Category: News

Robotic process automation (RPA) has advanced quickly in just a few years. In a short amount of time, both the number of RPA providers and the range of capabilities have greatly increased.  So much so, it can be difficult to keep up with all the changes.

This leads to the misconception that RPA is either too complicated, too costly, too technical or simply too difficult, for small or medium-sized businesses to put in place. While these statements may have once been true, that is no longer the case. Today, the wide variety of available options mean RPA is now for everyone. The barriers to entry have dropped so now is the right time to reconsider how automation can help your business.

What’s RPA?

Ever seen an excel macro run? It looks like an invisible person is moving data around in your spreadsheet, reformatting cells, and summarising information. Macros are known to consolidate and reform data, but they have a major restriction: they can only manipulate data in your spreadsheet.

RPA is similar to the excel macro, but unlike the macro isn’t restricted to a single application and can be used on any desktop application you use on a day-to-day basis.  Normal tasks that use a system can now be automated.

Copying files, renaming them, collating information, reformatting data, copying information… Repetitive tasks like these are game for RPA.  

Learning to Understand

The moment you start to understand what RPA can do and overcome the misconceptions that initially excluded it from your thinking, the next challenge is finding the chance to apply it in your own business. You can find many demonstration videos showing RPA in action, but it can be difficult to implement it in your own office. There’s a lag between understanding what RPA can do and understanding how RPA can be used. Don’t worry, the opportunities are there.

Now you’re faced with two possibilities: seek help or jump right in. The first choice will require funding but will speed up the process, the second seems more daunting, but shouldn’t.

There are low-priced, modest, and effective options available to get you started: start small, think big, grow fast, as the mantra goes.

Because RPA acts as the glue to link isolated systems, it’s important to stress that it works just as well as a solution for integration as it does for automation. The Financial Services industry is a perfect example. Companies in this industry have often grown through acquisitions and end up with multiple, separate IT systems all with similar functionality. RPA can connect them and increase the data integrity between them. Even small businesses can have their own applications to handle sales, accounting and ordering resulting in manually re-entering key information into separate systems. The lack of integration isn’t due to time or acquisition. It’s due to the modular way system solutions are bought.

Let’s make automation simple: It’s repetitive transactions that uses structured data.  As a result, speed, customer satisfaction and quality are all improved.

Up until recently, that was all RPA could do. Now, artificial intelligence (AI) is changing that.

Commoditizing AI

Mass media occasionally exaggerates things, which can lead people to misunderstand what AI is and what expectations are unattainable. Fortunately, the market is changing, and we’re witnessing a blending of RPA with Machine Learning (ML) to address more intricate transactions that were previously out of scope for RPA on its own.

The difference between machine learning and traditional programming is that ML learns by example, and traditional programming involves developers explicitly coding every situation. A clear example of this is character recognition. In character recognition, traditional coding requires every variation of handwriting to be known and coded in advance (which is highly unlikely), however, ML identifies characters after being offered just few hundred examples.

Initially, data scientists were scarce, making it hard for new businesses to use new ML capabilities. You can now buy ML algorithms off the shelf, meaning they’ve already been trained. For example, they can understand the information contained on an invoice scan and launch the necessary postings in accounting systems.

Together, RPA and ML can yield solutions to difficult business problems which makes it tempting to start there. Take it from me — start with the simple problems RPA can handle first: start small, think big, grow fast.

More about RPA

There is lots of free information to get you started with RPA.

For more, you can check out our “A-E” of digital disruption learning series starting with Automation.

Make sure you test your knowledge here by taking our automation quiz.

Rob King, VP Product at The RPA Academy (https://therpaacademy.com) and Author of Digital Workforce. Rob King is the author of Digital Workforce, an executive guide to RPA. It explains the different RPA vendors, along with elements such as roles and structures needed, key components of governance and processes for successful implementation.

     

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Robotic process automation (RPA) has advanced quickly in just a few years. In a short amount of time, both the number of RPA providers and the range of capabilities have greatly increased.  So much so, it can be difficult to keep up with all the changes.

This leads to the misconception that RPA is either too complicated, too costly, too technical or simply too difficult, for small or medium-sized businesses to put in place. While these statements may have once been true, that is no longer the case. Today, the wide variety of available options mean RPA is now for everyone. The barriers to entry have dropped so now is the right time to reconsider how automation can help your business.

What’s RPA?

Ever seen an excel macro run? It looks like an invisible person is moving data around in your spreadsheet, reformatting cells, and summarising information. Macros are known to consolidate and reform data, but they have a major restriction: they can only manipulate data in your spreadsheet.

