HOW TO TAKE THE FIRST STEPS TO A LUCRATIVE VIRTUAL CONTROLLERSHIP/CFO BUSINESS MODEL A Special CPA.com Webinar May 11, 2015

Thomas R. Gawne, CPA

Professional Services Systems Engineer

29 years in the tax and accounting technology sector

Consultant, Facilitator and Presenter

Introductions

Empowering CPA’s and businesses for the Digital Age

CPA.com is a subsidiary of the AICPA

 

Nicole M. Ksiazek, CPA, CGMA

Manager, Finance and Accounting Outsourcing

Blue Bell, PA Office

Over 18 years of experience with a specialization in optimizing accounting processes through software applications

McGladrey works with growing, entrepreneurial organizations with sophisticated needs, issues & complexity

Key industry verticals:o Consumer Productso Private Equity and Venture Capitalo Technology and Business Serviceso Manufacturing and Distributiono Life Scienceso Clean tech and Alternative Energyo Family Officeso Multi-unit Restaurants

Our Agenda

Opportunity in the Cloud

Niche Example

Key Elements to Success

Next Steps

The Second Industrial Revolution - 2010

“The full implications of the new machine age are going to take at least a century to play out.”

 - Erik Brynjolfsson, MIT Professor,

co-author NY Times Bestseller “The Second Machine Age”

Source: TED Talk (Feb. 2013)

Growth of Cloud Computing

And Many Others

Small BusinessHas Moved to the Cloud

Network growth: >150% last year$150M recently

raised

QuickBooks® Online 500K users

Paychex Equity Investment

Efficiencies saving 90 minutes per employee per day

Serving over 10k firms and top US banks

$45M recently raised

Moore Indicates That We Have Crossed to Early Majority…

Inno

vato

rsEar

ly A

dopt

ers

(Visi

onar

ies)

Early

Maj

ority

(Pra

gmat

ists)

Late

Maj

ority

(Con

serv

ative

s)

Lagg

ards

CHASM

Helping Firms With Adoption Curve

Firm Solutions

CPA Profession

1990

2000

Today

Transformation of Client Accounting

Today’s

opportunity

Cloud-based

Integrated

Paperless

Dashboards

Real-timeSmall businesses push work back to firms to

focus more on their business

Role of firms reducedQuickBooks introduced

to small businesses

Accounting Services Today

The Opportunityo Ride the wave of demand for outsourcingo Leverage cloud technology to achieve productivity

The Challengeso Commodity practiceo Low marginso Hard to scaleo Hard to upsell to higher value “virtual CFO” services

Firm Value Chain

Input Data

Assemble

& Verify

Report

Analyze &

Interpret

Advise &

Consult

Higher Value & Future Focus

Lower Value & Historical Focus

What is Needed?

The Roadmap to Success• Model for evolving Accounting Services as a practice• A guide to technology investments required• Change management strategy – internal and external

What is Needed?

3 Key Strategic Decision Points

Determine current and desired state of your client accounting service practice

o Evolution of client accounting services

Identify technology investments appropriate to stages of transition underway

Organize change management around specific business practice transformations and technology deployments

o Orchestrate change initiatives that minimize wasted efforts and maximizes lasting improvements

Getting Vertical Through the Cloud

Business Intelligence Reporting

Real-Time Client

Collaboration

Standardized Workflows

Client Accounting Capabilitie

s driven through cloud

computing

• Professional Services –

90%

• Construction – 76%

• Retail – 75%

• Not-for-Profit – 73%

• Manufacturing – 65%

• Wholesale Distribution – 61%

• Technology Companies – 59%

• Transportation – 48%

• Hospitality – 45%

• Franchises – 40%

• Government – 29%

Most Popular Client Verticals for Outsourced Accounting Services

A Restaurant Niche Example . . .

Passionate about the food service industry

Why t

he R

est

aura

nt

Indust

ry?

