On Balance Magazine - Jan/Feb 2019

January | February 2019 | Vol. 15 No. 1 A publication of the Wisconsin Institute of CPAs | wicpa.org

New Beginnings Tammy J. Hofstede | 6

Plus: SPECIAL REPORT: Could licensure go away? | 14 All about accounting automation | 24 The future of manufacturing | 30 Prepare yourself for Wayfair | 34

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A publication of the Wisconsin Institute of CPAs | wicpa.org

January | February 2019 Vol. 15 No. 1

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6 Features

Columns

6 New beginnings The WICPA has a new president & CEO. Tammy J. Hofstede, formerly CFOO, will lead the organization in the wake of Past President & CEO Dennis J. Tomorsky’s retirement. Find out about this 26-year veteran’s career and qualifications.

By Marcia Tillett-Zinzow

28 ACCOUNTING EDUCATION

Developing and teaching a data visualization course Accounting educators can play an important role in helping prepare future CPAs.

By Cory Ng, CPA, CGMA, DBA, and Sheri L. Risler, CPA, CGMA

14 SPECIAL FEATURE: Occupational delicensing Legislation in other states threatens to eliminate licensure. Could Wisconsin be next?

By Ken Wysocky 18 How to help your clients sell a business The right advice will ensure a smooth transition and the best price.

By Steve Boylan 24 Accounting automation: threat or opportunity?

Learn the components of this technology model, its limitations and opportunities, and skills needed.

By Paul R. Brazina, CPA, CGMA, CFF, and Yusuf J. Ugras, PhD

wicpa.org

30 MANUFACTURING

The future of manufacturing in Wisconsin Heading into 2019, what’s on the horizon for this major industry in our state?

By Mike Steinl, CPA, CGMA

34 Departments

34 STATE TAXATION

Prepare yourself for Wayfair While the Wayfair case created changes and challenges, it could also lead to opportunities.

By Chelsea Zhao, CPA

2 Odds & Ends | news briefs

38 PRACTICE MANAGEMENT

Leadership and business development Professionals share business development strategies and tactics and the role firm leadership plays.

By Neil Fauerbach, MBA

32 Memorials | departed members

3 Outlook | chair’s letter 4

Membership Matters | member benefits

12 Kudos | members in the news 23 In Touch | president & CEO’s message

On Balance

January | February 2019

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Odds & Ends Schenck SC joins CliftonLarsonAllen (CLA)

2018–19 WICPA OFFICERS/BOARD MEMBERS Chair Michael D. Akers, CPA, CBM, CFE, CGMA, CIA, CMA, PhD Chair-elect Neil R. Keller, CPA, ABV, CVA Past Chair William L. Komisar, CPA, JD Secretary/Treasurer Katherine L. Hauser, CPA, CGMA Directors Jon C. Gaines, CPA, CGMA, MBA Patrick G. Hoffert, CPA Daniel Holzhauer, CPA Debra L. Lenz, CPA, CGMA, CIA, CRMA Terri M. Lillesand, CPA Wendy A. Peters, CPA Steven A. Pullara, CPA, CGMA Matthew J. Schaefer, CPA, CGMA Angela C. Thomas, CPA AICPA Council Rick E. Dreher, CPA, CGMA Ryan J. Hanson, CPA, CGMA President & CEO Tammy J. Hofstede Design & Layout Brett Stallman Advertising Terry Felker Editor Marcia Tillett-Zinzow Printing Delzer

Regional accounting and consulting firm Schenck SC became part of CLA on Jan. 1. In a December announcement, Schenck said the firm and CLA share a common focus on creating opportunities for their clients, people and communities.

Schenck was founded in 1930. CLA now has more than 1,000 team members serving clients from 18 locations throughout the state of Wisconsin.

Anderson, Tackman & Co. merges with Hawkins Ash CPAs Anderson, Tackman & Co., PLC, joined Hawkins Ash CPAs as of Dec. 1, 2018.

The move allows Hawkins Ash to expand its presence into southeastern Wisconsin and provides Anderson, Tackman with a broader portfolio of professional services to better serve its clients. With the addition of the Mequon accounting practice, the firm now has six offices in Wisconsin and three in Minnesota, 18 partners and more than 130 professionals serving clients throughout the U.S.

Survey SAYS …

Members read (89%) and value (93%) On Balance, and the majority want to keep receiving it bimonthly (41%) or quarterly (32%)—in print (65%) but also digitally (35%). These were the main results of the reader survey we sent out in early December, to which 316 members responded. It was the most successful reader survey we’ve conducted.

Almost half of those who took the survey work in public accounting (47%), and about a quarter said they work in industry. The majority of respondents were either managers or executives (65%), with fewer at the staff and senior staff level (25%) or retired (11%). Respondents were spread across the following age groups: 20-35 – 25% 36-50 – 34% 51-64 – 31% 65+ – 10%

PLUS: A total of 52 members said they would like to write for On Balance, and we have a LONG list of topic ideas the respondents shared as well. Thank you to everyone who responded for sharing your opinions and ideas. This is how we continue to produce an award-winning magazine.

And the winners ARE: As promised—after the survey closed, we did a random drawing for three Echo Shows and two Portable Chargers. We’re pleased to announce the winners!

Join us online!

On Balance is published five times a year by the Wisconsin Institute of Certified Public Accountants (WICPA).

Change of address should be sent to: Membership, W233N2080 Ridgeview Pkwy, Suite 201, Waukesha WI 53188; Phone: 262-785-0445 or 800-772-6939; Fax: 262-785-0838; email: jessica@wicpa.org.

Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2019 On Balance.

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January | February 2019

Echo Show Sonya Jansma, CPA, ABV, CGMA, CFE – Guinn Vinopal & Zahradka LLP Jeffrey Stovern, CPA – Red Cedar Steel Erectors Jill Macareno, CPA – Schunk Carbon Technology Portable WICPA Chargers Janet Johnson, CPA – retired Kevin Seubert – WEA Member Benefits

WANT YOUR BUSINESS MENTIONED IN ODDS & ENDS? Email your announcement to mtzinzow@icloud.com.

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OUTLOOK | CHAIR’S LETTER “For the WICPA to respond promptly and efficiently to contemplated or proposed legislative or regulatory initiatives, advocacy needs to be an ongoing process.”

Protecting and Leading the Profession

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dvocating on behalf of the accounting profession is one of the most important functions of the WICPA and one of the most valuable aspects of membership. The WICPA has been and continues to be committed to protecting the strength and integrity of the accounting profession by working with both parties regarding legislative or regulatory actions that impact CPAs as well as the business community.

This aspect of membership can often be overlooked until legislative or regulatory activities arise that force us to consider how we might be impacted.

For the WICPA to respond promptly and efficiently to contemplated or proposed legislative or regulatory initiatives, advocacy needs to be an ongoing process.

While the WICPA staff and the Public Policy Committee monitor legislative and regulatory activities in Wisconsin and other states, I believe there are three ways that every member can participate in the advocacy process: 1) Participate in Advocacy Day on Jan. 22, when CPAs will meet with Wisconsin legislators in Madison (see the WICPA web page for more details).

Advocacy Day on both the state and national levels is a biennial event, so your next chance won’t be until 2021.

Participation allows us to establish relationships with legislators and to help develop a foundation of trust and respect for both our role as CPAs and their role as legislators. I was able to participate in this process during the 2017 legislative session, which wicpa.org

resulted in establishing continuous professional development requirements and modifying the educational requirements to sit for the CPA Exam.

In addition to providing input to a few of our representatives, I now have a greater understanding of the legislative process and the importance of advocacy.

2) Participate in the AICPA Washington DC Advocacy Days, May 19-21, when CPAs will meet with members of Congress to share input regarding important national issues. For example, the 2017 visits focused on tax reform, IRS services, the Fiscal State of the Nation Resolution and the mobile workforce.

3) Your donations to the WICPA Political Action Committee (CPAC) or Legislative Involvement Fund (LIF) enable the WICPA to support legislators who understand the accounting profession and send a strong message that we want to participate in the legislative process by providing input on issues important to us.

Advocacy has been an area of special emphasis for our current CEO, Dennis Tomorsky. Following his retirement at the end of 2018, he will continue with advocacy projects through spring 2019. Thank you, Dennis, for your outstanding leadership.

Michael D. Akers, CPA, CFE, CIA, CMA, CGMA, CBM, PhD, is the Charles T. Horngren Professor and former chair of the Accounting Department at the Marquette University College of Business Administration. He is the 2018–2019 chair of the WICPA board of directors. Contact him at 414-915-6672 or michael.akers@marquette.edu.

On Balance

It is my pleasure to announce that, based on the recommendation of the CEO search committee, Tammy J. Hofstede has been selected as the new president & CEO of the WICPA, and her appointment has been ratified by the WICPA board. Tammy began her new role Jan. 1.

The search committee, which included both former and current WICPA board chairs and members, conducted a national search for the position. A local search firm, MRA, worked with the committee during the search and screened more than 100 applicants.

Tammy has been serving as the CFOO and has an excellent understanding of the organization.

She has a very good relationship with leaders of the profession in Wisconsin as well as the AICPA, other state society executives and legislators in Madison. She will be a strong advocate for Wisconsin CPAs, and we are excited about her ideas and vision for the future of the organization.

January | February 2019

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MEMBERSHIP MATTERS “Tax season is approaching—increase your firm’s visibility by signing up to be listed in the WICPA’s Find a CPA Directory so individuals and business owners in need of your services can find you.”

Find a CPA Directory has something for everyone

T

ax season is approaching! Increase your firm’s visibility by including your firm’s listing in the WICPA’s Find a CPA Directory. And if you’re a member who needs a CPA, we can help.

CPAs: List your firm and stay current As a firm that employs WICPA members, you’re able to take advantage of a premier, member-exclusive benefit: including your firm in the WICPA’s Find a CPA Directory.

Listing your firm can make it easier for individuals and business owners to find you when they need your services.

As we roll into the new year and gear up for Busy Season, it is a perfect time to add your firm to the Find a CPA Directory or update your existing profile information.

The directory currently features more than 300 firms. This feature helps connect the general public and other members to CPAs who can best meet their individual or business accounting and tax needs.

