Clarification by Division

Earlier this week my firm issued a press release announcing the formation of a separate subsidiary for its finance and accounting outsourcing practice.

While this does not change what we have been doing in an already-robust business process outsourcing (BPO) operation, the creation of Fesnak Outsourcing LLC clarifies for the marketplace that our work in this space contrasts with the traditional perception of CPA-firm services. It is not the after-the-fact “write-up work” of yesteryear, and it is far more than just an ancillary service among audit and tax.

We are excited about this latest milestone in the maturation of our outsourcing practice and the ability of our new division to continue capitalizing on the favorable growth trends in finance and accounting BPO.

Read the full press release here.

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Thoughts on the 2013 Digital CPA Conference

Along with three of my Fesnak colleagues, I attended the second annual Digital CPA Conference in Washington, D.C. this past week.

As I wrote in a post recapping the conference for Fesnak’s blog, the first Digital CPA Conference was launched in 2012, in response to the proliferation and maturation of cloud-based technologies, which simultaneously challenge traditional modes of operating in the accounting profession while creating exciting and unprecedented new opportunities. While these challenges and opportunities run the gamut from social media to generational trends in virtual/mobile workforces to efficiencies in document management and workflow, chief among the new opportunities is what the AICPA calls “client accounting services” enabled by cloud-based accounting applications.

“Client accounting services” is the AICPA’s term for finance and accounting outsourcing (FAO), a type of business process outsourcing (BPO). I prefer the term FAO over “client accounting services,” not only because it is more widely known, but also because it more accurately captures the breadth of services provided. After all, it is not just accounting; it is financial management, inclusive of financial planning and analysis (FP&A) and virtual CFO services. And “client accounting services” could be anything; the term does little to distinguish a robust BPO offering from old-school bookkeeping or write-up services – ironic, given the AICPA’s aspirations for “client accounting services” to supplant these traditional services with a more value-added, “trusted adviser” role.

Also ironic is that FAO is not at all new; it has been performed for years, if not decades, by outsourcing service providers such as the Big Four accounting firms and, today, by industry leaders such as Accenture, Genpact and Capgemini. What is new, however, is the concept of FAO as a core service offered by small, mid-size and second-tier national CPA firms. Indeed, there is a vast market opportunity for these firms: While the largest multi-national enterprises outsource to the aforementioned leading providers, emerging growth and middle market companies lag far behind in their adoption of FAO (see HfS Research / KPMG study here, and ACCA / HfS Research study here). As these small to mid-sized enterprises (SMEs) enter the market to procure FAO services, who better to meet the demand than the CPA firms that are already entrenched in these market segments?

The 2013 Digital CPA Conference provided plenty of great content from thought leaders such as Simon Sinek, Geoffrey Moore, Jennifer Wilson and others, and I appreciate the AICPA’s efforts to help CPA firms leverage new technologies, optimize new service opportunities like FAO, and navigate change and complexity in general. However, I think the Digital CPA conference is already at a crossroads in its short life. Although the conference addresses a range of technology-related topics, the central theme in both 2012 and 2013 has been cloud-based accounting applications as an enabler for developing “client accounting services.” Many of the sessions were geared toward firms that are just now thinking about, or have only recently launched, such initiatives. This is all positive. But as FAO continues to become a more prevalent offering at CPA firms, there will need to be a conference devoted  exclusively to outsourcing, just as there are audit and tax related conferences.

An “FAO Conference” (I’ll leave it to the marketers and event planners at AICPA to come up with a catchy name) should definitely address technology. But as Digital CPA speaker Bill Reeb noted, technology is just a tool. There are so many other areas that could be, and would need to be, addressed in an AICPA outsourcing conference. These include, but are by no means limited to: pricing strategies and contract negotiations; competition from non-CPA firms; the clash between the new outsourcing services and existing professional standards (e.g., for compilations); best practices in various accounting and financial management processes; KPIs for an outsourcing practice; cultural challenges running a BPO operation within a traditional CPA firm; recruiting talent; organizational structure and management of an FAO practice; outsourcing engagement structure and management; etc. (Certain of these topics were in fact part of the 2012 Digital CPA Conference, but at an introductory level only and were understandably not repeated in 2013’s conference, which was again geared toward very early-stage “client accounting services” practices). The Digital CPA Conference could continue to exist separate and distinct from an FAO Conference, with an ongoing focus on emerging technologies across all CPA firm disciplines.