RPA is similar to the excel macro, but unlike the macro isn’t restricted to a single application and can be used on any desktop application you use on a day-to-day basis.  Normal tasks that use a system can now be automated.

Copying files, renaming them, collating information, reformatting data, copying information… Repetitive tasks like these are game for RPA.  

Learning to Understand

The moment you start to understand what RPA can do and overcome the misconceptions that initially excluded it from your thinking, the next challenge is finding the chance to apply it in your own business. You can find many demonstration videos showing RPA in action, but it can be difficult to implement it in your own office. There’s a lag between understanding what RPA can do and understanding how RPA can be used. Don’t worry, the opportunities are there.

Now you’re faced with two possibilities: seek help or jump right in. The first choice will require funding but will speed up the process, the second seems more daunting, but shouldn’t.

There are low-priced, modest, and effective options available to get you started: start small, think big, grow fast, as the mantra goes.

Because RPA acts as the glue to link isolated systems, it’s important to stress that it works just as well as a solution for integration as it does for automation. The Financial Services industry is a perfect example. Companies in this industry have often grown through acquisitions and end up with multiple, separate IT systems all with similar functionality. RPA can connect them and increase the data integrity between them. Even small businesses can have their own applications to handle sales, accounting and ordering resulting in manually re-entering key information into separate systems. The lack of integration isn’t due to time or acquisition. It’s due to the modular way system solutions are bought.

Let’s make automation simple: It’s repetitive transactions that uses structured data.  As a result, speed, customer satisfaction and quality are all improved.

Up until recently, that was all RPA could do. Now, artificial intelligence (AI) is changing that.

Commoditizing AI

Mass media occasionally exaggerates things, which can lead people to misunderstand what AI is and what expectations are unattainable. Fortunately, the market is changing, and we’re witnessing a blending of RPA with Machine Learning (ML) to address more intricate transactions that were previously out of scope for RPA on its own.

The difference between machine learning and traditional programming is that ML learns by example, and traditional programming involves developers explicitly coding every situation. A clear example of this is character recognition. In character recognition, traditional coding requires every variation of handwriting to be known and coded in advance (which is highly unlikely), however, ML identifies characters after being offered just few hundred examples.

Initially, data scientists were scarce, making it hard for new businesses to use new ML capabilities. You can now buy ML algorithms off the shelf, meaning they’ve already been trained. For example, they can understand the information contained on an invoice scan and launch the necessary postings in accounting systems.

Together, RPA and ML can yield solutions to difficult business problems which makes it tempting to start there. Take it from me — start with the simple problems RPA can handle first: start small, think big, grow fast.

More about RPA

There is lots of free information to get you started with RPA.

For more, you can check out our “A-E” of digital disruption learning series starting with Automation.

Make sure you test your knowledge here by taking our automation quiz.

Rob King, VP Product at The RPA Academy (https://therpaacademy.com) and Author of Digital Workforce. Rob King is the author of Digital Workforce, an executive guide to RPA. It explains the different RPA vendors, along with elements such as roles and structures needed, key components of governance and processes for successful implementation.

     

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When I stepped into the role of Chair of the American Institute of CPAs (AICPA) in February 2018, we were — and continue to be — facing an unprecedented pace of change that’s transforming our profession. And I put forward a challenge:

Be early to be on time. Take bold steps and initiate change today so that we will not just be prepared for tomorrow — we will be even stronger than we are today.

You have risen to that challenge. As I’ve spoken with members and leaders across the U.S. and around the world, I’ve been energized and inspired by the progress our profession is making. We’re not just imagining the possibilities. We’re seizing them to create an even stronger tomorrow for ourselves and the next generation.

Here are some of the ways we’re doing it.

Delivering more value

We’re pushing our own boundaries by adopting new technologies, competencies and service areas to become even more indispensable.

Auditors are embracing new technologies such as audit data analytics, robotic process automation and OnPoint PCR to enhance the quality of services and improve efficiency.

Tax practitioners are deepening relationships with their clients — and therefore expanding their practices — by taking a more holistic approach and advising on areas such as retirement, estate and investment planning, as well as risk management.

Finance teams are using cloud computing, artificial intelligence and data visualization, empowering them to become the strategic partners their businesses need in these unpredictable, yet exciting, times.

And across the profession, accounting and finance, professionals are extending their trust and value into new areas such as cybersecurity, blockchain, integrated reporting and sustainability.

Through this journey, the AICPA is continuing to power your success. From the Go beyond disruption learning series to customized resources on aicpa.org, we’re delivering the insights, guidance and tools you need to both expand and apply your expertise.



