teams into High-Performing Units

By tying bonuses to client-centric metrics, creating new opportunities for innovation and leadership, and investing in team engagement through retreats, the Dillons have transformed their remote team into a high-performing, self-motivated unit. As Marcus aptly puts it, “If you’re kind of scratching your head on how to make your employees do what you want them to do, throw some dollars where it matters most.”

These strategies drive individual performance by fostering a collaborative culture that consistently exceeds client expectations and contributes to firm growth. With remote work becoming the norm rather than the exception, such approaches are crucial for CPA firms looking to thrive.

As more firms transition to remote or hybrid models, those that can effectively motivate and engage their virtual teams will have a distinct competitive advantage. The Dillons’ experience demonstrates that remote teams can be just as effective—if not more so—with the right incentives and opportunities than traditional office-based teams. Listen to the full episode of the “Who’s Really the Boss” podcast for all the details.

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, Collective by DBA , supports and guides accounting firm owners and leaders with firm resources, education, and operational strategy through community, groups, and one-on-one advisory.

How One Accounting Firm Transformed Their Business Model and Thrived in a CAS-Driven World

· ·

As client expectations shift and technology advances, many firm owners find themselves at a crossroads, wondering: How do we transition from a traditional tax practice to a thriving Client Accounting Services (CAS) model? 

In this episode of the “Who’s Really the Boss” podcast, Rachel and Marcus Dillon share their experience transforming their firm from a traditional tax practice to a successful CAS provider. The Dillons learned that to transition successfully, firms must adapt their processes, technology, and management approach while carefully balancing client relationships and financial stability.

The Catalyst for Change: The Last Worst Tax Season

For Rachel and Marcus, the decision to transition from a traditional tax practice to a CAS model was sparked by a pivotal moment in their firm’s history: the “last worst tax season” in 2017. With over 1,000 individual clients and 2,000 tax projects, the couple became overwhelmed and exhausted, working long hours and sacrificing precious time with their family.

Marcus recalls, “We walked away exhausted and were beyond our tipping point and decided that was it. Nothing like that ever again.” This experience was a wake-up call, prompting the Dillons to reevaluate their business model and seek a more sustainable and fulfilling path forward.

As the Dillons’ story demonstrates, recognizing the need for change is often the first step in a firm’s journey toward a more sustainable and rewarding future.

The Reality of Client Attrition

One of the most significant hurdles firms face when transitioning to a CAS model is convincing existing clients to embrace the change. As Rachel and Marcus discovered, many clients who were satisfied with their current arrangements resisted adopting a new approach, even when presented with the potential benefits. 

Despite their best efforts to communicate the value of CAS, the Dillons found that only a small percentage of their existing client base was willing to make the transition. As Marcus shares, “We were a very heavy annual-only client roster in 2017. We were not able to convert 95% of our client base to CAS. And so the oversimplified advice of people that just tell you, hey, you should go convert all your clients to CAS is probably not going to hold most of the time.”

Because many clients will not make the change, firms need to be prepared for client attrition and have a plan to refer clients who don’t fit the CAS model to other providers.

To mitigate client attrition during the transition to CAS, consider the following strategies:

  1. Communicate the value of CAS services and how they address clients’ pain points.
  2. Offer a phased approach to transitioning clients, allowing them to adapt to the new model.
  3. Provide exceptional service and support during the transition to demonstrate the benefits of CAS.
  4. Regularly seek client feedback and promptly address concerns to maintain trust and loyalty.

Embracing Cloud-Based Solutions and Real-Time Collaboration

As firms transition from a traditional tax practice to a CAS model, they quickly discover that their existing processes and technology may not be well-suited to the demands of ongoing client engagement. 

Firms must adopt processes and technology that effectively track project frequency, timeliness, and client communication to succeed in a CAS model. Cloud-based solutions and remote access become essential for collaborating with clients and providing real-time insights into their financial performance.

The Dillons’ experience illustrates the necessary changes firms must make to their processes and technology to thrive in a CAS environment. By embracing tools that facilitate seamless collaboration and real-time data sharing, firms can position themselves to deliver the high-touch, proactive service that CAS clients expect.