All members can benefit If you are looking for a CPA firm for your business or individual accounting or tax needs, visit the directory at wicpa.org/FindMyCPA. You can look up CPA firms by firm name, location, county, industries served or services offered.

For questions about the Find a CPA Directory, contact our Membership Department at 262-785-0445 or email membership@wicpa.org.

JOIN US AT UPCOMING PROGRAMS & EVENTS! FEB 20

Top 10 Audit Findings & How to Avoid Them, Altoona

FEB 20

Preventing Sexual Harassment in the #MeToo Era, Waukesha

FEB 22

IRS Hot Topics: Practice Update & Ethics, Madison

FEB 22

To Collaborate or Not to Collaborate: That Is the Question, Wauwatosa

FEB 22

Recruiting & Onboarding: Survive in a CandidateDriven Market, Green Bay

MARCH 20

IRS Hot Topics: Practice Update & Ethics, La Crosse

MARCH 21

CPAs in Industry Conference, Milwaukee

APRIL 24

CPAs in Industry Conference, Green Bay

APRIL 25

Bowling Night, New Berlin

Make sure YOUR firm is included.

Tax season is approaching! Increase your firm’s visibility by including your firm’s listing in the WICPA’s Find a CPA Directory so individuals and business owners in need of your services can find you. It’s easy to enroll in the program. Just sign into wicpa.org/FindMyCPA. Keep your profile current—and check out some new features!

If you’re already listed in the Find a CPA Directory, be sure to keep your profile information up to date so potential clients can find you. In addition, with the launch of the new WICPA website, we have added some features to the directory that will increase your firm’s visibility even more.

You’ll be able to: • • • • • •

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Upload your logo Add your firm’s description Add your firm’s URL Select from a list of services your firm provides Select from a list of industries your firm serves Manage all branch offices with one login

On Balance

January | February 2019

MAY 9

Member Recognition Banquet & Annual Business Meeting, Waukesha

Sona Camara is the membership outreach manager at the WICPA. Contact her at 262-785-0445 ext. 4511 or sona@wicpa.org.

wicpa.org

Provided as a free resource to help with finding tax, accounting and financial planning services, the WICPA’s Find a CPA Directory has something for everyone.

Individuals and businesses can search by:

Firms with WICPA Members are able to:

• Firm name

• Upload a logo

• Specific location or county

• Add a description and website

• Industries served

• List industries and counties served

• Services provided

• List the services provided

Search for and find your CPA or sign up to be listed at wicpa.org/FindMyCPA.

Check out our featured member benefit providers Becker Professional Education

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Our tagline, “Colors Simplify Investing®”, represents the uniqueness of their education process used with participants from all different industries and background.

These affinity partners and more can be found at wicpa.org/discounts. wicpa.org

On Balance

January | February 2019

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New Beginnings WICPA Announces New President & CEO

By Marcia Tillett-Zinzow

I

t may come as no surprise to some that Tammy J. Hofstede has been named the new president & CEO of the WICPA in the wake of Dennis F. Tomorsky’s Dec. 31, 2018, retirement. Board Chair Michael Akers, CPA, CFE, CIA, CMA, CGMA, CBM, PhD, made the announcement to staff at the WICPA offices in Waukesha on Wednesday, Dec. 5, and Hofstede officially took the reins on Jan. 1. She is the first woman to hold the leadership position.

“After a thorough, months-long, national search process, during which the search firm and search committee interviewed many qualified candidates, the decision was made to appoint Tammy Hofstede as the new president & CEO,” said Akers. “We see her as the most qualified of all those we interviewed, and her longtime leadership, commitment and dedication to the WICPA make her the ideal choice.”

Hofstede, who holds a bachelor’s degree in accounting, has been a committed WICPA staff member for the last 26 years. She began as an accounting intern in 1992 and was soon brought on as a full-time accounting assistant. Since then, she has gradually progressed to higher levels of responsibility, serving as accounting, legislative, foundation & technology coordinator (1995-2002); executive assistant & foundation coordinator (2002-2007); director of finance and operations (2007-2011) and, most recently, chief financial & operating officer (2011-present).

Gaining knowledge and experience When Hofstede was promoted to accounting coordinator in 1995, she also was given the opportunity to serve as the legislative and technology coordinator. She said that is where she learned and grew the most in the area of advocacy, working with then executive director, LeRoy Schmidt.

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Photo by John Sibilski

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“I was introduced to politics and the legislative process, was involved in passing and defeating many bills and have been actively involved in advocacy ever since,” she said. “It’s something I really enjoy.”

Her leadership skills and organizational knowledge continued to grow in subsequent positions as additional responsibilities were given her. While continuing to oversee accounting, legislative activity and technology, Hofstede was promoted to executive assistant. Shortly after Dennis Tomorsky took the reins as president & CEO, he promoted her to director of finance and operations, which added the continuing professional development department to her charge. In 2011, with a recommendation from the finance committee, Hofstede was promoted to chief financial & operating officer. Under the CFOO position, the communications, membership and marketing departments were also added.

“I’ve had the opportunity to learn about the functions of each department and to provide a different perspective, implement efficiencies and adopt best practices to better serve our members,” Hofstede said.

As CFOO, she also implemented cross-team collaboration and invited staff to provide input into organizational initiatives and strategies to enable the WICPA to better serve existing members and recruit new members.

“No one knows this organization and its members better than Tammy,” said the recently retired

Tammy and her children posed for a picture as she was named Milwaukee Business Journal CFO of the Year in 2015.

It’s all in the family The WICPA has been a constant in the lives of Hofstede’s two children—Tony, 29; and Ally, 24.

“You could say they even grew up at the WICPA,” said Hofstede. “I remember bringing them to work with me when they were off school, putting a pillow and blanket under my desk for them so I could still come in and get work done.”

Having been steeped in their mother’s career all their lives, both of Hofstede’s children vowed they would never work in the industry. But things change when children grow up. Tony has been with the WICPA for the past seven years, currently serving as director of marketing & technology.

Hofstede is proud to share that Tony’s expertise was integral to engineering the WICPA’s new website, which recently won several awards. Ally recently obtained her CPA license and is a secondyear audit associate at KPMG in Milwaukee. As the president & CEO, Hofstede is looking forward to the WICPA New CPA Banquet in June, where her daughter will be recognized as a new CPA.

Tammy actively participates in volunteer opportunities such as the Reading Makes Cents program.

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Tomorsky. “Her long history and deep knowledge of the WICPA and CPA profession will make this a very smooth transition. Tammy’s demonstrated leadership is certain to have a significant, positive impact on the organization and its members.”

Vision for the future Hofstede said her vision and plan for the future of the WICPA focuses on connecting the members. She wants members and their organizations to know the value of belonging to the WICPA and how members can work together for the benefit of the profession.

Photo by John Sibilski

“The WICPA connects members to credibility, a network of more than 7,300 members, a voice in advocacy, community and volunteer opportunities, development, resources and visibility,” said Hofstede.

“It is the only professional membership organization in Wisconsin that provides everything an accounting professional needs to succeed, both personally and professionally, all in one package.”

As president & CEO, Hofstede plans to travel around the state and personally reach out to members

Expressions of gratitude

by Tammy J. Hofstede I am honored to be the new WICPA president & CEO and truly humbled by the congratulatory messages I have received from members since being appointed to lead the WICPA. The support of our members, staff, my family and friends has been incredible throughout the search process.

My two keys to success with the WICPA have been working with amazing members and a very talented staff. I would like to thank Past Executive Director LeRoy Schmidt and Past President & CEO Dennis Tomorsky for the opportunities, encouragement and support they have given me over the past 26 years.

wicpa.org

I would also like to thank all the volunteers who served on the president & CEO succession and transition task force. It was a lengthy process, and they volunteered numerous hours of their time—especially Steve Handrick, chair of the task force, and Mike Akers, who finalized the process.

Thanks also go to my son and daughter-in-law and my daughter, who were my biggest supporters when I applied for the president & CEO position.

Last but certainly not least, I would like to recognize the WICPA staff. Their respect and

support during this process has meant the world to me. The staff take great pride in providing exceptional customer service and positive experiences for our members, and I am proud to lead such a devoted team.

“To whom much is given, much is to be expected.”

I have built my life on those words. I have been blessed in my life and am aware of all I’ve been given. I am grateful to this organization and its members, and I will do everything I am able to meet the high expectations I know you have of me.

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and organizations to introduce herself, reintroduce the WICPA and explore members’ ideas for how the WICPA can serve them. Other plans include providing regular video updates—from her as well as the WICPA’s board chair—and working with staff to continue rebranding and to research ways to utilize technology, such as live webcasting of programs and conferences. She also plans to add a volunteer manager and a mentor program to better serve members’ needs.

before the profession, including potential legislation for sales tax on services, deregulation, firm mergers and acquisitions, and a shortage of CPAs.

A passionate mission

“I look forward to this new role and continuing to serve you, our members. Please contact me to share your ideas, observations or concerns about the profession. Let me know if you would like me to meet with you or your organization about how we can connect and build our relationship to serve and advance the profession.”

Growing up on a farm in the small town of Eldorado, Wisconsin, Hofstede witnessed hard work and dedication and adopted her strong work ethic. Working in her grandparents’ mom-and-pop family restaurant business taught her about the ins and outs—and regulations—involved in running a business. “I found it really exciting,” she said. “So when I learned about the profession of accounting and the possibilities it held, I knew it was the career path for me. I developed a passion for it.”

Since her entire career has been with the WICPA, over the years Hofstede has had a front seat to the continuous changes within both the evolution of the profession and the association. She cited the many challenges and opportunities

She stated, “As the president & CEO of the WICPA, I embrace the opportunity to work together with the board and staff to focus on connecting our members to each other and the WICPA. I will work diligently to help make individuals, our profession and the WICPA stronger.

Members who would like to contact Hofstede can reach her anytime by calling 262-785-0445, ext. 4518, or by email at tammy@wicpa.org.

Marcia Tillett-Zinzow is a Wisconsin freelance writer and editor.

Contact her at mtzinzow@icloud.com.

Join the WICPA Educational Foundation Board!

The WICPA Educational Foundation is seeking members to serve on its board of directors.

