Building your Write-up Practice

By Gregory L. La Follette and Allen D. Glasenapp

In Brief

Finished Never Is

Despite persistent predictions of its demise, write-up services remain a valuable practice area for many CPAs. Even as many small business owners turn to retail software products as a way to save on accounting fees, they are really looking for solutions. When software leaves them hanging, the CPA is the one who receives the call.

The CPA practitioner can utilize write-up software programs to establish a direct, time-saving connection to the client's records. Instead of being called in cold during a time of crisis, the CPA can keep constant tabs on the client's situation. The CPA can then reposition and emphasize greater value-added services over the write-up work the client performs for itself under the supervision of the CPA. Too few CPAs and small business owners know that this option exists. It is a win-win situation for both parties: The client is able to handle what they want in house, and the CPA can retain the business and concentrate on advisory services.

"With the advent of television, radio will be gone in a short period of time. No one will want a computer in his or her home. No one wants to hear actors talk.

The Internet will never be a viable vehicle for business and marketing.

Everything that can be invented has been invented.

Shrink-wrapped retail software accounting packages mark the end of write-up work for CPAs."

You have no doubt heard the preceding forecasts of doom and gloom. Surely the one that concerns us accountants is the last statement. However, the biggest mistake your firm could make is accepting that the profusion of retail accounting packages will erode its revenue from write-up work. Why not reposition the way it packages and promotes write-up services by using flexible software programs?

There is no question that the practice of public accounting is constantly challenged by client-oriented, retail accounting software packages. That is simply the reality of the market for the foreseeable future. To survive, accounting firms must become more flexible and adaptable. They must be able to compete with current and future retail accounting programs targeted at potential write-up clients. Software developers will continue to develop and market new products as replacements for services typically performed by accounting professionals. That is reality.

You Can't Shake Hands with Your Software

Like all other businesses, accounting firms must abandon traditional approaches to doing business and embrace a more flexible, client-focused philosophy to both operations and marketing. With the increased use of computer technology, clients are looking for and appreciate a hands-on approach to solving their problems.

Clients cannot develop relationships with software, only with people. As Frederick Reichheld stated in his book, The Loyalty Effect:

What drives this new model is not profit but the creation of value for the customer, a process that lies at the core of all successful enterprises. Value creation generates the energy that holds these businesses together, and their very existence depends on it.

Inexpensive applications, purportedly designed to replace the need to hire an accountant, are attractive to small businesses because they allow owners to devote more time to running the business. Products such as those beginning with a Q claim to free small business owners (and potential write-up clients) from the boredom of routine, day-to-day activities. With one mouse click, the advertisements say, the user-friendly software package will write checks, process a small payroll, produce invoices, and generate real time financial statements and business management reports with charts in living color on demand. The software claims to do everything but walk to the bank and make the deposit.

Don't sell the farm just yet! It is possible to compete with these off-the-shelf applications, maintain a profitable write-up practice, and expand your client base by competing on value not available off the shelf. With new write-up software and your experienced guidance, you not only can provide clients with a user-friendly alternative, but you'll also help improve their profitability. The key is to develop a plan, identify a provider of quality software that will integrate with client-level products, and implement a positioning strategy.

Retailers Sell Software; Accountants Sell Solutions

With the proliferation of retail accounting software, most accountants must contend with write-up clients who do their own routine transaction processing, record keeping, and reporting. As a result, they must also contend with lost audit trails, limited reports, confusing account structures, suspended or unclassified transactions, and other problematic issues that result from a client's limited knowledge and experience in managing a set of books

Although retail applications become more and more sophisticated, they cannot replace the value of an experienced accounting professional when it comes to setting up account structures and providing financial guidance, report presentations, and financial analysis. For this reason alone, you must begin positioning your write-up services based on value while there is still time. Anyone can go to an automotive store and buy a part for their car--but it takes a mechanic to make it work. Likewise, buying accounting software does not make you an accountant.

A client using one of the more popular programs, such as Peachtree or QuickBooks, will still seek your help when they run into trouble managing their bookkeeping and financial reporting. At that point, you begin adding value by performing your magic--finding solutions. You are then in an excellent position to demonstrate how partnering your write-up services could have avoided the problem altogether and saved both time and money.

When you begin adding value to the relationship, the client will quickly begin to realize that no retail manufacturer can box the CPA's expertise. Computer programs can perform functions; but they cannot take proactive steps to avoid problems, taxes, or personal frustration. On the other hand, you can offer a client-oriented set of integrated business applications tailored to meet their needs--just the magic they are seeking.

No businessperson goes to a store to buy software Figure1.. They are looking for solutions: a low-cost alternative to professional fees and more free time. The retail software developers offer a user-friendly, "everything you could ever need" package at a low cost. Of course, you could remind clients that cheap things are seldom good and good things are seldom cheap, but that could get you a smile and lose you a client.

