Just came across a great post from Simon Sinek titled

Don’t Trust Companies Who Put Customers First

We couldn’t agree more and have created a firm culture based upon this philosophy.

Firm Culture.

We take care of our firm, its members and their families first. We are our own best and most important client. We are each individually committed to our own success and that of our firm. We recognize we are personally responsible for that success. The success of our clients is second only to the success of our firm and team members. We strive to do more than our clients expect. We believe that our development as knowledge workers is the keystone and engine of the intellectual capital of our firm and we are committed to that development. We are intellectually honest, ethical contributing members of our profession and community. We reward creativity, innovation and responsible risk taking. We always seek greatness, both individually and as a firm.

“Rumors of my demise are greatly exaggerated.”  While I’ve been absent from the ‘blogosphere’ for a week or so, there actually was a reason.  I could think of no other way to sneak in the following post.  By being ‘gone’ I’m hoping the blasphemy of suggesting that time sheets may in fact have some value will slide under the radar.  Ok.  Here goes.  Time sheets have value  -  in a cost accounting context.  There.  I said it.

The traditionally accepted  business model for medium and small accounting firms is predicated on a revenue model that is cost based.  Value is driven by cost, and  cost is calculated as hourly rates times hours worked.   Hourly rates are established by comparison to other firms in the same market.  And then of course you have to accept the premise that every firm has identical expertise and will require the same amount of ‘hours’ to complete the engagement.

So if you have an average hourly rate times an average number of hours you have the value of the service provided.  Right?  Wrong! You may have your ‘cost’, but you absolutely, unequivocally do not have your value.   Cost accounting 101 – value is not a derivative of cost.  What you can reasonably expect to realize (value) determines the amount of  costs you are willing to incur to deliver that specific product, not vice-versa.    So why are you predicating value as a function of cost, and you are by accumulating hourly rates and billing them to your clients as the value of your services?

Typically I’ve railed against using hours and rates because I believe they under estimate value.  But be careful.   That knife cuts both ways.  In our current market, the use of hours and rates as a basis for a proposal can almost guarantee you won’t be successful.  In 35 years of practice I’ve never seen a market as cut-throat.  Frequently in our firm it has gotten down to one question.  “How bad do we want it?”  When considering any unique advantages we would normally expect to get an advantage from (industry expertise, idle capacity, contacts, etc.) we use them to get to our ‘walk away price’.  (The amount we won’t go below, regardless).  Certainly we consider ‘cost’ in proposing on an engagement, but we consider it in light of what we believe we can price the engagement at to determine our level of interest.

How do we determine ‘cost’?  Not by a standard rate.  There are other more relevant metrics.  That’s another post.  How do we determine ‘value’?  It’s unique to each potential engagement and to your firm.  Do you have a Pricing Committee?  You should.  Let’s talk about that next week.

Recently Ed Kless, my good friend and Verasage fellow, penned a post on the Verasage web site titled Ed’s Top Ten Business Myths not so subtlety challenging  the historically accepted common body of knowledge that while possibly once valid, has seen little evolution and virtually no innovation in the last 100 years. Given the intellect and sophistication of our professional peers, it is perplexing that we continue to march in lockstep to the beat of an 1800′s drummer. Why does no one challenge or question? Where is the innovation. We know it’s not because the current business model is perfect.  In fact it’s not even ‘good’. So why? In the Allegory of the Cave, Plato sought to answer that question.

Socrates is addressing his student, Glaucon, and describes a ‘world’ where the inhabitants are chained in a cave facing forward, allowing them to see only the wall in front of them.  Projected on that wall, are reflected images of animals. The voices heard were attributed to the images, and since they could not turn their heads those images and voices became their false reality.

Ultimately, one prisoner is taken to the outside world, sees the sun and is exposed to reality.  Ultimately he is returned to his original habitat, but can no longer accept that false reality. When he attempts to share his intellect with the other prisoners he is rejected because it is of course more comfortable and less threatening. A regression to the familiar by the other prisoneres,  if you will.

So ultimately it is the individual choice of each of us to accept the reality of others through their projected images – the accepted body of knowledge and how things are done – or to question that intellect in search of a better business model for service providers.

Going back in the cave is not an alternative.

Great News to report.. Mark Bailey and Company has again been selected as one of the 2009 Best Accounting Firms to Work for. What makes our firm different and sets us apart? Our people.

Seems like a simple answer yet we truly have great people who have a passion for what they do. Employees who enjoy coming to work each day, are respected and know they are an integral part of the firm enable us to provide a work environment that sets us apart.

Last Fall I posted on the benefits of using Client Service Agreeents (CSAs).  One of the truly great benefits to your firm is obtaining concurrence with your client on a schedule of payments in advance of doing the work.  It is a practice management tool that is increasingly more important in our current economic environment.  But here’s the best part!

Recently members of our management team were reviewing software options for project management.  During a web presentation by our British friend and Verasage Senior Fellow, Paul Kennedy of O’Byrne and Kennedy of their software designed primarily for ‘pricing firms’  we were discussing CSAs.  Our document template is very similar to his, with one glaring exception.  Paul includes an automatic bank wiring authorization form.

By signing it the client instructs their bank to wire the agreed upon amounts on the agreed upon dates in advance or concurrently with the work being completed.  Simple, effective and brilliant.  While this works best for those of us who ‘price’, it has definite possibilities for you time sheet junkies as well.

CPAs like to get together to compare notes and try to solve the world’s problems. At one of these meetings, a fine group of partners were discussing their teams, especially in light of the recession.

When  the discussion turned to  the current economy the general consensus was that this was an appropriate time to reduce overhead by firing marginal  team members – thinning the herd.  I have two very significant problems with this concept.

Read more…

Much has been written about the deficiencies of Millenials, all totally irrelevant in my opinion true or not (and mostly untrue), but what about the Gen Xer’s?  As the current and future generation of business management executives are they worthy of receiving the torch the Codgers (those born between 1945 and 1957 who prefer to be called ‘baby boomers’ and can be identified by their bell-bottom slacks and bee-hive hairdos) want to pass them?  Can they handle it? Read more…

Some of the most common complaints expressed by our assurance seniors are that the client “didn’t complete the schedule request properly, or provide adequate support timely, or apply the appropriate accounting principles properly, or, or, or, yada, yada, yada”. And correspondingly the audit team didn’t meet, or, had trouble meeting their due date. (We assign due dates for projects based on budgets, and allow the team members to determine when, where and how they will perform the engagement, rather than attempting to micromanage their time and daily lives.) After hearing this refrain / excuse for the umpteenth time during one of our recent after action reports for a very good client, I reminded the offending senior of the purpose of our use of Client Service Agreements and why we have change orders. Read more…

Long known for our inability to communicate effectively either orally or verbally (yes there is a difference) as accountants we’ve found new facades to hide behind. Our communication with our clients is typically limited to brief general conversations, and written communications mandated by professional standards, such as engagement letters. The email / text message / voice mail have supplemented the traditional letter facilitating the anonymity so many in our profession seem to prefer, with the frequent result being misunderstanding or no understanding at all. Read more…

In the years since I began practicing, our profession has changed radically.  I do not want to sound like my parents and grandparents who lamented the passing of the nickel candy bar, 1 cent stamps, and walking to and from school ( up hill, both ways in the snow of Southern California), but are we progressing or regressing in terms of advancing the profession of public accounting and making it an attractive career?  What are the underlying currents that influence or even drive change? Read more…