Thursday, November 9, 2017

Mnuchin doesn’t rule out delaying tax cut for corporations

Treasury Secretary Steven Mnuchin isn’t ruling out delaying the start of a corporate tax rate cut, but emphasized the administration’s “strong preference” is for the relief to start in 2018.
“The longer we wait, the worse it is for the economy and making companies competitive,” Mnuchin said in an interview Wednesday with Bloomberg TV in Washington. Mnuchin declined to say that a phase-in of corporate tax cuts was completely off the table.
“The president’s strong preference—he feels very strongly that he wants to start this right away,” Mnuchin said. “But having said that, we’ll have to look at the entire Senate package.”
The Washington Post reported late Tuesday that Senate tax writers were considering a one-year delay in implementing a 20 percent corporate rate. The House tax legislation unveiled last week calls for an immediate and permanent 20 percent corporate rate. Before the bill was released, House tax writers were said to have been considering a gradual phase in of the rate to ensure their plan would comply with congressional budget rules.
Mnuchin was said to resist a gradual phase in of the proposed 20 percent corporate rate out of concern the move wouldn’t boost economic growth as much as anticipated—he’s said higher GDP from the corporate rate cut would offset its cost. A slow reduction of the corporate rate from its current 35 percent would also make the U.S. less competitive, as other countries cut their rates faster and foreigners delay investments in the U.S.
‘Right Direction’
The House tax-writing committee is in the third of what’s expected to be four days of work to hammer out details of the Republican tax plan—a plan intended to overhaul the tax code for the first time in more than three decades. President Donald Trump has charged Mnuchin and National Economic Council Director Gary Cohn with the job of shepherding it through Congress and onto his desk to sign by December.
Trump left for a 12-day trip to Asia on Friday, leaving Mnuchin and Cohn behind to “remain vigilant” on tax reform, the president said before his departure. “So if I have any problems, I will be blaming Mnuchin and Cohn. Believe me, they’ll be hearing from me.”
Last weekend, Mnuchin spent time in California selling the tax plan. He also participated in a press conference Tuesday with Senate Republicans to discuss the tax effort. Later that afternoon, Cohn met with a group of Senate Democrats and Trump called in to make a personal pitch for the tax-cut plan being worked on by Republicans.
Mnuchin on Wednesday signaled support for the House’s measure this week to limit the carried interest tax break, widely utilized by private-equity managers, venture capitalists, certain real estate investors and hedge-fund managers.
Carried interest is the portion of an investment fund’s profit—usually a 20 percent share—that is paid to investment managers. Currently, tax authorities treat that income as capital gains, making it eligible for a rate of 23.8 percent—on gains from assets held for a year or more. The top individual income tax rate is 39.6 percent.
House Republicans now plan on attaching a three-year holding period to carried interest. Trump targeted the tax break in his populist presidential campaign. The House’s move is “absolutely a step in the right direction,” Mnuchin said.
Obamacare Rollback
Republicans may be considering repealing the Obamacare requirement that most Americans carry health insurance, as a way to help pay for the tax code revamp. Rolling back the coverage rule would save the government $388 billion over 10 years, according to a Congressional Budget Office report released Wednesday.
That is a smaller benefit than previously projected for a plan favored by the White House. Previous CBO estimates of the policy have found that millions of Americans would lose or drop their insurance coverage without the mandate. And repealing it as part of tax legislation—especially after efforts to rollback Obamacare have failed twice in Congress—could complicate the debate.
“The appeal of putting that in is one, it gets rid of a very unfair tax on people who can’t afford it, and it frees up a lot of money that would go toward a middle income tax cut, Mnuchin said. “Whether that’s included or not included, we are determined that we get the tax cuts passed.”
He reiterated his confidence that Trump will sign the legislation in December.
“Gary and I are very comfortable being accountable, this is the president’s most important domestic agenda item and we’re going to get this passed,” Mnuchin said.
—With assistance from Michael McKee

Wednesday, November 8, 2017

Multinationals scurry to defuse House tax bill’s ‘atomic bomb’

