CPAs and accountants: If you want to take your business to a new level, then this will be one of the most important interviews you’ll ever read.
Last year in November, I read a very interesting article on the Accounting Today website, “The Year Ahead.”
One of the experts mentioned in the article was CPA.com strategic advisor, Greg LaFollette. Because I love technology, I was immediately drawn to his insights.
I believe the successful CPA practice of the future will not only adapt to technology but wield it with authority. Technology will equip the CPA practice to truly serve the best interests of their clientele, enabling the CPA to be responsive with strategic guidance at a glance. I don’t think the power of this development (and what it can mean for the modern CPA practice) can be overestimated.
I contacted Greg to see if he would be open to an interview. He graciously accepted. His insights and wisdom came through loud and clear.
This is a lengthy interview, but it’s filled with gold for the savvy, smart CPA who takes it to heart. I hope you enjoy it as much as I did.
Mary Rose Maguire: I love that you’re a technology evangelist. What are some of the advantages technology offers a CPA practice?
Greg LaFollette: I travel a great deal and get to talk to thousands of accountants all over. I would put it this way: in my career, we started the service bureaus. We took data and sent it out to a service bureau and got it back a few days later. We then decided that process took too long so we pulled in the computers onsite – IBM 36’s and 34’s.
We pulled those into our offices and that allowed us to do that same thing in two days rather than 3 – 5 days. So we were doing the same things but just doing them faster. And then in the late eighties, we got PCs that we put on people’s desks and that allowed us to go faster. Then we got networks and that allowed us to go a little bit faster.
All of those things allowed us to do the same things we had always done, but faster and cheaper. Then 8 – 10 years ago, we started to move things to the cloud. We invented what I call “a single source of the truth.”
Both my staff and my clients and I all look at the same thing – so it’s a single source of the truth. We’re all looking at the same GL and the related aspects regarding it. And that allowed us to do things we had never done before.
We had always wanted to do trusted business advisory work. Every client I ever had would walk into my office and say, “Greg, I’m going to start a business…,” or “I’m going to buy a business… I’m going to start a bakery. But I don’t know a debit from a window shade. I would like you to be my partner. I want you to hold my hand in business; I want you to guide me. I’ll bake the cakes and you tell me all the other things. You be my consultant and advisor. My ‘go-to’ person in the world.”
And I’d say, “Oh, absolutely. That’s what we’ll do.” And then they would start and we’d get their data at the end of the month. Then six weeks later, we’d give them a compiled financial statement. And that would be about it. We couldn’t do anything more because of the time constraint and the fee constraint.
One of the problems that whole system created was – I mean… every CPA out there now has five years education, basically a Masters degree, and when they’re doing that, nobody in a graduate course in a B school somewhere… nobody taught them how to do a bank rec. Nobody cared about that.
That’s nonsense work, you know? We cared about KPI’s and business planning but we were so busy doing compliance. And there is no value to compliance. Other than keeping people out of jail. Which is important only if you’re in jail…
So I do that, but you’re a small business and I send you a bill for $800 and you go, “What is this? I’m not getting any value from this.”
I understand. That’s true. You don’t get any value from it. The CPA on the other hand is saying, “This is crappy work. I don’t like this. This isn’t any fun. I’m not really providing value.” And they give the work to the client and the client complains about the bill. Probably rightfully so.
And then the CPA says “How in the world would I sell this person business planning advice and management advisory services? They won’t even pay for the work they have to have done.”
So they mistakenly assume that small business is cheap. And the fact is, small businesses would pay them for those services and kiss them full on the lips if the product they received was valuable.
So you have this huge disconnect. Every small business that I’ve talked to ‒ and I’ve helped dozens ‒ they all say the same thing: “I want my accountant to be my business partner. I want them to help me and guide me but they don’t.”
The CPA doesn’t do these things for their clients. They’re usually saying 1) I’m too busy, just trying to keep them out of jail and 2) they won’t pay for it since they complain about the lack of value in what I do.
Meanwhile, the business client says, “I don’t even know if my CPA offers that service.”
