In the middle part of the last decade I found myself standing in line at the grocery store waiting to checkout. Before me were two women in their late 50s discussing work.
One woman said to her friend, “Last year I worked in a tax office and it was the hardest job I ever had!”
I had to turn away as I suppressed a smile.
Later, as I reflected on that conversation, the smile faded. Is working in a tax office so hard? Did I really choose the of the most difficult of professions as my career?
It would explain a lot. Hiring qualified tax professionals has become nearly impossible over the last decade. Robert Half recently reported the unemployment rate for accountants stood at 1.8% in Q1 of 2019. The news isn’t any better if you plan on hiring a tax professional.
Crisis in Review
The crisis in the accounting industry is self-feeding. The worse it gets the more workload is shoved onto the desks of the remaining souls. Stress is taking a toll.
Several support groups for tax professionals exist on social media platforms. Tax season reveals a serious level of stress for practicing tax professionals. Complaints of long hours and clients unwilling to pay higher fees to compensate for the added complexities of the new tax laws has more professionals looking to leave the industry.
And it isn’t the tax pros facing the worst pinch. The ultimate loser is the client. With fewer experienced tax professionals accepting clients it has put taxpayers at risk. The IRS knows taxpayers have limited choices when defending themselves in an audit which means the IRS’ advantage is larger than ever.
Tax preparers are becoming more selective, too. Clients with documentation a mess are being turned away. Even clients with their documents in order are finding it hard to secure an experienced tax professional who understands the Tax Code and is willing to take on additional work.
Experienced tax professionals are like rock stars in many environments. An accountant in my office recently joined her mother for a Bingo event. She made the mistake of telling the lady next to her she was a tax professional. From that point on the questions came rapid fire with several people around her asking for her card and if she was accepting new clients. The relaxing weekend with mom turned into another afternoon of stress.
When I attend conferences (or on vacation or in the park or . . . )I get the same reaction. It becomes nearly impossible to enjoy time off if the people around me know what I do. They all have a quick question. They don’t understand an afternoon of quick questions is not time off to recharge.
People don’t care; they want answers their accountant can’t or refuses to answer. Or worse, they do their own tax return and want top quality answers without paying for it (until the IRS letter arrives).
It has gotten so bad that when I’m on vacation with Mrs. Accountant I tell people I’m a farmer (because I grew up on a farm and currently live on a hobby farm) so my vacation isn’t ruined. People are intensely interested in powerful tax strategies, but for some reason don’t want to pay the tax professional $500 for saving them $10,000. And have no problem consuming an accountant’s entire vacation.
And we wonder why the profession is shrinking.
To put it in further perspective: My office turned away over 20 new clients on April 15th this year. They just walked in and wanted us to drop everything so their return got filed on time. We don’t advertise; they just show up. Experienced tax professionals — even inexperienced tax professionals — have no problem filling their book. All they have to do is let people know what they do and it’s all over.
Greasing the Squeak
There are three groups who are willing to pay tax and accounting professionals well: government, big business and the wealthy. I see this even in my small tax office. Wealthy people and large businesses (I have even consulted large hedge funds) approach me in a different manner than typical clients. While they are acutely aware of the pressure tax professionals face, they make it clear they will pay for my time and information. In many of these cases I’m paid a fee versus and hourly rate. The incentive is to get me to stop watching the clock and focus on the Holy Grail: lower taxes coupled with higher returns and increased net worth.
While government watches my work, they don’t necessarily engage me. I’ve made it clear I don’t work for government which is probably why I haven’t been invited to do so. Businesses and individuals need my services more even if they pay less.
It is easy to see who is on the path to financial freedom and those who will doubtfully ever make it. The questions and the approach scream failure or success almost from the first words. Wealthy people want to learn while those allergic to wealth want confirmation they are right.
As self-serving as it sounds (and is), you need a tax professional. Finding one is the chore. I understand. When it comes to legal issues the wealthy (and smart) hire an attorney; when sick they see the doctor. When it comes to taxes — the largest expense you will have in life — too many hire a commissioned salesperson for guidance. That is like hiring the pharmaceutical sales rep if you are diagnosed with cancer! Or they go it alone when they are dealing with the sum total of all their income and wealth. Boggles the mind.
