What CAS practice leaders should focus on in 2022 and beyond

“We have to focus on culture,” says Jennifer Wilson, partner and co-founder of Convergence Coaching LLC. She’s talking about firm leaders and how they can better position themselves to take advantage of the growing opportunities related to client advisory service (CAS) offerings.

Also, get article overviews on the following news items:

• A new process for appealing partial PPP loan forgiveness decisions.
• An announcement on IRS staff reassignments.

• Government warnings about potential cyberattacks.
• Comments sought by the AICPA Auditing Standards Board on a proposal related to compliance audits.
• An update from the AICPA Peer Review Board on clarified standards.

What you’ll learn from this episode:

• An overview of the CPA.com and AICPA PCPS CAS Benchmark Survey.
• Wilson’s explanation of the “capacity challenge” affecting some organizations.
• Several of Wilson’s focus areas for CAS practice leaders.
• What Wilson means when she says that firms can’t “scare away talent.”
• A summary of recent news coverage in the Journal of Accountancy.

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript:                                                            

Neil Amato: Now joining me on the Journal of Accountancy podcast is Jennifer Wilson. Jennifer is a partner and co-founder of Convergence Coaching LLC. She’s a speaker at several panels, several discussions at the Digital CPA Conference in Nashville and that’s where we’re recording. Jennifer, let’s start first with the CPA.com PCPS CAS Benchmark Survey. Can you briefly explain what your role was in that project and then also just define what CAS means?

Jennifer Wilson: Sure, Neil, and I’m so glad to be here with you today. Let’s start with what does CAS mean and then I’ll talk about the benchmark survey, because it’s not relevant unless you know what CAS means. The definition, or the current definition of CAAS, is Client Accounting Advisory Services, sometimes shortened to Client Accounting Services, CAS, or Client Advisory Services, getting rid of one of those A’s. When it’s written, it’s usually CAS. A lot of people call it CAS. What it really is, it’s outsource accounting and it’s outsource accounting in many forms, but it includes transaction processing. Clients that can’t find the right bookkeeping staff and they want to outsource accounts payable, accounts receivable, payroll, transaction processing to a third-party — it’s financial statement preparation. It’s financial insights, budgeting, forecasting.

Looking at these financial statements that the outsource accounting practice leaders are producing and looking at what insights there are to share with the client for how they could run a better business and acting in an outsourced CFO or controllership role, really providing high-level advisory services all around the accounting. That’s what CAS is.

The CAS Benchmark study from CPA.com and AICPA PCPS is a study of CAS practices to look at their financial performance and various practice management investments that they’re making and areas of focus to try to understand what’s happening in the CAS space and what the trends are. It’s to create a benchmark or a baseline and then to begin to look at trends over time. The first survey was fielded a few years back, and this is the second benchmark study. It was just published in 2020, and that’s what we’re talking about.

Amato: Regarding that survey, what to you are the two or three biggest takeaways?

Wilson: First, Neil, I’m proud of the AICPA and CPA.com for doing this survey because nobody else asks these questions about CAS practices. Up to this point, the profession is always focused on audit and attest services and tax, and client accounting was like the little sister or something. It didn’t get talked about much.

Now with all that CPA.com is doing to focus on this very important advisory service, the benchmark study is so critical that we could start really looking at the data and understanding what’s happening. One of the big things about this practice is it’s growing. It’s growing at a rate of 20% in the latest benchmark survey, where typical accounting practices, combined compliance and CAS, are like 6% to 8% growth. Twenty percent growth is huge. It’s a profitable service. It’s frankly a sweetheart service and profits where the median firm was earning 34% margin and the top performers earned 47% margin, which is unheard of and probably not what we’re aspiring to, because they’re probably chasing labor. They probably haven’t been able to hire as fast as the growth. That might be a little bit of a misnomer, but certainly better margins than the typical CPA firm for sure.

Amato: In one of your sessions at Digital CPA, you’re presenting on solving the capacity challenge in public accounting. Describe the capacity challenge and what firms should be doing to build their capacity.

Wilson: Capacity challenge from my perspective is all about talent and having enough talent resource, enough talent capacity to serve the client needs, and also the internal practice management needs of a firm or of a CAS practice. Across the profession, we have a capacity problem, and there’s a variety of factors leading to that.

One is the pipeline challenge where we don’t have enough talent entering accounting programs or graduating with accounting programs. We’re not paying the right starting salaries. They’re too low. A lot of accounting grads — everybody wants accounting grads — they’re going into technology and finance and actuarial and economics and all kinds of other places because the starting salaries are better.

We have a pipeline problem. We don’t have enough new CPAs popping in and accountants, and we also have the Great Resignation that’s happening, or the Big Quit as it’s sometimes called, and some people think that’s a pandemic phenomenon, [that] people will stabilize after this pandemic. But I believe it is a demographic phenomenon that is not going to stop, not going away.