Some of the opportunities include: • Assisting in efforts to attract students to the profession.

• Providing strategic governance in accordance with the WICPA Educational Foundation mission.

• Acquiring new leadership skills.

The WICPA Educational Foundation plays a pivotal role in supporting programs to improve awareness and perceptions by educating students and educators about the exciting opportunities available to accounting professionals.

To apply, visit wicpa.org/EFBoardApplication through Feb. 28, 2019.

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Questions? Contact jessica@wicpa.org.

wicpa.org

Volunteer this April for

Reading Makes ¢ents Sponsored by the WICPA Educational Foundation

Help Students Get Money-Smart April is National Financial Literacy Month and a great opportunity for you to help students get smart about money by reading to an elementary school class about the basics of money.

The WICPA Educational Foundation will provide everything you need.

Express your volunteer interest at wicpa.org/MyWICPA or contact Sona Camara at 800-772-6939 ext. 4511 or sona@wicpa.org. wicpa.org

On Balance

January | February 2019

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kudos

John Folsom, CPA

Nicole Kerschbaum

Evan Y. Lin, JD

Justin Erickson, CPA, was promoted to senior by CliftonLarsonAllen (CLA), Milwaukee.

John Folsom, CPA, was promoted to partner at Wegner CPAs, Madison, effective Oct. 1, 2018. Folsom leads the firm’s tax and business services department and is head of the construction and real estate niche.

Katie Gannon, CPA, was promoted to partner at KerberRose. She was previously a manager at the firm’s Green Bay office.

Jason Grosh, CPA, has been promoted to director by BKD LLP, Madison office.

Ruth Kallio-Mielke, CPA, managing tax director for the Milwaukee Tax Practice at Deloitte, spoke at an IRS press conference in Milwaukee on Tuesday, Dec. 4, announcing National Tax Security Awareness Week Dec. 3 -7, with a series of reminders to taxpayers and tax professionals.

Nicole Kerschbaum has been hired by Vrakas SC, Brookfield, as an audit associate. She interned with the firm in 2017.

Jordan Krainer has joined Vrakas CPAs + Advisors as an associate.

Evan Y. Lin, JD, managing member of Lin Law LLC, has been named to the 2018 Wisconsin Super Lawyers list by the publishers of Super Lawyers® magazine. Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas.

Alan E. Matsoff, CPA, has joined the firm of Sitzerger & Co. The firm is headquartered in Brookfield and also has offices in Lake Geneva and Glendale.

Mark Mirsberger, CPA

Pete Oettinger, CPA

Scott Stuckman, CPA

Mark Mirsberger, CPA, CEO of Dana Investment Advisors, was named 2018 Business Person of the Year by the Elmbrook Rotary Club. The program recognizes the leadership and accomplishments of a successful Brookfield or Elm Grove individual.

Pete Oettinger, CPA, Wegner CPAs, traveled to Germany in October to educate local college students on United States tax law and set the stage for an international internship program.

Oettinger heads up the firm’s German Companies niche.

Jeff D. Olsen, CPA, has been named a partner at Berndt CPA, Madison.

Dan Rasmussen has joined Vrakas CPAs + Advisors as an audit associate.

Patti Schauer, CPA, vice president of finance and human resources for Core Creative, Milwaukee, was recognized in an article in the Milwaukee Business Journal, which named Core Creative as a recipient of the Best Places to Work/HR Awards.

Scott Stuckman, CPA, was named a Future 15 award winner

by Young Professionals of Manitowoc County. The Future 15 are young professionals who have set themselves apart in both their personal and professional lives. Stuckman is a tax manager for CLA (formerly Schenck SC).

Andrea Werner has joined Vrakas CPAs + Advisors as an audit associate.

Mary Jo Werner, CPA, JD, a partner with Wipfli LLP, authored an article in the LaCrosse Tribune on Nov. 4, 2018, titled “IRS should assure privacy of practitioners.”

Michael Matuszak, CPA, was promoted to partner at KerberRose, Wausau.

Want your

new job, promotion or award mentioned in Kudos?

H Email your announcement and photo in JPG format to mtzinzow@icloud.com. H

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CAN WE

PARTNER WITH THE STATE TO BETTER PARTNER WITH CLIENTS?

In WisconsinÂŽ, we can. When Brakebush wanted to expand their Marquette County-based poultry products company, they turned to Baker Tilly, who then turned to us. We worked together to identify refundable tax credits that enabled Brakebush to pursue an initial $51 million expansion and bring 100 new jobs to the state. Just think what we could make happen with you and your clients. See the whole story at WEDC.org/success-stories-brakebush. wicpa.org

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Occupational delicensing: Could Wisconsin be next?

By Ken Wysocky

L

egislation to eliminate licensing requirements for certified public accountants and other professions has gained traction in dozens of states, and some industry leaders fear that Wisconsin could soon join their ranks. The move could put both accountants and consumers at risk.

“This is a very real threat,” said Skip Braziel, vice president of state regulatory and legislative affairs for the American Institute of Certified Public Accountants. “If you’re at all concerned about the level of competency of the higher learned professions in the marketplace, you need to pay attention to this.”

So far, 36 states have considered 54 bills in 2017 and 2018, said John Johnson, director of legislative and governmental affairs for the National Association of State Boards of Accountancy. Some states are considering multiple

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“If you’re at all concerned about the level of competency of the higher learned professions in the marketplace, you need to pay attention to this.”

– Skip Braziel, vice president of state regulatory and legislative affairs, AICPA

wicpa.org

similar bills. Generally speaking, the bills propose either eliminating or diluting licensing requirements or reviewing existing occupational licensing requirements.

To date, only a handful have passed, and state and national CPA organizations have successfully removed CPAs from the bills or weakened language that could’ve been much harsher, Braziel said. Nonetheless, local and national accounting professionals like Braziel still are sounding the alarm and mounting opposition.

“Licensing is important … the public needs to know that CPAs are competent and that they go through a rigorous process to determine that competency,” Braziel said. “Some would argue that there are other methods to prove competence. But I would argue that licensure is the best method because it creates consistent standards that provide certainty in the marketplace.”

Moreover, if CPAs don’t meet those standards, there’s a clear and transparent process for getting them back into compliance. And if they don’t, there’s also a process to remove them from the profession.

Furthermore, eliminating licensure for CPAs would disrupt a core tenet of the industry. “We’ve spent decades creating a uniform regulatory system that allows CPAs to move across state lines without relicensing,” Braziel said.

“But that’s dependent on each state being substantially equivalent in terms of licensing requirements. So if regulations are changed by one of these bills, the tapestry of our regulatory system becomes frayed, which is a risk unique to CPAs.”

An issue with bipartisan support Opposing such legislation in today’s volatile and polarized political environment is tricky because removing or diluting licensing requirements is that rarest of animals: an issue that’s generally supported by both liberals and conservatives alike, observers said.

Democrats typically support such bills because they open up job opportunities for members of marginalized communities by reducing the hurdles that make it difficult to start small businesses. Republicans also are proponents because deregulation meshes well with the party’s lessgovernment-is-better-government philosophy. Moreover, such legislation fits into their right-to-work agenda, Braziel said.

“The topic resonates across the political spectrum, from progressives all the way to libertarians and every gradation in between,” Braziel said. “There is some deep intellectual

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thought that goes into the issue, but it’s not simply on one side of the political spectrum.”

Most of the bills are based on model legislation drafted by think tanks and other institutions. While well-intended, the bills are problematic for the accounting profession because they tend to lump CPAs and other “learned” professions (such as the engineering, medical and legal professions) in with hair braiders, barbers, tattooers and the like, industry observers noted.

In addition, Braziel warns that the anti-regulatory efforts don’t always come in the form of formal legislation.

In New Mexico, for instance, Governor Susana Martinez signed an executive order that allows people to perform services normally restricted to licensed professions, including CPA services. The only caveat: Service providers must tell customers they don’t have a license, and the customers must sign a waiver acknowledging they were so informed.

To Braziel and others, the real question is how many occupations really need a high level of oversight to protect the public. “We could have a thoughtful conversation about this … but instead what we see is a rather blunt-force attempt to drop these really broadly written bills that bring everyone into the scope of the bill and force us to justify why we should be exempted,” he said.

“You can see that perhaps at some point in our history, we’ve gone too far [with licensing regulations],” said John Scheid, CPA, the chief executive officer of Scheid Investment Group LLC and chairman of Wisconsin’s Accounting Examining Board. “But that’s certainly not the case for CPAs. I think the Wisconsin Department of Safety and Professional Services (DSPS) realizes this. I’m not expecting major changes, but you never know.”

The situation in Wisconsin Scheid was referring to the department’s pending review of state occupational-licensing requirements, requested by the governor in the 2017-’19 biennial budget request. Through the review, the department hopes to gain a better understanding of what occupational licenses exist in Wisconsin, determine how the state’s licensing requirements compare to other states’ laws and ensure that the state retains whatever licenses are necessary to protect citizens’ health and public safety, according to a DSPS spokesman.

The study is scrutinizing the requirements that apply to more than 230 professions the department licenses and

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On the other hand, Scheid is concerned because he already encountered pushback from some legislators while trying to garner support for a bill that mandated continuing education as a requirement for CPA license renewal. Gov. Walker signed the bill more than a year ago.

“It was interesting because when we started talking to legislators, in some cases we encountered some pushback, even some from legislators that I wouldn’t have expected it from … because of this nationwide movement afoot to roll back regulations,” he explained. “Some legislators said, ‘My goodness, we’re trying to eliminate some of the regulations and requirements and you’re asking us to pass additional ones. We’re heading in the wrong direction.’”

The battle in Louisiana

“It’s very important to protect the public and ensure that CPAs truly are professional and up to date on what’s going on in the world today in businesses and professions.”

“All of a sudden the bills were out of committee and on the house floor,” Gitz said, noting that normal legislative rules and protocols had been suspended in order to speed things up and leave enough time for the third special session.

“And they had bipartisan support.