Shifting from a Partner-Centric to a Team-Based Approach

One of the most significant challenges firms face when transitioning to a CAS model is adapting their management style to support ongoing client engagement. As Rachel points out, “We have to hire and then empower our team to work with the client to deliver the information, to have conversations, to have a relationship. We have to trust our team so that we can serve clients. If not, the practice isn’t scalable, so you’re not really better off one way or the other.”

In a traditional tax practice, partners are often clients’ primary point of contact, handling everything from client communication to project management. However, in a CAS model, this approach quickly becomes unsustainable, as the ongoing nature of client engagement requires a more distributed approach to client service.

To scale a successful CAS practice, firms must shift from a partner-centric model to a team-based approach, empowering staff members to take on greater responsibility for client relationships and project delivery. This requires a significant mindset shift for many firm owners, who may be accustomed to maintaining tight control over client interactions.

Learning from the Challenges and Triumphs of Others

As the Dillons’ story illustrates, transitioning from a traditional tax practice to a CAS model is a journey filled with challenges, surprises, and growth opportunities. While every firm’s path is unique, there is much to be gained from learning from the experiences of those who have gone before.

By sharing their struggles and successes, Rachel and Marcus offer valuable insights and guidance for other firms considering a similar transition. Their story serves as a reminder that change is rarely easy, but with perseverance, adaptability, and a willingness to learn, it is possible to navigate the complexities of the CAS landscape and emerge stronger on the other side.

Charting Your Course to CAS Success

For firms embarking on their own CAS journey, the Dillons’ experience offers several key takeaways:

  1. Embrace the need for change: Recognizing when your current business model no longer serves you is the first step towards a more sustainable and rewarding future.
  2. Communicate the value of CAS: Clearly articulating the benefits of CAS to both existing and prospective clients is essential for building a successful practice.
  3. Adapt your processes and technology: Embracing cloud-based solutions, streamlining workflows, and eliminating inefficiencies are critical for delivering high-quality CAS services.
  4. Empower your team: Shifting from a partner-centric to a team-based approach is key to scaling a successful CAS practice and providing exceptional client service.
  5. Stay committed to the journey: Transitioning to a CAS model takes time, effort, and a willingness to learn from both successes and failures.

By remembering these lessons and staying committed to the journey, firms can chart their own course toward CAS success, building a profitable and personally fulfilling practice.

Are you ready to take the first steps toward building a successful CAS practice and shaping the future of accounting? If so, tune in to the Who’s Really the Boss podcast and hear Rachel and Marcus Dillon’s inspiring story.

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, education, and operational strategy.

Elevate Your Client Advisory Services with LiveFlow’s New Courses on Earmark

· ·

We’re pleased to welcome the “Empowering Client Accounting Services (CAS) with LiveFlow” channel to Earmark! Presented by LiveFlow, this channel focuses on taking CAS to the next level.

Read on for details about their first course and how to start earning free CPE credits.

Overview of the Channel

The “Empowering CAS with LiveFlow” channel features webinars and courses aimed at advancing accounting professionals’ client advisory skills.

Topics covered include:

  • Financial forecasting and projection strategies
  • Data-driven insights for strategy and growth
  • Technology to improve workflows and advisory
  • High-value services like budgeting and planning

With real-world expertise, this channel provides the knowledge to expand your CAS offerings.

First Course Details

The debut course dives into 13-week cash flow forecasting to elevate client financial planning.

Led by Amy Walker, CPA and Anita Koimur, participants will learn:

  • The role and value of 13-week forecasts
  • Steps for building accurate cash flow projections
  • Using forecasts to guide business strategies
  • Reporting methodologies and best practices

Listeners will gain skills to immediately improve their CAS capabilities.

Earn Free CPE with Earmark

Earmark makes it easy to earn CPE credits for listening to accounting podcasts and webinars. 

Get started with LiveFlow’s cash flow forecasting course here.