Tax Practice of the Future: Three Pillars of Leading Firms

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Technology and demographic mega-trends are creating new opportunities for tax and accounting firms to scale their expertise and deliver more value for clients and employees. We’ve identified three common themes among leading firms on a journey to create their ideal practice, including:

  1. Lead with tax planning
  2. Create an advisory workflow, and
  3. Deliver bundled services.

Lead with tax planning

First, when we ask tax pros if they do tax planning, most reply, ‘of course.’ When we ask if clients know how much the firm saved them in taxes last year, the responses are almost always ‘uh, no.’

If clients don’t know how much you saved them, they are paying for tax preparation. The comparative pricing anchor is what everyone else charges for preparation, but leading firms aren’t billing for preparation. Instead, they focus on tax strategies that deliver quantifiable savings and put those savings in writing.

Advisors communicate the savings annually and often cumulatively. The clients say, “If my Pro can save me $10K in taxes, I would gladly pay them $5K, because I’m still ahead.” That is a radically different value proposition than the $457 fee that NSA says is the average to prepare an individual with a schedule C tax return. Successful firms lead with tax planning, not preparation. And tax planning is the appetizer at the beginning of the menu for additional advisory services.

Traditional firms offer tax planning on a reactive basis, for clients who ask for it. Most traditional firms only provide planning to about 25% of clients, and usually just once a year. Even worse, many ‘planning’ sessions in traditional firms are nothing more than estimate check-ups to prevent under-payment.

One of the primary complaints taxpayers share, is their tax preparer is too reactive. Leading firms clearly message their value proposition as planning and minimizing tax liabilities. They start with tax planning for every client, and the tax preparation is bundled. Leading firms standardize tax strategies, so they can easily plug and play multiple options with different clients. Tax planning interviews create a pipeline of opportunities to more advisory services in the future, which helps power prosperity for clients, and fuels the firm’s growth.

Create an advisory workflow

Second, leading firms create an advisory workflow that supports proactive tax planning. These firms leverage cloud technology to automate bookkeeping and reporting. They collaborate with clients in powerful new ways, which eliminates wasted time for firms and clients. Automation creates capacity in the firm by eliminating non-value work, smoothing tax season spikes, and finally expanding revenue with much higher value services than tax preparation.

Creating this cloud workflow requires training, changes in workflow, and most of all, a willingness to change mindsets. It isn’t quick or easy, but leading firms are willing to invest in people and training to be the best.

Traditional firms continue to nag clients for information to prepare taxes and swap data files that often require significant cleanup during busy season, which results in tax return extensions and more nagging. Leading firms don’t nag clients for information, and many cloud firms finish business returns before the filing due date. Clients are delighted with a smoother process, and it frees up capacity for the firm to do more valuable work the rest of the year.

Traditional firms deliver bookkeeping, cleanup, compilation and tax preparation services, using workflows that create even more nagging to the client for information. These traditional firms inefficiently maintain multiple desktop applications and hundreds of data files which creates IT maintenance work. Traditional firms solve for tax returns or financials that are very late and rarely used to improve operational results and complain that cloud accounting solutions are different, not as good as desktop, or more expensive. In comparison, leading firms recognize the average small business owner spends 21 hours a week on accounting related work, and cloud automation cuts that time in half- making a huge difference for the client and a very easy ROI.

Leading firms replace bookkeeping and cleanup work with onboarding clients, maintaining the cloud platform and connecting the technology pieces, so the business owner can focus on what they do best. Leading firms let the cloud automate 80% or more of the work, and they provide the owner with the key performance indicators in real time. More than two thirds of business owners say they would be out of business if they did not have access to their data on their mobile device, which is also the primary reason more than 80% of new business owners choose cloud applications to run their business.

Poor cash flow management is the primary contributor to faster, there are opportunities to automate some billings as understand the engage regularly with the books and the owner, without having to request information, or swap files, or send back journal entries, or compilation reports.

Deliver bundled services

Finally, leading firms update their business models to align with client’s expectations and leverage automated billing processes to eliminate billing work. For individual clients, they offer three packages of bundled services, which include higher fees and clearly communicate value beyond preparation of tax forms. They get paid before e-filing instead of invoicing after the fact.

For business clients, leading firms offer three packages of bundled services at fixed monthly fees, that provide clients with advisory services to help them achieve their goals. Compliance work is foundational, not the value proposition. Packages provide clients with choices and maintain clear boundaries to prevent scope creep. The subscription billing to the client is aligned and supported by the QuickBooks Online subscription and keeps the client much more engaged with the firm. The business model changes help eliminate the annual transaction where the client disappears for a year and brings in terrible books to clean up during tax season. Bundled services smooths the spikes, automates much of the firm’s revenue and collection process and creates capacity in the firm, which paves the way to deliver additional advisory services.

Building a TPOTF requires a transformation of the firm, that begins with the right vision and mindset. In the next installment, we’ll examine how leading firms create a compelling vision.


Author Bio: Jim Buffington is a CPA and leads the ProConnect Customer Council, supports Intuit’s E-file Security initiatives, and acts as the Customer Liaison for Intuit ProConnect, where he learns best practices from leading firms to share with the profession. Before joining Intuit, he was in public practice for a dozen years as a partner in an East Texas firm preparing oil & gas tax returns. Jim used Lacerte & QuickBooks software in practice, and loves improving processes and technology to drive productivity and better client experiences. Jim’s passion is helping Tax & Accounting Professionals lead with planning and advisory services to help power prosperity for businesses & families. You can find him teaching Tax Pro courses or in TaxProTalk, a video series for ProConnect customers. Jim is an Aggie, he has been with Intuit ProConnect for 17 years. Connect with him on Twitter @jimatintuit