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Successfully attaining the large opportunities, as Gale Crosley discusses in her column, "Segment for Success" (also in this issue), does take a great deal of focus and specialization. A firm really needs to consider where its talents lie and how best to promote them to a market ready and able to receive them.
For KAF Financial Group, effectively marketing the expertise of its highly specialized team of accounting, tax and business advisors meant creating six practice areas to provide clients with an integrated business solution to all their financially related issues, including traditional accounting, tax, technology consulting and business valuation, HR consulting, financial planning, and crisis management.
For a 40-person CPA firm, finding the time and talent to dedicate to each practice area without spreading its resources too thinly was the ultimate challenge. After all, like most firms, about 80 percent of its revenue is still derived from traditional accounting services like individual tax returns, financial statements and accounting.
Virtual Team Building
Thanks to tax software like TurboTax and mass tax preparation centers, individual tax return preparation is viewed as a commodity service for most types of basic returns. Clients expect greater value from their accounting firms. The challenge for firms is that tax compliance still requires the same amount of time from an accountant whether or not the client views it as a high value service.
The real value in most 1040s is having the tax preparation done at the same firm that also handles financial services, such as wealth advising and corporate work. With tax returns, 80 percent of the perceived value is derived from the final 20 percent of the work. Therefore the solution for KAF was to create a virutal team to help complete the other 80 percent without overburdening valuable in-house resources that were needed for their specialized expertise.
Accounting has followed the lead of other industries in achieving a successful balance outsourcing routine work easily taught to skilled professionals, while retaining the more valuable, highly specialized elements that have evolved from years of relationship building and professional experience. Whether local or offshore, an outsourcing arrangement delivers additional human resources to free in-house staff to focus on more value-added financial work.
During tax season, KAF outsources 100 percent of its tax preparation work for individual returns. In total, KAF outsourced about 700 tax returns during the 2007 season. If the firm had tried to staff up to meet this demand, KAF would have had to hire an additional 4.5 people working more than 10 hours per day for six days each week during the final 6-7 week period that represents crunch time for its tax preparation.
The practice of staffing up presents challenges for firms. First, in many areas of the country per diem workers are very difficult to find. That means generally a firm would have to anticipate resource needs early enough to recruit four or five new entry-level accountants at a cost of about $300,000 in salary and benefits (never mind recruiting costs). Secondly, since approximately 50 percent of the average firm's revenues are derived from the busy season period, newly hired staff cost the firm money in the summer months and beyond when tax work slows significantly, eroding profits just gained during the first quarter.
Time, Money and Specialization
KAF has successfully grown its traditional accounting business by sending all of its tax preparation work to a dedicated team of trained accountants in India using Xpitax's outsourcing services. During the 2007 busy season, the firm added 12 percent in new business without adding new resources or incurring additional overhead. This achievement is even more remarkable since it was also the first season in which the firm implemented "Project Balance," a program designed to improve work/life balance during tax season.
KAF's overall strategy to create a more desirable work environment was a great success in 2007. The firm was able to effectively achieve all of its "Project Balance" goals, including limiting weekend work to four Saturdays during busy season, closing the office at 5:30pm every Wednesday and Friday evening, and ultimately giving employees greater control over when and how they worked. Not only has the program, in its first year, helped the firm improve staff retention, word of Project Balance's success has also had a dramatic impact on its recruiting efforts, saving KAF about $100,000 in recruiting fees.
Outsourcing tax preparation work has also helped KAF grow its business in other areas, in which clients see greater value. For example, eliminating tax preparation work in-house had freed up the audit staff to focus on the audit and review work they were hired to perform, which has also had a positive impact on employee morale. Additionally, KAF has experienced 20 percent growth in its specialized areas over the past seven years. Today, 73 percent of clients benefit from more than one service versus about 44 percent when it created its first practice area.
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