Multinational companies including Apple Inc., Pfizer Inc. and Ford Motor Co. would face a new tax on payments they make to offshore affiliates under the House Republicans’ tax bill—a surprise provision that has stunned tax experts.
The new 20 percent tax is “the atomic bomb in the draft” legislation, said Ray Beeman, co-leader of Ernst & Young’s Washington Council advisory services group. “We’re trying to get our arms around the implications.”
So far, many big U.S. companies have kept quiet on the proposal. But already, House Ways and Means Chairman Kevin Brady has tweaked the provision to lessen its impact, part of a package of changes the tax-writing panel adopted Monday night. The committee will continue debating the bill Tuesday.
House tax writers say the proposed excise tax is aimed at preventing U.S. companies from shifting their earnings offshore to subsidiaries in tax shelters—and it moved into the spotlight this week amid a series of global investigative reports on corporate tax avoidance. But tax practitioners say the provision has far larger implications for consumer prices on a range of goods.
“It’s a very big gorilla in the living room,” said Gary Friedman, a tax partner at Debevoise & Plimpton. Tech companies, pharmaceutical makers, automakers and reinsurers are the companies most likely to be concerned, he said.
A Pfizer spokeswoman said it was premature to comment, and an Apple spokesman declined to comment. Ford did not respond to requests for comments.
The tax would apply to billions of dollars in intellectual-property royalties that technology and pharmaceutical firms make to their overseas affiliates each year—payments often linked to tax-avoidance strategies. But it would also hit U.S. companies’ imports of generic drugs, cars and other products from their affiliates. Global insurers would incur the levy on the cost of “reinsurance” they buy from foreign affiliates.
‘Trade War’ Concern
The provision, which is estimated to raise $154 billion over a decade, “could trigger a trade war,” Friedman said—stirring other countries to tax their companies’ imports from U.S. units.
For investors, the impact would appear as higher overall expenses in corporate financial statements across a range of industries—potentially depressing earnings, said Robert Willens, an independent tax and accounting expert.
For consumers, the result might be higher prices for imported goods and insurance premiums—a message that various lobbying groups have been eager to share with House tax writers.
“We expected significant feedback there, and it’s exactly what we got,” Brady told reporters Monday. He added: “Insurance is an industry where I think there are some unintended consequences from the first draft. I am re-examining those provisions to make sure we got it right.”
The Coalition for Competitive Insurance Rates, a lobbying group that includes the U.S. arms of Zurich Re, Allianz Re and Swiss Re, came out swinging after the bill appeared.
Insurers’ Complaints
In the wake of recent hurricanes that ravaged Puerto Rico, Texas and Florida, “it is unfathomable” that the bill proposes “a measure that will shrink competition in the insurance marketplace and increase the cost of insurance for consumers,” it said in a Nov. 2 statement. Large global insurers, not smaller U.S.-only ones that wouldn’t face the tax, typically insure against most major disasters.
House tax writers envisioned the 20 percent tax as a way to shore up the U.S. corporate tax base, which has been eroded for years by companies sending their earnings overseas. As part of a tax overhaul that would cut the U.S. corporate tax rate to 20 percent—down from 35 percent—the House bill would also remake the U.S. approach to international business taxation.
Unlike most other developed economies, the U.S. taxes companies on their global earnings, but it allows them to defer paying taxes on overseas earnings until they’re returned to the U.S. As a result, companies have stockpiled an estimated $3.1 trillion offshore, beyond the reach of U.S. corporate taxes.
The House bill would end that practice, apply a cut-rate tax to the stockpiled earnings and use the new excise tax to try to keep more U.S. income at home in the first place.
‘Border-Adjusted’ Redux
The excise tax would apply to many payments that U.S. based companies make to foreign affiliates—be they subsidiaries, sister companies or parent companies. That would include royalties, but also payments for inventory later sold to consumers—essentially, any payment to a foreign affiliate on which the U.S. company could take a tax deduction immediately or over time.
The tax wouldn’t apply to payments between two U.S. affiliates of the same U.S. company. And it wouldn’t apply to interest payments—another method companies use to send profit overseas that would be curbed under a separate bill proposal.
Because the tax would apply to payments for inventory, some have compared it to the controversial “border-adjusted tax,” or BAT, that House Speaker Paul Ryan proposed last year. That proposal would have placed a 20 percent tax on companies’ domestic sales and imports, while exempting their exports. Ryan gave up on the idea after retailers and others argued that it would raise consumer prices.
“Our concern is that the tax ends up getting passed on to consumers and winds up being a consumption tax, similar to the border-adjustment tax,” said Levi Russell, a spokesman for Americans for Prosperity, a group backed by billionaire industrialists Charles and David Koch that also opposed the BAT.
International Automakers
Here for America, a lobbying coalition of international automakers including Honda, Toyota and Volvo, all with manufacturing, R&D and sales operations throughout the U.S., said in a Nov. 5 statement that the tax was “discriminatory” against global companies. The current tax bill, it said, “is flawed and disadvantages companies that are a backbone of American manufacturing and job creation.”
The bill does contain an escape hatch, of sorts—a way for companies to cut the amounts they’d pay under the excise tax.
Companies can either pay the 20 percent excise tax on the payments they make to an overseas affiliate—or they can make the affiliate itself subject to a tax on its net profit.
Choosing the second option might be more beneficial for most companies, tax experts said, because most U.S. companies pay their foreign affiliates a premium—a price that includes profit.
Consider a case in which the U.S. company pays its foreign affiliate $100 for a particular good. If it chooses to pay the excise tax on the payment, that’s a tax bill of $20.
But let’s say it costs the affiliate $60 to produce the good in question. Its profit would be $40, and its tax would be just $8. The company could cut its potential tax bill in half—but there would be a different kind of price to pay: It would have to disclose more to investors—and therefore, perhaps, to competitors—about its profits on particular product lines.
Currently, companies tend to make such disclosures on broad segments of the products they offer, not particular lines. “This bill allows the IRS to define what a product line is,” said Seth Green, a principal in KPMG’s Washington National Tax practice.
Choosing the extra disclosure and the lower tax bill is the better option, said Michael Mundaca, co-director of Ernst & Young’s National Tax practice—even if it does subject foreign affiliates to more scrutiny from the IRS.
“Neither choice is good,” he said, “but the second one is better, even with increased reporting.”

Tuesday, November 7, 2017

AFWA announces 2017 'Women Who Count Awards' winners

The Accounting & Financial Women’s Alliance announced the recipients of its 2017 Women Who Count Awards during the organization's annual Women Who Count Awards luncheon, held October 30 in Alexandria, Virginia.
The annual award ceremony recognizes female leaders in the profession who not only set examples in their "companies and communities," but who have also "earned the trust and respect of their clients and peers," according to the Alliance.
“Our members succeed as we encourage and empower them to take on challenges for personal and professional growth," said AFWA national president, Lori Kelley, per a statement. "I could not be more proud to celebrate these brilliant women. Their work exemplifies the values that define our organization, and the impact we as women hope to make in the profession.”
The 2017 Women Who Count Awards recipients are as follows:
  • Emerging Leader: Jennifer Brodmann - PhD candidate/dissertation fellow, the University of New Orleans, New Orleans, La.
  • Industry Professional: Grace Staten - marketing director, MassMutual, San Diego, Calif.
  • Public Practice Professional: Kelly Haden - manager, Ericksen Krentel, New Orleans, La.
  • Woman of the Year: Dr. Marilyn Willis - professor emeritus, University of Tennessee at Chattanooga, Chattanooga, Tenn.

