New Jersey CPA - May/June 2019

M AY/J U N E 2 0 1 9

GO BEYOND: MAXIMIZE YOUR VALUE Page 8 Page 6 Page 4 9 ATTRIBUTES THE CHANGING LEVERAGING & MAXIMIZING OF SUCCESSFUL WORLD OF CORPORATE YOUR BUSINESS TRUSTED CPAs RELATIONSHIPS ADVISORS

Page 10 CPE: GO BEYOND COUNTING CREDITS

Rutgers Business School Master of Accountancy in Taxation > Largest graduate tax program in New Jersey > Faculty emphasize practicality > Designed for career professionals > Broad array of course offerings > Flexible course schedule

Many courses offered on both the Newark and New Brunswick campuses [150business.rutgers.edu/taxation credit hours requirement satisfied in 2 semesters] business.rutgers.edu/taxmaccy kathleencharmon@business.rutgers.edu (973) 353-5028

Rutgers, The State University of New Jersey – founded 1766

contents M AY/J U N E 2 0 1 9

THE MAGAZINE OF THE NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

RALPH ALBERT THOMAS, CPA (DC), CGMA Chief Executive Officer & Executive Director rthomas@njcpa.org ELLEN C. McSHERRY Chief Operating Officer emcsherry@njcpa.org DON MEYER Chief Marketing Officer dmeyer@njcpa.org RACHAEL BELL Managing Editor rbell@njcpa.org KATHLEEN HOFFELDER Content Editor khoffelder@njcpa.org MARC L. REIN Multimedia Specialist mrein@njcpa.org

4 The Changing World of Trusted Advisors

8 9 Attributes of Successful Corporate CPAs

6 Leveraging and Maximizing Your Business Relationships

10 CPE: Go Beyond Counting Credits

To keep up with the changing needs of the profession, today’s CPA needs to be less of a traditional accountant and more of a trusted advisor to their clients and corporate colleagues. That involves management awareness at the top and open minds at every staff level. Find out the most efficient ways to accomplish this.

Building your network makes it easier to grow your business, help your clients and fulfill your own personal goals.

But leveraging business relationships is a two-way street — to receive quality introductions you must give quality introductions. It’s important to look at your internal and external connections.

2 CLOSE UP

Getting to Know Kyle Sell THE NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS 425 EAGLE ROCK AVENUE SUITE 100, ROSELAND NJ 07068 973-226-4494 | NJCPA.ORG #NJCPAMAG READ NEW JERSEY CPA ONLINE AT NJCPA.ORG/ NEWJERSEYCPA DE SIGN / P RODUCT I ON / ADVERTISIN G THE YGS GROUP 3650 WEST MARKET STREET YORK, PA 17404 Advertising Contact: LAURA GAENZLE ACCOUNT EXECUTIVE 717-430-2351 laura.gaenzle@theygsgroup.com

CPAs who are chief financial officers are valuable partners to the board and leadership because they are able to see and convey the company’s big picture.

How does a corporate CPA/CFO enhance their skills in the C suite and/ or on the board of directors? How do they develop long-term career-building relationships?

To truly make the most of continuing professional education credits, accounting professionals need to change their mindset to start thinking about the way CPE is actually defined: any way in which we gather information that enhances our understanding and knowledge of our profession.

18 FINANCIAL PLANNING SERVICES

12 ACCOUNTING, AUDITING & ATTEST

The Robo v. Human Advisor Debate: Is It Winner-Take-All Proposition?

The Hidden Cost of the New Revenue Recognition Standard

19 FIRM & PRACTICE MANAGEMENT

13 BECOMING A CPA

How to Prove Value: Loyalty v. Satisfaction

Experiential Learning: Linking the Classroom with Real-World Practice 14 BUSINESS ADVISORY SERVICES

yy A Perfect Match: Choosing Referral Partners that Add Value yy Unique Opportunity for Investors in the New Jersey Cannabis Industry

20 FORENSIC ACCOUNTING, LITIGATION SERVICES & BUSINESS VALUATION

Why Clients Need a Business Valuation 21 LAW & ETHICS

6 Things to Know About Recent Accountancy Act Changes

16 CORPORATE ACCOUNTING

22 PROFESSIONAL DEVELOPMENT

The Changing World of Accounts Receivable

6 Steps to Becoming More Adaptable

23 TAX

Employee Misclassification: Independent Contractor v.

Employee 24 TECHNOLOGY & INFORMATION MANAGEMENT

Current and Future Applications of Cryptocurrencies 26 NJCPA NEWS

yy 2019/20 Executive Committee and Board of Trustees yy New Jersey Students Receive Scholarships yy NJCPA to Move Office Location yy Members Field Live Tax Questions 31 CLASSIFIEDS 32 MEMBER STORY

David Rim, CPA

CLOSE UP

Getting to Know Kyle Sell

BY KATHLEEN HOFFELDER, NJCPA CONTENT EDITOR

When a former partner told Kyle Sell, CPA, MBA, a Deloitte & Touche LLP audit partner, who was then an audit manager, that he needed to get more involved and carry the torch for his organization and other Big Fours at the NJCPA, he took that to heart and did just that. More than 15 years later, after serving on numerous committees as chair, vice chair and president, Kyle will become the 2019/20 president of the NJCPA on June 1.

He remembers meeting NJCPA CEO and executive director Ralph Albert Thomas, CPA (DC), CGMA, for the first time in 2008, noting “one of the first questions Ralph had asked me when I had lunch with him was ‘what can the NJCPA do for you?’” At that time, Kyle didn’t have a good answer, but he does now. “I have taken it upon myself to continually ask that question and see what the Society can do for its members, and what it can do for young professionals,” he explains.

Kyle has made assisting the next generation of CPAs a focal point of his service at NJCPA, and he plans to continue that effort as president. “I know at times it can be a challenge to get representation and really good involvement from the Big Four” he explains, which is why he has actively served on NJCPA Student Programs & Scholarships Committee and the Scholarship Fund.

“I try to find good opportunities to get our younger members involved,” he says, noting that he is very open minded in his thinking. The Society and other accounting associations “provide a great environment in which to learn and become broader business professionals,”

he explains. “We spend so much time internally focused on serving clients and developing our skillsets, but sometimes we don’t spend as much time with our young professionals thinking about community, networking, leadership or how to open our eyes to other things.”

As president, he aims to change all that. As he explains, more seasoned accounting executives should help to inform younger professionals about choosing this career path and how to enhance that experience. “Having the opportunity to interview high school seniors for college scholarships is probably one of the most rewarding things I’ve done at the NJCPA,” explains Kyle. “To sit across from a high school student and find a way to financially help them but also give them some guidance and direction is a great and rewarding experience.”

Kyle also gives back to his alma mater, Lafayette College, where he obtained his B.A. in economics and business with a concentration in accounting. He goes back once a year to teach a session on corporate governance and to explain the ins and the outs of an accounting career.

“I do a two-hour seminar once a year and talk about the impact we as CPAs have in the boardroom and with our clients,” he says.

Kyle continues to notice some challenges in the profession, however, which he will look to focus on. Diversity and inclusion, he says, is one area that needs more attention. Accounting professionals are increasingly asked by clients, “why don’t we see a more diverse and wellrepresented team? The Deloitte Women’s

Leadership Initiative, for example, is a huge part of the Deloitte culture, which he says should be duplicated elsewhere with other inclusion councils. He believes we should foster a culture built around inclusiveness. He also has constant reminders about gender equity as he and his wife, Jocelyn, raise four daughters, ages 12 to 18.

READ MORE LEARN MORE ABOUT KYLE njcpa.org/about/board

New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068. Issue No. 75 Copyright © 2019 New Jersey Society of Certified Public Accountants. Annual membership dues include $9 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues.

Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723.

The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.

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Ralph Albert Thomas, CPA (DC), CGMA NJCPA CEO & Executive Director

Why CAMICO? • For more than 32 years, CAMICO has been protecting CPAs with insurance solutions tailored to the professional services and concerns faced by CPA firms every day.

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Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. © CAMICO Services, Inc., dba CAMICO Insurance Services. All Rights Reserved.

THE CHANGING WORLD OF TRUSTED ADVISORS

By KATHLEEN HOFFELDER

NJCPA CONTENT EDITOR

Accounting professionals today are faced with new kinds of data and analytics, different ways to communicate, increased use of social media and generational differences in the office. To keep up with the changing needs of the profession, today’s CPA needs to be less of a traditional accountant and more of a trusted advisor to their clients and corporate colleagues.

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CREATING THE ENVIRONMENT So how can firm leadership and other management prepare for this new CPA role?

For one thing, they need to create an environment in which professionals can thrive.

That means CPA firms and corporate accounting departments need to generate learning opportunities for staff of all levels.

“Allowing team members to participate in client meetings and creating opportunities for shadowing can give the incoming leadership first-hand knowledge and experience servicing clients in a business advisor capacity,” explains Todd W. Polyniak, CPA, partner at Sax LLP, who heads the firm’s accounting and auditing department and Innovation Committee.

While there is no one-size-fits-all guide to becoming a trusted advisor, Joseph Tarasco, CEO and senior consultant, Accountants Advisory Group, LLC, notes that if mutual trust exists between clients and staff, there is the basis to become a trusted advisor.

“Without mutual trust, there is no trusted advisor relationship. At the core of a trusted advisor relationship is a high degree of reciprocal trust with the client and partner — it’s not a one-way street,” he says.

And that relationship can take a long time to nurture. As Joseph Hunt, a member of the audit staff at SobelCo, explains, it’s important for CPA firm leadership to

inform young professionals early on about the role of a trusted advisor. “Trust is not built during the span of one tax season or one audit, it is built over years,” says Hunt.

LEVERAGING GENERATIONS The trusted advisor role is more complicated than ever, especially with five generations in the workforce and five ways of working with clients. Learning can occur on both sides of the generational timeline, however. As Hunt reminds, “the skills of partners and longtime professionals cannot be ignored by early career professionals who want to do it their way.” Though there are always methodologies that can be improved or tweaked, it’s important to understand that the way management “has treated their clients is the reason the firm is still around,” he adds.

Differences can be positive, however.

“As a general rule, individuals from different generations have various perspectives on ways to approach projects and client service. This change can pose challenges to a growing firm but can also open up a number of opportunities if handled correctly,” adds Polyniak. He recommends allowing for more interaction between the age groups by removing any artificial silos that would normally and naturally

separate groups by age. This, he says, will help bring out the best in each of the generational groups.

Tarasco agrees. “Leveraging the strengths and cultures of a multigenerational workforce by encouraging them to learn from each other creates more opportunities for partners to delegate work, create programs that encourage generations to work together and share knowledge, and create future succession plans,” he says.