So there’s a huge disconnect. You have a customer who wants to buy it and an accountant who wants to sell it. Every accountant I know would rather sell what I would call trusted business advisorships than compliance. I mean, compliance is tedious work. It has to be done but it’s no fun. And no small business wants to pay for it. But they’re willing to pay for the other service (trusted business advisorship)
MRM: Jon Baron, the managing director of the Professional segment of Thomson Reuters Tax & Accounting business, gave an opening keynote address at the 2016 Thomson Reuters SYNERGY Users’ Conference. Baron cited statistics that show, among other things, that by 2020 the world will be a place where there are roughly 50 billion connected devices; individuals will own on average at least six connected devices per person; and the world will produce 44 zettabytes of data. What do CPA practices need to know about connecting with digital devices?
GL: I’ve worked with Jon and worked for him in the past. He’s a good 25-year friend. It used to be technology was something accountants did. It’s now embedded in one’s practice; it’s embedded in personal life. Accounting isn’t any different than medicine or home-building. We all live with devices being used at one point in time.
There’s nothing special about us. If you think you’re going to do any kind of service and not think you’re going to be able to do it on your mobile phone, you’re absolutely wrong. That’s just the way it is.
I’m a Boomer. I have a milestone birthday coming up in the Spring. I’m “barely sixty.” (laughs) People in my generation – and I’m painting with a very wide brush, here – have resented the idea of anytime, anywhere on a device and 24/7 availability. My peers will say to me, “I don’t want that damn smartphone in my pocket so that someone can access me at any time. I’ll wait until I get to my office so I can read it so I can separate work life and home life.”
That’s their mindset, their worldview. It’s not right or wrong, just how they view it. Millennials on the other hand, say, “I absolutely want my smartphone because I want to be able to leave the office at 2:30, go watch my kid’s soccer game, sit in the stands, cheer my kids, and get an email from a client and answer it, then go back to watching my kid’s soccer game and then later maybe going back to the office.”
They view it as a freedom, not a constraint. So it is a different worldview.
To be honest, I’m really not that excited about devices. It’s like electricity. They just make things happen.
I will add that the #1 driver (ahead of money, ahead of working conditions) new accountants coming into the profession look for when evaluating whether to work for an accounting firm, is tech adaption.
So the firm that has adopted technology and adapted its practices to take advantage of that technology – that is what the new accountant will look for.
MRM: How have the expectations of accounting clients changed over the past 15 – 20 years? Is there more of an expectation of accessing their accountant online and through mobile devices?
GL: Yes, there is a 100% expectation of digital access. However, that digital access and the expectations of using it follow generational lines.
So if I’m a Boomer and I’ve been serving Boomer clients over the past 10 – 20 years, it’s highly doubtful they’ll come to me and say, “I absolutely insist I must be able to send you documents through your secure portal.”
If you say to that same client, “If the bank that served you for years closed and you had to go find a new bank, you’d talk to an account manager and tell them what you needed. Then you’d ask for the web address to use the banking services online.
If that bank said, “Oh, we don’t offer e-Banking services,” you’d likely then say, “Okay. Bye.”
The same goes for planning a trip. The airline you chose… you wouldn’t have even seen that airline unless you had been able to access them online.
It used to be just exchanging documents. Now the expectation is to allow the client to see his general ledger onscreen and be able to look at it at exactly the same time as the accountant.
I’m a big advocate for video calls for many reasons. I tell accountants that if I were still practicing, I would put Zoom on the desktops of every one of my preferred A-plus clients. I would say to them, “If you ever need me, just push that button and I will be here.”
Because that’s what they expect. They’re looking at their GL and they have a question. I would make myself available with the push of a button. Now there are times I’m not there and not available. But if a client did push the button and I was there, then we could immediately look at the GL together and we could say, “It’s this or that…” and “We should do this or that.” It still has miles to go before it happens, though.
MRM: What are the top 3 – 5 challenges you see accounting firms face for the next ten years?
GL: One of them is the talent war. Finding and attracting appropriate talent. Globalization is a huge problem.
When you talk to smaller accounting firms, I’ll ask, “How many of you do international work?”
Maybe 10% – 15% say they do. Then I ask, “How many have clients that deal internationally?” And around 85% – 90% of the hands go up.
That’s changing faster and faster. So the whole idea of globalization is becoming really, really important.
The long arm of government in regulation – all of sudden, sales tax is incredibly complex. There are 4,500 taxing districts in the US and over 35,000 different tax codes to follow. Depends on who buys it, where it’s bought, where it’s delivered, how it’s paid for, all of those things – all to determine who gets the sales tax. So that’s just one part of regulation.