It is easy to cry about the crisis in the accounting and tax industry. I’m a solutions guy so I prefer to look for answers instead. The outline above expressing the stress professionals in the industry face is only to set the stage so you understand what is going on behind the curtain. There are actionable solutions professionals need to know and the public needs to understand so they can gain the maximum advantage to the benefit of all.
Several goals are necessary to improve the performance of the industry: reduce stress on the accountant, adequate compensation to encourage more to enter and stay the profession and more responsiveness to the client.
While salaries might be the easy culprit, money isn’t the overriding problem. Money would salve many wounds within the industry, especially at the entry level, and would encourage more to pursue an accounting career, but it will not alleviate the stress from endless deadlines and demands from clients. Let’s look at a variety of solutions, starting with salaries and fees, then addressing stress followed by industry trends sure to improve performance and reduce stress.
Money motivates. . . to a point. Offering tax professionals and accountants a larger salary is always nice. But if the stress is never-ending and job satisfaction is low more money will only make it easier for more to retire early and leave the rat race.
While there is an acute shortage of qualified tax and accounting professionals, many in the industry tend to work up to and beyond what is typically considered retirement age. People attracted to the industry love the work and the challenges even when it is demanding. Helping people manage their business, taxes and life is a powerful draw. Working with clients as they reach for their goals is addicting.
Larger firms have the advantage to segregating pricing from the front line accountants. Fees are negotiated between the firm and client by the sales teams. The tax and accounting professionals doing the work only need to record their time spent working on the account and serving the client’s needs. I do oversimplify a bit. The important takeaway is that the larger the firm the more distant fees and their collection are from the accountant doing the work.
Small and mid-sized firms are another story. Frequently the accountant working with the client in smaller firms is instrumental in the fee determining process. The client always wants a lower fee. What clients need to understand is a lower fee means a pay cut to the accountant in many cases, especially if she is also a partner or the owner of the firm. Nothing demotivates faster than a pay cut while the workload increases.
Fees and salaries go hand-in-hand. Clients need to be educated that lower fees mean fewer qualified candidates will seek a career in accounting and fewer qualified professionals available to work on their account in a timely manner.
The tax end of the profession feels the pinch hardest. Finding people willing to work a seasonal job at a high level of knowledge and experience for a seasonal salary has always been difficult.
Tax offices can best meet demand with adequate fees to cover the salaries of their professional team with a reasonable profit for the partners/owners. Tax work comes in various sizes. Business returns are different from individual return. For a tax office to be most efficient they need to focus on the type of client they wish to serve. It is difficult mixing very simple returns with complex return without dedicated staff to handle each type of return separately. Very small office are best served when focusing on a niche. Highly experienced accountants working on simple returns is a poor use of resources and an under qualified preparer working on a complex return opens the firm to litigation risk.
The right compensation package allows you to attract and retain high quality employees. Robert Half provides an excellent salary guide for the industry and there are several resources for compensation of tax professionals. Where you are located also determines how far you deviate from the averages. One thing is clear: Tax and accounting professionals can earn very substantial salaries with excellent work-life balance when handled properly. You want to be one of these firms or work for one.
Accounting and tax firms can maximize their efficiency by dealing with the next area of concern: stress. Reduced stress should lead to higher salaries and profits while providing optimal work-life balance and provided the client with the best value.
Stress is a constant in many accounting offices with deadlines constantly bearing down. Tax offices are even worse during the filing season. There are several way to reduce stress and improve your team’s well-being.
It starts with the client. Some clients increase the stress in the accounting and tax office. Paperwork hastily tossed in a box and missing paperwork tops the list. Everyone in the industry can tell stories about clients from hell: bad records, difficult to work with, constant interruptions. These clients increase stress massively and can drain the lifeblood out of a firm, harming all clients. The faster you disengage these clients the better for your firm and remaining clients. If you are that client you want to reevaluate, as it will become increasingly more difficult to secure a place at a quality firm.