David Malek, director of marketing at Darden Restaurants, also sees benefits from tapping into a multigenerational workforce as CPAs move into the trusted advisor role. According to Malek, “testing ideas against opposing points of view are how the greatest ideas get developed. Leveraging the distinctive strengths of every generation and enabling them to learn from one another creates an additional collaborative environment.”

Indeed, diversity in the workforce, whether by age, race or other factors, can assist CPAs in dealing with diverse clients. As Jason Dorsey, president and co-founder of the Center for Generational Kinetics and NJCPA 2019 Annual Convention & Expo keynote speaker explains, diversity “is a huge advantage for the firms that choose to embrace it. I think it’s also particularly important as millennials are the most diverse generation in the workforce — at least until Gen Z fully enters the CPA ranks.”

APPLYING TECHNOLOGY Even the most forward-thinking and tech-savvy CPA can struggle at times with new technology and how it may make a task more efficient. Becoming a well-regarded trusted advisor does mean stepping out of one’s comfort zone when it comes to technology.

But Amy Vetter, CEO of The B3 Method Institute and another NJCPA 2019 Annual Convention keynote, reminds that new technology, in and of itself, won’t help CPAs thrive in their new role as trusted advisors but it can make tasks easier and more cohesive when used correctly. “It is important to step back from the business when implementing

new technology. The reason is, you don’t want to end up changing everything to do the business the exact same way as before,” she says.

And CPAs, firm leadership and corporate management do have to put some thought into what areas of their work could benefit the most from technology.

According to Vetter, “rather than replacing technology, understand what you are trying to solve for first. Do you want to start specializing in certain industries or markets? Is there a certain profile that you have found that creates more success than when a client doesn’t meet that profile?”

Artificial intelligence (AI) and new data and analytics can spark new life into old ways of doing business. But according to JT Kostman, Ph.D., managing director of Grant Thornton Labs and an NJCPA 2019 Annual Convention keynote, new ways of thinking about technology are required.

Accountants, he says, need to learn how to partner with AI symbiotically to use these tools and not compete with them. “They need to divest

themselves of those aspects of their work that are better done by machines; reserving their time to provide those skills that are solely in the provenance of people…the very things that, after all, are what we value from our most trusted advisors.”

As Dr. Sean Stein Smith, CPA, assistant professor at Lehman College explains, technology enables CPAs to offer higherlevel advisory services, establish and defend margins in these new services and truly add value to client organizations.

“Assisting clients with evaluating current progress and future directions in a manner that is personalized, customized and real time is what clients expect and will keep them coming back for more,” he says.

LEARN MORE JUNE 11-14, ATLANTIC CITY ANNUAL CONVENTION & EXPO njcpa.org/convention READ MORE BUSINESS ADVISORY SERVICES ARTICLES njcpa.org/topics/advisory

NEW JERSEY CPA | MAY/JUNE 2019

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LEVERAGING AND MAXIMIZING YOUR BUSINESS RELATIONSHIPS

By ANDREA DIAZ, CPA,

SKC & CO. CPAs, L.L.C.

Let’s get straight to the point.

The number-one reason most people start building a network is to grow their business. But, after some time in the game, you realize how much more building business relationships can benefit all aspects of your life.

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Creating a solid group of qualified individuals from different industries with varying backgrounds opens your mind to new ideas, helps your clients grow their businesses, provides opportunities to fulfill your own personal goals and dreams, educates you on topics and places that weren’t previously on your radar, and, in the end, will naturally grow your business.

So, how do you get all these amazing benefits from your business relationships?

When it comes down to it, your “team” is the most significant network you will ever build.

Here are four ways to build and leverage your team so that you can succeed both in business and in your personal life:

will educate you and provide you with ideas and solutions for a variety of needs.

The best way to use that new-found knowledge is to help your clients overcome a challenge, meet a goal, grow their revenue or reduce their expenses. It could be as simple as using the merchant services person on your team to help reduce your client’s merchant service costs or as complicated as knowing the right attorney to assist your client through the sale of their business. In any instance, your consistent goal should be to leverage your team to help your clients. Not only will this deepen your relationship with your clients, your team will love the referrals and ideally think of you the next time they need an expert in your field.

1. FIND PEOPLE Surrounding yourself with people smarter than you will challenge your mind, expand your experiences and keep you in a mode of constant growth. The smarter people in my life have recommended books that changed my perspective, suggested visiting places that exposed me to a world outside my existing horizon and challenged me to listen and entertain ideas without the necessity of accepting them.

You may have to meet a lot of people before you narrow down who you want on your team, but I encourage you to find those who you enjoy listening to and who have a different perspective. You want to learn from your team, and they should want to learn from you. Find those who are like-minded in their morals and integrity. This is hugely important since you will be referring their services to your clients. If done right, these individuals

2. LEVERAGE YOUR TEAM’S TEAMS A healthy team is a growing team, so when someone who is already in your network asks to introduce you to someone, take them up on their offer. If you spend time with your team, get to know one another and share in each other’s triumphs and challenges, they will have a deep understanding of your personal and business goals and will want you to succeed as much as you want them to succeed. Therefore, their introductions should be in line with your ideal contacts.

Keep in mind, leveraging and maximizing your business relationships is a twoway street, so in order to receive quality introductions, you must also give quality introductions. Again, this is another way to help your clients. If you are open to meeting new people, especially introductions from your team, these new people

could provide fresh concepts and could be just the right fit to solve one of your client’s challenges. The more you use your network to help your clients, the more your clients appreciate the value you bring to the table.

3. HAVE AN OPEN MIND Another benefit of creating a team that you love is that it provides opportunities to fulfill your own personal goals and dreams.

For example, I joined a women’s golf committee for two reasons: get better at golf and simultaneously meet some women to grow my network. On the committee was the director of a nonprofit organization that empowers young women through a program that incorporates running. I listened to her story about why she started this nonprofit and the stories of the young ladies who went through the program, and it moved me. Immediately she became a part of my team. She was looking for volunteers, and I was beyond excited to help. Being a coach for her nonprofit, Girls on the Run, was one of the most rewarding and fulfilling experiences of my life. Not

only did this change me personally, but it has created opportunities in being asked to sit on the board of a nonprofit and join other professional groups.

4. BE VULNERABLE A relationship is only as good as the commitment you put into it, so if you want to be challenged and grow, you have to be vulnerable. Open up not only about your successes, but about your failures. Tell your team when you didn’t reach your goal or show them where you’re struggling. You’ve spent countless hours with these folks at breakfasts meetings, lunches and over cocktails, so you should know who to trust, who can help hold you accountable and who can support you as you grow.

This is why having a diverse team is imperative. One person may be more influential in helping you keep your networking goal, and another may be just the right person to make sure you leave by 4 p.m. every Wednesday to make it to your daughter’s piano lessons. Our teams are natural accountability partners, mentors

and cheerleaders. Whatever your goal or need, it is exceedingly easier to fulfill your dreams if you have an accountability partner to answer to.

As accountants, be sure to include in your team other accountants, from various levels and firms. These individuals will serve as mentors, sounding boards and sometimes just a person outside of your firm who “gets it.” Become a mentor to a younger accountant, introduce them to your team and teach them how to build their own team. Happy connecting!

Andrea Diaz, CPA, ABV, MST, is a manager at SKC & Co. CPAs, LLC She is a member of the NJCPA and can be reached at adiaz@skcandco.com.

LEARN MORE MAY 16, EDISON BUSINESS-BUILDING TIPS & SPEED NETWORKING JUNE 11-14, ATLANTIC CITY ANNUAL CONVENTION & EXPO njcpa.org/events

NEW JERSEY CPA | MAY/JUNE 2019

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9 ATTRIBUTES OF SUCCESSFUL CORPORATE CPAs

By CHERYL MUCHA, CPA

CFO YOUR WAY LLC

Corporate CPAs play a pivotal role in their companies’ success, helping to drive business forward and contribute to its profitability. This is especially true when the CPA is in the position of chief financial officer (CFO).

How does a corporate CPA/CFO enhance their skills in the C suite and/or on the board of directors? How do they develop long-term career-building relationships?

Whether the employer is a for-profit or nonprofit organization, there are several attributes and qualifications that define (and can elevate) that professional’s value to an organization.

1. PERSPECTIVE CFOs are valuable partners to the board or leadership because they are able to see and convey the company’s big picture.

From the business owner to the mail clerk, the CFO understands how every employee fits into the company puzzle and how each role affects the other (intraand inter-departmentally). Because of their perspective on each area’s revenue stream and the company’s overall operation and financial health, they are in a unique position to help direct the CEO towards more strategic growth.

2. BUSINESS ACUMEN Hand in hand with operational perspective is sharp business acumen. Those who

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understand business beyond the data are well suited to an advisory role in upper management. They know how financial metrics affect short-term and long-term stability and growth and where the key business drivers are. As such, they are instrumental in making solid business judgments based on current financial data, market changes and industry trends on an executive level.

3. TECH SAVVINESS Staying abreast of rapidly changing technology is a challenge in many fields, and accounting is certainly one of them.

CFOs must be aware of all the accounting software and systems available that streamline processes and produce better reporting. Whether it’s bookkeeping and accounting modules, order processing, timekeeping and payroll, sales or inventory, a savvy CFO is always looking to deploy business technology that improves accounting practices and back-end reporting. The goal: to drive smarter business decisions, improve profitability and contribute to the company’s future growth. As technology

really tell you about the company’s financial health? Do the statements support corporate objectives? If not, where are the opportunities to improve and what can be capitalized upon to enhance margins? The ability to drill down into the numbers provides great financial value to an organization.

8. LEADERSHIP SKILLS CFOs may be called upon to form an inhouse accounting department or manage the existing one. Therefore, being a strong leader who possesses human resource skills may come with the job. This may be especially true as organizations downsize based on market conditions and seek to do more with fewer people in senior management roles.

rapidly changes, CFOs will be challenged to stay abreast of what’s new and what’s best for their organization.

4. TAX EXPERTISE CFOs must be well versed in corporate tax matters that affect long-term financial strategy as well as short-term tax issues.

This is especially important as changes associated with the Tax Cuts and Jobs Act come into play. Keeping up with tax code revisions requires diligence and specific continuing education. The CFO will also be the liaison with the company’s CPA firm for audits and to ensure tax compliance. Since they speak the same financial language, the CFO will ensure that all relevant reports and figures will be made available efficiently — another check on that valuation list.

5. INDUSTRY-SPECIFIC KNOWLEDGE No one person can be an expert in all matters, but a CFO with expertise in a particular industry will surely be more valuable to employers in that sector.