So you have talent… globalization… complexity…
Technology isn’t a problem, but it’s both an opportunity and a threat.
The opportunity is to create that single source of the truth, to create a place for their clients where it’s helpful. The hard part comes with all the little add-on products that the client needs.
They may need a gardening app, or if they’re a florist, an FTP app. The accountant then has to act like a plumber where they hook those things together and make sure they stay running.
That’s both an opportunity if you can make everything work but a threat if you can’t.
The last one is ultra-specialization – having an incredibly hyper-selective client base. When I first started in the 70’s, we focused on clients that had the same first three digits of the zip code in common. As long as they lived in our community, that’s who we served.
Now I’m seeing more and more firms that are ultra-specialized. There’s a firm in Bloomington, Indiana who specializes in optometrists. They have 800 optometrists that they serve in the country. That’s all they do.
So if you graduate from an optometry school… they’re going to say to you as you walk out the door to set up your practice, “Call Darren. Because he’s the guy. He knows more about this business than anyone. He speaks at the national optometry convention, and they know everything about the business. They know the metrics.”
You couldn’t do this without the cloud. The vast majority of his clients, he’s never met. He doesn’t have to.
A guy in Dallas serves large animal veterinary clinics. Another guy from Sacramento does churches. Small churches. He doesn’t charge very much but he has over a thousand of them. All throughout the country. That’s all he does.
That kind of specialization disrupts the local CPA who says “I can do anything. I can help your business.”
But the competition isn’t the other CPA down the street. It’s now the guy in the trade magazine. Or the guy who gets talked about at the conference. Or the buddy you went to school with and he’s a pediatric dentist. And he says this guy is from a CPA firm where all they do is dentists. In fact, they’re called the Dental CPA. That’s a change in how the practice works.
It’s better for everybody. If you think about it, what causes that is automation. So if you think about automation as a big circle – it can be a virtuous circle or a vicious circle, depending on your perspective. But automation is a fact.
So, for example, if you’re using QuickBooks, accountants used to collect transactions, record them, classify them, move them in the right spot, organize them into a general ledger, etc. All these online products now do that. They go to the bank, they pull this information in, they look at it, categorize it, they get smarter and smarter and smarter. Artificial intelligence is happening.
All those people who traded keypunch for dollars… they’ve been disintermediated. Because now, that sort of work has been automated. It’s been commoditized. Automation causes commoditization.
So what do you do when you’ve been commoditized? You have to figure out a way to differentiate yourself.
So if I want to differentiate myself, I say, “Okay. I’m going to differentiate myself by only dealing with Hallmark card shops. I know a woman in Indiana where that’s all she does.
Her differentiation was to specialize in Hallmark card shops. Once you specialize, what comes next? You start streamlining the processes for Hallmark card shops. In doing that, you automate Hallmark gift shops. So now you’re back at the top of the circle, and the stuff you’ve been doing now starts to become a commodity ‒ because it’s now been automated.
So you go back around the circle again. You don’t stop and say “I’ve arrived.” But that’s the circle of life.
MRM: How can an accounting firm combat the increase of automated services and remain viable for the future?
GL: You can’t combat it, at all. This is what’s happened with the cog-based systems. Because of the incredible horsepower that publishers put behind those products and because the cloud has such an incredible amount of data ‒ Intuit’s, QuickBooks’ ‒ they have two million small business users creating hundreds of thousands of transactions every minute. And all of that data is there for Intuit to mine and understand at a very high level.
Firms can help each small business user understand these things. So now you have Siri on your iPhone and Amazon Echo voice recognition coupled with artificial intelligence.
Intuit just showed their new chatbot. You can now click a button and say something like “How much does ABC Company owe me?” And the chatbot will come back and say, “They owe you $8,412.00 from invoice number #123456. It’s due next week. Do you want me to check on the rest of their invoices?”
And you can ask, “How much do I have in the bank? Do I have enough for payroll?” And it will answer all those questions. That’s pretty powerful. So the accountant has to stay ahead of that automation, which is mostly feedback stuff.
MRM: What do you think are some common mistakes accounting firms make with marketing?