Investing in people

One of the greatest contributions we can make to our profession is to invest in our people. Those in the profession today, as well as those climbing the rungs behind us. Each of us has a responsibility to attract the next generation of CPAs by sharing our own successes and the nearly limitless opportunities those three letters open up.

I’ve had the pleasure of meeting with several students this year. During one particular state society meeting, I spent an hour with some of the most inspiring accounting students. Or so I thought. After the event, one student told me that she actually arrived that day wanting to become a nurse. But after our time together, she was leaving knowing that the CPA path — and all it offers — is the one for her.

Our profession’s story is powerful. It’s just up to each of us to tell it.

But don’t stop there. One of the greatest things you can do is both mentor and be mentored. Sharing the wisdom of your experience with the next generation — and embracing the unique perspectives they offer — will elevate us all. This can occur through formal programs, such as the AICPA Mentor Program, or an employer program. Or it can be as simple as grabbing a cup of coffee with that go-getter sitting in the cube outside your office. All it takes is a little time and an open mind.

Extending influence

Through my additional role as Chair of the Association of International Certified Professional Accountants (the Association), I’ve seen firsthand over the past few months how the ties binding us together — across practice areas, beyond borders — are becoming tighter and more complex as technology continues to break down the barriers of time and distance.

Whether a sole practitioner in Iowa, a CPA in Hong Kong or a finance leader in Poland, we all share a common ambition to stay ahead of a fast-changing world. And that’s why it’s so important that we maintain an active voice, working closely with legislators and standard setters to protect the interests of the profession and those we serve. Because in this hyper-connected world, one action can have a far-reaching impact. Prime examples? The implications of U.S. tax reform and Brexit on multinational business.  

This year, we continued to focus on multiple U.S. federal policy issues, such as anti-money laundering and beneficial ownership legislation and cybersecurity. We worked with state CPA societies and state boards of accountancy to prevent anti-licensing proposals in state legislatures from conflicting with existing reciprocity and mobility statutes that cover CPAs. And we focused on international issues that could have ripple effects for CPAs in the U.S., such as mandatory audit firm rotation and international auditing standards.

 —

I’m proud of the steps the profession has taken this past year to be on time for whatever the future holds. And the Association, which brings together the strengths of the American Institute of CPAs and the Chartered Institute of Management Accountants, has been working harder than ever to position you for success. Check out our recent 2018 Integrated Report for even more ways we’re delivering on our mission to drive a dynamic accounting profession worldwide.

I truly believe there’s never been a better time to be part of the accounting profession, and I’m so excited to see how much more we’ll accomplish together.

Thank you for all that you do every day to keep our profession strong.

Eric Hansen, CPA, CGMA, Chair, AICPA

     

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Chocolate makes a bitter coffee taste sweeter. A dry wine brings out the flavors of a well-cooked steak. Good pairings make everything better.

The same can be said for the work you do. Pairing solutions with the challenges you face can improve the final result. And this certainly applies to the most recent tax season.

We asked tax practitioners about what they experienced this spring, and in this informal AICPA Tax Section survey, we found out pretty much what we were expecting: It was a demanding one. (You can read more about the survey in this AICPA Tax Section newsletter article.)

By examining the busy season pain points and pairing resources that address these issues, you can find solutions to even the most pressing trials you faced. 

If these issues sound familiar and you want to get a leg up on extension season and next spring, sign up for the annual post-tax season webcast, Tax Practice Quarterly: Hot Topics in Tax Practice Management, on May 9. You’ll learn practical strategies to prepare your firm for next year. It’s free for Tax Section members, and PCPS members can claim a 20% discount.

Tax reform implementation

No one should be surprised that tax reform played a major role in this season’s complexity, and in fact, it was the number one challenge for tax practitioners. Trying to stay abreast of the new rules and guidance while helping clients understand the effects of the changes was enough to keep many of you up at night.

It’s not like you weren’t prepared. Most of your pre-season time was spent learning the new laws. But that didn’t leave much room for anything else. And tax reform guidance continued to be issued throughout the season. It was a lot to take on.

Diving deeper, practitioners commented that their biggest challenges were effectively applying new tax provisions (most notably Sec. 199A) and ensuring that tax software provided the correct results.

Perfect pairing: Stay current on the tax reform news that affects your tax clients with information and tools found in the Tax Reform Resource Center.

Clients and the new laws

A majority of those surveyed expressed that their clients had varied levels of understanding when it came to their tax situation this year. Some clients were very prepared while others were taken by surprised. As noted by 32 percent of respondents, tax pros spent a lot of time explaining these changes to clients.