– John Scheid, CPA, CEO, Scheid Investment Group LLC, chairperson, Wisconsin Accounting Examining Board

“We have a Democratic governor that thought the bills were great and Republican leadership that thought the bills were great,” he added. “We represented the only real opposition … and I really thought that Louisiana was primed to advance this legislation because of all the budgetary distractions.”

regulates, including CPAs. The department must present its findings and recommendations to the state legislature

by December 31. After that, it’s subject to consideration by the legislature and Governor-elect Tony Evers, the spokesman said.

Gitz said pressure from national lobbyists in favor of delicensing only added to the chaos. But in the end, lastditch efforts by the Louisiana society, NASBA and the AICPA—plus later support from other like-minded, nonCPA professional organizations—succeeded in delaying advancement of the bills.

“We’re hopeful it (delicensing) won’t become an issue in Wisconsin,” Scheid said. “It’s very important to protect the public and ensure that CPAs truly are professional and up to date on what’s going on in the world today in businesses and professions.”

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Anyone in Wisconsin who scoffs at the thought that such legislation wouldn’t pass here should listen to Ron Gitz, executive director of the Society of Louisiana CPAs. This past summer, Louisiana Gov. John Bel Edwards called state legislators back for three special legislative sessions to figure out how to eliminate a nearly $650 million revenue shortfall in the state’s budget. During a short regular legislative session squeezed in between the second and third special sessions, Gitz and others were surprised to learn that amid all the distractions about state finances, seven bills related to occupational licensing and regulations, introduced earlier in the year, were suddenly under consideration.

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“It basically was all-out war,” Gitz said. “We talked to anyone and everyone who would listen … but the old argument about how the CPA profession was different from others just wasn’t holding water.”

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“We talked to anyone and everyone who would listen … but the old argument about how the CPA profession was different from others just wasn’t holding water.”

– Ron Gitz, executive director, Society of Louisiana CPAs

Gitz asked to have CPAs carved out of the bill but was told that if one profession was carved out, everyone would want the same treatment. “So it was just easier to lump CPAs together with horse massagers, hair braiders, florists and so forth,” he said.

The issue also was clouded by sympathetic bill titles, such as the Right to Earn a Living Act. As Gitz noted, it’s difficult to oppose something that sounds so positive.

Proponents of the bills also told Gitz and others that CPAs could be removed from legislation after the fact.

“We said if that’s the case, just take us out from the beginning,” he said.

Gitz also warns other state CPA societies that licensing-elimination bills may not emerge from the usual state-legislature committees, which creates a disadvantage if society members don’t have established relationships with legislators on those committees.

“It might come from legislators you don’t normally talk to,” he said. “In this case, the bills came through the Commerce Committee instead of the usual Ways and Means or Finance committees. So we were dealing with a different group of legislators than the ones we usually lobby with.”

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Even though the bills were stymied, Gitz expects a revival in the next legislative session. “They told us they’d be back,” he said. “The battle is not over yet.”

What should Wisconsin CPAs do?

Wisconsin CPAs must resist the naive belief that it can’t happen here, Braziel warned. “Complacency is a big issue,” he said. “You can’t presume it will never happen in your state. People are predisposed to believe that a lot of bills get introduced, but most of them don’t pass. That’s true as a general rule, but we have to work very hard to protect ourselves, or we’ll end up with worse bills passing in multiple states.”

Braziel also urges CPAs to contact their state societies and volunteer to talk to legislators. Paid advocates have a place in the overall strategy, but regular people who live and work in communities—and who may know legislators—can be just as effective. “CPAs have a wealth of trust in these communities, and we need to spend some of that trust capital in this process,” he said.

In conjunction with that, NASBA and the AICPA developed a “tool kit” for CPA’s that was distributed to state CPA societies and boards of accountancy. It contains talking points, messaging suggestions and other information that will help CPAs educate legislators, Johnson said.

“We need to be proactive and educate legislators about the profession and how these bills could cause great harm to the public,” he said. “Being proactive is critical. We’re always going to be playing whack-a-mole to an extent [as legislation pops up], because that’s the nature of the beast.

“If you can engage and educate legislators and staff on the front end, it makes it much easier to have that follow-up discussion about a particular piece of legislation and makes more obvious to them the dangers of weakening licensure when it comes to the financial well-being of the constituents they serve,” he concluded.

Gitz urged other CPA societies to get up to speed on the issue and develop strategies in case legislation is proposed in their states. As he put it, “It’s terribly important that we’re all prepared for this.”

Ken Wysocky is a freelance writer based in Whitefish Bay. Contact him at 414-962-6202 or kwysocky@wi.rr.com.

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How to Help Your Clients Sell a Business The right advice will ensure a smooth transition and the best price.

By Steve Boylan

I

f you have clients who own small to mid-sized companies, you’ll no doubt be consulted when they decide to sell. And with 7 to 10 million businesses projected to change hands in the next five to 10 years,1 knowing where and how to get involved as a member of your clients’ exit strategy team is critically important. First, understand a business owner’s goals about how and when they want to exit. Then help them shift their mindset and action plan from tax sheltering to value building, which will bring the greatest financial benefit at closing. Here’s how.

Your role on the business-selling team Ideally, there are four to five members on a business owner’s exit strategy team: accountant, estate-planning attorney, business intermediary (broker), personal wealth manager and possibly an insurance agent. Each adviser brings a specific skill set to the table that ultimately provides a maximum financial benefit for the seller at closing. If your client doesn’t have this team in place, be proactive in helping assemble an advisory group that’s a good fit for the company’s size and type.

As a CPA, your role on this team is vitally important.

And, of course, you want to be the go-to resource for your client, which for the most part is fine. The problems arise when advisers commit to services for which they’re not qualified or trained. In some cases, there can be a tendency to value businesses using resources that are not current or

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reliable, or starting the process with an unrealistic selling price. A business that is priced too high likely will not sell quickly or even at all. Ultimately, this just wastes the owner’s valuable time.

In a business ownership transfer, the focus of each adviser should be on what they do on a daily basis. Since the exit strategy team will base the price on the business evaluation introduced at the outset, it’s best to have this handled by the adviser who is trained and certified to provide accurate market value reports.

Get ready to sell now “When do you want to sell your company?” If you have not asked your business-owner clients that question already, the time is now. It’s never too early to have this conversation, so don’t wait until your clients bring up the subject. There are several key issues that ideally should be addressed at least three years prior to the sale of a business.

That’s assuming the business will sell exactly when the owner wants it to, which actually is rare. Life has a way of intervening to change the plan. If an owner has to sell earlier than expected, and the red flags affecting the value of the business have not been mitigated, it’s likely that the financial benefits the seller will receive at closing will be much less than desired.

So an important part of your job as a trusted financial adviser is to help your business-owner clients understand

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what detracts from the value of a business as well as what builds selling power. While this generally means your client will pay more in taxes, preparing financial records for maximum selling benefit will increase the selling price of the business and, more than likely, result in more favorable terms. When a buyer and banker review the financial data of a company for sale, they want to see a three-year-minimum track record to feel comfortable moving forward. If they see a sudden spike in profits or owner compensation without a significant revenue increase or other valid reason, it’s a red flag that will lower their confidence in the numbers. That could put the entire business ownership transition in jeopardy. At the very least, it will lower the market value that the buyer and bank will accept.

To minimize those red flags that could stall or even halt the businessselling process, make sure your clients are preparing these reports: • Monthly sales tracking for at least three years.

• Annual percentage of revenues the top five customers represent for at least three years.

• Annual percentage of revenues the top five products and/or services represent for at least three years.

• Details on any large, one-time business expenditures incurred during the last three years.

• Annual health, life and dental insurance premiums the company pays for the business owner(s).

• Compensation for either a non-working family member or a family member being paid significantly over the market rate for their job description.

In addition, advise your clients to take these important action steps: • Start showing all owner compensation on profit & loss statements and tax returns.

• Minimize owner distributions.

• Adjust family members’ compensation to market rate.

• If real estate is owned by the business owner, ensure that rent paid is at market rate or higher.

• Eliminate or minimize large personal items paid by the business.

• Unless absolutely necessary, make no major capital expenditures at least two years prior to selling. Any equipment and/or material purchased should be revenue-producing immediately.

Choosing to sell a business is one of the biggest and most important financial decisions your clients will make in their lifetimes. Help them do it right by providing sound advice and working side by side with their other trusted advisers.

1

Source: The International Business Brokers Association, 2017

Steve Boylan is owner and president of BEACON Business Group, a mergers & acquisitions firm that specializes in selling Wisconsin and Illinois businesses.

He has more than 15 years of M&A experience. Contact him at 414-416-1024 or steveb@beaconbiz.net.

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Common Business-Selling Misconceptions Owner distributions are automatically included in SDE used in pricing a business.

They are not. Owner distributions could be coming from monies that have been on the balance sheet for a few years. If the owner can show that annual distributions have been sourced consistently from excess cash in the business, they are considered. Even then, the entire amount may not be considered.

A competitor is always the best buyer to look for.

This can be true. But depending on the industry, size and location of the selling and acquiring companies and other factors, it may not be. Additionally, in order for a competitor to gain enough knowledge and comfort to purchase, you will need to open all of the business’s financial and operational information for scrutiny. If the business doesn’t sell, the owner’s confidential information is now in a competitor’s hands.

A family member or key employee will be the buyer.

This is the most common assumption made by family-owned and privately held business owners. While this can be a great way to transfer ownership with minimal change, the owner must be prepared to be “the bank” in order to get the deal done at a reasonable price. Most family members and key employees do not have the financial wherewithal to qualify for a business loan large enough to buy a company.

The business will sell exactly when the business owner wants it to sell.

Unfortunately, this is rarer than people believe. Encourage your clients to start taking the steps to prepare the business for sale right away. Even if they plan to hold onto the business for 10-plus years or sell to that family member or key employee, the earlier they get their exit strategy in place, the better off they will be in the long run.

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Terri S. Boxer, J.D.

Robert E. Dallman, J.D., LL.M.

Thomas P. Guszkowski, J.D., LL.M.

Katie Hanley, J.D.

Megan K. Heinzelman, J.D., LL.M.

Courtney A. Hollander, J.D.

Megan L.W. Jerabek, J.D.

Thomas J. Kammerait, J.D., CPA

Benjamin D. LaFrombois, J.D.

Marcus S. Loden, J.D., LL.M.