GL: Multiple things. 1) They don’t do any. 2) They think marketing is a logo. 3) They think a logo is some combination of the first and last initials of the names of the partners, and they confuse their professional standards with something that is desirable from their potential clients.
So they talk about independence and professionalism. Meanwhile, their clients are looking at them and saying, “Hell, I don’t want someone independent. I want you to be my advocate!”
Lots of Baby Boomers, me included, started in the profession when it was unprofessional, even illegal to advertise. Instead, you were expected to advertise by attraction.
The illegality was called “encroachment.” I could not call a client or talk to a client about providing services. If I was having dinner with someone and they complained about their accountant, if I was an accountant, I could NOT say to that person, “Well, we provide that service. “ That was encroachment and it was illegal.
I was required by professional standards to call that other accountant or CPA as soon as possible and let him know that his client was unhappy with him.
So there are still people in practice who remember that. They look at all forms of advertising as being unprofessional. It’s improper.
I think the biggest problem with marketing is the lack of specificity. General marketing just plain doesn’t work and probably shouldn’t. Just trying to explain to an accountant the difference between branding and lead gen is a challenge.
They’ll say, “I put up a website and didn’t get any leads.”
I want to say, “Yeah… I went fishing and didn’t catch any ducks.”
By and large, none of them have an “elevator pitch.” None of them can say to you what they do in under 30 seconds. They’ll say something along these lines, “Well, we offer audits and reviews and compilations of sales tax preparation and all extended services.”
And I’ll say, “What does all of that even mean? I’m a consumer. I don’t want to buy any of those things. I want you to hold my hand.”
The smart ones have figured out that consumers buy people, not things. Referring to the well-known Simon Sinek TEDx talk, consumers buy the “why,” not the “what.”
The successful accounting firms – and there are some that are scary because they’re so successful making so much money with this and doing really good work – are focusing on ultra-specialization and with this very, very narrow focus and being very clear.
And their pricing model – the smart ones have completely thrown out the billable hour. Nobody who’s smart keeps a timesheet anymore. Even the act of recording time says to you and your staff that “our value is time,” and really, that’s not your value. No client ever came to me and said, “I want to buy four hours of your time.”
Instead, they want the results of that time or a very specific outcome. So the smart ones have come up with service packages. And they say, “Okay, Mary Rose. You’re starting a consulting firm. We have three packages we can offer you. A basic business startup compliance service. Or an intermediate advisory service. Or a “red carpet concierge” service.
And here are the things that are included… For the basic service, here is what you get: for $600 a month, we do your payroll, we pay your bills, we give you a financial report, do your sales tax return and we’ll meet with you for a half-hour once a quarter.
For the intermediate advisory service, we’ll provide analytical support and meet with you for an hour every month and help you with your projections… You check the boxes off a list and show them everything you do and say that costs $1,200 per month.
And for the concierge service, we’re available 7/24, we’ll meet with you in your office twice a week, we do all these things and that’s $3,000 a month.
So those are our packages.
And because people can look at these options and evaluate them, they’re more likely to hire the firm to help them with what they need. People like choices and they like predictability.
MRM: What are some of the more successful marketing tactics you’ve seen CPA practices use?
GL: Service packaging and pricing. I’m not sure if that’s considered marketing but if you don’t have that, it doesn’t matter how your market it, you’re not going to sell it.
You can have the best package in the world, but if the client comes through the door to look at your product and discovers your service sucks, then all the marketing in the world won’t fix it.
Product and service excellence isn’t a competitive advantage or differentiator. But those accountants who are ultra-specialized and deal with a niche? They really don’t have to market. Their phone rings anyway.
If you find a niche that is small enough to control but large enough to matter… now I’ve talked to accountants about this. They say, “Oh, we’re specialized. We work with those in the construction business.”
And I’ll say, “That isn’t a specialty. What… are you serving Peter Kiewit who built the Aswan Dam? Or some guy who came in and put a countertop in my kitchen? Both are construction.”
The accountant who specializes in Hallmark card shops doesn’t do retail. She has an ultra-specialized service.
MRM: If you could look into a crystal ball, what types of changes do you think accounting firms will need to make in order to be successful in the future?