On top of that, practitioners struggled with the changes to the withholding tables that may not have adequately covered clients’ liability, with a majority expressing that their clients would benefit from the underpayment penalty relief waiver. (In March, the IRS expanded underpayment penalty relief to a threshold recommended by the AICPA.)

Not surprisingly, practitioners saw an increase in extensions filed this year compared to the previous years.

Perfect pairing: Post-busy season is an excellent time to engage your clients in discussions around year-round tax and planning topics. Learn how to take a holistic approach to your clients’ financial situation with the AICPA Planning and Tax Advisory Services hub.

Delays, delays, delays

Although the government shutdown ended before busy season really got into full swing, questions about what the shutdown would mean for filing returns, getting tax refunds and IRS support made for a bumpy start to the year.

Several respondents commented that the changes to the Form 1040 required more time to review tax returns and walk clients through them.

But delays extended beyond the shutdown and implementing the new forms. Almost half of surveyed practitioners voiced frustrations with software. Waiting for updates and fixes and enduring spotty software diagnostics added to this season’s complexity and caused delays.

Perfect pairing: Hear from other practitioners about how they juggle the practice management side of running a firm by attending the next AICPA Small Firm Update on June 27. And If you’re in a small firm, check out these resources tailor-made just for you.

Looking ahead

Here’s the good news: there is no growth without struggle, which means you and your firm come out of this busy season stronger and wiser. Yes. It was a challenging season, but you not only handled your clients’ returns — you mastered them. Although busy season is in the rearview mirror, you know your work isn’t done. There are extended returns, lingering questions from tax law changes and mid-year reviews of your firm’s staffing and technology needs still on your plate.

Bookmark the AICPA Tax Section resource library, and check in throughout the summer. We’re working on resources and tools that can help you through the fall and hopefully make next spring season a little easier.

And don’t forget to register for AICPA ENGAGE happening from June 9 to 13 to take a deeper dive into the issues affecting you, your clients and your firm and learn concrete ways you can thrive in this ever-changing profession.

Busy season may be over, but you know what? We’re just getting started!

April Walker, CPA, CGMA, Lead Manager — Tax Practice & Ethics, Association of International Certified Professional Accountants

     

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With identify theft becoming one of the world’s fastest growing crimes, days like World Password Day are crucial to raising awareness of online threats. I sat down with Jay Overcash, Director of IT Security Strategy, to talk about how people can protect themselves from hackers.

Why is a day like World Password Day so important?

As more and more of our lives move into the digital realm, we rely on authentication to protect our valuable online data and assets.  Usernames and passwords remain the predominant method for securing online data.  World Password Day is important as it draws attention to the need to adequately protect online data with a strong password.

While today is World Password Day, how often should we evaluate our passwords and consider changing them?

Everyone should evaluate their passwords and consider changing them as least once per year.  If you use the same password on multiple websites, then you should consider changing the password more frequently; however, the best advice is to have a unique password per website and application.

What are some best practices when creating or changing a password?

Current guidance by the National Institute of Standards and Technology recommends creating an easy-to-remember password that is long and composed of a series of unrelated words.  The minimum recommended password length depends on the sensitivity of the data being protected but it is generally agreed that 8 characters should be the minimum length. 

An example of an easy-to-remember password composed of unrelated words is redfootballthreebutterflies.  This password does not use any numbers or symbols and is easier for the end user to remember.  From a security perspective, the length of 27 characters is exponentially more difficult for a machine to crack, and the unrelated words make it extremely difficult to guess.  Even with this long, much more secure password, individuals should change their passwords at least once per year.

How else can people protect themselves online besides staying aware of passwords?

In general, people should always use anti-virus software and not click on links or attachments in emails that appear suspicious.  Additionally, users should only download files from trusted websites. One optional item to keep users’ accounts safe is enabling multi-factor authentication (MFA) on their accounts.  MFA, also referred to as two-step verification, provides a second method for verifying authentication for accounts usually via text message or email notification.  Enabling MFA will greatly improve the security of your accounts online.

Given that today is World Password Day, it’s the perfect time to take the pledge to #LayerUp. Add multi-factor authentication and evaluate your current passwords. It could save you a lot of trouble in the future.

Protecting yourself and your clients’ information should be an everyday task. Stay on top cybersecurity using these tools and resources.

Liz Rock, Associate Manager – Branded Content & Channels, Association of International Certified Professional Accountants

     

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This blog post is the third in a series on risk assessment, a significant audit quality issue. View the first blog post here and the second here.

