fbpx

Earmark CPE

Earn CPE Anytime, Anywhere

Earmark Podcast

80% of Businesses Overpay Property Taxes by 20%: Here’s How to Fix It

· ·

What if I told you that your business could be overpaying millions in property taxes? It’s not just possible—it’s probable, according to property tax expert Josh Malancuk, President of JM Tax Advocates. In a recent episode of the Earmark podcast, Josh, drawing on his 28 years of experience in the field, reveals a startling statistic: about 80% of the commercial properties his firm evaluates are overvalued by 20% or more.

Uncovering these overpayments isn’t as simple as glancing at a tax bill. It requires an approach that most businesses—and even many tax professionals—overlook. “Most of the time, county and state assessors are kind of flying blind with their assessments, which is why we see about 80% of the time, large commercial properties are overvalued by 20%,” Josh explains.

During the podcast, Josh outlined the flaws of commercial property assessments, explained the property tax appeal process, and shared a real-world case study in which his firm slashed a $25 million assessment down to $9 million, saving the client over seven figures in taxes.

The Hidden Flaws in Commercial Property Assessment

The stark differences between residential and commercial property assessments create a perfect storm for overvaluation. For residential properties, assessors have a wealth of comparable sales data. Josh explains, “With certain property types, like a home, you’re going to have lots and lots of sales, probably sales right across the street, so it’s relatively easy to predict what your home value should be on a per-bedroom or per-square-foot basis.”

Commercial properties, however, present a unique challenge. Consider a 1,000,000-square-foot manufacturing facility in a small town. Josh says, “You’re lucky to see sales of any sort within three years.” This scarcity of comparable sales data forces assessors to rely on mass appraisal models.

As Josh describes, these models are “a one-size-fits-all” approach. They are typically based on reproduction cost or construction cost trends, with little consideration for the specific characteristics and market conditions of individual properties.

Josh’s firm uses comprehensive databases and sophisticated market analysis to combat these inaccuracies. They expand their search for comparable transactions to a regional or even national level, mirroring what a typical market participant would consider when evaluating a property.

The capability gap is significant. Josh notes, “99% of the time your county and your state assessors do not have that same capability.”

Navigating the Property Tax Appeal Process

Discovering an overvaluation is just the first step. Navigating the appeal process requires careful attention to varying deadlines and jurisdictional rules. Josh explains, “Each jurisdiction has its own period to appeal the property assessment. So once you get the notice, the appeal deadline can be as short as ten days or 30 days, or there may be no notice at all.”

The appeal process can involve multiple stages, from informal discussions with the assessor to county board hearings and, in some cases, escalating to state-level appeals or litigation. Each step requires a deep understanding of procedural rules to avoid disqualification.

Successful appeals rely on customized analysis, taking into account factors such as:

  • Age and condition of the property
  • Size and layout
  • Specific use and any functional obsolescence
  • Land size and characteristics
  • Truly comparable properties in the area or region

“Once we figure out the best approach, we build our market data and bring that into an organized message to the assessor to basically support our contention that the market value is different than their assessment,” Josh says.

Case Study: Uncovering Millions in Savings for a Food Processing Plant

Picture a sprawling food processing plant, its buildings a patchwork of structures dating back to the early 1900s. Josh’s team tackled this real case, starting with a staggering $25 million assessment and a tax bill of around $1 million annually.

Their approach? A month-long deep dive into every nook and cranny of the facility. “I spent about a month hiking around this manufacturing plant, discovering all of the nuances and all of the ages and the sizes and ceiling heights and the like.”

Donning hard hats, safety glasses, and brightly colored vests, the team pored over dusty blueprints, traced the facility’s tangled construction history, and scrutinized every square foot of the million-plus square-foot complex.

Their approach unearthed a treasure trove of assessment inaccuracies:

  • Entire sections of demolished buildings are still being taxed.
  • Incorrectly recorded ages of structures.
  • Outdated layouts and obsolete features are impacting market value.