Once you have a clean book of clients that value your work you can now excel at serving your clients.
Certain activities are more valuable to the client than others. Data entry is a low value task that also tends to add to stress when conducted for too long. The high value tasks are the most valuable to the client. High value tasks include planning and consulting.
Clients enjoy constructive conversations (planning and consulting) with their accountant because they feel they are getting value. And they are! No tax professional or accountant has ever created any real value plugging numbers. Business and personal planning — consulting — is a high profit activity for the firm that clients are happy to pay since planning with an experienced professional can yield a return into the three and four digit range. Smart clients are happy to spend $1,000 to save $10,000 or more in taxes or increase their net worth by orders of magnitude.
Consulting is a productive activity that also reduces stress. Professionals want to do more highly productive activities and avoid low value activities as often as possible. Productive is fun and makes clients happy; unproductive work is drudgery.
The issues boil down to managing the rote work activities and workflow.
Stress-laden work (data entry and other mindless tasks) can be addressed with automation, outsourcing or a combination of both.
While I viewed XCM as an outsourcing possibility, I missed what XCM was really all about: workflow.
Workflow is part of the automation process. Efficient workflow reduces stress and errors. GruntWorx and similar services complete many of the basic entries on a tax return. As the technology improves less and less time will be required by the accountant for data entry. This frees time to provide value-added services to the client like deeper tax return discussions, financial statement review and planning/consulting services to increase client’s net worth and reduce taxes.
Drake Software has Secure File Pro (it integrates with their software) as a portal to transfer documents between client and accountant. (Accounts complain endlessly behind the scenes over how much they hate it when clients take a picture of a document and text it because these are so hard to read and save. Document managers solve most of this problem.) SafeSend is another option that works with many of the most popular commercial grade tax software.
Automation reduces stress by reducing the amount of time buried in paperwork only punching numbers. Even if there is no time savings it is worth the added expense just for the reduced stress.
As automation technology evolves into robotic automation, computers will be able to enter more and more of the data on a tax return. The tax professional’s job in five years will be to review returns and consult with the client; the computer will handle the original preparation of the return. This will free more people in the field for more enjoyable and productive tasks, partially resolving the labor shortage within the industry.
Virtually all large accounting firms outsource a portion of their workload. In the last two tax season I worked on applying outsourcing a portion of my office’s work with less than exciting results.
I’m not willing to give up on the idea yet as outsourcing coupled with automation will consume a larger and larger part of the industry in the near future. Even people self preparing will find in the small print some or all of their tax return outsourced (the online software is probably programmed overseas). Fighting the inevitable will leave you stressed with lower profits while your competitors have lower prices, higher profits, fewer errors, spend more time consulting with their clients and have a better work-life balance.
Outsourcing can be integrated with automation and probably should.
Outsourcing also comes in two flavors: domestic and international.
Domestic outsourcing most clients have no problem with. Tax returns are either e-filed or mailed. In either case the data is handed off to another human being outside the firm for delivery to the IRS. This is all domestic and most feel comfortable with the process.
Real domestic outsourcing, however, involves your tax firm getting help from another tax office within the U.S. It might be a branch of the same firm or an outside firm hired to do the work. Domestic outsourcing still has issues with staffing and costs tend to be prohibitive.
International outsourcing is a whole different animal. Before an individual return can be outsourced in this manner requires approval by the taxpayer. Stiff penalties are a strong deterrent for a tax office to play it fast and lose.
Wealthy people and corporations generally are more comfortable with international outsourcing because they frequently have operations and/or investments in international markets. When proper security precautions are in place (using a reputable firm only) there is no reason to fear international outsourcing. I will test this process deeper in the upcoming tax season with clients who give authorization and report back to you.
When I attended the XCM conference I met many smaller firms that are using international outsourcing and making it work. (My first two years were false starts that were also expensive. If you can avoid the problems, especially the expensive ones, you may wish to consider learning from my experience.)