The audit risk model is the foundation of any audit. This might seem like CPA 101, but are you correctly applying it to your engagements?

In doing so, your first consideration is your client’s risks of material misstatement (RMM), which is made up of inherent risk and control risk. As a reminder, inherent risk is the risk of material misstatement assuming no related controls, while control risk is the risk that your client’s controls won’t prevent or detect and correct a material misstatement. So how do you apply this to your audit?

Understand your client and its environment

Because RMM drives your audit planning and procedures, your first step in applying the audit risk model is to obtain an understanding of your client and its environment. You should consider the nature of your client’s business, external factors that impact it, and how the organization measures and reviews its financial performance. This includes:

• Nature of the client – Make sure to think about business operations, investment and financing activities, and financial reporting.
• External factors – Consider industry conditions, the regulatory environment, and government policies. How competitive is your client’s industry? How easy is it to enter? What are its revenue characteristics? How quickly do products change?
• Organization strategies – How does your client address these external factors?
• Financial Performance – Consider your client’s financial performance, including key ratios and operating statistics; key performance indicators; employee performance measures and incentive compensation policies; trends, forecasts, budgets, variance analysis, and competitor analysis; and period-on-period financial performance (revenue growth, profitability, and leverage).

With each of these areas, make sure to document the steps you took to gain an understanding, any changes to your understanding of the client from previous years as well as risks identified and whether they are significant.

Understand your client’s internal control

Your next step in applying the audit risk model is to obtain an understanding of your client’s internal control. You’ll want to know what controls (either individually or in combination) are in place, if they are designed properly to meet their objective, and if they have been implemented. Make sure to consider the following:

• Control environment: What are management’s attitudes and actions related to internal control? How much emphasis do they put on achieving reliable financial reporting?
• Control activities: For all material classes of transactions, account balances, and disclosures, you’ll need to identify the relevant assertion(s), control objective, key controls, whether the control’s design is effective or ineffective, and whether the control is properly implemented.
• Your client’s risk assessment, information and communication, and monitoring: While smaller entities may not have well-documented controls or procedures in these areas, they likely still have some controls in place. For example, does the owner review financial results on a monthly basis?

Again, you’ll want to document your understanding of your client’s internal control, including the control environment. Then document the steps you took to understand it, any changes over the previous period, and all identified risks.

Use RMM to drive detection risk

Based upon your assessment of RMM, you’ll determine the nature, timing, and extent of your audit procedures. For example, if you determine that your client has low inherent and control risks at the assertion level, you might accept detection risk at high and thus use less rigorous substantive tests (i.e., analytical procedures or tests of details). On the other hand, if your client’s inherent and control risks are moderate to high, you would plan more rigorous substantive tests in order to obtain more persuasive audit evidence about the assertion as part of your audit.

The key for using RMM to drive detection risk is to remember that the nature, timing, and extent of further audit procedures planned needs to be responsive to the RMM identified.

The audit risk model is the basis for any audit. For a step-by-step guide to help you apply it to your engagements, download our free Audit Risk Assessment Tool, listen to the latest podcast episode from the Small Firm Philosophies series on risk assessment, and check out other resources on the AICPA risk assessment resources page.

Bob Dohrer, AICPA Chief Auditor, American Institute of Certified Public Accountants 

     

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Do you use plastic wrap to keep leftovers fresh? When you spill coffee on the floor, are paper towels your go-to clean up tool?

If you’re like me, you haven’t spent much time thinking about how disposable household products are adding to an Earth-health crisis.  

Americans produce an unsightly amount of trash each year — enough to reach to the moon and back 26 times. The worst part may be that more than 75 percent of this waste is recyclable, and 25.1 million tons of our trash is compostable food waste.

I’m guilty of adding to the problem. I used to throw out old food, plastic bags and shampoo bottles with reckless abandon. This not only caused injury to the environment but put a strain on my household’s budget.

In February, my husband and I decided to make a positive change for us — and the environment. We challenged ourselves to eliminate all excess waste and reduce costs for one month, then evaluate our progress in relation to our average monthly-spend.

Here’s how it went.

It’s all about the numbers.

Living without the trashy trappings of modern life isn’t easy, but little changes can have a big influence on your budget.

In 2018, my household’s average monthly bills were staggering for two people:

• $68.21 for 5,300 gallons of water
• $76.36 for electric
• $90.00 for natural gas
• $408.80 for groceries and other household goods (We spent $18.99 a month on paper towels alone!)

In total, that’s $643.28 per month and $7,719.36 per year. When I calculated that last number, I nearly cried. Where was this coming from?