The result? “We filed a protest, and in the end, we took that assessment down from $25 million to $9 million,” Josh proudly states. “It ended up saving the company seven digits over the years that we appealed.”

Impressed by the millions saved, the client entrusted Josh’s firm with reviewing their properties across an entire state—some 30 additional sites.

Unlocking Hidden Value in Property Tax Assessments

This examination of the intricacies of property tax assessment reveals a surprising truth: significant savings are hiding in plain sight, waiting to be uncovered by those willing to look closely enough.

Let’s recap the key insights:

  1. Mass appraisal models often lead to widespread overvaluation of commercial properties.
  2. Customized, property-by-property evaluation can reveal substantial inaccuracies.
  3. Navigating the appeal process requires expertise and attention to detail.
  4. On-site inspections can lead to millions in savings.

For businesses, these insights represent an opportunity to free up capital for growth and innovation. For tax professionals, it’s a chance to deliver immense value to your clients, potentially saving them millions of dollars.

Some jurisdictions even allow for retroactive relief, potentially multiplying the savings across previous tax years.

To gain even more insights that could revolutionize how you approach property tax assessments, listen to the full Earmark podcast episode featuring Josh Malancuk. 

Then ask yourself: How much-hidden value might be lurking in your property tax assessments? The answer could be worth millions. Isn’t it time you took a closer look?

Work Smarter, Not Harder: The 3.3 Rule for Accountants

· ·

Want to 2x your productivity while working way less? Sounds like a pipe dream, right? According to CPA John Briggs, it’s not just possible – it’s the key to thriving in accounting.

I recently chatted with John on my Earmark Podcast, and he explained his game-changing “3.3 Rule.” This approach challenges the traditional 70-hour workweek and billable hours model that’s been burning out accountants for decades.

John says the 3.3 Rule is the secret sauce for boosting efficiency, reclaiming work-life balance, and improving profitability.

So, what exactly is this magical rule? And how can you implement it in your firm? Let’s dive in.

Understanding the 3.3 Rule

The 3.3 Rule is based on cognitive science research showing that the average office worker is only truly productive for—get this—2 hours and 53 minutes in a typical 8-hour workday.

John takes advantage of this natural productivity pattern by structuring work in focused bursts of up to three hours, followed by strategic recovery periods.

As John puts it, “The rule, simply stated, is the most efficient workday consists of working up to three hours at a time, followed by a 30% recovery period.” So, if you crush it for three hours straight, you’ve earned yourself a full hour of downtime before diving back in.

The beauty of the 3.3 Rule is that it adapts to different work styles:

  1. 🏃‍♂️ “Sprinters” who work in short, intense bursts (think 60 minutes of work, 20 minutes break)
  2. 🚶‍♂️ “Joggers” who can maintain focus for 1.5 to 2 hours
  3. 🧘‍♂️ “Zen masters” who can work for the entire three hours straight

The key is to know your rhythm and match your work style to the task at hand. As John says, “If I feel like I’m losing focus after an hour, that’s totally fine.” It’s all about working smarter, not harder.

Implementing the 3.3 Rule

So you’re sold on the 3.3 Rule. But how do you make it happen in your firm?

First things first: mindset shift. John emphasizes the importance of self-awareness. “If I feel like I’m losing focus after an hour, that’s totally fine,” he says. The key is to match your work style to the task at hand.

By implementing this methodology, John’s firm has maintained an average of just 42 hours per week during tax season for the past three years. You read that right – 42 hours. In busy season.

So, what’s the secret? Two words: value pricing.

John advocates for setting prices based on the value provided to clients, not the time spent. “I don’t necessarily think billable hours is actually a great way to bill in general. I like value pricing or fixed pricing,” he says.