Monday, November 6, 2017

A juicy tax break—and the rules to keep everyone from taking it

House Republicans say they’re determined to simplify the U.S. tax code. A long-awaited provision in the massive tax bill they unveiled Thursday, a special rate for “pass-through” businesses, could do exactly the opposite.
“The tax code was already overly complicated, and this is going to make it worse,” said Anjali Jariwala, a CPA and financial planner at FIT Advisors in Redondo Beach, Calif., who specializes in doctors.
For the wealthiest taxpayers, the provision could create big savings by slashing top rates from 39.6 percent to 25 percent on some income. The vast majority of U.S. businesses—from dry cleaners and sports teams to law firms and even many of President Donald Trump’s personal holdings—are set up as pass-through businesses, in which profits pass through to owners untaxed and then are reported as income on their individual returns. A regular corporation pays its own corporate taxes; shareholders pay another round of taxes on any dividends they receive.
The House bill could prompt many more Americans to consider setting up a pass-through business. Along with cutting corporate tax rates, it reduces rates for pass-through businesses to a new maximum of 25 percent. Millions of well-paid workers who pay a top federal rate of 39.6 percent might have an incentive to stop earning a salary and start hiring themselves out as contractors to get the lower rate.
The bill’s authors have tried to head off a flood of new pass-through businesses and limit the provisions’ costs to the U.S. Treasury. Under the bill, many service providers—doctors, lawyers, accountants, and people in fields like financial services and the performing arts—are assumed to be excluded from the pass-through rate. Other pass-through businesses would have 70 percent of their income classified as wages, subject to a higher federal rate and to Social Security and Medicare payroll taxes. Just 30 percent of their income would get the low pass-through rate.
Business owners could hire accountants to challenge these assumptions. A business could prove to the Internal Revenue Service that it deserves to pay the lower rate on its pass-through income based on how much capital it has invested.
This is where the complications come in. The bill offers a series of formulas to determine how much of a business’s income is subject to the pass-through rate, and they’re already making accountants’ heads swim.
“It’s way too complicated at this point,” said Johanna Fox Turner, a CPA and financial planner at Fox & Co. Wealth Management in Kentucky who also specializes in doctors. “I just cannot figure out how they’re going to get all that to work.”
House Republican leaders cite the example of a lawn care business owned by a married couple that brings in $500,000 in profits a year. The pass-through provision, along with the elimination of the alternative minimum tax, should allow this couple to cut its current tax bill of $128,000 by about $25,000, according to a statement issued by the House Ways and Means Committee.
While the bill’s writers try to exclude professionals, such as doctors and lawyers, from the pass-through rate, these taxpayers have every incentive to find a way around the rules. For someone paying an effective tax rate of 33 percent, reclassifying even a small percentage of income at the 25 percent rate can save a lot of money, Jariwala noted.
Middle-income business owners, meanwhile, won’t get much benefit, if any, from the new pass-through rate. An unmarried person earning less than $91,900 already pays a top marginal tax rate of 25 percent.
That’s why the National Federation of Independent Business, a small-business lobbying group, says it opposes the House bill. “We think the benefits [of the new pass-through rate] should extend to all small businesses,” said spokesman Jack Mozloom. In addition to offering lower preferential rates for smaller businesses, Mozloom said, the bill shouldn’t make distinctions between professional service providers and other pass-through businesses.
“We think that’s bad policy, picking winners and losers based on what they do,” he said. “We certainly want manufacturers to get a tax break, but we want their accountants to try to get a tax break too.”
Those accountants are now busy poring over the new law, figuring out ways they and all their clients could save the maximum in taxes. Meredith Tucker, a CPA at Kaufman Rossin based in Ft. Lauderdale, Florida, asks, for example, whether a law firm, now organized as a pass-through partnership, could reorganize as a management company to grab the new, lower corporate tax rate of 20 percent?
“We’re all going to get our pencils out and figure out how to legally push the envelope,” Tucker said. “That’s what we do.”