The first thing my husband and I did was take a look in our trashcan, and most of what we saw was paper and plastic. Then we took a deep whiff. What we smelled was discarded food waste.

We looked at our power, gas, water and food bills and found places to cut back. When Feb. 1 rolled around, we were ready to take on the eco-challenge.

How we did it.

The first step to reducing our trash was to eliminate the products causing it.

We stopped using paper towels, plates and napkins, aluminum foil and plastic wrap and baggies. We eliminated all food waste by composting and started bringing our own bags to the grocery store or asking for paper bags at check out. We focused on purchasing goods contained in recyclable materials and reduced our dependence on pre-made foods. Every item that could be recycled by the city was washed and sent off.

To make up for what we cut out, we purchased these products:

• cloth napkins ($15.99)
• rags for cleaning purposes ($10.99)
• two canvas bags ($5 each)
• glass food storage containers ($17.99)
• biodegradable trash bags ($4.99)

We then looked at our bills and found ways to cut there too by:

• installing three smart thermostats ($30 each refurbished) and automating our heating and electric via smart home routines
• limiting our water use
• running the dishwasher only when it was full
• washing our laundry (always full-loads) in cold water
• buying only the food and goods we actually needed
• replacing all incandescent light bulbs with more energy-efficient LEDs ($1.81 each)

We then took a look at the weather and planned out (the few) temperate days when we could walk to the nearest grocery store. This saved on gas and limited the food purchases to only what we could carry.

Did it work?

In January, my husband and I disposed of 13 bags of trash. Fast forward to February, and that number dropped to three and a half bags.

And that’s not all. Here are the results of our month-long cut back:

• Our electric bill went down 10 percent.
• We cut our water usage by almost 2,000 gallons, reducing the bill by 37.7 percent.
• Being February, our natural gas bill was higher than average, but we managed to drop it by 23 percent when compared to February 2018.
• By being more discerning about what food items we bought and being limited to what we could carry, our food and household goods bill dropped to $363.64 — that’s 11.07 percent less!

In total, we saved $67.85 despite the rise in the cost of natural gas used during the coldest month of the year.

If we keep this up, we could bank an extra $800 or more by February 2020, which will easily cover the cost of the one-time purchases like the thermostats and storage containers that helped us get to this point.

My husband and I treated the challenge like a numbers game. Not only did it net us a few extra bucks, but we bonded by rising to the occasion together, and we plan to keep it up from here on out.

Being environmentally friendly is just one small part of creating a more sustainable environment for all. CPAs like you can help companies address social and economic development issues and pursue every opportunity to focus on sustainability-related initiatives that embrace today’s three top business priorities: profits, people and planet — the triple bottom line!

Now that you know how to implement cost-saving initiatives in your home, find out how to add value to your company and clients by using the resources in the AICPA’s sustainability toolkit. Also, join the like-minded sustainability leaders at this free half-day seminar on May 2 in San Francisco and this conference on May 9 in New York. You’ll be doing the right thing for our Earth — and your pocketbook!

Allison Carter Fanney, Communications Manager — Tax, Association of International Certified Professional Accountants

     

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Mrs. and Mr. Penny are sitting in their CPA financial planner’s office. Mrs. Penny, a 66-year-old community college professor, retires at the end of the school year with a modest pension. Mr. Penny, a 67-year-old construction foreman, plans to retire next year.

Neither paid much attention to their retirement savings until about five years ago, when they first engaged their CPA financial planner for tax advice.

“I hear Bora Bora is beautiful in the summers,” Mrs. Penny says to her husband, who nods and mentions taking off for the mountains in Austria after their beach trip.

Their CPA financial planner, Dana, looks at their assets and their expenses and considers their longevity. She gives some thought to their Social Security income, potential medical expenses down the road, income taxes and insurance. While the Pennys dream out loud about soft sand beaches and majestic, snow-covered mountain peaks, she runs some simulations and furrows her brow.

The Pennys aren’t going anywhere.

Mrs. and Mr. Penny are lucky. Thanks to Dana’s advice, they did set up retirement accounts several years ago and made somewhat regular contributions. And while retirement is realistic for them, globetrotting is not. Their CPA financial planner knows it is her obligation to explain this.

But no one mentioned Bora Bora.

As a CPA, you often have to hand out unpleasant news about people’s finances. Client reactions range from the defiantly incredulous to shrugging it off—but you never know what you’re going to get. And having to deliver difficult news… well, it stinks. But there are ways to mitigate the impact of these conversations and, in many cases, avoid them altogether.

If they’ve planned ahead by coming to you, prepare them for multiple outcomes.