Value pricing complements the 3.3 rule by:

  1. 💸 Allowing firms to benefit financially from increased productivity
  2. 🙅‍♂️ Removing the pressure to “look busy” during less productive hours
  3. 🎯 Focusing on outcomes for clients rather than inputs from accountants

But wait, you might be thinking – how do you measure productivity without billable hours?

John’s firm uses job descriptions and result-based metrics. For example, they might track the number of tax returns completed or the complexity of clients managed. They use a weighting system where complex clients are equivalent to multiple simple clients, ensuring fair workload distribution and accurate productivity measurement.

Implementing the 3.3 Rule isn’t always easy. It requires a fundamental shift in how we think about work. But the payoff? Happier staff, better work, and a healthier bottom line.

What Happened at John’s Firm

What’s it like to implement the 3.3 Rule? John shares his journey of transformation:

“When I started my firm, I said, ‘I refuse to put my team through the same crap that I had dealt with,’” he recalls. For John, that meant hiring more staff to ensure everyone could work at about 80% capacity, allowing room for those crucial recovery periods.

And the benefits? They go way beyond just happier employees (though that’s a huge win in my book!).

John notes, “When you work, you work.” Those focused work periods lead to higher productivity and fewer errors. Plus, this approach helps retain top talent in an industry where competition for skilled professionals is fierce.

The 3.3 Rule doesn’t just benefit your team – it benefits your clients, too. You’re delivering real value by focusing on outcomes rather than hours logged. And when you’re not stuck in the weeds of busy work, you have more bandwidth for the high-level strategy and advisory work clients crave.

Of course, implementing the 3.3 Rule isn’t always a cakewalk. John recalls, “When I introduced it to my team, they were weirded out. They’re like, ‘Is this a trick to get me fired because you’re going to catch me not working?'”

Leadership buy-in and clear communication are crucial to overcoming these challenges. You’ve got to walk the walk and lead by example.

The 3.3 Rule, combined with value pricing, offers a blueprint for firms to align their work practices with human cognitive limitations and client needs. By focusing on outcomes rather than hours worked, firms can achieve the holy trinity: increased productivity, improved work-life balance, and enhanced profitability.

It’s a win-win-win for accountants, their firms, and their clients. And in an industry long overdue for a shake-up, that’s something to get excited about.

Get all the details by listening to this episode of the Earmark Podcast.

An Accounting Firm Owner’s Guide to Strategic Technology Adoption

· ·

Is your accounting firm’s technology stuck in the past? In a world where clients expect seamless digital experiences and remote work is the norm, relying on outdated, disconnected software can be a recipe for inefficiency, frustration, and even lost business. But with so many options on the market, how do you choose the right tools to propel your firm forward?

In a recent Earmark Podcast episode, Blake Oliver shared his framework for strategic technology adoption. He argued that firms that intentionally select software to streamline operations, enhance client experience, integrate smoothly, and enable standardization will be best positioned to thrive.

Blake walked through the key software categories firm leaders need to consider, from proposal management to artificial intelligence (AI). He emphasized the importance of choosing tools that are easy to use, align with the firm’s unique needs and processes, and facilitate client collaboration.

Proposal Software

Blake recommended proposal software options that allow firms to quickly generate professional, standardized proposals, collect e-signatures and payments, and kick off projects seamlessly. “You cannot standardize the service delivery to your clients if you don’t have standard terms in your engagement letters,” he noted.

For example, Practice Ignition and Anchor allow firms to create templated proposals with standardized terms, pricing, and payment schedules. Clients can quickly review and sign off on engagements digitally, reducing friction and ensuring consistency across the board.

Practice Management

For practice management, Blake stressed the importance of workflow tools that centralize client communications, automate tasks, and provide visibility across the firm. With remote work now the norm, he argued, “If you’re in a remote environment, how can you work remotely without having workflow software?”

Platforms like Karbon, Canopy, and Client Hub offer client portals, task management, team collaboration, and insights reporting features. By standardizing processes and centralizing information in one system, firms can boost efficiency, transparency, and accountability, even with distributed teams.