Thomas A. Myers, J.D.

Randy S. Nelson, J.D., CPA

Timothy A. Nettesheim, J.D., LL.M.

Katelyn A. Pellitteri, J.D.

Thomas J. Phillips, J.D., LL.M.

David J. Roettgers, J.D., CPA

John A. Sikora, J.D.

Steven M. Szymanski, J.D., MBA

Robert B. Teuber, J.D.

Daniel S. Welytok, J.D., LL.M.

Peter J. White, J.D., CPA

New Tax Law. Experienced Tax Lawyers. von Briesen’s team of experienced tax lawyers, many of whom have advanced designations, help businesses and individuals navigate the new tax law.

The bottom line? We get results.

To learn more about our Tax Law Section and the services we offer, please contact Robert Mathers, Tax Section Chair, at rmathers@vonbriesen.com.

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vonbriesen.com/tax

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Robert A. Mathers, J.D., CPA, Section Chair

January | February 2019

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Thursday, May 9 at 5 p.m.

Milwaukee Marriott West Join us for the WICPA’s signature event of the year to: • Recognize membership milestones

• Present the 2019 Excellence Awards

• Elect the 2019–2020 Board of Directors

• Enjoy dinner, drinks and networking

Complimentary for WICPA members.

Registration is required to attend.

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For more information and details, visit wicpa.org/banquet.

January | February 2019

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IN TOUCH | PRESIDENT & CEO’s MESSAGE “Lawmakers hold the CPA profession in high regard and value the insight CPAs bring to the issues.”

CPA Advocacy: Support the Profession

H

ave you thought about extending your guidance to legislators and helping them understand how their decisions will affect you, your business or your clients?

Maintaining a strong presence at the Capitol in Madison is critical to ensuring our voices are heard and remembered when it comes to defeating or enacting legislation that impacts Wisconsin CPAs. On Jan. 22, WICPA members are invited to gather in Madison to discuss tax reform, sales tax on services and deregulation; and to strengthen relationships with other members and legislators. Lawmakers depend on CPAs to help them understand the issues so they can make educated decisions when the time comes to support or oppose initiatives that affect the profession and the business community. They hold the CPA profession in high regard and value the insight CPAs bring to the issues.

A common concern when getting involved in the legislative process is not knowing how to begin or what to say. But the WICPA makes it easy for you. We provide all the information you need to have successful meetings with legislators and their staff, including talking points and summaries to leave with them. If it’s your first time meeting with legislators, we pair you with an experienced leader.

Successful advocacy efforts are essential to protecting and advancing the profession. It’s very important that you make personal contact with your own legislators. They are there to represent you and need to know what is important in their communities. While they may not serve on the committees representing an issue, they have daily contact and influence with their colleagues and can help keep your input in the forefront.

Register now at wicpa.org/AdvocacyDay. If you cannot attend, you will still have opportunities to engage, support and give back to the profession. No matter how small or large, all efforts help grow and strengthen our voice.

Opportunities: • Become a WICPA key contact person for your legislators.

• Send an email to your legislators or connect with them on social media.

• Call your legislators.

• Invite your legislators to meet with you at your office or the Capitol.

• Contribute to the WICPA PAC (CPAC) or conduit (LIF).

• Serve as a campaign treasurer.

• Run for public office.

I invite you to contact me at the WICPA if you would like me to join you in meeting with your legislator, to introduce you to your legislator, or if you would like to be listed as a key contact. If you do not know who your legislators are, visit maps.legis.wisconsin.gov and enter your address, or contact the WICPA.

Tammy J. Hofstede is president & CEO of the WICPA. Contact her at 262-785-0445 ext. 4518 or tammy@wicpa.org wicpa.org

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Accounting Automation: A Threat to CPAs or an Opportunity?

We are at a point where accounting automation is the major technological innovation that will impact everyone working in the profession.

By Paul R. Brazina, CPA, CGMA, CFF and Yusuf J. Ugras, PhD

F

or years, business pundits have predicted the demise of the accounting profession as technology replaces work traditionally performed by the industry.

According to The Hackett Group, since 2004 the median number of full-time employees in the finance department at large companies has declined 40 percent, to about 71 people for every $1 billion of revenue.

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The CPA profession acknowledges that the accounting skill set is changing, but the need for specialists in financial reporting, auditing, tax and advisory services remains strong.

For example, Wolters Kluwer N.V. uses Oracle’s Hyperion software to close its books in half the time it used to. “With fewer workers needed to collect financial information, Wolters Kluwer is hiring more analysts to help sift its data on profits,

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revenue, and cash flow, among other things, to help in planning and forecasting.”1 Many fear that machines will replace people. That might be the case for routine accounting tasks, such as bank reconciliations and invoice payments, but new opportunities have emerged. As artificial intelligence becomes more accepted in the workforce, it can be an essential partner.

Artificial intelligence will not replace CPAs; rather, their duties, responsibilities and contributions will change for the better. Artificial intelligence will eliminate certain day-to-day tedium, freeing up CPAs to work where human attentiveness is needed, adding value to the business.

We are at a point where accounting automation is the major technological innovation that will impact everyone working in the profession. This article explores components of this technology model and assesses factors limiting its current use, opportunities for the future, and skills needed for those working with innovative technology.

Defining accounting automation In Accounting Today, Therese Tucker describes robotic process automation (RPA) as a system to capture, manipulate, and interpret transactional data flowing from myriad information technology (IT) systems and applications.2 RPA reduces the time spent performing repetitive tasks, and linking it to data analytics and artificial intelligence opens up a world where machines have the potential to augment (and perhaps replace) the work of humans. For CPAs, the key to a successful integration of accounting automation, or roboaccounting, will be a robust understanding of processes and the necessary internal controls.

What is commonly known as artificial intelligence really is divided into three concepts: • Artificial intelligence (AI) – The broader concept of machines making decisions and performing “smart” tasks that normally require human intelligence. This includes learning, reasoning and self-correction.

• Artificial superintelligence (ASI) – If AI is the ability of computers to mimic human thought, ASI goes a step beyond, where a computer’s cognitive ability is superior to a human’s.

• Machine learning – An application of AI based on the idea that when we give a machine access to data, it can continue improving its performance without human intervention.3 Robo-accounting is the combination of RPA, ASI, and machine learning.

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Game-changing technologies Service companies are devoting resources to harness the power of big data. The input of data through optical character recognition (OCR) is transforming the preparation of tax returns via tax preparation software. Computer-assisted audit tools and techniques (CAATT) software, such as IDEA and ACL, give auditors the ability to access large databases and perform audit testing/functions at blazing speeds. This type of data analysis is being incorporated into software to provide continuous auditing of transactions with AI, reporting inconsistencies and exceptions to audit teams and management. Blockchain also has the promise to ensure the integrity of financial transactions, thus reducing or eliminating the need for traditional audit verification. Here are a few examples of some of the new software options: • PwC and H2O.ai – This ongoing GL.ai project uses AI and machine learning to analyze billions of data points in milliseconds, to see what humans can’t and to apply judgment to detect anomalies in the general ledger. PwC says the general ledger module examines every uploaded transaction, every user, every amount and every account to find unusual transactions without bias or variability.

And the more it is used, the smarter it gets.4 • KPMG and IBM – In its partnership with IBM, KPMG has brought to market two cognitive solutions that automate the extraction of lease contract data for financial reporting and that identify research projects eligible for credit subsidies for tax reporting. The systems use the IBM Watson Explorer.5 • Intuit – For the small-business market, Intuit has joined the AI bandwagon with some basic applications, including Expense Finder, Auto Categorization and Mileage Tracking. Intuit claims to have approximately 100 patents pending related to machine learning and artificial intelligence.6 • Blockchain – This financial transaction system and global ledger technology connects millions of computers and servers. Transactions are grouped into a block, and that block is then sent out to the global network.

In the global network, the block is time-stamped and added to the chain in chronological order, thus the term blockchain. Blockchain could reduce the need to maintain bookkeeping functions because the platform will maintain and track transactions on a real-time basis.

That would free CPAs to work on other important tasks, such as valuation and planning, that can provide more business opportunities for companies. The structure of blockchain makes modifying recorded transactions

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difficult. Blockchain offers the assurance that underlying transactions are valid, exist, and are accurate and complete.

When applying AI to a trusted database, the audit risk of a material misstatement is minimized in an environment of strong internal controls, reducing inherent risk of the data and near 100 percent testing control detection risk.

Technological impediments Tax preparation software packages do not guarantee 100 percent accuracy for those tax practitioners who use OCR to input client data. In many cases, accuracy depends on the types of scanner, OCR software, and tax software compatibility.

There are not many clients who are willing to accept 80 percent accuracy in preparation of their return. The tax code also adds to the complexity for data input with exotic credits, deductions, and revenue recognition rules.

When it comes to blockchain use, there are multiple platforms and protocols for blockchain transactions, and no platform has yet emerged as the dominant system. Thus, no technical or process standards are universally used.7 The trend today is for developers to look for industry solutions tied to a specific platform. Sandro Psaila, an audit and assurance manager with Deloitte, related a story of blockchain failure: “Although blockchain promises highly secure transactions, fraud instances cannot be fully eradicated. In July 2017, an unknown hacker managed to steal nearly 32 million U.S. dollars’ worth of Ethereum, one of the most popular virtual currencies. The root cause of this fraud was not related to deficiencies in the blockchain technology, but rather due to a vulnerability within the software that was used to manage Ethereum wallets. The fraud was quickly detected, and related parity vulnerability was mitigated accordingly to safeguard the remaining wallets.” 8

Meeting the challenge During the May 2017 meeting of the Public Company Accounting Oversight Board’s (PCAOB) Standing Advisory Group (SAG), it was noted that, according to Deloitte’s 2016 Global Impact Report, many accounting firms are making significant investments in technology and new data analytic tools, which they have asserted could enable them to analyze large quantities of data more quickly and intelligently and to enhance the audit by automating time-consuming tasks that are currently manual and rote in nature.9 SAG noted that the PCAOB inspections staff has an ongoing project to understand the systems of quality control that firms have in place to provide assurance that the tools used to analyze the data meet the audit objectives; engagement teams are effectively using these tools and evaluating the results of screening large data populations; and engagement teams are applying due care, including professional skepticism, when using these tools during the performance of the audit work, including the evaluation of results of that work.10

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Current auditing standards make it very clear that CPAs cannot avoid responsibility for understanding highly technical processing controls over financial statement reporting. PCAOB AS 2201, An Audit of Internal Control Over Financial Reporting that Is Integrated with an Audit of Financial Statements, addresses the use of others’ work in the performance of the audit (Section 19): “The extent to which the auditor may use the work of others in an audit of internal control also depends on the risk associated with the control being tested. As the risk associated with a control increases, the need for the auditor to perform his or her own work on the control increases.”11 That technical understanding of robo-accounting and its related controls are clearly placed with the CPA firm under PCAOB AS 1201, Supervision of the Audit Engagement.