Every retirement plan is different when done correctly: tailored to income, savings, client lifestyles, etc. The Pennys gave their CPA financial planner a heads up five years ago about retirement. That’s not much time, but a crucial question she should have asked (and had them record in a questionnaire) is what kind of lifestyle they hoped to have in retirement. It’s not likely she could have done much to generate the income needed for international jet-setting on a regular basis. However, she could have better prepared them for the reality that excessive travel would probably not be possible.

Additionally, she should have asked to be updated on their expectations in regular touch-base meetings. Not only do expectations change over time, but the performance of the clients’ portfolio regularly forces course corrections that can mean the difference between living the good life and just getting by.

The Pennys needed to know from the start: there are no guarantees. Simply having an account and putting money in it doesn’t ensure retirement success; it’s just the beginning. By seeing different potential scenarios and having regular check-ins with their CPA financial planner, they’d have had a better idea of what they could do in retirement. Preparing clients in this way makes the transition to retirement far smoother.

Ask clients if they’ve thought about “plan B.”

Visualization is a powerful tool in acclimatizing people to less-than-ideal circumstances. Some questions you can ask in initial meetings:

• Suppose you can’t travel/buy X/put the grandkids through college. What would your retirement look like? Can you think of some alternatives that would make you happy?
• Can you compromise? If we adjust your budget, perhaps we could work in (one trip per year/one new car/paying for the grandkids’ room and board but not tuition, etc.).
• You have the money to do some of what you want, but it could leave you short for medical expenses later. Have you considered whether you’re likely to need regular medication or long-term care?
• Do you want to have something left for your family when you’re gone?

Don’t be afraid to be honest.

It can be uncomfortable to deliver the truth. But allowing clients to think their retirement will be a rainbow-festooned joyride of pleasure and unlimited spending when it clearly can’t be is crueler still. Managing expectations means being frank about the reality of your clients’ situation. When the Pennys first went to Dana five years ago, she was able to guide them to a result that would help them maintain their current lifestyle and meet their expenses in retirement. But they wanted more, and if she’d known that, she could have prepared them from the beginning.

Communication is key. Maybe face-to-face meetings are less common than they once were, but that shouldn’t stop you. Pick up the phone, send an email or have a Skype session. Engage your clients and make them an active part of their retirement plan. You undoubtedly want to help them meet their dreams. But preparing them for reality is just as important.

If you’re looking to learn more about providing retirement services, you should consider the AICPA Retirement Planning Certificate to hone your skills and demonstrate your mastery. Plus, this gets you one step closer to the PFS credential. To learn more about formalizing financial planning services in your tax practice and to find helpful resources that support you in your role as a CPA financial planner, visit our planning and tax advisory services hub.

Adam Junkroski, Lead Manager – Communications, Tax & PFP, Association of International Certified Professional Accountants

     

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Running a CPA firm today has plenty of challenges. As business clients expand their operations at an accelerated pace, CPAs must monitor multi-level tax compliance, international treaties and a host of global accounting and reporting standards. CPAs also stay current on technical standards and find, recruit, train and retain top talent in a competitive economy. We adjust our work models to align with the values of a new workforce, invest heavily in technology and develop new service offerings to meet client needs, all while combating shrinking profit margins. As a profession, we are more than capable of overcoming these challenges.

Of all these challenges, there is one that can be simplified: CPAs’ and CPA firms’ ability to seamlessly cross state lines to provide services to clients.

Most states have adopted mobility laws that allow individual CPAs to practice outside of their principal place of business without first obtaining another license. Unfortunately, the same can’t be said for the adoption of laws that allow CPA firms to do the same. To date, only 27 states have adopted CPA firm mobility. Firm mobility reduces regulatory barriers for our firms because it allows us to provide attest services across state lines without obtaining a reciprocal firm license. 

 

It’s well past time for all states to adopt similar laws. CPA firms waste considerable intellectual talent and energy chasing unnecessary licensing differences across state lines. Some states still require the CPA firm to get a reciprocal license when providing services to clients in that state, and some jurisdictions still even require the individual CPA to get the reciprocal license. The licensing process and response time varies with virtually every jurisdiction.

With all the inconsistencies across the states, we need to remember that a CPA firm licensed in one state is qualified and capable of serving their clients with operations in any state. Client business needs are real, and they are often time sensitive. When clients turn to CPAs and CPA firms for assistance and advice about their business operations in different states, it shouldn’t be burdensome for us to respond to these requests because of licensing inconsistencies and compliance costs. Ultimately, it’s  the client who pays the price both in time and cost.