Blake shared a cautionary tale from his experience, where choosing the wrong practice management tool cost his firm weeks of lost productivity. The lesson? Prioritize ease of use and team buy-in when evaluating options to ensure successful adoption.

General Ledger & Payroll

In the realm of general ledger and payroll, Blake advised firms to curate a lean tech stack of best-fit solutions. Instead of accommodating every possible client need, he suggested choosing one or two options that cover the bases for core client types, focusing on scalability, integration, ease of use, and reporting capabilities.

For the general ledger, that might mean standardizing on QuickBooks Online for most clients, with Sage Intacct reserved for those with more complex needs. On the payroll front, Blake highlighted Gusto and OnPay as user-friendly options that automate compliance and integrate with popular GL systems.

Blake emphasized the goal of going deep on a few core platforms rather than spreading yourself thin across a dozen different tools. By strategically limiting your tech stack, you can streamline training, support, and processes while still meeting diverse client needs.

Accounts Payable & Banking

Turning to bill pay, Blake highlighted the spectrum of solutions available, from all-in-one platforms like BILL for larger clients with complex approval workflows to more streamlined options like Relay for smaller businesses. He emphasized the key is to match the tool to the client’s specific needs and design efficient processes around it.

For example, a large nonprofit with multiple departments and strict controls might benefit from BILL’s advanced approval routing and audit trails. A small business, on the other hand, may prefer Relay’s simplified workflow and flat-fee pricing. The right fit depends on factors like transaction volume, number of approvers, and accounting complexity.

Whichever tool you choose, Blake stressed the importance of clear client communication and well-defined processes. Establish expectations around bill submission, approvals, and payment timelines upfront, and consider designating a dedicated team member to manage the AP queue and troubleshoot any issues.

Artificial Intelligence

Finally, Blake touched on the exciting frontier of AI, noting that ChatGPT’s new offering for teams, coupled with Microsoft’s significant investment in OpenAI, has made the technology more viable for accounting firms than ever. He advised listeners to start exploring use cases like drafting routine documents.

For instance, firms could leverage ChatGPT to generate first drafts of engagement letters, email responses, or work papers based on predefined parameters. By automating the initial content creation, staff can focus on more strategic work like analysis and advisory.

However, Blake cautioned against an “AI-first” approach. Tools like ChatGPT should augment human expertise, not replace it. He recommended starting with narrow, well-defined pilots and keeping humans in the loop to review and refine AI-generated content.

The Path Forward

Across all these categories, Blake underscored the importance of approaching technology decisions with intention and a focus on client needs. Flashy features may generate buzz, but the true test of any tool is how well it supports your firm’s service delivery and client experience.

By aligning your tech stack with your strategic priorities, designing efficient processes, and investing in training and change management, you can harness the power of modern software to drive meaningful results. The key is to start small, iterate often, and never lose sight of the humans at the heart of your business’s heart – your team and your clients. Ready to dive deeper into Blake’s strategic technology playbook? Listen to the full episode and start charting your firm’s path to digital success.

The Accounting Profession at a Crossroads: Adapting to Stay Relevant in a Changing Business Landscape

· ·

The accounting profession is at a critical juncture. Technology is rapidly transforming the business landscape. As client needs evolve and new skill sets become essential, CPAs must ask themselves: Are we keeping pace with change, or are we at risk of becoming irrelevant?

In this thought-provoking Earmark Podcast episode, I explore the evolving role and relevance of the CPA license with Steven Sacks, a consultant who serves professional service firms and not-for-profit organizations, and David Bergstein, a seasoned innovator in the accounting software industry. Our discussion reveals that to remain relevant and valuable in today’s rapidly changing business landscape, the accounting profession must adapt its education, licensure, and skill development to align with the evolving needs of clients and employers.

Bridging the Gap Between Accounting Education and Real-world Skills

There’s a growing disconnect between traditional accounting education and job market demands. David Bergstein points out, “Accounting education focuses heavily on debits, credits, and accounting standards but does not adequately prepare students with technology skills and business advisory knowledge needed in the real world.”