Individual clients are the most apprehensive. My goal is to get 100 clients next tax season to authorize outsourcing. I never outsource any client work unless I disclose to the client first and get their approval. We’ll see how it goes.
With the tax/accounting industry set to grow by 10% over the next decade, more professionals will be needed to complete all the additional work. As fewer people pursue accounting and tax as a profession automation and outsourcing will play a key role in completing work and managing workflow. Without these efficiencies more highly talented people will leave the field for less stressful work and from burnout.
The demand for solid information has never been higher. The Tax Code is complex and getting more so every year. Without automation and outsourcing there will be no time for your accountant to spend quality time with you or they will need to raise fees massively to seduce more people to work for them. The trends are a gift that reduce stress and increase accountant productivity. This is really good for the client and the accountant alike.
If you demand your tax and accounting work be done the old-fashioned way, don’t call me; we are full-up. We use computers to prepare returns, e-filing to file tax returns, use automation where ever we can and would love to find an outsourcing solution so we can handle more of the clients we currently turn away. And less stress would be nice before burnout sets in.
And if you demand I punch all the numbers by hand or you do your own return, don’t ask me any tax questions if you see me at a conference or at the park. I’m just a farmer. I have no idea what you’re talking about.
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As children we dream. We dream unfettered. We dream of traveling to the stars; we dream of life as a policeman, fireman or even a doctor. Some fall in love with numbers and can’t think of anything else. We dream of great discoveries as scientists or helping people reach their dreams and goals financially.
Then we grow up.
Society tells us we must prepare for retirement as soon as possible. The financial services industry breathes and dies by our willingness to buy into their story.
The news feeds are filled with stories of people who started early, saved hard and retired early. As someone living inside said community I notice a pattern. A large majority of people who take a knee at an early age—any age, in fact—go through a predictable pattern. Travel dreams are realized. Some want to golf or fish. After a while golfing or fishing all day becomes the job. Travel turns into a drag. Living on the road looks far more appealing from the outside.
Experiencing new destinations is what people really want. The actual traveling is sheer pain. I’ve never heard anyone say she can’t wait to be sealed inside an aluminum tube with her 260 closest friends for several hours.
Even with travel dreams alive, it is as common as weeds in a garden for people to pick up a side gig (some call it a side hustle) after the gloss of retirement wears off.
Then, there are people who find their calling early and live their side gig from day one. We call these people entrepreneurs or business owners.
Never Ending Story
Whether you find your calling early or after you retire from a “traditional” career, life is best when you discover what provides you the greatest joy. Once you find the activity you enjoy most you begin to build a life and habits around said activity.
Starting a business or side gig requires planning. The one issue rarely addressed is the exit plan. As I look down the barrel of my fast approaching 54th birthday I have to ask serious questions about my tax practice. What if I were injured or got sick? Either event could destroy what I spent a lifetime building.
As we age and accumulate wealth we quickly discover the need for a living will. I propose a significant percentage of people also need to consider an occupational living will.
Vision of the Future
Of all the employees I ever had, Bev is the only one still asked about every tax season. Bev hasn’t worked for me in seven years!
Bev was my first employee. Her skills and work ethic assured my efforts to build a firm were successful. Bev wasn’t the fastest, but she was consistent. And for the record, fast isn’t always better in taxes and accounting.
When I let Bev go it broke my heart. I wrestled with the decision a long time. Her abilities were more than adequate, but bitter Wisconsin winters were taking their toll. Cold air took her breath away. There were times Bev would need several minutes to catch her breath walking from the car to the office door. Her health was more important than a few more years of service.
Bev still comes to the office every tax season to get her return done. It’s a continuing fringe benefit for a rockstar employee. It’s always a good day when Bev walks in the door.
But there was another reason I asked Bev to retire.
When winter turns nasty and the hours long Bev felt the effects. She lost a step as tax season wore on. If the weather added to the stress I could chart the increase in errors.
I review virtually every return in my office. Some get a minor once-over and other returns get a proctology exam. Bev started to lose a step in her 60s when the workload increased and weather added stress. If only I found the fountain of youth to keep Bev at her post.