Understanding industry nuances and the

trends affecting the vertical make him or her a vital team member to any organization — someone who can weigh in on how industry trends affect sales, the customer base, production or other matters related to the business. The CFO also plays a pivotal role in helping the company plan for and leverage those changes. Today’s marketplace waits for no one, and leadership needs a partner who can help them plan effectively for a sustainable future.

6. VENDOR RELATIONSHIPS Ideally, a strong corporate CPA has developed a resource pool to bring to any company interaction, particularly with lending institutions, business consultants, insurance agents, IT contractors — any service provider that the company will need to remain productive and competitive. CFOs should always be networking.

7. ANALYTICAL SKILLS It’s not enough to pull the right reports; the CFO must be able to look at the numbers and see how they relate to stated business goals. What do the reports

9. COMMUNICATION SKILLS A CFO has to be a good listener. He or she has to get out from behind the balance sheet and speak and write in such a way that clearly, succinctly explains what the figures mean. A strong CFO is able to communicate to others who don’t have the same financial acumen or skills and explain the results in a meaningful, accessible way.

A career as a CFO can stretch a CPA’s accounting muscles in new and engaging directions beyond financial expertise.

Individuals who aspire to CFO positions should seek a career path that provides opportunities to develop skills and gain experience in human resources, business technology, the sales process and other operational areas. Those who have strong interpersonal and leadership skills as well will be able to compete most effectively for those positions — in today’s marketplace and in the future.

Cheryl Mucha, CPA, is the owner of CFO Your Way LLC. The firm creates pathways to profitability for growing local businesses with outsourced accounting services. She can be reached at cheryl@cfoyourway.com or 973-897-0650.

READ MORE

CORPORATE

ACCOUNTING ARTICLES

njcpa.org/topics/corporate

NEW JERSEY CPA | MAY/JUNE 2019

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CPE: GO BEYOND COUNTING CREDITS

By COLLEEN CULLARI

CULLARI CARRICO LLC

In this day and age, information is coming at us so quickly that it seems to be changing by the minute.

It’s time to leverage CPE for more than just compliance.

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CONTINUOUS LEARNING I used to believe that continuing professional education (CPE) was a tool to enhance the quality of services I was providing to existing clientele. After all, most of the courses I take to fulfill my CPE requirement are limited to the practice areas I serve. My entire 120 credit load is fulfilled by compliance with the government auditing standards requirement.

However, recently I realized that I needed to change my CPE mindset to start thinking about the way CPE is actually defined: any way in which we gather information that enhances our broad understanding and knowledge of our profession.

Our own standard-setting board has an ongoing standard-setting process in which they have maintenance updates just to ensure that the content released one day doesn’t conflict with content released days before. It is imperative now more than ever that we stay on top of all of this information. Incorporating CPE into our daily routine must become the standard for CPAs in practice; harnessing and distributing this information to our staff and clients on a timely basis is imperative to our professional development.

What drove this idea in the first place was my own feelings towards the accounting industry’s changing marketplace. For the past couple of years, our managing partner has been asking us to embrace disruptive

technology and start to become the client’s trusted advisor. I needed to know about disruptive technology and help my clients implement it all while still being able to communicate my analysis of the “afterthe-fact” accounting work I was actually hired to do. Now I was being charged with helping clients strategize for the future as well. Here I am, a manager, on top of my game, specializing in audit — and in this new accounting marketplace I felt like I was thrown back into staff level 2: researching, attending various seminars and reading articles by my peers on a daily basis just to stay afloat. I felt overwhelmed, but I knew I had to keep moving forward. The way I did that was by gathering as much information as I could and disseminating it. If I read an article or attended a seminar, I would immediately send my thoughts out to any client it pertained to. At the time, I didn’t even realize this process would strengthen my client relationships. I was simply blasting emails off left and right with subject headers that read, “I think this would help your business,” “Remember that problem you had?

This new technology seems to solve it,” “I heard this in a seminar today and I think you should be aware of it.” Clients noticed that I was thinking of them and they appreciated it. I realized that this was the first step in becoming the client’s trusted advisor and using CPE to grow and develop professionally.

PAY IT FORWARD Although I had been keeping my staff copied on most of my communications with clients, it wasn’t going any further than that. I realized that I owed more training to my team, especially my seniors who were working with the clients on a daily basis.

I needed to assist fellow members of my firm with their own professional growth and get them up to speed, but it was beyond my reach. I didn’t know enough yet about the concepts I was sharing with clients because what I was sharing was off-the-cuff type of ideas and information.

I thought I would never have the time to do the in-depth research necessary for training. The partners at our firm brought a solution to the problem by assigning key staff the responsibility of developing

content to present to co-workers at “lunch and learns.” We spread out the responsibility of the research to younger, less-experienced staff members and saw them flourish. They were excited about learning something new that even their partners didn’t know about, and they began to understand that it was their responsibility to also start researching and seeking out educational advances in the field to further our firm growth.

In the near future we are hoping to develop this content into in-house CPE seminars that we would also be able to invite our clients and potential new clients to attend. We have also found a need in the niche markets we serve to get clients together and information share during roundtable sessions at our office. We are

in the beginning stages of marketing our CPE this way. We will set up the roundtable, create the agenda and let the clients lead the discussion. This will not only enhance the client experience, but help us learn more about our clients’ needs in real time so we are better able to serve them in the future.

Colleen Cullari, MBA, is an audit manager at Cullari Carrico LLC. She is a member of the NJCPA Accounting & Auditing Standards and Nonprofit interest groups. Colleen can be reached at ccullari@cullaricarrico.com.

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NJCPA LEARNING OPPORTUNITIES

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NEW JERSEY CPA | MAY/JUNE 2019

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ACCOUNTING, AUDITING & ATTEST

The Hidden Cost of the New Revenue Recognition Standard

BY RICHARD P. HIGGINS, CPA, McCARTHY & COMPANY, PC

The Financial Accounting Standards Board (FASB)’s Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), applies to all contracts with customers unless the contract is within the scope of another standard (e.g., leases, insurance, financial instruments). The standard became effective for public companies for the first interim period beginning after Dec. 15, 2017, and nonpublic companies in the years beginning after Dec. 15, 2018. Businesses can apply this ASU retrospectively, or they can elect to recognize the cumulative effect of applying the new standard to existing contracts in the opening balance of retained earnings on the effective date (with proper disclosures).

This ASU will significantly affect the current revenue recognition practices of most companies. It could also impact the timing and amount of revenue reported, key performance indicators, debt covenant ratios, bond programs, contract negotiations, performance agreements, business activities and budgets. It is therefore important to look at the capitalization of costs associated with deferred revenue and its impact on the balance sheet.

TIMING The ASU requires that revenue is recognized when the good or service is transferred or as control over the good or service is transferred. Therefore, revenue can be recognized over time (services) or at a point in time (goods).

Recognizing revenue over time is like the percentage of completion method of accounting with a slight adjustment. One of the following two conditions must be met to recognize revenue incrementally: yy The customer must have control of the asset as it is built or improved, or yy The asset must have no use to you; therefore, you have right to the payment.

Recognizing revenue at a point in time involves recording revenue for each

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MAY/JUNE 2019 | NEW JERSEY CPA

performance obligation as it is completed or when the customer takes control of the asset. Control of the good or service is defined as “when the customer has the ability to direct the use of or can benefit from the transferred good or service.”

The timing of contract-related costs will have a significant impact on a company’s balance sheet as well. These include the cost to obtain and fulfill the contract.

IMPACT CPAs need to analyze how this ASU will affect balance sheets. There could be a major impact on how contract accounts are organized and the presentation of contract-related assets and liabilities on the balance sheet.

Commission and earnout agreements may need to be revised. Under the ASU, commissions that are directly attributed to a specific contract are treated as acquisition costs. These costs will need to be capitalized and amortized over the contract’s life.

This may cause a change in the timing of commission payouts. Earnout agreements that extend beyond the ASU’s effective date will typically have to be adjusted due to a change in when contract-related expenses will be recognized.

Businesses are required to maintain the financial metrics outlined in the terms of a loan or bond agreement. This can include everything from minimum working capital ratio to maximum debt-to-equity ratio requirements. Lenders and sureties use this information to determine if the company is financially healthy.

Since ratios may be negatively impacted by an increase in liabilities on the balance sheet, it is important for companies to have a conversation with their banker and surety to explain why. Develop a pro forma of what the balance sheet will look like once revenue is recognized in compliance with this ASU. The costs related to implementing this ASU reach far beyond changes to internal

processes and procedures. Businesses should develop scenarios based on typical situations and thoroughly analyze the possible impacts. It is always better to be safe than sorry.

Richard P. Higgins, CPA, is a principal with McCarthy & Company, PC, a leader in construction accounting.

He is a member of the NJCPA and can be reached at 732-341-3893 or Richard.Higgins@MCC-CPAs.com.

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BECOMING A CPA

Experiential Learning: Linking the Classroom with Real-World Practice

BY DR. BARRY PALATNIK, CPA, AND LEO PREVITI, CPA, STOCKTON UNIVERSITY

Research has shown that both faculty members and accounting students can benefit from interaction with practicing CPAs1.

Likewise, findings by the Pathways Commission2, which was created as a joint endeavor by the American Institute of CPAs and the American Accounting Association, found a deficiency between accounting practice and accounting education. To address this deficiency, one recommendation of the Commission is to provide opportunities for accounting practitioner/accounting educator exchanges to incorporate practitioner views into the education of the next generation of accountants. To deal with this deficiency, universities are expanding the use of experiential learning in their accounting programs.

WHAT IS EXPERIENTIAL LEARNING? Experiential learning is the development and application of knowledge, skills and values from direct experiences outside of a traditional academic setting3. Unless accounting faculty were once practicing CPAs, there is a distinct possibility that students will have no interaction with practicing accounting professionals until interviewing for a position. Experiential learning helps relate course content to real-world opportunities.

It is aligned with recommendations of the Pathway Commission to educate the next generation of accountants in such a way that they do not just know the technical aspects of accounting, but also understand how accounting contributes to business decision making and a prosperous society.

EXAMPLES OF EXPERIENTIAL LEARNING Experiential learning includes on-campus professional programs, audit setting/ simulation events and competitions, servicelearning opportunities and traditional internship programs. On-campus professional programs have become a common element in the education of accounting students. Such programs allow students to hear

from and ask questions of practitioners. Some universities formalize this interaction through a required “introduction to the accounting profession” course with weekly presentations by practitioners. Discussions of work experiences, as well as the skills and education which facilitate employment, prompt students to envision how their education lays a foundation for Stockton University students at the 2018 NJCPA Annual Convention & Expo professional success.