The profession once made individual CPA mobility a priority, and we were successful. Our efforts were so successful that we now promote our mobility as a model for other professions to follow. It’s time for our profession to break down the remaining mobility barriers. If your state is still grey on the above map, ask your state CPA society to work on legislation.

Tom Sulewski, CPA, Shareholder in Charge of Audit and Assurance at Clark Nuber PS. 

     

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You did it.

After 11 weeks of nose-to-the-grind work, you’ve successfully put another filing season behind you.

Looking back, you undoubtedly see how this year’s season was like no other. A government shutdown, tax transcript changes, new rules — you navigated them all. You’re a champion for your clients, and you deserve some time to rest and recoup.

However, this respite is limited, and you’ll be back to the grind before you know it.

As time is of the essence, here’s a list of the best places to recharge your batteries. And for a little extra help, you’ll find a few packing suggestions to ensure you have what you need when you get there.

Adventure location: Chiang Mai, Thailand

What to pack: Yoga mat

After a stressful busy season, what you really need is a chance to unwind, and there’s no better place to do that than Thailand. Home to some of the most popular yoga retreats in the world, the city of Chiang Mai is a dream come true for yogis. If yoga isn’t your thing, you can relax in luxury at one of the city’s many spas. 

Need to chill out but stay a little closer to home? Visit Minneapolis. Take advantage of one of the Minnesota Landscape Arboretum’s yoga classes or practice your poses in the city’s sculpture garden. Embrace your love of animals at Yoga Ananda where llamas happily serve as pose support. 

Adventure location: Zermatt, Switzerland

What to pack: Wool socks

The weather may be getting warmer in much of the U.S., but that doesn’t mean skiing is off the table. Zermatt, Switzerland, offers some of the best spring skiing in the world. Visit the Theodul Glacier for more than 13 miles of slopes. The glacier crosses into Cervinia, Italy, so when you get hungry, be sure to slide over the border for a snack (no passport needed).

If you’re looking for a place closer to home and still have an experience that’s outside the box, look no further than Alaska’s Western Chugach Mountains. There you can go “heli-skiing.” This means advanced skiers are dropped from helicopters onto slopes unreachable by chairlifts.

Adventure location: Marrakech, Morocco

What to pack: An appetite

If you want to be a gastrotourist, then no other city in the world has as flavorful and aromatic foods as Marrakech, Morocco. Try traditional dishes like tagine and couscous at Ksar Es Saoussan and grab a refreshing mint tea (served hot) at Atay Cafe.

If you’re not feeling up to a 14+ hour flight time to get your dinner, check out the creole food haven of New Orleans. Nosh on traditional gumbo at Galatoire’s Restaurant and indulge your sweet tooth with beignets at the famous Cafe du Monde.

Bonus location: Another great foodie site is Las Vegas, but I recommend you wait and visit in June to also take advantage of the learning opportunities at the AICPA ENGAGE Conference.

Adventure location: Oberon, New South Wales, Australia

What to pack: Spade and shovel

Did you know there are places in the world where you can dig for your own gemstones? One such place is Australia, where the popular practice is called “fossicking.” Gold, sapphires and zircons — and occasionally diamonds — can all be uncovered near the town of Oberon.

You don’t have to go halfway around the world to mine your own gems. You can visit the Crater of Diamonds State Park in Murfreesboro, Ark. Last year, a woman visiting from Colorado found a 2.63-carat diamond, and in total, more than 250 diamonds have been found at the park. Full disclosure — I’ve been to the Crater of Diamonds. In addition to a spade and shovel, pack a change of clothes because you will get muddy. And no. I didn’t find a diamond.

Adventure location: Gansbaai, South Africa

What to pack: Shark cage

Admittedly, this trip isn’t for everyone. Get up close and personal with unique marine wildlife in Gansbaai, South Africa. The good news is it’s only a 20-minute boat trip to get to the dive location. The bad news is that once you get in the water, you’re likely to come face to face with a great white shark.

The best news is that you don’t have to travel far to go shark diving! Visit South Florida to dive with bull and tiger sharks. Several businesses in California offer multi-day excursions to meet great white sharks. If that wasn’t enough adventure for you, try swimming cage-free in Hawaii.

No matter how you plan to spend your post-season downtime, the break is well deserved. And we’ll be here to help you get back into the swing of things when you return.

The AICPA Tax Section will host their annual post-busy season webcast on May 9. Learn more about billing best practices, staffing and workflow management issues and key AICPA resources so you’re ready to tackle fall busy season and beyond.

Allison Carter Fanney, Communications Manager — Tax, Association of International Certified Professional Accountants

     

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