Your mission, should you choose to accept it, is to leverage your professional knowledge and offer clients software that ties directly back to you. The client stays close to you while retaining the freedom to control the cost of data entry, check processing, and internal management reporting. In essence, it is a positioning strategy that packages your experience with the box.

Offering Experience and a Box

Instead of being threatened by or giving up your practice to the retail write-up applications, consider them an opportunity to differentiate your services. Begin by developing a plan that will capitalize on the marketing opportunities created by what the retail applications don't do rather than worrying about what they can do.

If you look at the problem through the eyes of your clients, you will discover that all most of them really want is the ability to process routine transactional functions. By using integrated write-up software with ancillary client modules, you provide the tool clients need to handle routine activities. This also frees you to focus on higher-level functions that better utilize your expertise (setting up chart of account structures, providing more sophisticated and credible financial statements, assisting with adjusting entries and accruals, and producing payroll compliance reports).

A relationship-building approach is a win-win scenario. Clients gain control over their business. CPAs have a template to nurture and expand write-up services. By always focusing on the client's needs, wants, and aspirations, you will develop a loyal client base, increase referrals, and become more profitable.

You Need the Right Tools

Now you need the same thing as your write-up clients: the right software. The best place to start is with the client's needs. Select software that includes a suite of client-based modules. They provide the benefit of choice and allow the flexibility necessary to perform daily business transactions and routine management reporting.

The most critical feature of the add-on client modules is that they keep control of the general ledger, chart of accounts, and general accounting controls in the practitioner's hands. Clients are more interested in the operational tools such as accounts payable, accounts receivable, and in-house payroll processing. These tools allow them to pay their bills, invoice their customers, generate management reports, and pay their employees, i.e., all the things needed to build a business.

However, producing and interpreting financial statement information overwhelms the average businessperson. So, the small business owner buys accounting software that will automate these transactions. By offering ancillary modules of your write-up software, you can satisfy your clients' need to automate day-to-day business activity while retaining flexible control over the financial statement.

Just Give It Away. If you really want to get the attention of current and prospective clients and add value to the relationship, give the software away. That's right, give clients the box for free as a sign of your commitment. The reason many potential clients are considering or already using a retail application is because of the low initial purchase price. By removing this factor, you create the opportunity to convey the added value of client-focused write-up services.

Small businesses maintaining business records using retail applications need a CPA when they encounter problems. When they seek assistance, you have an opportunity to offer your no cost write-up tools as a way to avoid similar problems in the future. Clients once lost to retail software often come back when they get into trouble. Other clients may already be using a retail package for day-to-day transactions but still want your expertise for financial statement preparation.

It is highly probable that most business owners are unaware that there are write-up packages available that allow them to simply export their data directly to the accountant's office. This type of integrated software provides productivity advantages to both small businesses and the firms that serve them. Realistically, you will not convert all clients to the integrated system, but the odds will increase if you can demonstrate that the cost will be easily recovered through increased efficiency. This could be particularly apparent to potential tax clients.

There are thousands of accounting firms all across the country with thriving, profitable, write-up practices. These practitioners have learned to adapt and have distinguished themselves and their services by adding value for their clients. All these practitioners have in common is that they use the right tools.

General Ledger vs. Write-up Applications

The software that you choose for your write-up practice will have a significant impact on firm profitability, and it is increasingly difficult for accounting practitioners to decide which application will be best for the practice. The primary decision is to choose whether to employ a general ledger or a write-up package to meet clients' demands. Many are unaware of the subtle, but significant, differences between the two.

General Ledger Applications and Limitations. While special-purpose write-up software has been available for over a decade, many practicing accountants still use generic general ledger software for developing client write-ups. Unfortunately, general ledger data entry applications are generally designed for real-time use and do not easily allow for entry changes. Furthermore, general ledger applications were developed to fit the specific financial record-keeping and reporting needs of a single business entity and therefore are of limited use to the practitioner.

While general ledger software may be less expensive, it has several limitations that add to its overall cost. The following specific limitations of generic general ledger software packages should be considered:

* Can add time-consuming steps to write-up work. For example, general ledger software is not designed for multiple client set-ups, and additional procedures are often required when setting up a new client or chart of accounts.

* The same account structure must often be used for each client, which creates problems for clients in different industries.

* Limits the user to a single data entry format, best suited to a single company that can adjust their process to fit the software. An accounting firm serving hundreds of clients doesn't have the option of dictating business practices.

* More time must be spent on client set-up, creating a more error-prone data entry process.

* Requires extra effort to modify transactions and reports, because most software cannot post to a prior period or year. Often, incorrect entries can only be changed through new adjusting entries, reversing, or reposting. Even editing the current month's transactions is often slow.