There’s a lot of retirements happening — that creates a capacity problem. This Big Quit or the Great Resignation is that Generation Y, Millennials, younger Gen Xers, and those Gen Zs, those super valuable young people coming in, they have all kinds of employment options, and that’s not just an accounting incidentally, that’s across every profession, across every single industry. I believe that this Big Quit or big resignation will keep happening as we see a migration. All of that is leading to firms scraping to have enough people to serve the demand that they have.

Amato: If you were a CAS practice leader, what would be the strategies you’d focus on in 2022 and beyond?

Wilson: For sure, I’d focus on talent. The benchmark study showed us some great trends in talent. The firms were investing more in learning and development. They were dedicating people to the CAS practice. But I would focus on talent management. I’d focus on employee engagement and motivation. I would make sure we have a shepherd for every single person that works for us in our practice, regardless of its CAS or audit or tax or admin operations, every single person needs a shepherd who’s asking them, “How are they doing? What’s not working? How can we help?” That’s really critical.

I would invest in recruiting. I would have a full-time recruiter in my firm if I had 50 people or more, and I would have a part-time recruiter really at 25 or 30 people. A practice leader does not have time to do the continuous recruiting necessary, not just on campus, but experienced-hire recruiting to fill the capacity challenge. The other thing is, that’s a talent piece, and we could spend a whole podcast on talent.

But if I were a CAS practice leader in 2022, I would also focus on innovation and automation. I would figure out, What are all the things that we do manually to serve our clients in CAS and how many of those things can be automated? Here at the Digital CPA Conference there are a number of vendors who are exhibiting, and they have some super cool artificial intelligence and robotics available that really are going to be game changing as it relates to reducing the amount of human hours necessary to do the work, which will help us with the capacity challenge. Those are a few of the things I’d do.

Amato: You say we could do a whole podcast on talent. What else would you like to say on talent? Sounds like it’s a topic that really matters to you.

Wilson: Yes. Well, Neil, we can’t scare away talent. If we have any grouchy, sometimes mean bosses in the firm, even at the highest level, I don’t care if they’re the best rainmaker we have or sit on the biggest book of business, if they’re scaring away talent, I’ve been saying they’re an enemy of the state. They really are going to have to change their ways.

We have to focus on culture. We have to have a destination employment entity is what we’re trying to create here. We want people to want to work for our firms, not to tolerate working, and that means we need to understand the attributes that our people value by asking them and then start making the changes necessary to have a firm or have an organization that they want to work at.

Amato: That’s great. Anything you’d like to add in closing?

Wilson: Well, I think also we have to look at the client base. If we want to keep talent, and automation and finding new people isn’t enough to solve the capacity challenge, we also will have to reduce the client load, and the first place to look is clients who aren’t very nice, who are slow pay, no pay, clients we’ve outgrown. That’s another thing I’d do as a practice leader.

I guess the other thing I would say is, the CAS practice is such an exciting area, and firms really should be focusing on how to capitalize on that 20% growth and these wonderful margins, and the difference that it makes for clients. The reason it’s growing, the reason it’s profitable is because clients so desperately need it and because the insights that we as CPAs can deliver to our clients are so important to their success that the difference it makes is why the practice is so valuable.

Amato: Jennifer, thank you very much.

Wilson: Thank you, Neil.

Amato: Again, we appreciate Jennifer Wilson taking the time to be on the podcast.

In other news, the U.S. Small Business Administration has announced a new process to appeal partial loan forgiveness decisions for Paycheck Protection Program, or PPP, loans. Jeff Drew has that article, which details how PPP borrowers who are seeking full forgiveness can appeal if their loan was only partially forgiven.

In tax-season news, while praising staff reassignments by the IRS as a “positive step,” the AICPA reiterated the need for the IRS to act on measures proposed recently by the Tax Professionals United for Taxpayer Relief Coalition. The JofA‘s Paul Bonner continues to follow that story.

Also, the AICPA Peer Review Board has clarified certain peer review standards. The clarification is designed to make peer review guidance for CPA firms and peer reviewers easier to read, understand, and apply. Ken Tysiac has that news. And also [there’s] coverage related to the AICPA Auditing Standards Board seeking comment on a proposed statement that would address the application of generally accepted auditing standards to a compliance audit. Comment are due by May 16.

And finally, three federal agencies have reinforced the need for organizations to protect critical infrastructure systems against potential Russia-sponsored cyberattacks. The Cybersecurity and Infrastructure Security Agency, the National Security Agency, and the FBI jointly urged that organizations patch all systems, begin using mandatory multifactor authentication, and strengthen password requirements. Jeff Drew’s coverage on that topic includes other guidelines for keeping computer systems secure. You can find that and other news on journalofaccountancy.com, or in links from this episode’s show notes. Thank you for listening to the Journal of Accountancy podcast.