Today: Disconnected Systems Ideal: Connected/Holistic

QuickBooks POS Payroll

Manual Processes

Restaurant Managers

Many checkbooks

Several locations Bookkeeper Inventory

Restaurant Group

To Transform Restaurant Accounting

Significant Growth Opportunity

• Vertical Growth – distributors & suppliers• Customer Loyalty & Financial Reporting • Management Accounting & Restaurant Consulting• Scalable from 1 to over 1,000 clients• Leads to other Niche areas – retail, hospitality,

private clubs, franchises, etc.

Are you keeping up with the growth?Why t

he R

est

aura

nt

Indust

ry?

Typical Restaurant Structure

M-ConsoleShared

Corp Restaurant 1 Restaurant 2 Restaurant 3 Restaurant 4

CompanyM-Console

Company, Inc.Currency USD

CompanyCurrency: Cayman

CompanyCurrency: Cayman

CompanyCurrency: Cayman

CompanyCurrency EUR

CompanyCurrency: EUR

CompanyCurrency: CAD

CompanyCurrency: GBP

Consolidations 1Currency: Cayman

Consolidations 2Currency: EUR

Consolidations 3Currency: USD

SIMPLE

COMPLEX

Single Accounting Console• One common set of data across all locations• Locations are created within single

transactional environment• 1 TIN for entire company for all locations• No ability to manage locations independently• Books maybe balanced by location and/or by

entire company

Multi-Entity Shared• Shared Data

• Chart of Accounts, Customers, Vendors etc.

• Single Intacct Database• Single Base Currency

• Each entity may be managed independently or from top

• Books maybe balanced by entity or by entire company

• Consolidations performed from top level

Restaurant KPI Examples

KPI’sNumber of table turnsFood categoriesTurnover of total roomGuest Counts (growth)Per person AverageControllable IncomeAverage Ticket PriceFood & Beverage MixHistorical vs currentTotal # of seatsComps

Other MeasurementsPrime Costso COGS + total labor + ee

benefitsFood & Beverage Mixo Revenue 60/40 averageo COGS 33% food; 25% bar13 week periodsLaboro Mgmt 4%; direct 14%;

other 5%EBITDA: 25-28%

Restaurant operatorso Scrutinize food and

beverage costso margin by menu itemo by location o by server

> Business actions that increase gross margins

Role-based dashboards

Management by KPI’s

Reporting Examples

Food Sales

Liquor Sales

Other Sales

Food Sales

Food Costs

Food Margins

Trusted CFO Solutions – Our MethodAlternatives to pricing your services based on client-perceived

value, rather than hours spent

AssessmentPhase• Discovery• Assessment• Recommendations

ImplementationPhase• Project Planning• Prioritizing Goals• Take Action

Client Services• Back Office

Accounting• Virtual CFO• Cloud based

Solutions

Fixed Fee Products & Services

Ron Baker says:

“Billing ≠ Pricing”

The Critical Pieces of Getting Started

Learn About and Build out Your Roadmap Champion Needed to Lead the High-Value CAS FirmIt starts with the Business PlanDon’t go it alone – Employee, Professional and Client Advisory BoardsThe standardized practice & “Getting Vertical” Mandatory Client Assessment as a stand-alone engagement“Before-and-after” presentationEngagement Letter and Service Level AgreementProcedures Manual (shared with client)New Client OrientationNew Client Training

o Technologyo Financial Statements, KPIs, Critical Success Factors

The Standardized Practice

Consistent/standard Chart of Accounts (COA) as one package price. Premium fees for a custom COA

Standardized services by industry vertical and by type of service

Standardized Internal Management Reports/Services

Procedures Manuals for each client

Service Order Requests for services outside of the engagement agreement – retainer always on account for these requests and for “concierge” services

Dedicated client-service staff to provide top client experience, while sheltering our production staff

Client Accounting Services

The services offered within Client Accounting Services groups generally fall into three categories:

Financial statement preparation using the accounting data provided by the client, which often requires compilation

Transaction processing, such as entering accounts payable, receiving approval for payments, sending payments

CFO/Controllership services, includes reviewing financial performance and providing input and strategies to improve business processes and performance

Increasing Firm/Client Collaboration

The economy requires closer CPA firm and client collaboration to deliver better financial advice, help them make faster, smarter business decisions and improve their financial performance

Real-time vs. after-the-fact decision making

Firms are focusing on technological improvements to enable heightened collaboration and are making the following shifts to their client accounting services practices:

Client Accounting Services

• Firm typically has 25-200 clients

• Clients have $1 - 5 Million annual revenue

Firms are charging value-add bundled retainer fees for these services – $1,500 - $5,000 / mo.