The Volunteer Income Tax Assistance generosity of Stockton alum and NJCPA (VITA) program is another form of member Daniel Barbera, CPA, CFO of experiential learning. Under the superviLydia Security Monitoring, Inc., students sion of their professors, students prepare were able to interact with accounting tax returns for low-income families and professionals to more fully comprehend gain practical experience while making a what becoming a member of the profesdifference in their community. Another opsion entails. The convention attracts CPAs portunity for experiential learning comes in public and private practice, providing a through the IRS’s Criminal Investigation valuable link between the classroom and Division. Accounting students are afforded the real world for students. the opportunity to experience the law When faculty partner with accounting enforcement side of accounting as they inprofessionals, it can enhance the abilities vestigate a mock tax crime side by side with of accounting graduates. Through experiIRS special agents, prosecutors and other ential learning opportunities, students financial crimes units in an education proare afforded the more balanced classroom gram which has become known as “Project and practical view needed to educate Adrian.” Students are coached though a and motivate the next generation of series of exercises performing forensic and accounting professionals. law enforcement tasks, expanding their knowledge of how accounting may interact Dr. Barry Palatnik, CPA, MBA, is assistant professor with law. Overall, experiential learning of accounting at Stockton University. He is a member requires creativity and innovation on the of the NJCPA and participates in its Accounting part of accounting faculty together with the Educators community. He can be reached at barry. assistance of the practitioner community. palatnik@stockton.edu. Leo Previti, CPA, MBA, JD, is Introducing students to professional assistant professor of business studies and accounting at associations is another form of experienStockton. He can be reached at leo.previti@stockon.edu. tial learning. For the last two years, 1 Stockton University accounting faculty files.eric.ed.gov/fulltext/EJ1053724.pdf 2 attended the NJCPA Annual Convention commons.aaahq.org/groups/d690969a3/summary 3 & Expo along with some of the universi researchgate.net/publication/270671768_On_ ty’s accounting students. Thanks to Becoming_an_Experiential_Educator_The_ assistance from the NJCPA and the Educator_Role_Profile

NEW JERSEY CPA | MAY/JUNE 2019

13

BUSINESS ADVISORY SERVICES

A Perfect Match: Choosing Referral Partners that Add Value

BY TERRI S. JOHNSON, CRE, CAPSTAN TAX STRATEGIES

Today’s CPAs serve as true partners and trusted advisors to clients, becoming intimately familiar with each client’s growth, plans and struggles. This means that when the need may arise to augment in-house services, most CPAs won’t partner with just anyone. Many CPAs are wary of recommending consulting firms, concerned that an unsuccessful engagement might damage the client relationship. No matter what type of referral partner is being considered — financial services, insurance, 1031 exchange, cost segregation or any other — the CPA firm must do their research and carefully select someone they trust to take care of their clients.

WHY CAN’T WE KEEP THINGS IN-HOUSE? Depending on the nature of your firm, maybe you can. However, as the tax code gets deeper and more complex, it’s becoming difficult for all but the largest firms to have every necessary expert just down the hall. For example, cost segregation is a specialty service requiring knowledge of construction methods, engineering and the Internal Revenue Code for fixed assets including applicable tax court cases and revenue rulings. The concept of accelerated depreciation may seem simple, but depreciation law and building technologies are anything but. A detailed, defensible cost segregation study can only be performed by an experienced engineer, and most CPA firms don’t have the volume to justify keeping those niche resources in-house. Partnering with a qualified cost-segregation firm allows a CPA firm to provide a value-added service without keeping engineers on staff.

WHAT WILL THE RIGHT REFERRAL PARTNER DO FOR MY FIRM? The right referral partner (RP) will provide new services and financial value to your firm. The ideal RP will collaborate with you in a way that increases

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MAY/JUNE 2019 | NEW JERSEY CPA

profitability and enriches your client relationships, with minimal time invested on your part. Client satisfaction and retention will increase, and the ideal RP will make the process easy for you while strengthening your position as trusted advisor. The ideal RP possesses the following qualities: yy Trustworthy. The CPA must implicitly trust the RP to take care of the client while respecting the primacy of the CPA/client relationship. The ideal RP understands that his or her role is to augment the CPA’s expertise and strengthen the CPA’s relationship with his or her clients. yy Qualified. The ideal RP is a skilled subject-matter expert with appropriate experience and certification. yy Accessible. Good communication makes a good RP. Frequent, transparent communication between the client, CPA and RP that defines goals and roles is key to success. yy Adaptable. The ideal RP will tailor their level of engagement to your preference. In general, clients aren’t one size fits all, and you want an RP that can and will customize their approach. Some CPAs prefer that RPs act like an extension of their staff, while others prefer that RPs be behind-the-scenes players.

Some firms want to be involved every step of the way, while others prefer to just be copied on the final product.

Whatever your preference, the ideal RP will customize a unique method and will institute a consistent process that meets your needs. yy Consistent. The ideal RP will make sure that their entire team understands the process through education and onboarding that institutionalizes the knowledge and stresses the value of the relationship. With the right RP, you can look forward to consistent processes and outcomes every time, knowing that you and your preferences are valued.

yy Candid. The right RP will be candid about what’s best for a client’s bottom line. The right RP isn’t in it to sell something but to suggest strategies that will create a successful outcome. When a RP occasionally says “I wouldn’t,” it means that you and your clients can feel confident proceeding when they say, “Let’s do it.” yy Upstanding. The ideal RP will stand by their service.

Finding the right RPs for your firm might not be easy. You might have to kiss a few metaphorical frogs. But it’s worth investing the time initially to find the right partners, and you’ll know when you do — they’ll make you look great, make your clients happy and make the whole process easy.

Terri S. Johnson, CRE, is a co-founder and partner at Capstan Tax Strategies. She works closely with commercial real estate owners and accounting firms to provide practical, creative and customized engineering-based tax solutions. Terri can be reached at tjohnson@capstantax.com.

READ MORE BUSINESS ADVISORY SERVICES ARTICLES njcpa.org/topics/advisory

BUSINESS ADVISORY SERVICES

Unique Opportunity for Investors in the New Jersey Cannabis Industry

BY RAYMOND V. OWENS, CPA, CITRIN COOPERMAN & COMPANY LLP

When President Trump signed the Tax Cuts and Jobs Act into law on Dec. 22, 2017, the country experienced a dynamic shift in tax policy, the likes of which had not been seen since the Reagan administration. Amongst the changes were lower corporate and individual tax rates, provisions for the repatriation of income and provisions to bolster economic growth in areas in need of a boost. One such provision is IRC §1400Z-1, which provides for Qualified Opportunity Zones (QOZ). QOZs are generally economically depressed areas where the federal government is attempting to spur investment.

Eligible areas have a calculated poverty rate of 20 percent or a median family income not exceeding 80 percent of the statewide or metropolitan-wide median family income. Investors can potentially defer or reduce taxable capital gains by reinvesting them into such zones, subject to certain requirements. At present, New Jersey has 169 designated zones, and three of these jurisdictions have openly expressed their desire to host cannabis businesses. This could provide a potentially exciting investment opportunity to the right group of investors.

HOW IT WORKS The mechanism by which investment is encouraged is relatively straightforward.

In exchange for their investment, investors in QOZs are allowed to temporarily defer capital gain recognition on investments sold in the current year. After initially realizing the gain, investors have 180 days to reinvest their gains into a qualifying zone via a Qualified Opportunity Fund (QOF). Per IRC §1400Z-2(d), a QOF can be organized as either a corporation or a flow-through entity, but it must hold at least 90 percent of all of its assets within the QOZ and make an election to be treated as an eligible entity.

If the investment is held for five years, the investor will benefit from a

10-percent step up in basis to use against the gain. If the investment is held for seven years, the investor will benefit from another 5-percent step-up on top of that. If the investment continues to be held at Dec. 31, 2026, the investor will be forced to recognize the remaining 85 percent of the gain invested. This becomes limited to the lower of the original investment or 85 percent, should the investment fail to appreciate in value.

Investments held in excess of 10 years will benefit from a full exclusion of gain recognition. The regulations have no maximum on how much can be contributed to an investment vehicle, and an investor may be permitted, under current law, to hold the investment while it appreciates up until Dec. 31, 2047.

Now, it is important to note that not every business can be eligible for this treatment. When Congress wrote the law, they specifically exempted certain businesses from the program. These so-called “sin businesses” include casinos, liquor stores, racetracks and country clubs, to name a few (see IRC §144(c)(6)(B) for the full list). Luckily for those eyeing the cannabis industry as their next possible venture, cannabis enterprises are not listed and should therefore qualify.

WHY IT’S EXCITING At present, cannabis is still federally illegal to buy or sell under the Controlled Substances Act of 1970. As a Schedule I narcotic, any business engaged in trafficking cannabis is subject to IRC §280E, meaning none of their ordinary business expenses (e.g., rent, repairs) will be deductible against taxable receipts. This generally deters investors and operating companies alike from wanting to operate in the cannabis industry. By forming a QOF and investing in real estate, which may be leased to an operating cannabis company depending on the jurisdiction, investors may be able

to participate in the growth of the industry. This strategy could potentially offer investors the ability to defer recognition on their current taxable capital gains while also making available capital for them to invest in the “secondary cannabis market.”

New Jersey may be a perfect market to employ this strategy. On Feb. 5, 2019, New Jersey released guidance indicating their conformity with the federal opportunity zone provisions. The cities of Jersey City, Asbury Park and Trenton have all expressed interest in allowing “alternative treatment centers” (New Jersey’s name for medical dispensaries) in their cities. Each of these three municipalities contain QOZs within their borders which could host cannabis enterprises.

A 2016 report published by the New Jersey Policy Perspective estimates that if cannabis were to be legalized for adult use in New Jersey, it would likely grow into a $1 billion-a-year industry. There is potential for approximately 343,000 consumers; possibly more from a spike in tourism from nearby states where cannabis may remain illegal. Given the industry growth that has already taken place in states like California and Colorado, the populous state of New Jersey appears to be the site for the next industry boom, and QOZs may be the ideal strategy to share in the prosperity.

Raymond V. Owens, CPA, is a tax manager at Citrin Cooperman & Company LLP. He is a member of the NJCPA Cannabis Interest Group and can be reached at rowens@citrincooperman.com.

LEARN MORE JULY 31, ISELIN CANNABIS CONFERENCE njcpa.org/events READ MORE CANNABIS ARTICLES njcpa.org/topics/cannabis

NEW JERSEY CPA | MAY/JUNE 2019

15

CORPORATE ACCOUNTING

The Changing World of Accounts Receivable

BY DAVID RUBIN, CREDIT MANAGEMENT GROUP

It used to be that a company emailed a customer an invoice for goods delivered or services rendered and then waited to receive a paper check. It was a simple system with room for improvement. The problem was that someone at the company had to produce, print and mail the invoices. Billing would sometimes be delayed because the person responsible for this function was busy doing something else.

