CPA Firm Economics 101

Marc Rosenberg, CPA / Mar 10, 2014

classroomEver wish your staff could take a course in the basics of how a CPA firm works?  Ever wish your partners could take the same course?  The benefits would be immeasurable.

Here are just a few examples of what the curriculum would include:

CPA firms should be a high priced, low volume business.  The accounting business is profoundly influenced by the laws of supply and demand.  The supply of CPAs is greatly limited by the technical challenge of their work and the continual demand for their services makes them recession-proof.    Firms need to understand this dynamic and price aggressively while being selective about the clients to whom they commit their scarce resources.

Staff should know how filling out a timesheet builds their career.   Billable hours make money for the partners.  Why should staff give a hoot?  Because it’s a lot more fun working for a growing, profitable firm than one that’s stuck in the mud and struggling with the bottom line.  When the partners make good money, they plow a generous portion of it back into the firm with higher salaries, better training, investments in cutting edge technology and more.  Most importantly, the resulting growth creates fabulous advancement opportunities.  Get your staff to love timesheets.

How realization, write-offs and work-in-process affect the firm.    Time management is the single biggest factor in a CPA firm’s success because time is a scarce resource.  Once it’s wasted, it can never be recovered.  Here’s a typical example: of 50 hours worked on a project only 25 can be billed, either because the work was done incorrectly, an excessive amount of work was performed or the client’s weak systems required additional work.  We call the 25 wasted hours a write-off of work-in-process, which sends realization plummeting.  Perfection is unattainable.  Nonetheless, staff need to understand how wasted time impacts the firm and how it can be minimized without scaring the you-know-what out of them.

7 Comments

  1. Bill Pirolli on March 11, 2014 at 9:08 am

    Mark,

    I have been teaching firm economics for years at our firm It is required that everyone sit through it….even partners!!



    • Marc Rosenberg on March 12, 2014 at 1:07 pm

      Bill – my hat’s off to you. You are a real thinker. How incredible that 99% of local CPA firms do absolutely nothing to teach their personnel how CPA firms work and the impact that every action they take impacts the growth, profitability and success of the firm.



  2. Madelyn Hornstein on March 11, 2014 at 9:10 am

    Is this in webinar format or must someone in our organization teach the curriculum?



    • Marc Rosenberg on March 12, 2014 at 1:05 pm

      Madelyn – we are in the beginning stages of creating a webinar for this subject but I must say it is months off. At this point, someone in your firm would have to teach the curriculum. An alternative to this would be to bring me in to teach the course to your staff (and partners, if they wish to attend). Yet another alternative would be to purchase a copy of the book for all current and future firm personnel. Our standard offer is to offer a maximum discount of 50% on purchases over $2000. If you bought 100 books, I would be delighted to offer a 60% discount, which would net out to $4,600 + shipping. If you want to discuss this further, give me a call at 847-251-7100. Thanks for your interest in our work.



  3. Wayne Yesbick on March 11, 2014 at 9:13 am

    Please provide details on ordering your book.



    • Marc Rosenberg on March 12, 2014 at 12:48 pm

      Wayne, go to http://www.rosenbergassoc.com, click on Monograph Catalog, select the book “How CPA Firms Work…” and you are on your way! Thanks for your interest in our work.



  4. Peter Larkin on March 11, 2014 at 9:38 am

    I am an attorney who devotes 90% of his practice to representing and advising accounting firms. I would attend this course to improve my ability to speak with my clients about their business.



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