Most Common Services:

• Financial Statement

Preparation

• General Ledger/Trial Balance

• Payroll Reporting

• Cash Flow Management

• Payroll Preparation

• Transaction Processing (BPO)

• Virtual CFO ServicesMajority of Outsourced Accounting clients have between 5-25 employees

CPA Firm Client Accounting Services Profile

Service Delivery Platform

The service delivery platform is a term used regularly in the “cloud-computing” world

o Defined as the available technology components and/or solutions that will be used in the client accounting service delivery model

For example: could include the following integrated business solutions

o Intacct Financials-on-demando Bill.com cash flow and bill management o Paychex integrated payroll serviceso XCM workflow management

Steps in the Prospect-to-Client ProcessQualification of prospect / analysis of existing client opportunities

Learn how at the Client Accounting Workshop!

Cost Estimating Tool

Defining the Scope

Assemble Your TeamPartner-in-Charge CAS Business GroupBusiness

Development Marketing/Sales,

Finance, Human

Resources, Technology, etc.

Director of Client Accounting Services

Virtual CFO

Implementation & Client Support

Services (separate positions as the firm grows)

Client Relations (Client Scheduling,

Contract Maintenance, Client

Satisfaction)

Virtual Controller

Accounting Manager

Accounts Payable

Accounts Receivabl

ePayroll

Plan

Marketing – Top Firm Challenges

Client Accounting Services has not been adequately positioned and sold “within the firm” so is not positioned for success publicly.

Limited resources and lack of year-round consistency

Strong reliance on passive word-of-mouth for sales

Focus on developing sales through new customers

Limited market intelligence and ongoing research

Lack of complete budgeting and ROI reporting to measure results vs. expectations

Segmenting Your Market

Firms who have successfully identified and built their marketing and services around industry verticals are able to get the most from each marketing dollar by specifically targeting WHO they need to reach and WHERE.

In the CAS practice, clients expect us to know more than they know about how to win in THEIR industry in addition to ours. Firm marketing materials should demonstrate that we “get it.”

Types of Marketing Activities

Marketing Activities

Present at Industry Events

Georgia Restaurant Association

Webinars

Whitepapers

Client Testimonials

Case Studies (Simple & Complex)

Interviews and Articles in Industry

Publications

Connect with Restaurant Owners

• Speak to the chef, compliment food, decor, service

Establish a rapport

• Ask what systems they use, offer recommendations for issues, tell them you’re establishing a niche, get feedback

Give reviews and feedback

• Post comments on Yelp, Open Table, Food Spotter, Social Living. Tell them you are; tell them you did.

Attend Events

• At their restaurants, Taste of Atlanta, Dine America Gala, Georgia Restaurant Association, Culinary Colleges

Other Workshop Topics

Engagement letter templates and service level agreements

Key cloud based solution case studies to build the model

How to build your business plan

Key performance indicators (KPI’s) success factors

Rich virtual toolbox of templates and documents to complement

Collaborative engaged exercises to enhance learning

Small facilitated group to enable shared learning amongst participants!

Join Us for Our Next Workshop

Seats still available at our Chicago, IL Workshop!June 11th & 12th

Illinois CPA Society550 W. Jackson Av., Ste 900Chicago, IL 60661

Sign-up: CPA.com/casworkshop

*Save $300 when you register by 5/15

Join us to learn, engage, and develop at this year's Digital CPA Conference...• Engage with thought leaders and peers• Develop the critical skills required to address key issues impacting today’s

accounting practices - from technology implementation and practice management to evolving client expectations