A tax audit and a funny old gentleman

For the benefit of those readers of this blog living outside of Australia – our financial year ends tomorrow. So to mark this annual event here is a little joke about our tax office & an old chap. It is one of the funniest jokes I have heard or read about a tax collection agency like the Australian Tax Office.  Please forgive the language, but it is very funny!

Grandad & the Australian Taxation Office.

The ATO decides to audit Grandad and summons him to their office.

The auditor was not surprised when Grandad showed-up with his lawyer.

The auditor said, ‘Well, sir, you have an extravagant lifestyle, and no full-time employment, which you explain by saying that you win money gambling. I’m not sure the ATO finds that believable.’

I’m a great gambler, and I can prove it,’ says Grandad. ‘How about a demonstration?’

The auditor thinks for a moment and said, ‘Okay. Go ahead.’

Grandad says, ‘I’ll bet you a thousand dollars that I can bite my own eye.’

The auditor thinks a moment and says, ‘It’s a bet.’

Grandpa removes his glass eye and bites it. The auditor’s jaw drops.

Grandpa says, ‘Now, I’ll bet you two thousand dollars that I can bite my other eye.’

Now the auditor can tell Grandad isn’t blind, so he takes the bet.

Grandad removes his dentures and bites his good eye.

The stunned auditor now realizes he has wagered and lost three grand, with Grandad’s lawyer as a witness. He starts to get nervous.

‘Want to go double or nothing ?’ Grandad asks ‘I’ll bet you six thousand dollars that I can stand on one side of your desk, and pee into that wastebasket on the other side, and never get a drop anywhere in between.’

The auditor, twice burned, is cautious now, but he looks carefully and decides there’s no way this old guy could possibly manage that stunt, so he agrees again.

Grandad stands beside the desk and unzips his pants, but although he strains mightily, he can’t make the stream reach the wastebasket on the other side, so he pretty much urinates all over the auditor’s desk.

The auditor leaps with joy, realizing that he has just turned a major loss into a huge win.

But Grandad’s own lawyer moans and puts his head in his hands.

 ‘Are you okay?’ the auditor asks.

 ‘Not really,’ says the lawyer. ‘This morning, when Grandad told me he’d been summoned for an audit, he bet me $25,000 that he could come in here and p#$$ all over your desk and that you’d be happy about it!’

Don’t Mess with Old People!

A careful & helpful accountant beats a big 4 firm!

Although my day job is as a specialist headhunter in the accounting profession, I have some fingers in other pies. For example, some clients see me as a “honest broker” – rightly or wrongly. That is someone who can offer an objective sounding board and (perhaps) a slightly different perspective.

One of my commercial clients was planning to exit his business and has hired me as sounding board and has brought his accountant – a chap which he has used for several years – to join him as an adviser. I’ve met this accountant chap many times over the years. To protect the innocent let’s call him Adam as in Adam Sandler.

Adam is not the most brilliant or technically gifted accountant in the world. However, he has a wonderful attitude of being really helpful to his clients. Adam goes out of his way to serve, ask questions and generally be available to his clients. None of what he does is ground breaking stuff – but he does the small things well and is consistent.

Some time ago the same client referred to above had a tax issue. I introduced him to a top-notch tax specialist at a big firm. To cut a long story short, the lack of service, care and attention from the big firm drove my client friend back to his local accountant – Adam. Not because of his technical ability or size of his firm – he went back to Adam for two simple reasons. Adam showed care and was helpful. A one man band beat one of the world’s biggest accounting brands. He simply made a difference to his client by showing some care and helping!

My question to you – are you showing your clients care and are you helpful? I’d love to know what you think.

Bye for now,

James E

As an accountant – are you blind to opportunities?

Recently I was chatting with a CFO on the phone. To protect the innocent let’s call him Ed.

Ed is an accounting and finance professional with over 40 years experience. Over the last 15 years or so he has worked as a “gun for hire.” His speciality is to go into a business that is experiencing trouble and turn the place around.

Ed’s current assignment is as an interim CFO of a small to medium manufacturing company. This particular business has been in operation for 50+ years and employs over 100 people. For some reason, the business has been trading at a loss for the last 10 years. Ed, with a fresh set of eyes and some skill, within one year has turned around the business from a loss to a profit.