Friday, November 3, 2017

In the war for talent, money is ammunition

In all the talk about work-life balance, exciting work opportunities, career support and all the other ways top firms are making themselves attractive places to work, it’s important not to forget that money remains a key motivator.
To start, it’s a given that firms need to pay competitive salaries (Irvine, Calif.-based Best Firm Haskell & White makes a point of its “above-average pay”) -- and salaries in the field are rising for staff at all levels.
Beyond that, though, the firms on Accounting Today’s Best Firms to Work For list have explored a variety of other ways to reward staff.
For instance, West Chester, Pa.’s Fischer Cunnane & Associates “pays a profit-sharing bonus to the 401(k) plan for employees which, over the years, has averaged 5 percent of their compensation,” the firm reported. “The bonus applies to full-time and part-time employees who satisfy the ‘hours worked’ requirement for the year.”
Haskell & White offers both profit sharing and individual bonuses: “Profit sharing is based on a pro rata achievement of financial results,” the firm said. “Individual performance bonuses are based on client service, marketing, engagement, financial metrics and mentoring personnel.”
Many firms build bonuses around multiple factors like those Haskell & White mentioned, but many others tie them to single measurements. Besides sharing profits when their firm meets its financial goals, employees at Atlanta’s Smith & Howard can earn an additional 5 percent of their salary if they meet their chargeable-hour goal for the year.
The Best Firms also don’t rely just on period-end rewards. At Las Vegas’ Houldsworth, Russo & Co., “All employees can be awarded on-the-spot bonuses throughout the year,” over and above the year-end bonuses it gives based on individual performance and contributions.
And at Missouri’s Wilson Toellner, “All team members participate in frequent incentive programs, where prizes and financial rewards are available for reaching milestones on LinkedIn in the areas of networking connections and information sharing.”
Two areas stand out as particularly common focuses of bonus pools at top workplaces in the profession. The first is client referrals, where the Best Firms often have programs like that at Kentucky’s Rudler: “Our client referral program rewards professionals and support personnel for bringing in new business with 10 percent of the first-year client collections and 5 percent of the second year paid as commission. Bonuses are estimated to be over $23,000 for 2017.”
And in this era of staff shortages, it should come as no surprise that the other area where the Best Firms are likely to offer generous bonuses is leads, referrals or recommendations that lead to new hires.

Thursday, November 2, 2017

U.S. tax cheaters line up against their accused ex-Swiss banker

American taxpayers who opted to disclose their offshore accounts to avoid prosecution paraded into a New York courtroom this week.
They came to testify against their former Swiss banker who is on trial for helping customers conceal millions of dollars from the Internal Revenue Service as the U.S. began cracking down on tax evasion. The taxpayers told jurors how Stefan Buck, 37, former head of private banking for Bank Frey & Co., advised them to open accounts at the Zurich-based financial institution after UBS Group AG admitted in 2009 that it fostered tax cheats and paid a $780 million penalty.
Prosecutors allege Buck conspired with a Swiss lawyer, Edgar Paltzer, to open and maintain undeclared accounts on behalf of U.S. taxpayers who were forced to close accounts at other banks.
Buck is one of the few foreign bankers, lawyers and advisers charged in the U.S. effort to tackle Swiss-aided offshore tax evasion who is defending himself in court. A handful of the defendants, including Paltzer, have pleaded guilty and agreed to cooperate, while at least two have been convicted and two others were acquitted.
Client Testimony
Christine Warsaw, a 67-year-old from Carefree, Arizona, testified that Buck convinced her and her late husband, Steve, to move about $1 million to Bank Frey from Credit Agricole SA, where employees told them it was “kicking out the American accounts” because of concern about U.S. scrutiny.
“We didn’t want the IRS to be notified,” Warsaw said. “It would open us up to investigation.”
Warsaw said Buck told them he didn’t have to report their holdings to the IRS if they allowed Bank Frey to have discretionary management of the account, and that it couldn’t hold U.S.-based securities or investments. They opened two accounts at Bank Frey, which Warsaw said they closed after getting a subpoena in 2011.
The couple entered a voluntary offshore disclosure program and paid more than $1 million in taxes, interest and penalties on the accounts, she said in federal court in Manhattan
The 2009 UBS settlement led to more than 50,000 voluntary disclosures to the IRS and the repatriation of billions of dollars. It also led 80 other Swiss banks to reach non-prosecution agreements with the Justice Department to resolve potential liability in the U.S. for tax-related criminal activity.
Buck’s attorney, Marc Agnifilo, tried to shift the blame onto the taxpayers during his opening statements, saying that many of them have been evading taxes since the 1970s, while his client was only born in 1980. Buck was a low-level employee at Bank Frey who was simply following orders from his superiors, Agnifilo said.
“This case involves a massive and unwarranted shift in personal responsibility,” Agnifilo said. “All but one of them got a pass, a complete pass from criminal prosecution. The rest of them broke the laws of this country with total impunity. All they had to do was point at Switzerland.”
The case is U.S. v Paltzer, 13-cr-00282, U.S. District Court, Southern District of New York (Manhattan).

Wednesday, November 1, 2017

IRS manages to make e-Services transition after all

The Internal Revenue Service said Monday that it was able to transition most of its e-Services user applications to a new platform over the weekend, although it reiterated its warning Friday of delays in moving to new authentication technology.
In an email to tax professionals Monday, the IRS said most of its online user applications for e-File, Transcript Delivery Systems and the AIR Transmitter Control Code are now available.
“The transition of e-Services to a new platform was completed this weekend,” said the IRS. “This technology upgrade will mean an improved look and feel to the applications.”
However, state tax authorities will still have some trouble hooking into the federal e-Services with their own online apps.
“All users except for state users may now submit new or change existing applications,” the IRS warned. “Restoring state access to applications and to extracts is a priority. Meanwhile, states may submit critical changes by contacting their IRS Government Liaison.”
The IRS apologized for the delay in rolling out the long-promised upgrade to its online applications and said it would be bulking up its help desk to deal with inquiries.
“This technology upgrade took longer than anticipated,” said the IRS. “The IRS apologizes for the inconvenience this has caused. The IRS also has added additional personnel to the e-Help Desk to assist with applications questions and processing.”
However, the IRS noted that a warning it issued Friday about a delay in upgrading the authentication procedures for the e-Services is still in effect (see IRS still grappling with e-Services delay). “As a reminder, we announced on Friday that the move of e-Services to a new identity proofing process called Secure Access currently is on hold while we review vendor options,” said the IRS. “Please know that we are doing our best to upgrade our systems to make e-Services easier to use and more secure for you and your clients.”
The authentication delays are mostly due to a flap over a recently suspended $7.25 million non-bid contract with the credit bureau Equifax for identity verification. The contract came under sharp criticism when it was signed despite a massive data breach at Equifax that put the personal and financial information of more than 140 million people at risk (see IRS puts Equifax contract on hold).
The IRS has faced problems in recent years from data breaches in some of its e-Services, such as the Get Transcript and Identification Protection PIN apps, allowing cybercriminals to access taxpayer information and file fraudulent tax returns. The IRS needed to close the Get Transcript app in 2015 and the IP PIN app last year before adding improved authentication procedures last year (see IRS relaunches ‘Get Transcript’ app with better authentication and IRS restores IP PIN tool with improved authentication). It also had to close down the Data Retrieval tool for the Free Application for Federal Student Aid after discovering vulnerabilities this past tax season. The tool reopened this month (see IRS plans to reopen FAFSA student loan tool on October 1). However, the IRS is still seeking ways to improve user authentication and intends to provide the Secure Access identity proofing it promised in Monday’s email once it finds a new contractor to implement the technology who will prove to be less controversial than Equifax.