It then became a waiting game to get paid. “I never received your invoice” or “The check is in the mail” could be used as excuses for not paying in a timely manner.

Customers were in control of a company’s cash flow, and there was not much that could be done about it. Even with advances in technology, customers still have the upper hand when it comes to when they will pay.

Accounts receivable management is, therefore, a critical operational function.

Systems and procedures need to be in place to ensure that invoices go out on time and payments are made according to the agreed-upon terms. Here are some practical recommendations:

yy yy yy yy yy yy yy

Credit terms and policies Average accounts receivables Average days to pay Days sales outstanding Bad debt write-offs Collection procedures Persons responsible for each function (credit team) yy Performance expectations (financial and for each team member) yy Key performance indicators and metrics yy Benchmarks (internal and external)

DEVELOP A CREDIT POLICY PLAN A credit policy plan should be designed to align corporate goals with business procedures. If your credit policy plan is well executed, cash flow will improve, payment cycles will be more predictable, bad debt and write-offs will decrease, and profitability will increase.

It should include information on: yy Accounts receivable goals yy Customers

ESTABLISH A COLLECTIONS PROCESS Cash flow will improve if companies have a collections process. Establish procedures for each class of customer (A, B and C).

Develop best practices and give the credit

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MAY/JUNE 2019 | NEW JERSEY CPA

CORPORATE ACCOUNTING

team the tools needed to get the job done.

These may include: yy Templates for email and written communication. A series of templates should be developed that get more forceful over time and are polite yet firm yy Scripts for conversations based on various situations yy Policies for dispute resolution including rules for saving a client relationship and fostering good will IMPLEMENT A CREDIT AND COLLECTIONS SYSTEM A credit and collections system will help with the invoices receivable management.

This technology integrates applications such as billing and invoicing, remittance processing, collections management, dispute resolution, and reporting and analysis.

Typically, a credit and collections system will include modules for: yy Credit facilitation such as credit scoring, credit application processing,

yy

yy

yy

yy

credit checks, financial statement analysis, credit limit decisions, A/R monitoring and credit risk management Invoicing which includes features like electronic invoice presentation and payment (EIPP), electronic bill presentation and payment (EBPP), error checking, discounts and contract management Remittance processing in the form of electronic data interchange (EDI) and electronic funds transfer (EFT), automated clearing house (ACH), credit/debit card processing, auto-cash algorithms and routines, payment-to-invoice matching, cash settlement, and cash forecasting Collections management functions such as prioritizing collection efforts, payment reminders, communication tools, payment plan calculators and auto-dialers Dispute management features like deduction management, chargeback processing, exception reporting

with automated escalation processes, collaboration tools and document sharing The goal is for every step of the accounts receivable function to be digital — billing, payments and clearing of cash and collections. One survey of law firms found that those that accept online credit card payments get paid 39-percent faster on average.

It is important to weigh the cost and benefit of implementing an accounts receivable management system in-house versus outsourcing this function. Just as companies benefit from outsourcing payroll and accounts payable, outsourcing accounts receivable can reduce operating, overhead, technology and payroll costs, improve cash flow and help to maintain good relationships with customers.

David Rubin is the managing director of Credit Management Group, one of the leading providers of offsite accounts receivable management services. He can be reached at 215-845-5040 or david@creditmgtgroup.com.

NEW JERSEY CPA | MAY/JUNE 2019

17

FINANCIAL PLANNING SERVICES

The Robo v. Human Advisor Debate: Is it a Winner-Take-All Proposition?

BY JAMES FERRARE, WITHUM WEALTH MANAGEMENT

Robo advisor. While this term might initially conjure up the image of a spaceage consultant — everything from Rosie the Robot in The Jetsons to R2D2 — it also generates the need for careful consideration when it comes to financial and wealth management.

By definition, robo advisors (robos) provide digital financial advice based on mathematical rules (algorithms) that are devoid of virtually any human intervention.

As might be expected, these self-guided investment platforms are unequivocally cheaper than advice received from most financial advisors. The bullish case for robos is this: their algorithms, net of fees, will do a better job than human advisors in asset allocations and managing client assets.

However, the choice between a digital and human advisor is NOT a zero-sum game and NOT a winner-take-all proposition.

There is no doubt that robos are helping fill a void that many asset management firms find unprofitable with regard to small account balances. Robos typically utilize low-cost index-based investments as a means of gaining market exposure. Non-robo advisors have an expanded investment universe from which to work, including traditional and non-traditional investments. Aside from an expanded investment universe, a non-robo advisor will always maintain one critical advantage — the ability to connect and communicate with their clients.

EMOTIONLESS ADVICE VERSUS FINANCIAL INTEGRATION Can a robo truly replace or replicate a dedicated, independently certified and/ or credentialed human advisor? While it’s true a robo advisor is void of emotion, since the software cannot be influenced by greed and fear, it does require a participant to have complete and total faith in the algorithm-based program. This unwavering confidence in a software program can be tested in times of heightened volatility.

In contrast, a human advisor can be of

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MAY/JUNE 2019 | NEW JERSEY CPA

tremendous assistance during market turbulence, especially when it comes to encouraging clients to stay the course when their emotions are tempting them to do the exact opposite.

In addition, human advisors offer another strategic advantage over robos: the ability to create total financial integration for their client. A properly credentialed and experienced advisor can assess variables that extend far beyond asset allocation and portfolio rebalancing. Pertinent examples include an upcoming change in the tax code, a pending business sale, a short-term deficiency in cash flow, a concentrated investment, a change in employment or marital status, or the dovetailing of a 401(k) plan into an overall investment strategy. These scenarios, which are quite common over an investment cycle, tip the scales toward having a trusted go-to advisor or advisory team.

Competition is fierce among robo advisory firms. In addition to competing against traditional advisors, they also are vying for clientele alongside other robo advisors. Each distinguishes itself based on different algorithms, asset class choices, requirements and unique features.

Adding to the competition are “hybrid” robos which offer some limited level of human interaction. Financial and wealth management professionals and their clientele can find some comfort in the fact that all robos should be registered investment advisors. As such, they are subject to the jurisdiction of the Securities and Exchange Commission and the substantive and fiduciary obligations of the investment Advisors Act of 1940.

When considering a robo, price should not be the only key variable for choosing the right advisor. Asset levels, complexity and the need for human interaction are also strong considerations. Of course, robo and human advisors are not necessarily mutually exclusive. In some cases, each may represent the smarter choice for the greatest gains.

CASE STUDY: THE POWER OF A ROBO/PERSONAL ADVISOR COLLABORATION An investor would like to contribute a modest monthly amount into a diversified, age- and risk-appropriate portfolio. The contributed capital amount is expected to tally $250,000 over the next three years. The investor would like the account to be periodically rebalanced and have losses harvested to minimize capital gains at the end of each year. A broker quotes an all-in cost of 1.50 percent per year. The pricing represents their typical “outsourced” approach and low associated asset balance. A robo advisor in this case can make sense.

The same investor receives sudden wealth of several million dollars and is uncomfortable with having a digital relationship for these funds. As the result of being discouraged in a previous broker search, the investor identifies a registered investment advisor held to a fiduciary standard just like their robo advisor. Their independent personal advisor becomes a cost-effective, intelligent choice for creating an integrated investment strategy.

James Ferrare is managing principal of Withum Wealth Management and principal of Withum’s sub-investment advisor Pinnacle Associates Ltd. He advises clients in investment management matters as they navigate each new stage of life. Jim is a member of the New York Society of Security Analysts and CFA Institute and can be reached at jferrare@withum.com.

LEARN MORE MAY 23, SOMERS POINT HOT TOPICS IN FINANCIAL PLANNING njcpa.org/events READ MORE FINANCIAL PLANNING SERVICES ARTICLES njcpa.org/topics/financialplanning

FIRM & PRACTICE MANAGEMENT

How to Prove Value: Loyalty v. Satisfaction

BY LEE FREDERIKSEN, PH.D., HINGE

Savvy professional services providers don’t just strive for client satisfaction but rather client loyalty. One way CPAs can gauge loyalty versus satisfaction is by talking with their clients. But the reality is that clients may not speak openly and honestly for a variety of reasons. A better approach in some circumstances is to use independent research to help uncover perception gaps between the firm and its clients and measure brand strength.

A recent Hinge study, Inside the Buyer’s Brain: Understand your buyers. Win more business, engaged with 1,475 buyers and 3,005 sellers. More than 32 percent of the respondents represented the accounting and finance marketplace. The study uncovered three sets of industry loyalty and satisfaction insights and data that can help CPAs assess value loyalty and satisfaction with their firm.

1. BUYERS ARE BECOMING LESS LOYAL Hinge buyer research from 2013 through 2018 showed a 14-percent drop in “highly likely” buyer intent to stay with the service provider in two to three years. However, while loyalty is dropping, satisfaction is on the rise. On top of that, the average professional services brand is weakening.

Hinge’s Brand Strength Index measures both reputation and visibility. The average Brand Strength Index has dropped from 60.1 in 2013 to 54.3 in 2018. There has been a decline in both reputation and visibility with professional services firms over the last five years.

How likely are buyers to stay with the same service provider in 2–3 years?

100% 75% 50% 71.4%

57.4% Highly likely

25%

0%

2013

2018

2. ONLINE SEARCH IS BECOMING MORE COMMON In 2013, more than 70 percent of buyers reported turning to their network when they needed a new service provider. While referrals remain the top search method, less than 60 percent of today’s buyers ask for referrals — a 15-percent decrease.

While clients are more willing to be referral sources, the rate at which they are actually making referrals is down almost 5 percent from 2013 data. This suggests that prospects are using other methods to find CPAs rather than asking a friend or a colleague for a referral.

Online search has become more widely adopted — up from 11 percent in 2013.

Today, online search is used by nearly one in five buyers.

Top 5 Search Methods for Professional Services Firms Network/ ask a friend or colleague

Search online

24.6% 18.2%

Refer to recent projects/ 15.3% past experience Accept meeting requests/ 13.8% they come to us 0%

Professional Services Buying Criteria Relevant experience/ past performance

35.1%

Team expertise/ skills

33.4%

Knowledge of the industry/ client business

20.6%

The abilty to deliver results

19.6% Buyers

Good reputation 16.8% 0%

59.5%

Existing relationships/ we already know them

2. How do I stack up against my competitors?

3. How can I better differentiate my skills and expertise?

4. Why do my best clients choose me?

5. Why did some of my prospective clients choose other practices or firms?

All of these questions can be answered with research and data.