Now I know what you’re thinking … that’s easy James. Ed simply went in, sacked a lot of people, controlled some other costs and got the business to make money. No – it didn’t happen that way. Rather, Ed asked questions of people on the shop floor, middle management and of course of the owners. Through a combination of asking the right questions and some digging into the financial records, Ed was able to uncover a fundamental flaw. The flaw was both simple and destructive. Believe it or not – no one knew what margin the business made on the products they manufactured. Or put another way … that they didn’t really know what it cost them to produce their products. So how on earth can they make a profit when they didn’t know the cost of what they were making.

In my phone chat with Ed he told me that, armed with the above knowledge, it was a relatively straightforward process to make the necessary adjustments to get the business back to profit. A success story!

However, it was Ed’s next comment that caught my ear the most. He noted, with some frustration and amazement, the fact that that the external auditors and accountants that this business had been using over the last 10 years (trading at a loss every one of those years) weren’t proactive enough to at least ask the question “Why the loss was occurring year after year?” As Ed said to me, “It just reinforces the stereotypes of accounting firms and their people – they look through the review mirror and don’t come up with ideas to tangibly help their clients. They are more focused on ticking forms about the past and making lodgement deadlines. Its very sad – 10 years of missed opportunities.

Now compliance is important, but clients see it as a necessary evil – not as something that helps their business. Lets face facts, the majority of compliance services are simply commodities. The now and the future for the profession lies in advisory work which helps businesses  make more money, save more money or save time.

Until next time,

James

Do first impressions count?

A while back I met a chap in a park walking his dog who, after a chat while we were both cleaning up after our dogs, introduced himself as a business growth specialist. Given the environment in which we met neither of us had a business card with us. Since then we have run into each other at least another 3 times. Still no luck – no business card on either side.

Lets call our dog-walking friend Danny as in Danny DeVito. I liked Danny he was friendly, appeared to be enthusiastic and passionate about his discipline and was articulate in the value that he delivered for his clients. He looked (not his dress of course but his manner), sounded and behaved like a real professional.

Just the other day I ran into Danny again and hazzar he had a business card on him. He said he was in a rush, gave me the card and sped off.  As Danny semi-jogged his way with his dog to the other side of the park I look down at the card he gave me. Up to this point I believed Danny was a seasoned professional, well versed in his discipline and ready to add value to his clients. When I looked at his card my heart just sank.  Here is what I saw …

  • The card was printed on some sort of heavy paper (about 120gsm) the type you get printed at those business card vending machines you see at airports.
  • The design/layout was quite up to the standard of what my 13 year old son can do on MS Publisher.
  • Danny didn’t have his own domain. So his email address read “danny@yahoo.com”
  • No website

I could go on but I think you get the idea. Now a lot of you reading this work with big accounting firms, law firms and consultancies – you’re probably ok but there is always room for improvement. Why not ask a friend or contact outside of your market for a frank opinion of your logo, business card & website? You might just get a surprise.

By the way … Danny’s area of special expertise and client service offering? Marketing. Oh brother!

All my best,

James E.

Tell your clients why you are more expensive

The other day I was invited to an event launching the corporate offering of a well known online retailer. It was a great event – wonderful venue with harbour views, tasty food & beverages and an eclectic crowd. It was a most enjoyable evening.

However, there was one highlight that especially stuck out to me – the key note speaker was a chap named Martin Grunstein. I had vaguely heard of his name before so I didn’t know quite what to expect. Martin describes himself as “The Customer Service Expert” He was a most engaging speaker and had a unique style of delivery.

Although Martin’s experience is predominantly retail, a lot of the material he presented at the event is easily transferable to professional services such as accounting.

One of his points that stuck with me was the importance of telling your clients and prospective clients what you actually do for the fee that you charge. It is vitally important that you give clear reasons as to why the fee is at the level it is.

For example, lets say that a prospective client of yours questions why your fee for a specific project is $15,000 rather than $10,000 from a competitor – or in other words why are you 50% more expensive? According to Martin, the onus is upon you as the service provider to tell the client why you are more expensive and why your service is superior.