Tuesday, October 31, 2017

Thomson Reuters offers new audit management tool

Thomson Reuters has added an Audit Management solution to its Connected Risk platform to help firms better assess risks and increase the efficiency of their audit process.
Thomson Reuters launched its Connected Risk platform in the first quarter of 2017 following its acquisition of Empowered Systems, whose proprietary technology underpins the offering. Connected Risk is designed to help customers tailor solutions to meet specific risk-use cases.
The new Audit Management addition is designed to facilitate the role of an audit advisor to their business clients by providing information to support strategic decision-making.
Auditors can use the tool to adjust audit plans in cycle to reflect changes in risk profiles, and where applicable, assessments can be informed by the broader business risk through use of the underlying Connected Risk platform’s data mapping and aggregation capabilities, according to Thomson Reuters. Audit professionals can also execute audits underpinned by electronic work-papers and subsequent audit findings management, which is all tracked and reported through the integrated dashboards and reporting engine and/or integrated into existing business intelligence tools.
“There is no denying that both the financial services and corporate sectors continue to experience unprecedented volumes of regulatory change and complexity,” said Gareth Evans, managing director, enterprise risk management at Thomson Reuters, in a statement. “The amount of data our customers must understand shows no sign of abatement. What they need more than ever are ways to better make sense of what matters.”
He added that the Audit Management tool will allow auditor customers to apply “the deep expertise that Thomson Reuters is known for in managing and interpreting unstructured data.”

Monday, October 30, 2017

Pathways to Growth: Want to land that big fish?

It drives me crazy to hear complaints about lost business opportunities when there was very little understanding about how to land that big fish. If you’ve got something of value to offer and are approaching the right buyer, reeling in the big ones isn’t rocket science. It’s a proven process based on doable steps and learning moments.
I often hear partners blame missed opportunity on issues like price pressures or competition. But I can count on one hand the number of times I’ve heard, “You know, Gale, I blew this one.”
Recently I got a call from a CPA I had coached years ago who eventually left public accounting to serve as CFO of a large, publicly held company. He couldn’t wait to tell me about a request for proposal that he and his company sent to their current provider, as well as some of the other largest CPA firms in the country. Breathlessly he exclaimed, “I just walked out of the orals, and you’d be shocked and horrified at what I saw!”
He described an anemic sales process and pathetic presentations by all of them that demonstrated no understanding of the client. When he asked several pointed questions, none of the presenters could muster a substantive response.

Tired of landing in the ditch?
He and I had a good laugh, but neither of us were shocked. He said, “These firms haven’t innovated their sales process since the 1970s.”
In the mid-market where I reside, this is life as we know it. Partners call me after the fact, constantly in despair, having watched one and then another opportunity roll into the ditch. It’s especially disheartening to see this happen to partners who hear what they need to do, but constantly revert to dated approaches — like poring over records rather than interviewing senior executives, including the CEO, to shine light on what the business seeks to accomplish, and learning everything possible about context and strategy.
Listening for the main mega-themes in the interviews is the clue to a winning strategy, not the fact that you (think you) have better auditors.
Instead of conversations with executives about the company and the context of the decision, contenders often come to the conference table with a well-dressed entourage and lots of technology. They mistakenly assume that chest-thumping and digital bells and whistles will secure the opportunity.
When I was with IBM, we called this approach “spray and pray.” The tactic involves showering your prospect with information about how wonderful you are, and praying they find something relevant to grab onto. What clients really want is something solid and relevant to them — value, innovation and customization. To achieve this, you have to crawl into your buyer’s head to uncover deep, often hidden needs. The name for this is strategic solutions selling, and I describe the process in detail in a document I call the “Big Fish Emergency Toolkit.”

Listen close
Truth is, your prospect knows something about you or you wouldn’t be a contender. Instead of the “me and us show,” you need to become the producer of the “you and your challenges show.” The way to do this throughout the sales process includes key principles such as:
  • Qualify the opportunity. Make sure it’s worthy of pursuit by going one-on-one with decision-makers, influencers and others who have a vested interest in the outcome.
  • Get comfortable talking about your competitors. Ask the prospect about the competition, which helps put you in a consultative, rather than a vendor, position. During your one-on-ones, don’t hesitate to learn about other firms under consideration and what they bring to the table.
  • Find an advocate. Identify and cultivate someone who can help you navigate the minefield of confusing and wrong information that will come your way. Like the real estate agents say, “Buyers are liars.” It’s not that they’re bad people, they just sometimes forget to tell you the truth or may not know it! An advocate can come from anywhere in (or sometimes outside of) the organization.
These techniques will serve you well as you pursue opportunities of all sizes, not just the big ones. Also, note that strategic selling can be especially useful down market, where fewer of your competitors will know and use the approach.
You’re not going to land that grown-up fish using a kid’s rod and reel. You need big ideas, robust tools and fresh solutions that distinguish you from the crowd. There’s a big ocean out there, and there’s no reason the biggest fish in it shouldn’t be yours.

