You did it! You finished another successful busy season, a time of high revenues and numerous opportunities to get to know your clients and their needs a little better. I hope you enjoyed a well-deserved break once you were done. When I was in practice in a six-person firm, once we had taken some time to relax and refresh, we liked to seize the opportunity to do some analysis and fine-tuning of the firm’s quality culture and procedures. If any changes are needed, this is a great time to identify and implement them.
Determine clients who may be a better fit for another firm. Culling clients who aren’t the right fit is easier to do if you can quantify how well each client matches your practice. The PCPS Client Continuance Evaluation Tool uses a 1 to 5 rating system to allow firms to categorize clients in a number of areas, including risk and profitability, client integrity, availability and ease of access to needed documentation. CPAs can use the scores to determine whether the relationship should be continued. (The Client Continuance Evaluation Tool is part of the PCPS Invigorate the Focus on Quality Toolkit.)
I also found that the weeks immediately after busy season are the best time to examine your own personal observations about a client. Were they less forthcoming than in the past? Were they suddenly in a cash-tight position that was difficult to explain? Have they been making poor financial or management decisions? Are they paying employees in cash or taking other steps to circumvent laws or regulations? Busy season offers you a window into client activities and that can help you determine whether it’s time to distance your firm from some client relationships. Be sure to include your staff members who deal with each client in this process, since they may have some valuable insights into day-to-day dealings that you may not normally hear about.
Size up new clients. Familiarize yourself with the Quality Toolkit’s Proposal Meeting Prep Checklist, which you can use to determine whether prospects are right for your firm. A discussion using the checklist can reveal potential risk areas for the firm such as:
- Complexity. Does the firm have the time, staff, or expertise to complete the engagement?
- Objections to procedures. If you explain your procedures and the prospect pushes back or seems to be seeking ways to get around them, it could be that the business doesn’t have sufficient internal resources for the service they seek—which will require more time from your staff. In a worst-case scenario, the client may be trying to conceal fraudulent activity.
- Pricing concerns. Prospects that question your fees may not understand the work required to serve them, or this attitude could signal possible payment issues down the road. Firms should try to ensure they are working with clients that value the work being done.
Use the AICPA Audit and Accounting Practice Aid to review the firm’s quality control policies. Is your quality control monitoring system working? Many firms look over their quality control document when they know they have a peer review coming up, but this important review should be done every year after busy season. The years between peer reviews are a good time to monitor your engagements and make changes to your procedures as needed. Remember, too, that you should be documenting your quality control steps, including your monitoring efforts. If after your review, you find some adjustments are needed, the PCPS Invigorate the Focus on Quality Toolkit also includes a wealth of resources such as quality control design and compliance checklists specifically for sole practitioners and for firms with two or more professionals, as well as peer review and audit documentation information. In addition, the AICPA Statements on Standards for Tax Services, which are voluntary, are a great resource for quality enhancement guidelines.
Many small practitioners also use other firms to perform internal monitoring for them. Once again, post-busy season is a good point to examine your relationship with this outside monitor. Do they still understand your practice? Are they performing as expected? Set aside some time to consider these questions and whether any changes are due.
Get Set for a Busy Year
Given tax reform and numerous other developments, the coming year looks like a particularly eventful one for CPAs. Practitioners who get their shops in top shape now will be in a better position to serve clients throughout the year and as the next busy season approaches.
Carl Peterson, CPA, CGMA is the Association’s Vice President of Small Firm Interests. Have questions for Carl? Contact him directly at email@example.com or 651-252-4618. And be sure to sign up for Carl’s Small Firm Update webcasts. The next one will take place on June 7 at 2:00 to 3:00 PM ET.