Section 05 states: “The engagement partner and, as applicable, other engagement team members performing supervisory activities should inform engagement team members of their responsibilities, including matters that could affect the procedures to be performed or the evaluation of the results of those procedures, including relevant aspects of the company, its environment, and its internal control over financial reporting, and possible accounting and auditing issues.” 12

Opportunities to gain credibility in an automated accounting environment Auditors must be knowledgeable about the technologies employed by their clients, and they must understand the types of internal controls to prevent a material misstatement. One of the best ways to establish this level of expertise is to pursue a recognized technology credential. The AICPA established the Information Management and Technology Assurance (IMTA) section to support members who offer assurance services and information management support for their clients and decision-

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makers. Tied to this new section, the AICPA offers the certified information technology professional (CITP) credential, which acknowledges CPA professionals who receive additional training in the areas of emerging trends, security and privacy, business solutions, IT assurance and risk, and data analytics.13 To meet the CITP credentialing standard, candidates must do the following: • Hold a valid and unrevoked CPA license, active permit or certificate issued by a legally constituted state authority (the CPA license must also be in an active status).

• Pass the credential exam. At this point, the CITP exam is a four-hour, computer-based exam composed of multiplechoice questions. The standard AICPA-member fee to take the CITP exam is $400.

• Complete the online credential application.

• Attest to meeting the minimum business experience and education requirements, and pay the appropriate credential fee. The standard, initial CITP fee is $360. A CITP candidate must have a minimum of 1,000 hours of business experience in information management and technology assurance within the five-year period preceding the date of the CITP application. Credential candidates must complete 75 hours of precertification education within the relevant credential body of knowledge, based on the definition of continuing professional development. All hours must have been obtained within the five-year period preceding the date of the application.

Another well-recognized organization for developing and training in IT controls is ISACA. This association engages in the development, adoption and use of globally accepted, industry-leading knowledge and practices for information systems. ISACA led the development of COBIT 5, the business framework for governance and management of enterprise IT. This organization offers five IT certifications: certified information systems auditor (CISA), certified in risk and information systems control (CRISC), certified information security manager (CISM), certified in the governance of enterprise IT (CGEIT) and cybersecurity nexus (CSX).14 Arguably, the skill sets of the CISA and CRISC are most critical to the CPA auditor: • The CISA is a recognized certification for information systems audit, control, and security professionals. To be eligible, five or more years of experience in information systems audit, control, assurance or security is required.

• The CRISC certification is designed for those experienced in the management of IT risk and the design, implementation, monitoring and maintenance of IS controls. To be eligible, three years of work experience

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managing IT risk by designing and implementing IS controls, including experience across at least two CRISC domains (of which one must be in Domain 1 or 2) is required for certification.

Conclusion Accounting automation is evolving to combine RPA, data analytics, and AI. It will impact all areas of accounting, including financial statement preparation, audit, tax preparation, and advisory services. At this point, there are no universally recognized standards and protocols for the software being developed. Major players are devoting significant resources to move the field forward with open source software to attract innovation and widespread acceptance. Some aspects of robo-accounting clearly are under the purview of management, but CPAs can apply this technology in practice management, audit, tax preparation and advisory services. It will be critical for the CPA profession to gain recognition as experts in the internal control systems surrounding these technologies. That expertise can be gained with additional education, experience and credentialing.

Bernard Marr, “Machine Learning, Artificial Intelligence – and the Future of Accounting,” Forbes ( July 2017).

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2 Therese Tucker, “Robots

Are Not Accountants,” Accounting Today (March 15, 2018).

Marc Staut, “Rise of the Robo-Accountant: Artificial Intelligence and Emerging Technologies,” (Oct. 6, 2017). http://news.cchgroup.com/2017/10/06/rise-robo-accountant-artificial-intelligenceemerging-technologies 3

4 “Harnessing

the Power of AI to Transform the Detection of Fraud and Error,” PwC Global. https:// www.pwc.com/gx/en/about/stories-from-across-the-world/harnessing-the-power-of-ai-to-transform-thedetection-of-fraud-and-error.html Ranica Arrowsmith, “KPMG Offers New IBM Watson-Enabled Accounting Tools,” Accounting Today (March 15, 2018). https://www.accountingtoday.com/news/kpmg-offers-new-ibm-watson-enabledaccounting-tools 5

6 “Machine

Learning: Unlocking the Power of Millions for the Prosperity of One,” QuickBooks Online Team, The QuickBooks Blog. https://quickbooks.intuit.com/blog/innovation/machine-learningunlocking-the-power-of-millions-for-the-prosperity-of-one Eric Piscini, Darshini Dalal, David Mapgaonkar, and Prakash Santhana, “Blockchain to Blockchains: Broad Adoption and Integration Enter the Realm of the Possible,” Deloitte Insights, Tech Trends (Dec. 5, 2017).

7

8

Sandro Psaila, “Blockchain: A Game Changer for Audit Processes,” Deloitte Perspectives.

9 “The

Use of Data and Technology in Audits,” PCAOB, Standing Advisory Group Meeting (May 24-25, 2017). https://pcaobus.org/News/Events/Documents/05242017-SAG-meeting/DTABriefing%20Paper%20May-2017.pdf 10

Ibid.

AS 2201: An Audit of Internal Control Over Financial Reporting That Is Integrated with an Audit of Financial Statements. https://pcaobus.org/Standards/Auditing/Pages/AS2201.aspx 11

AS 1201: Supervision of the Audit Engagement. https://pcaobus.org/Standards/Auditing/Documents/ PCAOB_Auditing_Standards_as_of_December_15_2017 12 13

https://www.aicpa.org/membership/join/credentials.html?tab-1=4#tab-4

14

http://www.isaca.org/certification/pages/default.aspx

Paul R. Brazina, CPA, CGMA, CFF, is an assistant professor of accounting at La Salle University in Philadelphia. He can be reached at brazina@lasalle.edu.

Yusuf J. Ugras, PhD, is associate professor of accounting at La Salle University. He can be reached at ugras@lasalle.edu.

This article was previously published in the Pennsylvania CPA Journal and is used with permission from the Pennsylvania Institute of CPAs.

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{ Accounting Education | New techniques }

Developing and teaching a data visualization course Demand for accountants with skills in data analytics will continue to grow, and accounting educators can play an important role in helping prepare future CPAs.

By Cory Ng, CPA, CGMA, DBA and Sheri L. Risler, CPA, CGMA

T

he explosion of big data has created opportunities for CPAs to leverage the power of data analytics to help their companies or clients gain a competitive advantage. Specifically, CPAs in leading firms are using technology to integrate their knowledge of financial and nonfinancial data to generate new insights, improve decision making and enhance company performance.1 Demand for those with skills in data analytics will continue to grow, according to Jenny Chan, partner in the advisory services practice at Ernst & Young. Chan notes that “expectations will only be higher for accountants to be technologically savvy with the ability to use applications and digital innovations to improve the efficiency and effectiveness� of business operations.

An indispensable component of effective analytics is the ability to generate visualizations. Accounting educators can play an important role in helping future CPAs develop their data analytics and visualization skills. The purpose of this column is to assist accounting educators in designing an effective introductory data visualization course.

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We provide here a seven-step process that we followed in creating and delivering a special topics, graduate-level accounting data visualization course. We believe the curriculum could also be adapted to undergraduate students.

1. Create Learning Objectives We started with creating course learning objectives, and then worked backward to determine the assessments and instructional activities. The learning objectives should be specific and measurable. Some of our main objectives include introducing students to basic design principles and techniques for visualizing data, creating visualizations to analyze data, and communicating business insights.

2. Choose the Right Tool After considering the course learning objectives, choose a data visualization tool that will help you accomplish your goals. According to PC Magazine,2 the top three software providers for data visualization are Tableau, Microsoft Power BI and IBM Watson Analytics. We decided to go with Tableau because of its wide use in industry, intuitive

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interface, availability of training resources and price tag (it’s free for students and instructors). It is important to note that the specific tool is not as important as the ability to extract data, build a visualization graphic, gain insight and communicate to decision makers.

3. Get Trained Tableau offers a variety of training options, including videos and live instruction courses. We took an introductory training course that covered topics such as connecting with data, creating visualizations and calculations, and building dashboards. Chart types included cross tabs, heat maps, tree maps, scatter plots and others.

contributed to significant learning experiences. Striking a balance between covering technical content while keeping students engaged is always a challenge as we strive to enhance the level of engagement.

4. Register for Instructor Resources Tableau maintains an instructor resource page. This site provides a variety of curriculum materials, including lecture notes, presentations, student handouts, data files, assignments and exams. Once registered, instructors have access to curricula that cover basic to advanced data visualization topics.

5. Higher-Order Thinking A well-designed course should provide students with an opportunity to practice higher-order thinking skills, such as analysis, critical thinking, evaluation and creation. In addition to traditional lecture, we incorporated active learning techniques, reading and writing assignments, project-based assignments and peer learning, all in an effort to support higher-order thinking.

6. Teach and Assess the Course After designing the course, implement your plan and teach the course. Our typical approach during class was to discuss concepts, demonstrate how to create a visualization, and then have the students create a similar visualization, sometimes using a different data set. We assessed the course using quizzes and tests, graded homework assignments, written assignments and a final project that included a presentation of a data visualization created by the students.