Dementia is an insidious disease. It approaches gradually. People around you may notice, but we have self-defense mechanism to delude ourselves. We are the last to know our quality is no longer up to par.
Bev is still mentally sound. Stress and health were the real deciding factors.
Lifetime of Love
I was lucky. I found the work I enjoy early in life. As a business owner I can choose my hours and workload within reason. This is a lifelong occupation. If I were to sell my practice I’d probably be doing taxes and consulting on the side within months. (Either that or Mrs. Accountant would hit me with a rolling pin as I started to bounce off walls.)
As much as I love my work I must accept the day may come when I’m no longer proficient at it. Worse, a car accident or cancer could end my ability to serve my clients. In the past the issue wasn’t as acute. The returns I handled back then were more traditional. Now I manage accounts from around the nation, all with advanced issues. Finding qualified staff has been a challenge. Dementia in unwelcome.
I’m not alone in this. The Washington Post had an excellent article dealing with these issues and it’s where I got the idea for this post.
The more you love your calling the less likely you want to retire from it. Unfortunately, the day comes when we no longer serve our clients adequately. That is where an action plan set into place well in advance can protect you, your family and your clients.
Occupational Living Will
Your facts and circumstances will determine the necessary steps in your occupational living will. Below are steps I’ve taken over the last several years in preparation for my demise.
- Create a business bible. Around the time Bev took the long walk I had a come to Jesus moment. I knew the day would come when my body couldn’t cash the checks my mind was writing. Every member of my office team was a part of building the office bible. Every task was outlined step-by-step. Should any employee be on vacation, quit, retire or become incapacitated, there was a guide for each process our company performs. We discovered the office bible is an excellent tool when we get in a bind and it gets regular use. It is also a part of the training process for new employees.
- Create redundancy. Certain people handle certain tasks. In a small office it is hard to have several people working on every project. While it is natural for one person to handle most issues around certain tasks, it is wise to train staff to have at least a working knowledge of other tasks. The increased payroll expenses should be minimal.
- Create a succession plan of ownership. This is hard for business owners. In my office if I’m ever unable to perform my duties I would lose the right to vote my shares. In effect I would lose control of my company to someone already in place and able to make the decisions necessary to keep clients serviced and the company alive.
- Train and train some more. It is almost impossible to over-train your team. Cross train so more than one person is competent in all areas of practice.
- Keep your family informed. Planning for dementia, accident or other disease is not the highlight of the day. Still, keep a copy of the office bible available to family members with additional information on operating the business. Remember, your family will be under serious stress if something happens to you. Provide a guide to make it as easy as possible for your loved ones in your time of incapacity. Be sure to inform family of pass codes and where the money is, including working capital, online savings accounts and lines of credit.
Here are considerations I’ve had a difficult time handling, yet MUST be addressed.
- Find your replacement. It is so easy for me to fall into the trap of I’m so good at what I do nobody can measure up. That’s ego, not intelligence speaking. Once upon a time I had a much larger staff. As my practice transformed into serving fewer clients at a higher level it grew harder to find experienced tax professionals to compliment my talents. My primary goal this year is to find my replacement. Instead of sending me out to pasture I can have more free time during tax season and a seasoned pro to compliment my tax skills. A true win/win situation.
- Work with peer/competitors. At first blush this one sounds stupid. But think about it. You already work with other professionals and businesses in your field. Start a dialog to build bridges for unforeseen personal events. It could lead to a sale or merger of your business. Or, it could compliment both businesses, reducing stress and increasing profits for all.
Estate planning is often put off to the detriment of family. In business it is even more important to plan ahead. Having trusted friends and family in place to guide you through an illness or dementia might be uncomfortable, but it is necessary if you care about your clients, employees, friends and family.
There are alternatives to retiring. Your workload can shift, be reduced or more focused. When you love your work as much as much as I do it is hard to plan for the day it will be reduced or completely out of your life.
But it is still the right thing to do.