Friday, October 27, 2017

The power of the red chair

One day, we were having a team meeting. I was becoming particularly frustrated with the discussions we were having.
We love a healthy discussion with opposing views, but it seemed like we had crossed a line and were just spinning our wheels instead of making progress. We were discussing potential new services to roll out, new billing methods to offer and a better client portal. We couldn’t seem to come to a consensus and then it hit me: It doesn’t matter what we think. That only thing that matters is what our clients think. What can we implement that will make their lives easier and make them happier with the experience we provide?
To break the stalemate, I blurted out, “Suppose Susan (one our top clients) was in the room right now. What would she say?” When your team knows that a client is sitting right across from you, or within easy earshot in the hallway, that changes everything from the way you converse with each other, to the way you state your case, to the way you outline the pros and cons of each new offering you’re proposing.
The person sitting in the “client chair” can trump every decision that we make—or want to make. Clients trump decisions because that’s who we work for. Whichever member of my team is sitting in the client chair is expected to answer any question that comes up in the meeting. At our firm, we have a special red chair at the head of the conference room table reserved for the “client.” All the other chairs are gray, so there’s no mistaking whoever sits in the client chair on any given day has the responsibility to be the client advocate in our internal meetings.
Even if only two of our staffers are in a meeting, one must sit in the red chair and speak from the client’s perspective. For example, it wasn’t easy for our office manager to let go of her habit of questioning every new idea that involved spending more money. But she was committed to the idea of having a client advocate in every meeting so when it was her turn in the red chair, she learned to let go of her job role and embrace the purpose.
It doesn’t have to be Susan every time. Rotate your top clients into every meeting. Ask yourselves: “How are the Joneses going to answer this? What are the Jacksons going to say about that?” As soon as you establish a framework like that, it’s going to permeate the culture of your company.
Over time the red chair mentality will permeate the culture of your company and be the lens you use to make decisions. Suppose you overhear an employee in the hallway explaining her rationale to a colleague for voting against investing in a customer relationship management system, rolling out a new client service offering or taking a CPE class after work. But, before you can jump in, her colleague says, “Do you think Taylor would be supportive of that?”
Bottom line: Don’t say anything in a meeting that you wouldn’t feel comfortable saying in front of clients—clients who are sitting in the same room. That’s how you know you’re making the right decisions.
Let’s look at some examples:
Billing: Hourly billing is designed for inefficiency. Clients will always tell you they don’t care how long it takes you to get an assignment done as long as it’s done well. Brain surgeons don’t get paid by the hour. Their job is to keep people alive. CPAs’ job is to keep clients financially healthy.
Technology: I can assure you clients are going to recommend any solution that’s helpful for them, that makes their lives easier—things like eSignature, electronic filing, The Vault.
Tax planning services: Which services are they going to tell you they find most valuable? What about when they meet with you? What does the agenda look like? What sort of collateral do we deliver? What does our client service model look like?
Customer relationship management: Many in your office might not want to invest the time and money it takes to get a CRM system up and running. But, don’t you think your clients find it valuable for their CPAs to be able to instantly retrieve everything about their personal and financial life that’s relevant to solving a financial goal or challenge?
People don’t leave their CPA because they charge too much. They leave because they don’t feel valued and appreciated—and because they don’t feel listened to. “We went out and bought this chair to show you how much your opinion matters to us when we make any kind of decision,” they might say. This is how we should already be making our decisions. Use the chair as a catalyst to build the service level your best clients want and may soon demand.

Thursday, October 26, 2017

What separates the best from the rest

As part of the war for talent going on in the profession, firms are competing fiercely to become employers of choice, and that means searching out any advantage they can, however small.
The firms that participate in Accounting Today’s Best Firms to Work For ranking are among the fiercest competitors in the field, and an analysis of the data compiled in the survey process reveals a short list very specific policies, procedures and perks that mark the difference between those who made the list and those who almost made it.
The list below represents those benefits where the difference between the percentage of firms on the list that offered them was greater than the percentage of firms that didn’t make the list by more than 10 percentage points – and they range widely, from straightforward perks like fitness programs and retirement plan contributions, to broader policies like sharing information about how the firm is doing financially.
Firms looking to recruit or retain top talent will want to go over this list carefully to make sure they’re keeping up with the Best Firms:
  • 1. Offering paid time off for community service activities or volunteer work.
  • 2. Offering telecommuting options.
  • 3. Providing fitness or wellness programs.
  • 4. Inviting staff members’ families to firm events.
  • 5. Limiting firm meetings and staff-only events to work hours.
  • 6. Offering tuition reimbursement or assistance for additional degrees or credentials.
  • 7. Having formalized succession planning programs or practices.
  • 8. Offering flexible hours or compressed work weeks.
  • 9. Offering personal development or stress management workshops, seminars or classes.
  • 10. Matching employee contributions to retirement savings plan accounts.
  • 11. Sharing information about how the firm is doing financially.
For more ways to create a top workplace, see 20 Days: Building a Better Firm.