7. Make Revisions and Do It Again After completing the course and reviewing the assessment results, determine what worked well and what did not. Make the necessary adjustments based on assessment results and course feedback, and prepare to teach the course again. We learned that providing students with an opportunity to create visualizations using their own data sets was appreciated by many and

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8. Other Options If delivering a stand-alone course is not possible, another option is to integrate material from the HUB of Analytics (also known as the HUB) available at www. hubae.org. The HUB provides open educational resources, including fictional data sets, cases, teaching notes and tutorial videos for faculty and students. The cases use Tableau and other analytic software, such as ACL and IDEA. Instructors could easily replace a traditional final project with a case from the HUB.

Conclusion The demand for data analytics and visualization skills is not going to fade. Accounting educators must seize the opportunity to assist their students in developing these important skills. One project, or even an entire course, will not equip students with everything they need to know, but early and repeated exposure will help students become more marketable and prepared for jobs that require this skill set.

1 “Business 2

Analytics and Decision Making ¬– The Human Dimension,” CGMA (2016).

Pam Baker, “The Best Data Visualization Tools of 2018,” PC Magazine ( July 24, 2018).

Cory Ng, CPA, CGMA, DBA, is an assistant professor of instruction in accounting at the Fox School of Business at Temple University in Philadelphia and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at cory.ng@temple.edu.

Sheri L. Risler, CPA, CGMA, is an associate professor of practice in accounting and director of the master of accountancy program at the Fox School of Business at Temple University. She can be reached at srisler@temple.edu.

This article was previously published in the Pennsylvania CPA Journal and is used with permission of the Pennsylvania Institute of CPAs.

On Balance

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{ Manufacturing | Future trends }

TRANSFORMATIONS The future of manufacturing in Wisconsin

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As we head into another new year, what’s on the horizon for the manufacturing industry in our state?

M By Michael W. Steinl, CPA, CGMA

anufacturing has been a key part of Wisconsin for nearly as long as agriculture.

During that time, many changes have occurred within the sector.

We’ve seen manufacturing become generally less labor intensive and more automated. Manufacturing has been lost to companies out of state or overseas, causing Wisconsin manufacturers to rethink what they do and how they do it.

Currently, we’re experiencing transitions in the workforce and business ownership as more and more baby boomers are retiring. Then there is the everincreasing level of reporting requirements. As we look to the future, we can expect to see continued major changes in how manufacturers must operate in order to be profitable and successful. Here are some examples:

Labor shortages will continue to be a major issue.

At Wegner CPAs, we have seen clients turning down work because they don’t have the labor capacity to get it done.

Over the last few years, to meet their staffing needs, companies have begun hiring people who would not even have been considered a decade ago. Companies have also come up with a variety of creative ways for attracting new employees from nontraditional sources. These include working with the Wisconsin Department of Corrections, working with veteran’s services to recruit vets being discharged from the military, sponsoring tech labs in high schools to teach students about the great career opportunities in the manufacturing sector, and setting up scholarship programs for students interested in manufacturing-related trades, to name a few.

M&A and business succession activity will increase.

The ownership of many manufacturing businesses currently resides with the baby boomer generation, and many of these owners are at or nearing the point where they would like to exit the business. The problem has been exacerbated by the economic downturn that occurred in 2008. At that time, many business owners who were considering a sale or transfer saw a

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large percentage of their net worth evaporate. As a result, they decided to continue until the business and their net worth recovered.

The relatively strong economy over the last several years has now put many of those owners back into exit mode.

The issue will be finding buyers. If there isn’t a next-generation family member or someone within the company currently to transition the business to, finding a qualified buyer could be difficult—especially if the seller has certain expectations of the buyer, such as maintaining the business as is or sticking to a high selling price floor. Therefore, it could be a buyer’s market in business sale situations. Sellers may need to be more creative and use tools like seller financing or ESOPs to get their equity out of their businesses.

Use of technology and automation in production will accelerate.

This is happening partly in response to the labor shortages mentioned above, but also due to advances in technology. We will likely see even greater advances in the use of automation and artificial intelligence.

Over the last 30 years, major changes have occurred in manufacturing production. Robotic welders have replaced human welders in certain situations. Computer numerical control machines have replaced machinists for some functions.

The production process is becoming much more computerized in general in many facilities. Old perceptions that all factories were dark, dirty and dangerous are being transformed by the realization that many facilities are bright, safe and clean work environments. Many future factory workers will need to be at least somewhat skilled with computers.

Production information will become even more readily available.

Formerly, ERP systems often had been implemented only by relatively large companies. With advances in software, the cost of implementing an ERP system is becoming cost effective for more companies. As a result, manufacturers that relied on monthly financial closings or their checkbook balances to know where they stood will now have accurate information on a realtime basis. This is likely to grow in future years.

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{ Manufacturing | Future trends }

In the past, many companies relied on month-end or yearend physical inventory counts to know their inventory levels.

Already, more and more companies are making use of real-time production and inventory information. They now rely on cycle counting as a check for the data rather than inventory counts as the basis for creating the financial information. We will likely see more companies making use of the software currently available to provide up-to-the-minute production data.

Insurance costs will continue to rise.

As society continues to be litigious, it is likely that product liability, discrimination or other worker-related claims will continue for the near future. In addition, we will continue to see health care costs climb steadily. As a result, insurance costs will likely continue to grow as an expense for many manufacturers.

Manufacturing will become more vertical.

We’ve already seen a shift in which many manufacturers are doing some distribution. In addition, some wholesalers and distributors have begun doing light manufacturing. This will continue to grow. The internet has made it much easier for manufacturers to distribute their products without having to go through a middleman. The same reasoning has caused distributors to get into some of the production. The result, however, is that many manufacturers will need to be able to handle a larger customer base and build a customer service team.

Tax and financial reporting will likely become more complex.

The recent income tax law change was billed as a simplification in some respects. While this may be true for individual taxpayers, it is not necessarily so for manufacturers.

On the tax side, manufacturers will still need to address differing depreciation rules for book and tax, but also on a state-by-state basis depending on where the business has nexus. The changes in the law regarding meals and entertainment will complicate the tracking for those costs. Records still need to be kept to claim R&D credits and the Wisconsin Manufacturing and Ag Credit.

As states are looking for revenue sources, there will be more exposure to multistate income tax requirements. This will only be compounded on the sales and use tax side by the recent Wayfair vs. South Dakota Supreme Court case. That case alone has created major additional tax exposure for many companies and has turned upside down how most manufacturers have been handling their sales and use tax reporting requirements.

On the GAAP side, the new revenue recognition and lease rules will also have a major impact on the financial reporting for many manufacturers. Both of these changes could result in a variety of unforeseen consequences. For example, as a result of these new rules, companies may need to renegotiate loan terms with banks to avoid loan covenant violations.

All of these topics will likely seem daunting for most.

Looking back to how manufacturing has already changed and evolved over the decades, the sector has weathered a wide variety of challenges. Many companies have managed to not only survive, but to thrive here in Wisconsin. The sector is up for the new challenges, and the best years for Wisconsin manufacturing may well be yet to come.

Mike Steinl, CPA, CGMA, is a partner and leader of Wegner CPAs’ manufacturing and supply chain group. Contact him at 608-442-1905 or mike.steinl@wegnercpas.com.

memorials

32

Robert J. (Bob) Quinn, CPA

Donald A. Thut, CPA

(1954–2018) Bob Quinn, CPA, passed away at age 64 on Monday, Oct. 22, from glioblastoma brain cancer. Quinn earned his bachelor’s degree in accounting from UW–Platteville and passed the CPA Exam on his first try. In 1977, he was employed by Siepert & Co. LLP, Beloit, where he worked for 30 years, earning partner status after five years and eventually advancing to managing partner. He later worked for Rate Watch in Fort Atkinson and Baker Tilly in Janesville. Quinn served as charter member and treasurer of Beloit 2000, president of the Roscoe Chamber of Commerce, a board member of the Beloit YMCA and Beloit Country Club, and an active member of other community organizations. He is survived by his wife, three children, five grandchildren and other relatives and friends.

(1931–2018) Donald A. Thut, CPA, Hales Corners, died Monday, Sept. 24, at the age of 87. Thut attended UW–Madison and received his bachelor’s degree in accounting in 1953. Following that, he joined the Army and served his country in Korea as an ordinance supply officer from 1953–55. Thut retired from a career with the Wheaton Franciscan Sisters in 1997, having served as vice president of finance. He generously shared his time serving on the boards of many charitable organizations and as a volunteer tax preparer for AARP. Thut is survived by his wife, four children and six grandchildren.

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If you are aware of a member obituary and believe it should be included in Memorials, please send a copy of the obituary or contact Marcia Tillett-Zinzow at mtzinzow@icloud.com.

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On Balance

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33

{ Tax | Wayfair decision }

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O

n June 21, 2018, the U.S. Supreme Court issued its opinion in South Dakota v. Wayfair. This 5 to 4 ruling overturned the court’s 1992 Quill Corp v. North Dakota decision and thus eliminated the physical presence requirement for sales tax nexus, opening the door for all states to impose sales tax collection and reporting obligations on out-of-state businesses who By merely make sales to customers there. Given the Chelsea Zhao, CPA broad significance of the Wayfair case, businesses and tax practitioners should understand the impact of the case and proactively develop action plans for responding to states’ new sales tax economic nexus laws.

From Quill to Wayfair In Quill, the court embraced a rule requiring a seller to have an in-state physical presence before the states may impose sales or use tax collection obligations upon them. For example, under the Quill standard, an out-ofstate company that sold merchandise to consumers in a state did not have nexus there for purposes of collecting and remitting sales tax if it had no stores, warehouses, employees or other physical presence in that state.

However, 26 years later, everybody is living and breathing in a world that is rapidly advanced by the internet and technology. It is in this context that the Wayfair court held that “the physical presence rule of Quill is unsound and incorrect.” While the court did not actually rule upon the constitutionality of South Dakota’s law—which required remote sellers to collect and remit sales tax if they either engaged in more than 200 separate transactions with in-state purchasers or sold at least $100,000 of goods and services to in-state purchasers during either the prior or current calendar year—the fact that the court spoke favorably about the law’s chances of being upheld caused many states to view South Dakota’s law as the blueprint to follow for enacting their own sales tax economic nexus laws.