I am not advocating an FAO Conference for 2014; there is not enough time – or, more importantly, demand – to pull it off that soon. But as the next best thing, I would like to see the 2014 Digital CPA Conference evolve to include separate concurrent session tracks for firms that have more mature and robust outsourcing practices, perhaps addressing some of the areas suggested above.

(Disclosure – my Fesnak colleague Nicole Ksiazek serves on the Digital CPA conference advisory panel.)

Back to School!

Today is Labor Day, marking the transition from summer to fall. While the “newness of fall” is not exactly a familiar phrase like the “newness of spring,” this is a time of reinvigoration in the business world – “back to school for adults,” as I like to say.

In a business context, Labor Day is more of a new beginning than New Year’s Day. Summertime distractions and vacation delays are in the rearview mirror, making it easier to get the attention of customers eager to get things done before the upcoming year-end. A sense of urgency increases to make the numbers before the year comes to a close. Executive teams want key decisions made and in place before the New Year begins. Conferences and networking events will soon be in full swing, generating new ideas and new connections. The rapidly-approaching fourth quarter is a time for strategic and tactical planning, a time to think about the big picture and set goals and objectives for next year, and to develop a budget that aligns with those plans; now is the time to make sure these activities are properly planned and scheduled.

Like the school year, the new business year starts now. Think of it as a fresh start, for yourself and for your business. Approach it with the same enthusiasm you had when you were a kid, boarding the yellow bus on the first day with a knapsack full of brand new school supplies.

Happy Labor Day!

Redefining the Pennsylvania CPA Requirement

The Pennsylvania Institute of CPAs (PICPA) reported on June 19, 2013 that “(Pennsylvania) Governor Tom Corbett signed House Bill 40 (now Act 15) into law… amending the CPA Statute. This law redefines the experience requirement to become a CPA. Candidates no longer have an attest mandate, but they will still be required to complete the overall hours of experience. The law will be effective August 18, 2013. State Rep. Gordon Denlinger, CPA, introduced this legislation to allow the experience requirement to encompass service or advice in any of the areas of accounting, attest, compilation, management advisory, tax, or consulting… Experience hours will be acceptable if gained through employment in government, industry, academia, or public practice.” A snapshot of the “before and after” requirements is linked to here.

I have mixed feelings about the elimination of the attest experience requirement. Selfishly, it certainly makes life easier in the outsourcing practice at my firm. We no longer need to worry about giving our employees attest hours in our assurance group, and temporarily backfilling their roles while they are on audit engagements. I am sure our counterparts in the tax practice are equally happy about this. It should make it easier to recruit new accounting graduates into outsourcing, because they no longer have to worry about how they are going to get their attest hours to earn their CPA licenses.

But I also have some reservations about this new law. CPA means “Certified PUBLIC Accountant.” The key distinguishing characteristic of a CPA is the ability to perform an independent financial statement audit or review, and provide assurance as to the presentation of financial statements in conformity with generally accepted accounting principles. It therefore seems heretical to take the attest requirement out of becoming a CPA. Yes, there are many other aspects of accounting that have nothing to do with auditing. For example, management accounting is recognized as its own discipline – but there are already designations for that: the Certified Management Accountant (CMA) and the Chartered Global Management Accountant (CGMA).

I suppose the problem is that neither the CMA nor the relatively new CGMA are as well-known or understood, nor do they carry the same prestige as the CPA. In contrast, the CPA designation is much more familiar. In business, it is a litmus test of the capabilities of a candidate for an accounting position, whether in public practice or private industry. It is even familiar to the mainstream public, which sees it as an indication of general competency in accounting or tax without necessarily understanding the distinction of being qualified to audit financial statements. In the public’s perception, a CPA in the accounting profession is analogous to a licensed attorney in the law profession. As an attorney may specialize in any number of areas of law, the public sees a CPA as potentially specializing in any number of areas of accounting – not necessarily with any particular expertise in auditing. Truth be told, many of today’s CPAs who met the soon-to-be-obsolete attest requirement have not actually performed any audits for years or even decades. From that perpective, this new law may be viewed as simply catching up to what the CPA designation has already evolved into and what the public perceives it to be.

So what do you think of this new law? What impact, if any, will it have on alternative certifications such as the CMA? Please comment below.