Wednesday, October 25, 2017 debuts collaborative version of its financial regulatory software has debuted the new Team Edition version of its financial regulatory compliance software. The company provides software that distills regulatory content into actionable intelligence using machine learning and artificial intelligence tools.
The Team Edition is the offering one step more advanced than the most basic service offers, which is the Pro Edition. Pro offers access to all the company’s aggregated content, so regulatory and compliance professionals can peruse the information and compile the information that is pertinent to their organization, and needs action. Team Edition also offers collaboration capabilities between all the members in a compliance and regulatory team, so they can share and exchange their topic- or agency-specific regulatory research and insights with other team members.
“We’re presenting another angle of frustration, which is, now that I’ve done some research, how do I share that?” Explained CEO Kayvan Alikhani. “The Team Edition lets people share news within the team automatically. Just save the research, and share, and they all get a collaborative view.” also just launched the Developer Edition of its software, which provides API access so regulatory and compliance professionals can write their own code and expand on the capabilities of’s solution.
The top-tier Enterprise offerings also includes the capability for software integration with a firm’s existing CMS or other software.
Separately, recently recruited Marsha Ershaghi Hames, Ed.D., to its advisory board. Ershaghi Hames is an expert in ethics as it relates to corporate compliance.
For more information and pricing, click here.

Tuesday, October 24, 2017

GetPayroll to give away a year of free service to 10 nonprofits

To celebrate the upcoming holidays, payroll software provider GetPayroll will be awarding a year of free access to their solution to 10 U.S. nonprofit organizations. Usually, the payroll software costs between $30 a month to upwards of $150 a month, depending on the size of the company and the features needed.
To enter the giveaway, nonprofits need to fill out a form including basic information such as company name and address, a description of the nonprofit, and an explanation of why the organization believes it should win a year of free service for 2018. GetPayroll claims that the awards may be valued at up to $5,000 for the year,
At the end of 2018, one of the 10 winning nonprofits will be selected randomly to receive an additional $1,000 donation on behalf of GetPayroll and the software company’s founder, president and CEO, Charles Read.
“It is important to me that the organizations that are giving back to communities across the U.S. are recognized and taken care of,” said Read in a statement, adding that if every payroll service provider in the United States did the same thing, they would collectively help 40,000 nonprofits serve their communities.
To enter the competition, click here.

Monday, October 23, 2017

10 business challenges that brand research can solve for firms

It seems everyone is talking about “brand” these days. Given the many tangibles and intangibles involved in creating and managing a brand, giving it a concrete definition can be a challenge. However, one thing is clear—brand is important.
In many ways, brand is a promise. When buyers—whether they’re retail consumers or business users—consider doing business with a firm, they’re looking not only at the product or service being offered, but the firm’s reputation and perceived value. How potential and current clients perceive your organization is the foundation of your brand.
There are certain times in your firm’s existence that warrant taking a closer look at your brand. Perhaps you are facing a major business decision that you can’t afford to get wrong. Or a new challenge that has high stakes. Situations such as these are the opportunity to take a step back and look at the bigger picture as it relates to your brand.
Here are 10 business challenges that brand research can help you solve:
1. Difficulty describing your firm
Have you heard the old Indian parable about the blind men describing an elephant? Each touched various parts of the animal and, based on their individual experiences, each described a very different entity. Sometimes different business developers describing their accounting firm can create the same confusion.
Brand research can help you determine where you’re creating value and what’s most important to potential clients so you can better align your value with their needs and create a more focused yet comprehensive description of your firm.
2. Changed target audience
If your target audience has changed because you’ve changed the services you provide or the industry or industries you serve have changed, then your brand message needs to change as well. Brand research can help shed light on the new target’s issues and needs, as well as how and where they get information so you can more effectively address your new audience.
3. New firm name or identity
Brand research will uncover how your market thinks about your firm now, what kind of brand equity you might already have, and how your target audience might react to a new brand name or identity. Our research has shown that often names which seem clear, effective and sure winners to the stakeholders appear weak, confusing and even nonsensical to potential clients.
4. Outdated firm appearance
No matter how well thought out your original logo, typeface and tagline, all things eventually look their age and need some revision to stay current. Brand research can tell you what your target audience prefers for the look-and-feel of an accounting firm they would want to do business with.
5. Downward pricing pressure
As markets and competition evolve you may find yourself facing increasing pressure to lower prices. Brand research can help you escape the clutches of commoditization and thinning profit margins by revealing where you have credibility to charge more because of greater expertise and specialization.
6. Stalled growth
Sometimes an accounting firm runs into stiffer competition or an evolving market in which previously successful sales approaches no longer work and growth stalls. Brand research can reveal how the marketplace has changed, where the market is going, and the best ways to reposition your firm and reconnect with current and potential clients.
7. Changed competitive landscape
As your firm grows it will run into competition that may dictate a more sophisticated approach or a change in focus to attract prospects who may not be aware of your firm and its value. Brand research will help you determine your competitive advantage against your rivals as well as your potential value to a new, larger audience.
8. Merger or acquisition issues
Perhaps a merger or acquisition is the source of your growth. M&As often mean entrance into a new geographic market or the addition of new service lines and client types. Brand research can reveal how strong the acquisition’s brand is, how strong your brand is in the new market, and what may be complementary or competitive between your two firms.
9. Introducing new services
Introducing new service lines can be fraught with danger. It may be unclear what would be most appealing about the new service to potential clients. Or what kind of operation within the industries you serve would align best with your offering. For example, let’s say you provide accounting and tax services to the financial industry and you’re thinking about launching a new service. What kind of financial institution would be best to target—regional banks, local banks, credit unions, savings and loans? Brand research can help find answers.
10. Top talent acquisition
One of the biggest challenges facing accounting firms today is attracting and retaining top talent. Our recent employer brand research study revealed that online searches and firm websites are much more important to potential employees than most professional services firms realize. Brand research can help you understand what’s valuable to top talent in terms of workplace environment, advancement opportunities and employee benefits so this kind of information can be utilized to attract the kind of employees you seek.
There’s a lot to learn with brand research. Everything from how the marketplace views your firm to who your true competitors are and how you differ from them. Best of all, you can gain insight into the entire client journey—from how to first attract them to the best ways to keep them.