Buyers

10% 20% 30% 40% 50%

3. CLIENTS ARE PLACING A HIGHER IMPORTANCE ON CPA EXPERTISE When evaluating a CPA practice, buyers are most likely to look at past performance (35 percent). This top selection criterion has changed since 2013 — when a good reputation, price and cultural fit were the top three selection criteria.

Since 2013, Hinge has observed an increase in the average perceived value rating.

Buyers value their professional service firms 33 percent more today.

Rather than asking “How do I prove value loyalty versus satisfaction?” today’s CPA firms should be trying to answer the following questions: 1. How do my clients really see me?

10% 20% 30% 40% 50%

Loyalty is going down. Satisfaction is rising. It appears that fewer prospective clients are asking for referrals. They are accessing online resources more and more as they select CPAs. These prospective clients are looking for CPAs who can solve their immediate problem and help them develop new business. Leverage research and statistics and then go stake your claim. As any good CPA knows, “the numbers tell the story.”

Lee Frederiksen, Ph. D., is the managing partner of Hinge. He is an author and frequent speaker on strategy, marketing and organizational management.

He can be reached at 703-391-8870 x101.

LEARN MORE MAY 15, WEBINAR COMPETING IN TODAY’S MARKET njcpa.org/events READ MORE INSIDE THE BUYER’S BRAIN: UNDERSTAND YOUR BUYERS. WIN MORE BUSINESS. hingemarketing.com/ibb CLIENT RETENTION ARTICLES njcpa.org/topics/clients

NEW JERSEY CPA | MAY/JUNE 2019

19

FORENSIC ACCOUNTING, LITIGATION SERVICES & BUSINESS VALUATION

Why Clients Need a Business Valuation

BY MARTIN C. McCARTHY, CPA, McCARTHY & COMPANY

Clients typically keep a watchful eye on their financial position and cash flow, as well as production, operating costs and the various other factors that can impact profitability. What they might not think about is having a professional business valuation done until the day they need one. Clients need a business valuation to: yy Develop an exit plan yy Sell the business yy Obtain bank financing or alternative funding yy Develop an estate plan or gifting program yy Value the business for filing a decedent’s estate tax return yy Determine the fair market valuation of the business in the case of a shareholder or partnership dispute, shareholder or partnership investment or buyout, buy-sell agreement or divorce yy Value a business for a business bankruptcy VALUABLE INSIGHTS A business valuation is the process of examining various economic factors of a company’s operations using predetermined formulas to assess the value of the business or an owner’s interest in a company. A business valuation will help clients understand the true value of their business and may be conducted to provide an accurate snapshot of the company’s financial standing to present to current or potential investors. There are three basic approaches to determine the fair market value (FMV) of a business: asset, income or market value.

It is important to set a base line value for the business as soon as it is well established, and to continue to have it valued periodically.

Like an investment in stocks or bonds, the value of a business fluctuates due to changes in buyer behaviors, competitive offers, economic trends, government regulations, disruptive technology, globalization, trade agreements, cost of labor and raw materials, and numerous other market forces.

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Clients need to know if their business is growing, stagnant or declining. A valuation can identify weaknesses in a business.

Armed with this information, clients can develop processes and procedures to improve operating efficiencies, reduce costs, manage cash flow and introduce other initiatives to increase profits.

Clients should have a valuation done periodically throughout the lifetime of their business. At the very least, it should be done five years before transitioning a business. Clients need to know exactly how much their business is worth before implementing a succession plan and exit strategy.

HIGH-GAIN QUESTIONS As their most trusted advisor, CPAs should have regular conversations with clients about the value of their business. Start by asking questions such as: 1. When do you plan to retire or phase out of the daily operations of your business?

2. Do you have a formal written transition plan?

3. Will you sell the business to a third party or transition ownership to a family member or employee?

4. Have you thought of possible successors?

5. Have you thought about companies that might be interested in buying your business?

6. Would you consider merging with another business as an exit strategy?

7. How much do you think the business is worth?

8. What is that number based on?

9. Are you counting on having an income stream from the business to fund your retirement?

10. How much money will you need on an annual basis to support your lifestyle goals?

11. Can the business survive if you are not actively involved?

12. Would you consider staying with the company to ensure a smooth transition?

A proper business valuation should be done by a CPA or another qualified industry expert. The AICPA offers the Accredited in Business Valuation (ABV®) credential exclusively to CPAs and qualified valuation professionals. Holding the ABV designation can help position CPAs valuation experts and provide peace of mind to clients.

Martin C. McCarthy, CPA, CCIFP, is the managing partner of McCarthy & Company, a leader in construction accounting. He can be reached at 610-828-1900 or marty.mccarthy@mcc-cpas.com.

LEARN MORE SEPTEMBER 24, ISELIN BUSINESS VALUATION AND LITIGATION SERVICES CONFERENCE njcpa.org/events READ MORE BUSINESS VALUATION ARTICLES njcpa.org/topics/businessvaluation

DO MORE JOIN THE FORENSIC & VALUATION SERVICES INTEREST GROUP njcpa.org/groups

LAW & ETHICS

6 Things to Know About Recent Accountancy Act Changes

BY JOHN F. DAILEY JR., CPA

For several years, the NJCPA has been lobbying for changes to the Accountancy Act of 1997 to bring New Jersey’s laws up to date with other states/jurisdictions and the Uniform Accountancy Act (UAA).

On Jan. 31, 2019, Governor Murphy signed P.L. 2019 Ch. 10 (Senate Bill 2962) into law. The following are six things to know about how these statutory amendments affect the state’s CPAs. 1. New Definition of Attest. It has taken five years, but the revised definition of “attest” brings New Jersey in line with the rest of the universe. NJSA 45:2B-44 redefines attest engagements as audits, reviews, examinations performed in accordance with attestation standards (SSAE), agreed-upon procedures and PCAOB engagements.

This change is consistent with the provisions of the UAA. 2. Changes to the Third “E” — Experience. There are three “Es” that are required for CPA licensure: Education, Examination and Experience.

The new language in NJSA 45:2B-51 revises the experience requirement to include one year of experience providing services such as accounting, attest, compilation, management advisory, financial advisory, tax or consulting that must be verified by a licensee. This experience is acceptable if it was gained through not only employment in pubic practice, but also employment in government, industry or academia.

3. Firm Registration Mobility. New Jersey has had individual mobility for about 10 years now. A few years back, the UAA was revised to include provisions for mobility of firm registrations, and more than 30 states/ jurisdictions adopted such mobility.

New Jersey can now be added to that

list. The amendment to NJSA 45:2B 54 allows a firm that does not have an office in New Jersey to offer attest services in the state without acquiring a firm registration provided that the firm can legally perform attest services in its principal state/jurisdiction of business. The New Jersey State Board of Accountancy (Board) will soon be updating its regulations to effectuate this change to the law.

4. Managing Partner/Shareholder.

Prior law required that a resident manager in charge of a practice unit in New Jersey had to be licensed and in good standing. That requirement has now been removed. Lobbying efforts for this change have been made for years by larger firms that typically have owners who practice in areas other than attest and may not be licensed. These folks may now serve as managing partners/ shareholders of their offices located in New Jersey.

5. Accounting & Auditing CPE Requirement. NJSA 45:2B-68 has been amended to remove the CPE requirement that mandates 24 credits in areas of accounting or auditing (A&A) for those in public practice.

Do not be misled by this change.

The current regulations of the Board, specifically NJAC 13:29-6.2, still require that 24 A&A credits be earned by those licensees engaged in public accountancy during each triennial period. There appears to be no consideration by the Board, to date, to change the regulations regarding this requirement. So, while the statutes have been amended, the regulations have not, and all New Jersey licensees in public practice must continue to satisfy the 24 A&A CPE credit requirement.

6. “Mobility” of CPE Credits. For many years, CPAs who are licensed by multiple jurisdictions have been asking for “mobility” of their CPE credits. NJSA 45:2B-68 has been amended to state that non-resident licensees are determined to have met their New Jersey CPE requirement by complying with the CPE requirement in the state/jurisdiction in which the licensee’s principal place of business is located. Such licensees will have to demonstrate CPE compliance with the requirements in their “home” state by signing a statement verifying such compliance on their New Jersey license renewal application. However, if a non-resident licensee’s principal place of business is located in a state that has no CPE requirement, then the licensee must comply with New Jersey CPE regulations.

These statutory amendments took effect on Jan. 31, 2019, the day the Governor signed the bill. However, this is just the first act of a two-act play. On March 8, the comment period ended for various changes to the Board’s regulations under what is commonly referred to as the “sunset rule.”

It would be wise to keep checking the NJCPA’s website for additional updates as the process of updating the Board’s regulations is completed.

John F. Dailey Jr., CPA, is a member of the New Jersey State Board of Accountancy. He is a co-author and presenter of the NJCPA’s New Jersey Law and Ethics course and a past president of the NJCPA. Jack can be reached at jdaileyjr2@comcast.net.

READ MORE LEGISLATIVE UPDATES njcpa.org/advocacy NEW JERSEY STATE BOARD OF ACCOUNTANCY UPDATES njcpa.org/stateboard

NEW JERSEY CPA | MAY/JUNE 2019

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PROFESSIONAL DEVELOPMENT

6 Steps to Becoming More Adaptable

BY TWINKLE TAILOR, CPA, PRUDENTIAL FINANCIAL

Change is the only constant in today’s world. As such, adaptability is a unique trait that helps people respond to change and be comfortable in the face of uncertainty.

Adaptable people flourish amidst chaos while those who are inflexible flounder.

In everyday terms, a person with high adaptability is often described as “flexible” or someone who “goes with the flow.” But is adaptability something people are born with, or can it be learned over time? The answer is that it can be learned. Although a person may not naturally be flexible, the ability to remain flexible in ideas and expectations can be nurtured. This shift in attitude over time can make someone better at adjusting to changes.

WHY IS IT IMPORTANT TO BE ADAPTABLE? Adaptable people are excellent leaders.

Leaders have an innate ability to embrace change and adapt to new situations. In today’s ever-changing business environment, an organization’s ability to adapt is a critical competency. Likewise, employees must also be ready to adapt, whether to a new idea, technology or skillset.

Organizations are seeking employees who embrace learning and are resilient.

These employees relish working for an agile organization that allows their jobs to change to keep pace with ever-changing realities and affords them ongoing opportunities to acquire new skills. Those who never want to stop learning, appreciate the value of listening to others and understand the benefits of constantly evolving are of great value to organizations.

