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The problems with the structure of CPA firms
When selecting a CPA (certified public accountant) there are a lot of things to consider. Most people do not shop around for the best accounting and tax service. Generally, a friend will give a referral to someone and they will go to that company. This is a great practice in that referrals are the best type of endorsement that a company can get. The problem still remains that even the referrer usually has not shopped CPA's and the only basis they have for their referral is their personal experience. Without a comparison how do you know you are getting the best service at the best price?
When I started Bowen Accounting & Tax I based my procedures and policies on my knowledge of what most midsized to larger accounting firms do and do not do. It was my attempt to update the business model of the older stagnant firms for today’s market, and offer the best service to individuals and businesses possible. Below are some of my findings.
Hourly Billing
The main problem that I found with almost all accounting firms is the idea of hourly billing. Most large accounting firms have a lot of overhead that they have to cover, and most of the work performed at large firms is completed by lower level (non-CPA) employees. Employees and partners turn in a list of clients that they did work for, and how many hours they spent to the billing department, and then the billing department turns this into a bill for the client. This creates a couple of problems.
If you use a midsized or large CPA firm then take a moment to imagine a low level accounting assistant frittering away your time on YouTube.com, while you are getting hit with $145 an hour worth of charges. Lower level, salaried and hourly, employees just don't have the same motivation a partner or a sole-proprietor have, thus they waste time. Most larger firms have rules about what percentage of hours have to be billed. If the employee has not actually performed the right percentage of hour's worth of work, it is not unheard of for them to find someone to bill it to.
Hourly billing is a standard practice for almost all CPA's, not just larger firms. This is one of the main reasons I intended to avoid it is as a general practice. Clients deserve to know what something is going to cost them upfront, and be able to plan and budget accordingly.
In light of this Bowen Accounting & Tax, generally does not bill by the hour. Usually, during the consultation, the amount of time a project requires is assessed and the total project cost is determined and agreed to upfront with the client. Occasionally, this causes a problem if the scope of the work is larger than originally estimated and adjustments need to be made. This is the very reason that almost all firms prefer to bill by the hour only, rather than having to contact the client and get an approval to increase the price of a project.
Overhead
Overall hourly cost is driven up by the sheer amount of overhead that many firms create for themselves. If you like wood trim in your elevators, large conference rooms, lots of secretarial staff, and glass walled corner offices then a larger firm is for you. You should have no illusions though, you are paying for it. A small firm can offer all of the same services that a large firm can with much less overhead.
Less overhead does not necessarily mean lower price to the consumer, but most consumers do not know the total price after their first meeting with a CPA. Generally, hourly rates and total costs are not discussed, and the client ends up getting month after month of bills, and the total cost is never known. Many smaller firms have comparable hourly rates to larger firms, and receive more profit because of their lack of overhead.
Generally, smaller firms try to keep their overhead low because they are smaller. It is possible to keep low overhead for the life of a company, but once you add the fancy building with large conference rooms and high tech phone systems it is hard to get rid of them. Larger companies certainly pass the cost of their overhead on to their clients’, it is inherent in the billing systems they use.
Static Location and Lack of Communication
Most CPA firms, large and small, generally do not leave their offices. If you want an appointment then you have to schedule one with their secretary, and you can be sure that they will bill you if you miss it, or show up late. It is also nearly impossible to get them on the phone or to answer a quick question via email.
Firms that serve many clients feel the need to create a wall of protection around them. This wall can make clients feel like a number rather than a valued client. It creates a situation where the client feels like they are serving the CPA and not visa versa. Most clients of midsized to larger firms do not have the email address or direct number to their CPA. Questions are rarely answered quickly, and turnaround times get longer and longer based on the amount of clients the firm has.
Smaller firms have the ability to meet with their clients’ onsite, but generally do not. While smaller firms have email and sometimes do not have receptionists, it is generally very difficult to get a 'quick answer' to a question via phone or email. This is prevalent across the board with CPA firms.
Technology exists that allow accountants to manage their practices even when they are not in the office but it has not changed the 'You come to me' attitude of most firms. While most CPA's would be happy to meet a very large client onsite or at Starbucks to discuss their needs over coffee, it is almost unheard of that they would do such for the average client.
How does it make you feel?
If you have ever felt like your CPA did not care, charged you too much for a simple task, felt like you could not get an easy answer to a question, or that your account was not getting the attention that it deserved then you probably should look for a new one. CPA firms are never going to change unless their clients vote with their dollars. The lifeblood of any service-based business is its clients. If you feel like you have not been treated right then perhaps it is time to shop around.
~Richard Bowen, CPA