In the above example, reasons may include:

  • You as the client are assigned one contact person whom you can contact at anytime regarding anything to do with the project.
  • Access to other clients of the firm who have done the same project in their businesses so you as the new client can learn from their combined experiences
  • Complimentary phone support for 12 months following the project completion.
Each of the above reasons represent significant benefit to the client, lowers risk and increases the likelihood of the project being successful. It is then a simple case of saying to the client, “This is why we are 50% more expensive. Go and ask the other firm if they can do the same. If they can do it for the lower price go for it. If they have to charge more then ask them why they didn’t include these aspects in their original proposal?
Either way – you set yourself apart as the more professional and more informer provider.
Thank you Martin – great advice!
See you next post,
James

Does size really matter? – the YES argument

I met with a CFO recently and asked him the same question about the importance of an accounting firm’s brand. Unlike the last post, this chap has given a qualified YES – the brand is important. For the time being I will withhold his name but suffice to say his organisation is big, complex and has high expectations of its external accounting  firm(s)

In professional services it’s always the individual it comes down to in terms of expertise and the quality of the work that you get, but you rely on the professionalism of the brand of the overall organisation as to the resources that they send to you.  So at the end of the day it’s very important, but it comes back the integrity of the organisation and the professionalism of those organisations.  If we were looking to appoint a new auditor, for argument’s sake, and I was aware of a local audit firm that’s just gone through some problems with some audit clients, I would probably tend to steer away from them because I would feel that their processes had broken down somewhere that meant that I was taking on trouble by adopting them and therefore I’d go elsewhere.  So, their quality through their professionalism is very important at the end of the day, because you’re paying for that expertise, you’re paying for those services, and in most cases you want something that you can rely on to take to other parties – not just internally – therefore that name has to stand up in front of those other parties that you’re using that work for as well.

They (the external accounting firm) ultimately have to present our accounts to their investors, which are institutional investors, and they wouldn’t be happy if someone was being used that they weren’t familiar with in most cases I would imagine. For purposes of quality assurance with other parties that we would use that information for the brand is absolutely important.

Size does matter for some clients. That being said the individual must be up to the task of delivering a consistent & sound service that provides an effective outcome for the client.

See you next post,

James E

Does size really matter? – the NO argument

I asked a CFO friend of mine who used to head up Finance at an engineering firm (Revenue $80m employing 100+ staff) how important an accounting firm’s brand is to him when he is looking to engage external help/advice. This is what he had to say.

I wonder whether brand is quite the right word. Perhaps reputation or their perceived level of expertise is better. But for the sake of the question, let’s stick with brand. The brand itself in the first instance, I wouldn’t say is that important. I would be more interested in speaking to the people who were going to be doing most of the work and looking at what their experience is, their qualifications, or how “good” that particular individual is. Brand doesn’t really come into it. Look at the case of Arthur Andersen which at the time was a major global accounting brand. They were the auditors for WorldCom, Enron, HIH, Ansett and One Tel – not a very good track record!

You can talk about the brand of a major multinational firm, but they’re only as good as the person that you’re going to be dealing with week to week. There is always going to be variation in the quality of the people within a large organisation. So, I wouldn’t say that brand itself is that important. I probably look at the professional firms generically and say, “Big Four, second tier, smaller…” In my mind, I don’t see any difference between any of the Big Four firms. I wouldn’t really know whether one was better than the other. Furthermore, I wouldn’t know if one individual within the big firms are better than the other.

Some interesting thoughts from Paul. The insight that captured my imagination was his statement regarding the “person” – You can talk about the brand of a major multinational firm, but they’re only as good as the person that you’re going to be dealing with week to week. There is always going to be variation in the quality of the people within a large organisation.”

Leaving aside the important areas of  support infrastructure, methodolgy, staff training and development it is the individual which makes the biggest difference to the client relationship. The other areas should be seen as hygiene factors (their impact is felt when they are not present)

In the next post we will talk about the “YES” case for a firm’s brand being important.

Bye for now,

James

Don’t show me the money!

I was in a meeting recently with a couple of senior partners with a big accounting firm (think top 10).

We were discussing with a marketing consultant I introduced to the firm what do people operating their own businesses really need and want from their advisers – in this case accountants.

The conversation went the usual way regarding client compliance needs, opportunity to value add, be proactive and the like. I’ve been in lots of discussions like this over the years and I’m sure you have too. Too often these conversations revert to motherhood statements, platitudes and the bleeding obvious.