GL: There are all kinds of things but I keep coming back to 1) they have to realize that technology is a part of what they do. It’s not something that you advertise (technology expertise). It’s important regarding the way you interact. I try to encourage accountants to make sure they understand all new technology.
It doesn’t mean they have to be proficient. Just understand it. So if you’re serving restaurant clients and you don’t understand Open Table, Yelp, Seamless, GrubHub ‒ and what they mean to a restaurant ‒ and how they work, how it impacts their business, then you can’t be helpful.
You don’t need to know all the ins and outs of them, but enough to be conversant. So I do two things with accountants. I do all of my scheduled calls via video and I use it as a measuring stick. Because if someone won’t do a video call with me (unless they’re driving… then that’s a bad idea), if that causes difficulty, then that says something about you.
It says “I don’t consider technology important. I’d sooner do things the old way.”
Another thing I do with accountants who claim they’re technologically advanced and cutting-edge, is after our conversation, I’ll send them $5.00 worth of Bitcoin and say, “Enjoy a cup of coffee on me.”
And then I watch my Bitcoin account for 30 days. And when the $5.00 is never claimed and goes back into my account, I know they’re a fraudster. They’re not technologically advanced. They say they are, but they’re not.
I’ve had new CPAs say to me, “I don’t text. I don’t like to text.”
And I say, “You know what? You don’t get a choice.”
You’re talking about a huge amount of new businesses that are being started – and Boomers don’t usually start businesses – Millennials start businesses. Gen Z are starting businesses. And Gen Y doesn’t even like text, they’re using Slack.
You have to meet your clients where they are. In the old days, the professional got to set the rules – “You meet me in my office. Hold your hat in your hand while I’ll talk and then I’ll send you a bill for an hour.” Those days are gone.
MRM: What question didn’t I ask that you wish I did? And yes, please do answer.
GL: There are around 150,000 accounting firms in the country. 50,000 of them are CPA firms. The other 100,000 are bookkeepers, QuickBooks advisers, etc.
The top 100 firms (all CPA firms), the 100th firm ‒ how many people do you suppose that 100th firm employs?
GL: Half of that… but it was a good guess.
The 500th largest firm has 18 people. So all firms are extremely small businesses.
When I speak to accountants, they always come up to me and say, “Oh, I’m from a very small firm.” And I laugh and say, “All firms are small firms! 4, 5 or 6 people… most are small practioners.”
So they’re very, very small and need a lot of help.
MRM: Thanks so much for your time, Greg. This was a great interview.
About Greg LaFollette:
Greg is one of the most recognized and respected voices on technology within the accounting profession. He has a broad background in the field, having spent time in private practice, as an executive with a top-tier technology vendor and as an editor of a leading publication keyed to accounting technology. He is also a sought-after speaker at trade shows and conferences.
Prior to joining CPA.com, Greg was a consultant to public accounting firms and to technology vendors with a focus on the accounting profession. Additionally, he was the Executive Editor of TheTechGap — the country’s first blog specifically created for the tax and accounting profession and for vendors who seek to serve that community and Senior Manager of Tax and Technology Consulting with the Top 25 firm of Eide Bailly, LLP.
Earlier in his career, Greg served as the Executive Editor of The CPA Practice Advisor (formerly The CPA Technology Advisor), VP of Product Strategy at Thomson Reuters Creative Solutions, and founding partner at LaFollette, Jansa, Brandt & Co., LLP in Sioux Falls, SD. He served on the AICPA’s CITP Credential Committee (Chair), the National Accreditation Commission (ad hoc via the Credential CITP Committee), and the Top Technologies Task Force, the TECH+ Planning Committee. He serves on the Technology Advisory Board of the Journal of Accountancy where his column, “What’s Your App-Titude,” is printed monthly. He appears on Accounting Today’s list of the Top 100 Most Influential People in Accounting, the CPA Practice Advisor’s Top 25 Thought-Leaders, and was inducted into the Accounting Technology Hall of Fame in 2011.
Greg completed his professional training at Augustana University (SD) and is a CPA, a CITP, a CGMA,, and a member of the AICPA Information Technology Division. He is a graduate and former staff lecturer at the AICPA’s National Tax Institute.
He and his wife Kaye have one grown daughter and choose to live in their hometown of Sioux Falls, SD where he chairs the City’s Board of Ethics and is a volunteer’s as a high school speech coach.