For example, many young professionals struggle to apply their classroom knowledge to real-world situations. They may have learned how to do t-accounts and journal entries but never touched modern accounting software like QuickBooks or Xero during their education.

Bridging the education-skills gap is crucial for the CPA profession to adapt to the changing needs of clients and employers and maintain its relevance in the business world. This may involve:

  • Incorporating more hands-on, technology-focused training into accounting curricula, such as working with modern accounting software like QuickBooks, Xero, or Sage
  • Partnering with businesses to provide internships and real-world experience for students
  • Encouraging faculty to stay up-to-date with the latest industry trends and tools
  • Emphasizing the development of soft skills, such as communication and critical thinking, alongside technical knowledge

By aligning accounting education with the realities of modern practice, the CPA profession can ensure its future members have the skills and knowledge they need to succeed in a rapidly evolving business landscape.

Reimagining CPA Licensure for a Diverse Profession

As the roles and expertise of CPAs become increasingly diverse, the profession must reevaluate its licensure model to ensure it reflects the realities of modern accounting practice.  

Steven Sacks emphasizes the need for greater clarity around the CPA’s role and definition: “If you really want to increase the pool of CPAs, define what the CPA is, what it means. Define the definition of the practice of public accounting. What is public accounting? What are accounting services? There are a lot of things that are really not clear.”

The disconnect between the CPA license and the day-to-day work of many accountants raises important questions about the credential’s relevance and value. As I point out in the episode, “What does the license actually give us a franchise on or a monopoly over? The only thing is the audit.”

Embracing Alternative Certifications and Career Paths

Our discussion reveals a growing trend of accounting professionals, particularly younger generations, pursuing non-traditional roles and credentials to build successful careers.

David Bergstein shares his observations: “I’m seeing the younger generation not become CPAs and become advisors or accountants. Non-CPAs have tremendous practices out there. They have very lucrative practices. They’re in their 30s and 40s. For the most part, they didn’t pursue an accounting career. They took very few accounting courses. Now, they’re quarterbacking firms and hiring some CPAs, but mainly accountants and non-accountants. They’re doing managerial reports and partial CFO services with a data analytics background.”

This shift in career trajectories reflects a growing recognition that the traditional CPA path may not fit everyone best. Instead, many aspiring accountants opt for alternative certifications, such as the Certified Management Accountant (CMA) or the Chartered Financial Analyst (CFA), which better align with their career goals and interests.

A Call to Action: Shaping the Future of the CPA Profession

Whether you’re a seasoned veteran or a new graduate just starting your career, you can shape the direction and impact of the CPA credential for generations to come.

So, what can you do to help drive positive change and ensure the profession’s continued success? Here are a few suggestions:

  • Advocate for educational reforms that prioritize real-world skills and hands-on learning experiences
  • Support efforts to modernize CPA licensure requirements and create new pathways for non-audit professionals
  • Explore alternative certifications and career paths that align with your unique interests and goals
  • Engage in meaningful continuing education that expands your knowledge and keeps you at the forefront of industry trends
  • Collaborate with colleagues and professional organizations to share ideas, best practices, and innovative solutions
  • Educate clients, employers, and the public about the diverse capabilities and expertise of CPAs beyond traditional audit services

By embracing change, innovation, and diversity, the CPA profession can chart a course toward a brighter future—one in which CPAs are recognized as trusted advisors, strategic partners, and indispensable experts in a wide range of financial and business disciplines.

The accounting profession is at a crossroads, and our choices today will shape its future. By adapting our education, licensure, and skill development to align with the evolving needs of clients and employers, we can ensure that CPAs remain relevant, valuable, and indispensable in a rapidly changing business landscape. To dive deeper into this critical conversation about the future of the CPA profession, listen to the full Earmark Podcast episode.

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.