However, towards the end of the meeting, something interesting happened. One of the senior partners, leaned forward and said the following (paraphrased):

We have to be upfront and completely honest with people that we meet who may or may not become a client. If we can help them improve their business and grow then we need to show them how we can do that. If we can’t help them then we need to tell them and step away.

I really like that statement. So often accounting professionals have so much pressure on them to meet their budgets, keep their write offs to a minimum and use everything in their power to make sure productivity is kept at a high level. Rightly or wrongly their is a (over) focus on fees.

The sad fact is that if you, as an accounting professional, are preoccupied with fees and the paraphernalia that comes with that, then clients will feel, see and smell it. No amount of soothing words, gifts, seminars/workshops, and invitations to the corporate box at the Rugby or Cricket will or can change a clients view that you and your firm is only interested in the money.

Wouldn’t clients prefer and want advisers (be they accountants, lawyers, management consultants etc…) to focus on them and their business, personal wealth and wellbeing and view their fees as a byproduct of a committed and strong relationship?

This is the sole reason I have stayed with my own accountant for more than 10 years now. He takes care of me and he knows the fees will take care of themselves.

What do you think.

All my best,

James E.

How an accounting firm upset Al Pacino (2 of 2)

Following on from the last post, here is the second example of how the incumbent accounting firm upset “Al” the CFO of a major law firm (as if the first example wasn’t enough!)

Once the tender was announced, and the accounting firms invited to prepare the documentation and presentations ready for the selection panel, Al noticed that the incumbent firm didn’t show much energy or enthusiasm for the process. When they came around to actually present to the panel they came up with a standard, average run-of-the-mill pitch. Nothing really stood out. Al got the impression that they had already given up.

Ironically, in spite of the weakening relationship over the last couple of years, the incumbent firm still had the advantage of knowing practically everything about the law firm since they had been the auditor/adviser for the several past years. They knew things about the law firm that none of the other 5 firms could possibly know.

I get the feeling from Al that if the incumbent firm pulled something put of the bag and had directly addressed the problems with the relationship they would have been in there with a much better chance. Also I was surprised to learn that the incumbent accountants had helped (and were quite successful) in referring clients to the law firm. In spite of helping the law firm grow their fee base it wasn’t enough to help the incumbent accountants keep their business. They needed to do their core job better. Just goes to show – accounting firms need to do much, more more to keep their clients happy. Being a “standard accounting practice” is simply not enough these days.

The other lesson here is to not give up. There is always scope and room to reinvent & strengthen the relationship you & your practice has with its clients no matter how difficult or strained.

In summary, the law firm they went with a big 4 accounting firm and the incumbent lost between $100 to $150k of ongoing work a year – not including special advisory projects. Quite a price to pay!

Catch you next post,

James E

How an accounting firm upset Al Pacino (1 of 2)

The other day I had a coffee with a friend of mine who happens to be a CFO of a big law firm in Australia. As always to protect the innocent let’s call my friend Al as in Al Pacino.

Al had been unhappy with the accounting firm he was using for the last couple of years. So to bring the matter to a head he arranged a tender and invited 5 major accounting firms to bid and to keep things fair he invited the incumbent to also lodge a bid.

After a few weeks, all submissions were made and the “beauty parade” commenced. Of the six firms tendering 2 were stand outs, 2 were average and 2, as Al succinctly put it, “were rubbish”. Their old accounting firm was one of the bottom 2.

I asked Al why the incumbent firm had rated so poorly; was their a bias in his business that they had to change accounting firms no matter what? Al had said no – the selection panel was more than willing to give them a fair go. However, in the period leading up to the tender and during the process the incumbent firm did themselves no favours. Al shared the following two examples.

Example1:

Not long before the tender was announced Al got a phone call from a senior partner in the accounting firm. The partner told Al that another partner who was working on an important piece of advisory work for Al was leaving their firm to join a competitor. Al thought to himself well this isn’t good news but at least we’ll have a month or two to transition to another partner so the work can continue. Al almost exploded in anger when the accounting partner told him, ” by the way … today is his last day” Al was furious. He since found out that the partner doing the advisory work had resigned 3 months earlier and here he was being told that today was his last day! Al considered the height of unprofessionalism and an incredible lack of transparency. Not a good look to say he least.

Tune into the next post to read example 2

James E