HOW TO BECOME ADAPTABLE 1. Keep calm and confident. A person’s reaction to a change is the first impression of their adaptability. The key is to remain calm and composed. Instead of withdrawing, take time to understand the change and how it will impact you, and create an action plan for how to best adapt to it.

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2. Engage in positive self-talk. When faced with a change, engaging in positive talk with oneself is a valuable habit. Rather than feeling their blood pressure rising at the thought of change, adaptable people steer the change mindset through self-talk. It also helps in identifying concerns more clearly and recognizing ways to overcome them.

3. Acquire new skills. Rapid changes in technology provide people with opportunities to acquire new skills.

Make the most out of opportunities to learn something new, even if it includes taking a part-time class.

It’s the ‘always learning’ attitude that sets professionals apart in their ability to remain adaptable in the face of change. Increased knowledge and skill will also provide a competitive advantage when opportunities for career advancement present themselves.

4. Prepare alternative solutions.

Adaptable people are more likely to have a plan B in case plan A fails or is rejected. Demonstrating adaptability means providing alternative solutions to initial suggestions while remaining flexible. Acceptance in the face of rejection makes a person more of a team player, someone who “goes with the flow.”

5. Utilize coping mechanisms.

The way a person responds to personal and professional setbacks may significantly affect their future success. Extroverts who draw strength and motivation from talking to others should share their feelings with family, friends or their professional network to become more aware of the issue and determine how to embrace it. Introverts may need to spend time alone in a comfortable, relaxing environment

to help analyze the situation and find a solution.

6. Think ahead. Adaptable people are in control of their work. They are always looking for opportunities to improve. Change is built into their DNA. Whether a new assignment or a personal situation, having the change mindset can help a person think ahead and better prepare for it.

Being adaptable and flexible remains a vital skillset to move ahead and stay ahead in one’s career. Professionals should flex their adaptability muscles often to reap the benefits of growth and success in the future.

Twinkle Tailor, CPA, is a financial analysis manager at Prudential Financial in Newark.

She is an MBA Candidate at Rutgers University and is a member of the NJCPA Emerging Leaders Council, Accounting & Auditing Standards Interest Group and Student Programs & Scholarships Committee. Twinkle can be reached at twinkle.tailor@yahoo.com.

READ MORE CAREER DEVELOPMENT ARTICLES njcpa.org/career/stages

TAX

Employee Misclassification: Independent Contractor v. Employee

BY SCOTT H. NOVAK, ESQ., POST POLAK

Worker misclassification is rampant and continues to be an audit issue for the federal government and the state of New Jersey. Some misclassification cases have even made national headlines. It will likely become a bigger issue as clients begin to understand what benefits the new Internal Revenue Code (IRC) section 199A could bring to them if they are considered to be operating their own pass-through trade or business. While misclassifying workers as independent contractors can go far beyond employment tax savings, in most cases, by the time the federal government or the state catch up with the employer, the amount of tax, interest and penalties assessed can be devastating.

So how do employers get caught misclassifying their workers? Targeted and random audits are one way. But in many instances of injury, the worker does not have his or her own workers compensation coverage, and the injured worker applies for workers compensation benefits. This can lead to a dispute between the worker and the employer, and the state will likely step in to determine coverage. A similar situation may occur if the worker is laid off. The worker, even though characterized as an independent contractor, may apply for unemployment insurance benefits. If it is not obvious that the worker was correctly characterized as an independent contractor, an investigation of the employer may ensue.

THE ABC TEST Since workers compensation and unemployment matters are within the purview of the state, the New Jersey Division of Labor and Workforce Development (NJDOL) is generally the entity that will investigate in these situations. NJDOL has a very simple three-part test — the ABC test — to determine if a worker is an independent contractor or an employee. The three parts of the test, all of which must be satisfied, are as follows:

A. The individual has been and will continue to be free from any control or direction over the performance of services both under his contract and in fact; B. The service is either outside the usual course of the business for which it is performed, or is performed away from its business; and C. The individual is customarily engaged in an independently established trade, occupation, profession or business that is of the same nature as that involved in the service.

These three simple rules are nearly impossible to overcome unless the person is an independent contractor in the true sense of the meaning. The case of Carpet Remnant Warehouse v. Dept. of Labor, decided on Aug. 6, 1991, sets forth the New Jersey Supreme Court’s view on these three factors.

The primary reason that the federal government gets involved in misclassification cases is for employment tax reasons. However, independent contractor status allows employers to avoid many other requirements under the law, such as requirements under ERISA, the Fair Labor Standards Act, the Family Medical Leave Act, the Occupational Health and Safety Act and rules enforced by the Equal Employment Opportunity Commission. Penalties for violation of these acts can be steep.

SECTION 199A IMPLICATIONS New IRC section 199A allows pass-through trades or businesses to exclude up to 20 percent of their earnings from taxation.

This will give some employees the incentive to request classification as independent contractors. The section 199A regulations specifically indicate that if a person was an employee and is now an independent contractor performing services for the same company, they will be presumed to still be an employee for the purposes of section 199A for three years, even if they set up a separate company through which those services are performed.

It has been said that the rules of independent contractor versus employee are outdated and do not take into account the realities of work relationships in the new “gig” economy. Only time will tell as more case law develops in this ever-evolving area of the law.

Scott H. Novak, Esq., is of counsel at Post Polak, P.A., where he specializes in the area of tax law, with a focus on tax controversy, trusts and estates, planning and transactional tax matters. He can be reached at SNovak@postpolak.com.

LEARN MORE JUNE 13, WEBINAR SURGENT’S EMPLOYEE V. INDEPENDENT CONTRACTOR: ACHIEVING SUCCESS IN A WORKER CLASSIFICATION AUDIT njcpa.org/events

NEW JERSEY CPA | MAY/JUNE 2019

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TECHNOLOGY & INFORMATION MANAGEMENT

Current and Future Applications of Cryptocurrencies

BY DR. SEAN STEIN SMITH, CPA, LEHMAN COLLEGE

Bitcoin may have been the way that many CPAs and financial professionals were introduced to cryptocurrency, but that is just one of thousands of cryptocurrency options available in the marketplace. Compounding the confusion, the price volatility that dominated the cryptocurrency market during 2017 (upward) and 2018 (downward) muddied the waters for practitioners and organizations seeking to obtain a more comprehensive understanding of just how these assets function.

As 2019 continues to roll forward, this seems an appropriate time to examine some of the other current and future applications that may have been previously overshadowed.

STABLECOINS As if cryptocurrencies were not confusing and complicated enough, the development of a new cryptocurrency asset class —

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stablecoins — is something that should be on every CPA’s radar. A good way to think of this asset is a hybridization between traditional cryptocurrencies such as Bitcoin and fiat currencies backed by governmental organizations. The primary selling attribute of a stablecoin is that it offers the distributed functionality of cryptocurrencies without the price volatility that has often been associated with crypto. The specifics of how this stability is achieved will vary from coin to coin, but these stablecoins are tethered to fiat currencies, commodities or other assets such as gold. Practitioners need to understand what these coins are tethered to and how the stability is achieved (e.g., 1:1 backing, smart contract execution). As these different instruments become increasingly widespread and circulated, the stability associated with them will help accelerate the shift toward

cryptocurrencies actually being used as currency options. What this means is that there are going to be more questions and opportunities for practitioners to develop and expand service lines connected to cryptocurrency taxation, reporting and custody.

LIGHTNING NETWORK Common issues about Bitcoin and other cryptocurrencies is that, in original formats using a Proof of Work consensus methodology, these networks and various cryptoassets do not function quickly enough for enterprise adoption. One possible solution, building in previous applications and options while simultaneously leading to additional developments itself, is the idea of a lightning network. Without drilling down too much into technical specifications or details, the concept of a lightning network can be

TECHNOLOGY & INFORMATION MANAGEMENT

summarized as follows: Using a tool known as a payment channel, the lightning network allows individuals or institutions to conduct business and send payments back and forth on a nearly continuous basis. Originally designed with micropayments in mind, these channels allow payments to be sent between organizations for whatever time is deemed appropriate. The true takeaway, however, is the fact that, under such a methodology, the underlying blockchain is only used for the opening and ending balances of transactions.

This increases the speed with which transactions can be processed while still leveraging the encryption of blockchain technologies.

REGULATION Cryptocurrencies, despite the label of currency, have not yet been adopted by the mass market for the purchase of goods and services. This is primarily due to the lack of clarity from a regulatory perspective with the only definitive guidance currently available taking the form of an IRS memo from 2014. That said, there are several interesting developments

occurring in different parts of the country that are driving change and disruption in the cryptocurrency space. Interestingly enough, and perhaps contradictory to what normally occurs, various regulatory and oversight bodies are increasingly leading the conversation instead of being led and advised forward by the private sector. Keep an eye on the following states in 2019 and going forward: yy New York, which is revisiting the BitLicense regulation yy New Hampshire and Ohio, both of which are accepting Bitcoin for state tax payments yy Wyoming, whose legislature is working on nearly a dozen bills and items to help clarify and standardize cryptocurrency reporting As time moves on, different states will approach blockchain and cryptocurrency from different perspectives, but the underlying trend is clear. Regulation is coming to the cryptocurrency space, and these rules, guidelines and standards will inevitably drive new developments and applications.

Cryptocurrencies are a fast moving and rapidly evolving area for practitioners, and no

single article can summarize what the future applications and drivers of change will be. That said, keeping an eye on emerging developments such as those mentioned here will leave you well prepared to deal with changes as they arise.

Dr. Sean Stein Smith, CPA, DBA, M.S. MBA, CMA, CGMA, is an assistant professor at Lehman College. He will be the leader of the NJCPA Emerging Technologies Interest Group starting June 1, 2019, and is a member of numerous other NJCPA committees and interest groups.

He can be reached at drseansteinsmith@gmail.com.

LEARN MORE MAY 9, PATERSON BITCOIN/BLOCKCHAIN JUNE 11-14, ATLANTIC CITY ANNUAL CONVENTION & EXPO njcpa.org/events

DO MORE JOIN THE EMERGING TECHNOLOGIES INTEREST GROUP njcpa.org/groups

NEW JERSEY CPA | MAY/JUNE 2019

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NJCPA NEWS

2019/20 Executive Committee and Board of Trustees Meet the NJCPA officers and trustees who will be serving June 1, 2019, through May 31, 2020.

EXECUTIVE COMMITTEE AND BOARD OF TRUSTEES

PRESIDENT

PRESIDENT-ELECT

SECRETARY

KYLE SELL, CPA Deloitte & Touche LLP

ALAN SOBEL, CPA, CGMA

EDWARD O’CONNELL, CPA, CGMA, CFF, CFE

SobelCo

WithumSmith+Brown

TREASURER

IMMEDIATE PAST PRESIDENT

CEO & EXECUTIVE DIRECTOR

CAROL DONATIELLO IOCCA, CPA

SARAH KROM, CPA

RALPH ALBERT THOMAS, CPA (DC), CGMA

WilkinGuttenplan

SKC & Co., CPAs, LLC

To learn more about our Executive Committee, visit njcpa.org/about/board.