Developments after Wayfair Wayfair has caused many states to enact sales tax nexus laws similar to South Dakota’s, and other states are considering adopting one. However, these laws’ provisions can be very different from one state to another. For example, the revenue threshold is only applied to retail sales for Minnesota, while for Hawaii it means gross sales income from tangible and intangible properties and services. The revenue amounts also vary widely by state, with a range generally between $100,000 and $500,000 and a small handful starting at only $10,000.

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{ Tax | Wayfair decision }

On July 24, 2018, the House Judiciary Committee held a hearing to examine the Wayfair decision, and four federal proposals were introduced in August. In mid-September, a bipartisan bill in the House was proposed to “bar retroactive taxation by the states, establish an orderly phase-in of compliance obligations, and create a small business exemption” (see Michael Cohn, Congress introduces bill to phase in online sales tax collection, Accounting Today, September 17, 2018).

However, as of now, no action has been taken to provide further guidance by Congress.

On October 31, 2018, South Dakota announced that the parties in Wayfair had settled the case out of court, which means that South Dakota’s court system will not issue guidance about its nexus law in the near future. As a result, some companies may be left wondering how to develop their response to South Dakota’s nexus laws and similar ones in other states.

What does Wayfair mean for businesses?

Even though certain questions relating to these new laws remain unanswered, sales tax economic nexus is here to stay; and, as a result, doing nothing is not a viable option. All remote sellers should make action plans promptly because sales taxes do not become an economic cost to a seller unless they are uncollected.

Businesses should evaluate how Wayfair affects their operations and develop a response that includes one or more of the following steps: 1. Complete a nexus study that covers both sales tax economic nexus laws and potential prior period exposures, such as due to previously unidentified in-state physical presence.

2. Periodically review the company’s revenue and transaction data to monitor whether it exceeds the thresholds of various states.

3. Ensure that the company has all resale or other exemption certificates from each customer.

4. Before registering with any new states, consider instead applying for a Voluntary Disclosure Agreement (VDA) program to mitigate any risk produced by prior period nexus exposures.

5. Evaluate or upgrade the sales tax filing system to handle the increased volume of sales tax returns being filed, and/ or consider outsourcing the compliance responsibility.

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“The new Wayfair case has resulted in lots of changes, challenges and confusion, but it could also lead to opportunities.”

– Chelsea Zhao, CPA

What does Wayfair mean for tax practitioners?

Tax practitioners are held to a high standard to deliver timely and accurate professional services to clients. As a result, taxpayers may turn to their CPAs to recover damages for failing to comply with these new sales tax nexus laws if the CPA failed to inform them about them in a timely manner (see Deborah K. Rood, CPA, “No Fair to Wayfair for a CPA firm’s professional liability risk,” AICPA Tax Section News, September 28, 2018). However, with limited guidance from Congress and rapidly changing state laws, CPA firms also face great challenges. To balance the need for managing these risks while seizing the opportunity for building their professional reputation, CPA firms should develop strategies relating to Wayfair by staying abreast of current developments, sharing insights with clients proactively, and potentially providing additional services to clients for compliance or consulting.

The new Wayfair case has resulted in lots of changes, challenges and confusion, but it could also lead to opportunities. It will be interesting to see what states and Congress will do now that the mid-term elections are behind us. Businesses and tax practitioners should work together in this post-Wayfair world and create some action plans for compliance and internal operation solutions.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CliftonLarsonAllen) to the reader. For more information, visit CLAconnect.com. https://www.accountingtoday.com/news/congress-introduces-bill-to-phase-in-online-sales-taxcollection-after-wayfair 1

https://www.aicpa.org/interestareas/tax/newsandpublications/taxsectionnews/2018/20180928-no-fairto-wayfair-for-a-cpa-firms-professional-liability-risk.html 2

Chelsea Zhao, CPA, is a tax director at CliftonLarsonAllen (CLA) in Milwaukee. She has more than 15 years of experience assisting multistate businesses with tax compliance and consulting. Contact her at 414-238-6705 or chelsea.zhao@claconnect.com.

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Interested?

Contact Marcia Tillett-Zinzow, editor, at mtzinzow@icloud.com.

On Balance

January | February 2019

37

{ Practice Management | Business development }

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A 37-year marketing and business development veteran shares advice from his peers and his own experience.

I

n the AICPA’s sales and marketing guide, Bulls Eye, Association for Accounting Marketing (AAM) writers Scot Jensen and Suzanne Lowe proclaimed, “Clients begin forming impressions of the possible effectiveness of their service providers when they first By encounter a firm’s marketing and Neil Fauerbach, business development processes.”

MBA And since you don’t have a second chance to make a good first impression, you need to put systems in place to help ensure positive impressions.

Grizzled veterans of marketing and business development for CPA firms have seen many approaches to building and maintaining those systems. Some approaches challenge professionals who say, “I went to college for accounting, not sales.” On the other end of the spectrum, you have Louis Tully, the accountant played

by Rick Moranis in the movie Ghostbusters, who asked everyone he met, “Who does your taxes?” In the middle are the business developers who are successful because they are connected, visible, focused and organized. And they are in short supply.

It is critical to the health of any size CPA firm to create a pipeline of properly trained business developers to build the firm’s presence in the market. Three Wisconsin AAM members were tapped for their professional expertise in this area. Art Kuesel, former CPA firm marketing director and current owner of Kuesel Consulting, works with CPA firms across the country to help them build their departments and train their people. He was recently named to the Accounting Today 100 Most Influential People in Accounting list. Diane Roundy is director of growth, marketing and business development at Schenck SC—and also on the board of the Green Bay Packers. Sandy Fischer is marketing manager at Wegner LLP and co-owner of an insurance agency.

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What levels within your firm are involved in business development?

At Smith & Gesteland, now BDO, we hired for technical skills but also put a great deal of emphasis on soft skills, including business development (BD). We sent many of our supervisors and above through training programs, including Rainmaker and Upstream Academy, with great results.

Those chosen to attend had strong interest in growing their skills, and leadership confirmed their potential.

Kuesel observes that firms he works with approach BD on four different paths. One is to start at the top and allow the initiatives to cascade downward throughout the firm. Another approach is to recognize that at the top, the change in behavior will be limited. Kuesel suggests starting with the “meaty middle”—managers through new partners—and getting them to march to a louder BD drum. In the third approach, firms nurture BD skills from the beginning. The fourth approach is to hire BD talent from outside the firm and/or reach from within and pull someone out of client service to put them on the BD track.

Many firms try multiple approaches. Kuesel said, “What works best for your firm will depend on the culture, need for results, timeline for results and ROI expectations.”

At Schenck, Roundy reports that her firm’s business development and marketing plans involve all levels of the organization. Plans for industry and service lines emphasize involvement from the supervisor level and above. And, if a less seasoned person shows an interest in business development, the firm gets them involved.

Individual BD plans are emphasized for supervisors and up, and strategy evolves around each person’s talents.

At Wegner, Sandy Fischer said that each of her firm’s industry and service areas has a marketing/BD plan. As an extension of those plans, the majority of the team have personalized marketing/BD plans. All team members are involved in implementing the activities identified in the plan. However, the majority of the responsibilities involve those at the level of supervisor through partner. Wegner conducts monthly training titled “BD Exchange,” in which

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39

{ Practice Management | Business development }

teams learn soft skills such as networking, dining etiquette and working a trade show.

From my own experience, leadership has been a critical element. If this is not driven and supported from the top, all these BD approaches will fail.

Does business development activity figure into performance evaluations?

At Smith & Gesteland/BDO, marketing and BD activities are a significant factor in looking at performance and eligibility for bonus and promotions. All levels are included, but managers through partners receive a higher level of scrutiny.

Kuesel observes that, in the past, BD was not a big part of evaluations, but today it’s much more common to tie some part of compensation to business development, client development, people development and other factors considered important to the firm.

At Schenck, Roundy said there are finders, minders and grinders, and all three are valued. The finders have higher goals toward BD than their grinders; however, all are expected to contribute.

Fischer said BD activity at Wegner is an important component of a successful career path, but the firm believes in playing toward people’s strengths. Business development goals are established with team members beginning at the supervisor level. They review goals on a quarterly basis, and adjustments are made throughout the year. But if BD is not a team member’s strong suit, it’s still possible for them to reach the partner level.

How do business development skills or potential affect a candidate’s chances of being hired?

The AICPA notes in their 2017 “Trends in Supply of Accounting Grad and Demand for Public Accounting Recruits” that the graduation rates of students in graduate and undergraduate accounting programs decreased between 2013 and 2016. The report notes that firms are still in a battle for talent to fuel their growth goals. We are all looking for technical talent, of course, but finding and training people to help grow firms is still a high priority.

So the talent wars have heated up.

Smith & Gesteland joined BDO in July 2018. Many larger firms are acquiring new talent through acquisitions.

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But BDO still has a high priority on recruiting top talent, and BD skills are an important factor in the firm’s screening process.

Kuesel notes that the market for talent is so tight that a lack of BD experience would not negatively affect a candidate unless it’s been determined to be a requirement for the role. While business development skills would be a plus for any candidate, given the market, they may not be a high priority.

Roundy believes that a great attitude toward BD raises a candidate’s opportunity for hire. There is an expectation that everyone should use their talents to provide excellent service, expand current relationships and gain referrals for new clients.

When evaluating a potential candidate for Wegner, Fischer says they look at the big picture. Candidates who are well-rounded with strong technical, communication and business development skills stand out. Her firm looks at where these individuals would fit within their service and industry lines as well as their culture.

As you can see from my AAM colleagues’ comments, there are many approaches and experiences within firms when it comes to business development. But the real secret sauce may just come down to culture, which is driven by leadership. If the leaders of your firm are not driving a culture that values and supports business development, it’s likely you will fail at those opportunities to make a good first impression.

Neil Fauerbach has 37 years’ experience in CPA firm marketing and business development, including a longtime post with Smith & Gesteland/BDO. He has been honored with CPA Marketing Report’s Accounting Marketer of the Year Award, inducted into the AAM Hall of Fame and included in Accounting Today’s 100 Most Influential People in Accounting. He recently retired.

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