* Reporting capabilities are also limited because statements are typically designed for internal use rather than presentation. For example, the ability to provide disclaimer letters or footnotes is rarely included.

* Financial statements are often controlled by the order of the chart of accounts.

* Finally, general ledger packages typically run only one report at a time, making it very tedious to generate statements for multiple clients.

The Write-up Application Advantage. When compared to general ledger packages, write-up software can provide a major productivity boost to the practitioner. Well designed write-up software incorporates a high degree of user flexibility that makes it the best fit for a CPA serving many clients. In particular, write-up software streamlines after-the-fact processing of daily business transactions for account analysis and financial statement preparation.

Write-up software packages typically provide scores of financial statement formats from different industries that can be selected and modified as desired. This flexibility allows the user the option of creating completely customized statements, schedules, and footnotes tailored to the client. They also offer the capacity to handle more clients than a typical general ledger software package and are often capable of using longer and more complex account numbers.

A major feature of write-up software is that it is designed for use by accounting professionals to handle large numbers of after-the-fact transactions. The best packages make it possible to configure the data entry screen to match the client's source documents and business processes. For example, the data entry screen could be arranged in the order each client prefers. This not only saves time when entering volume transactions, but also reduces the potential for transposition errors.

Another advantage of write-up software is the use of separate customized screens for transactions and journal entries that ensure maximum productivity for each type of transaction. Separate journals for segregating cash receipts, disbursements, sales, adjusting entries, payroll, and many other specialized journals are beneficial features found in write-up software. Far more default entry alternatives are typically available in write-up software and can be customized to meet the needs of each individual client.

Because many write-up packages are written, sold, and supported by accountants, they are based on an understanding of the profession. For example, write-up software packages typically make it possible to add accounts, employees, and vendors on the fly and to review general ledger detail without leaving the data entry screen.

The capability of write-up packages to provide automatic journal entries also goes far beyond most general ledger packages by providing options such as recurring depreciation expense and reversing entries, income tax accruals, gross profit calculations, inventory, and allocations by percent. Transactions that have already been entered, even from prior periods, can often easily be edited or located through searches, eliminating the need to pour through a transaction listing. You can also delete transactions in the current period and quickly correct a posting to an incorrect period.

Unlike general ledger packages, write-up packages are typically designed to allow a wide range of different reports and associate them with particular clients. The packages provide a wide selection of canned reports that apply to different industries and can be selected in whole or in part as needed.

In addition, you can generally develop reports from scratch for complete flexibility. For example, you can often change column settings, page headings, footers, whole-dollar rounding, account order, borders, positioning, and many other parameters. The newly formatted statement then immediately appears on the screen as you make each change.

Integration. Write-up packages can also save time through integration with other modular accounting software packages. The most important ancillary modules are client-based accounting software primarily designed for processing payables and receivables. Some suppliers of write-up software provide bookkeeping solutions that give clients the flexibility to enter their own day-to-day business transactions such as recording and printing checks, as well as entering disbursements and deposits.

At month end, clients send their transactions to the accountant on disk or via modem to be imported into the write-up software, eliminating the need to enter the transactions. Likewise, balances can be exported to an integrated tax program. This efficient feature makes it possible to complete business, partnership, or individual tax returns in minutes.

The integration advantages of write-up software also come into play with fixed asset accounting software and even practice management software, where the data flows in both directions. The best write-up packages can export a chart of accounts and trial balances for ease of set-up and oversight of the general ledger by the professional practitioner.

Keeping Write-up Services Alive, Well, and Growing

When offering integrated software to your clients, it is important that they understand the savings in the cost of data entry and processing time. Re-keying after-the-fact transactions, communicating changes to the chart of accounts, and adjusting entries can result in a reduction of billable time. The wise practitioner will use that saved time to assist clients in growing their business and increasing their bottom line.

As the number of services performed by these integrated applications increases, so does profitability through the increased efficiency of data collection and reporting. Significant time will also be saved in processing client data.

While retail applications could pose a threat to the write-up practice, today's premier write-up applications provide accounting professionals with the tools to mitigate the extent of that threat. In fact, they may be able to gain a competitive advantage by creatively employing the features of a well-designed write-up application.

The key to developing a successful strategy is to remain focused on the client and adding value to the relationship. Accounting firms do not drive the needs of the business community--just the opposite. In an atmosphere of epic change, businesses are seeking shortcuts, more efficient methods of managing information, and ways to increase profitability.

For the accounting practitioner, future success will require the development of more adaptable, value-added services. When you embrace change, you gain the advantage by developing scenarios that allow you to position your services as indispensable, regardless of technological advances. To succeed, you need to select the best write-up package available, one committed to remaining as flexible and adaptable as the market requires. The Japanese have a word for what will be required to be successful in the age of technology and the era of the customer. The word is kaizen--meaning "finished never is." *

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.