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NJCPA

BOARD OF TRUSTEES

JORDAN D. AMIN, CPA, MST

DENNIS BARTLETT, CPA

GREGORY A. BEDARD, CPA, CGMA

MICHAEL J. COLETTI, CPA

EisnerAmper LLP

Cullari Carrico LLC

Prudential Financial

Mazars USA LLP

NOORUS KHAN, CPA

JASON LAURETTA, CPA

JUSTIN D. O’HORO, CPA, CITP, CGMA

KATHLEEN F. POWERS, CPA

Smolin, Lupin & Co., P.A.

ADP

WithumSmith+Brown

Matheny Medical and Educational Center

MEGAN A. SARTOR, CPA

SHAUNE SCUTELLARO, CPA

CHRISTOPHER STOOP, CPA

JUNE TOTH, CPA CFF, CITP, CGMA

SAX LLP

CohnReznick LLP

EisnerAmper LLP

ZBT Certified Public Accounting & Consulting, LLC

NEW JERSEY CPA | MAY/JUNE 2019

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NJCPA NEWS

New Jersey Students Receive Scholarships In continuing its commitment to the next generation of accounting professionals, the NJCPA Scholarship Fund awarded more than $350,000 in scholarships to New Jersey high school and college students at its 59th Annual Scholarship Awards Ceremony on April 30.

More than 200 students applied for awards ranging between $6,000 and $7,000. Sixteen four-year awards were presented along with 37 one-year awards. The Atlantic/Cape May, Bergen and Mercer chapters also presented awards in varying amounts to local students.

“This program would not be possible without the generous support of members, our 11 local chapters and our firm benefactors. It’s wonderful to see such dedication to the younger generation,” said Ralph Albert Thomas, CPA (DC), CGMA, CEO and executive director, NJCPA. FIRM BENEFACTORS yy Bowman & Company LLP yy CohnReznick LLP yy EisnerAmper LLC yy Frazer, Evangelista & Company, LLC yy Mazars USA LLP yy Smolin Lupin

yy Untracht Early LLC yy WilkinGuttenplan yy WithumSmith+Brown, PC This year’s ceremony also included a Raymond Rigoli Award, named in his honor after he passed away in November 2018 and given by his friends and family. Raymond Rigoli, CPA, was a professor at Ramapo College for more than 35 years. Peter Renzulli, CPA, president/CFO at PerformAccount and an adjunct professor at Rutgers University, was also mentioned at the awards ceremony.

He passed away in December of 2018.

For a complete list of the winners, visit njcpa.org/scholarships.

NJCPA to Move Office Location To offer a more technologically advanced and inviting environment for learning, the NJCPA is moving its office location within Roseland to 105 Eisenhower Parkway, Suite 300, on July 1.

The new location will offer a variety of amenities, such as the ability to stream meetings, seminars and webinars; a more comfortable and modern facility for CPE and other events; and a more up-to-date space for smaller gatherings.

Learn more at njcpa.org/move.

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29

NJCPA NEWS

Members Field Live Tax Questions NJCPA members shared their tax knowledge with the general public in February and March as the NJCPA, in conjunction with NJTV, News 12 New Jersey and the Asbury Park Press, conducted live tax Q&A sessions.

Kenneth Bagner, CPA, MST, CGMA, member of the firm of SobelCo, and Karen Artasanchez, CPA, MST, shareholder of WilkinGuttenplan, answered tax questions on Feb. 27 on NJTV’s live broadcast.

Questions ranged from interpreting the Tax Cuts and Jobs Act of 2017 and whether the IRS will waive underpayment penalties on reduced withholding to estate taxes and unemployment issues at the state level. You can watch the video of the broadcast on NJTV’s Facebook and YouTube pages.

Nine NJCPA members manned the phones during the Society’s annual tax call-in program with the Asbury Park Press on March 3. This year’s program helped to answer nearly 200 tax-related calls on issues such as non-resident forms, family-owned businesses or other tax problems. The following CPAs participated: yy Neil Becourtney, CPA, of CohnReznick yy I. David Eliran, CPA, of I. David Eliran, LLC yy Robert Fodera, CPA, of Baker Tilly yy Stephen Mazur Jr., CPA, of Mazur & Associates yy Maria Patriarca, CPA, of PKF O’Connor Davies

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MAY/JUNE 2019 | NEW JERSEY CPA

yy Pat Pepe, CPA of Pat Pepe, CPA yy Joseph Petrucelli, CPA, of Petrucelli, Piotrowski and Co. yy Barry Shapiro, CPA, of WithumSmith+Brown yy James Toto, CPA, of Mazars USA LLP NJCPA members also fielded 189 tax calls on March 6 at News 12 New Jersey during their live news broadcast from 6 to 8 p.m. The following CPAs answered calls: yy Christopher Arunkumar, CPA, of Breakpoint Assurance Company yy Neil Becourtney, CPA, of Cohn Reznick LLP

yy Christopher Cicalese, CPA, of Alloy Silverstein yy Andrea Diaz, CPA, of SKC & Co., CPAs, LLC yy Joseph Petrucelli, CPA, of Petrucelli, Piotrowski and Co. yy June Toth, CPA, of zbt CPAs & Consultants “It’s wonderful to see so many members get involved and give back to their communities in such a selfless way,” said Ralph Albert Thomas, CPA (DC), CGMA, CEO and executive director at the NJCPA. “We are fortunate to have so many members sharing their expertise with the public.”

CLASSIFIEDS

MERGERS/ACQUISITIONS

Seize a merger/acquisition opportunity with benefits for you. We are looking for firms ranging from $300,000 to $5,000,000 eager to combine forces as we continue to grow across northern NJ, Westchester and the Hudson Valley region. Goldstein Lieberman & Company is ideally situated to service all types of industries. Visit www.glcpas. com; email me, Phillip Goldstein, CPA, Managing Partner, philg@glcpas.com; or call me at 800-839-5767 to have a confidential conversation.

Local Morris County firm is seeking to acquire practices ranging from $200K to $500K from retirement-minded practioners and/or seeking compatible merger of candidates who have a book of business exceeding $200K. We have partner, manager and staff offices available.

Contact Carl Gutt at 973-451-0800 ext. 22 or cgutt@dglcpa.com.

Essex County retirement-minded CPA seeks CPA to assume his partnership interest and continue with remaining partner at our office location. Retiring partner will remain during transition period. Interested candidates should reply with resume to essexcpa@gmail.com.

Monmouth County tax and wealth advisory firm seeking partnership with sole practitioner, CPA practice(s): looking for an additional source of recurring revenue to compliment your tax practice?

Looking to enter the wealth advisory business without the costs and complexities? Do you have a succession plan for incapacity or retirement? Contact Charlie (CPA) at charris@hstaxwealth.com, 732-268-8813; www.hstaxwealth.com.

Union County Accounting & Tax practice is looking for potential acquisition or merger candidates with annual billing ranging from $250K – $750K. Possible scenarios include: outright acquisition, merge and transition toward retirement or merger of equals.

Please reply in strict confidence to unioncountycpa2000@gmail.com.

Retirement minded? Want this to be your last tax season? Long established Morris County firm seeks to acquire firms ranging from $100K – $350K for expansion.

Interested? Contact Managing Partner at morriscountycpa@gmail.com.

New Jersey practices for sale: gross revenue shown: Hunterdon Co. CPA $650K – 65% tax, 29% reviews/comp, 6% mthly/qtly bkkpg. For more information, call 800-397-0249 or visit www.aps.net.

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MEMBER STORY

Niche specialties like his are important, he adds, especially as more public accounting firms expand into advisory capacities. “I feel very much at home with any manufacturing and distribution company. The production process always fascinates me,” he says, adding that process improvements and cost accounting are really exciting to him.

His first job in public accounting at EOS Accountants LLP in Hackensack also helped train him in this field. As an auditor, he worked with chemical manufacturers throughout the Northeast who were mostly wholly-owned Japanese subsidiaries. He had a full, hands-on experience with clients, even climbing chemical silos as part of inventory counts.

From Public to Private and Back to Public Accounting

BY KATHLEEN HOFFELDER, NJCPA CONTENT EDITOR

David Rim, CPA, CGMA, senior manager at Mazars USA LLP, didn’t immediately know he would love public accounting, but after sampling the waters in private practice he came back to public accounting where he remains.

Working at Mazars came easy for him after having worked in private accounting at an environmental services company in Newark. It’s there where he honed his communication skills away from accounting jargon. “A lot of times there were accounting and financial reporting issues that I was used to conveying to other accounting professionals. Framing these matters in operating and general business terms went a long way in helping to get my point across,” says David.

“It provided the opportunity to learn more about the operations of businesses

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while partnering with the plant managers and operations folks.”

This communication came in handy when he eventually decided to head back to public accounting and join the ranks at Mazars. While David enjoyed his time working in private accounting, he missed juggling various clients and the fast pace.

He thought at the time that private practice would provide a better quality of life for him and his wife, Kimberly, a teacher in Old Bridge, but he missed the hustle and bustle of public accounting more than he anticipated.

At Mazars, David enjoys being a trusted advisor to his manufacturing, distribution and life sciences clients, not just a compliance person. “I like to be someone who’s asked to be there at the meetings and help clients solve problems.”

OTHER LESSONS LEARNED He wasn’t always so set on accounting.

Prior to landing his accounting jobs, he originally wanted to try his hand at law. “I actually wanted to be an attorney,” he says, when he worked at a part-time job while attending Ramapo College. But, according to David, “it didn’t seem like the life for me.” He soon realized he favored accounting work more than any legal projects.

He also has military experience which didn’t provide him with the technical side of accounting, but it did give him an invaluable worldly perspective. As part of his four-year enlistment with the U.S. Army after high school, he was deployed in the Republic of Korea for two years and also patrolled the streets of Baghdad in 2005.

As David describes his time in the military, “it’s four years of your life finding out who you are as a person.”

Growing up in Bergen County in a Korean-speaking family helped while being stationed in Korea. Though the Americanized Korean language can be somewhat different, being able to communicate “came in handy at times,” adds David. His basic training in Oklahoma also helped prepare him for Korea and Iraq.

“It was quite an experience,” he says.

Though David continues to thrive on being busy, his daily tasks just increased tenfold — David and Kimberly welcomed their first child, Jonathan, in September 2018.

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