Friday, October 20, 2017

KPMG introduces Ignite, a portfolio of AI tools

During its Global Data and Analytics summit in Boston this week, Big Four firm KPMG launched a portfolio of artificial intelligence (AI) capabilities called Ignite. The AI tools are designed to enhance the decisions and processes that KPMG clients use to go digital.
“Artificial intelligence, combined with advanced data and analytics and robotic process automation (RPA) are enabling a new generation of intelligent automation that is changing the nature of work and quality of services,” said Cliff Justice, principal and leader of intelligent automation, KPMG in the U.S., in a statement. “KPMG Ignite will offer clients and our KPMG professionals some of the most advanced suite of AI tools, solution capabilities and accelerators, designed to move quickly and capture the most value in this era of exponential technology change.”
Earlier this year, the firm founded KPMG Ignition, a workspace in Midtown Manhattan that brings together its Innovation Lab, Insights Center and Technology Solutions. The space now has a dedicated Intelligent Automation Lab that uses certain tools and approaches to build AI solutions.
KPMG has built accelerators for Ignite in the form of patterns and tools to enable rapid AI solution development and delivery. These accelerators work by integrating with existing IT infrastructure without the need for developing new methodologies and templates.
KPMG Ignite also features a set of frameworks and methods that describe how KPMG professionals approach client-specific AI solutions and make them repeatable. The initiative will also provide ongoing testing, prototype development and innovation on emerging AI tools and approaches.
“The promise of AI requires more than just technology. Its power must be grounded on a foundation of trusted analytics, access to unique and reliable data, and deep-rooted domain knowledge in order to drive new insights and strategies,” added Brad Fisher, KPMG’s U.S. leader of data and analytics. “KPMG Ignite fills a critical void in the marketplace for businesses that aim to meet the competitive challenges of the future, particularly those who wish to expand and serve customers more efficiently.”
To learn more about KPMG Ignite, click here.

Thursday, October 19, 2017

Rio Tinto and ex-CEO and ex-CFO face accounting fraud charges on $3.7 billion coal calamity

Rio Tinto Group’s calamitous $3.7 billion coal deal in Mozambique keeps coming back to haunt the world’s second-biggest miner, three years after it unloaded the mine.
U.S. authorities filed fraud charges against London-based Rio, former Chief Executive Officer Tom Albanese and ex-Chief Financial Officer Guy Elliott, claiming they inflated the value of the coal assets acquired in 2011. The unit was sold for $50 million in 2014 following impairments of about $2.9 billion in 2013 and $470 million a year later.
Rio concealed setbacks at the project and Albanese publicly reinforced a “false positive outlook” for the asset, according to a Securities and Exchange Commission complaint filed in federal court in New York. Executives told Albanese and Elliott by May 2012 that the Mozambique unit was likely worth negative $680 million, the SEC said.
“Rio Tinto intends to vigorously defend itself against these allegations,” the company said in an emailed statement on the SEC charges. Albanese, Rio’s CEO between 2007 and 2013, said in a separate statement that “there is no truth in any of these charges.” Elliott, who retired in 2013, also refuted the allegations in a statement issued on his behalf. He stood down as a non-executive director of Royal Dutch Shell Plc, the company said Wednesday in a statement.
Rio has also agreed to pay a 27.4 million pound ($36 million) fine for a breach of disclosure rules concerning the Mozambique assets, the U.K. Financial Conduct Authority said in a separate statement. The Australian Securities and Investments Commission is also reviewing the issue, the company said.
There’s an onus on Chairman Jan du Plessis and the board to explain the issues around the SEC charges, Peter O’Connor, a Sydney-based analyst with Shaw and Partners Ltd., said in an email Wednesday.
Rio’s shares declined 2.3 percent by 3:30 p.m. in London, while rival BHP Billiton Ltd. fell 1 percent.
The charges come as Rio assists authorities in three countries over a separate case related to the $20 billion Simandou iron ore project in Guinea. Rio said in November it had alerted authorities including the U.S. Department of Justice and the U.K.’s Serious Fraud Office to a $10.5 million payment to an external consultant made in 2011.
Rio’s 2011 acquisition of Riversdale Mining Ltd., holder of the Mozambique assets, came as the producer sought access to coking coal in the Moatize basin at a time the African nation was seeking to become a major supplier of the steelmaking raw material.
The plans unraveled as the government refused to allow Rio to barge coal down the Zambezi and amid prohibitive costs of accessing or building rail lines to a port. Estimates of recoverable coking coal held by the assets were also downgraded, Rio said in 2013.
Rio, Albanese—who stepped down in August as CEO of Vedanta Resources Plc—and Elliott, “allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multi-billion dollar transaction was a failure,” Stephanie Avakian, co-director of the SEC’s enforcement division said Wednesday in the statement. Shell declined to comment on charges against Elliott.
Rio raised $5.5 billion from U.S. debt investors, including $3 billion after May 2012, the SEC said.
Concerns over the carrying value of the coal assets were raised in January 2013 by an executive in Rio’s Technology and Innovation Group, allegedly triggering an internal review, the SEC said in its statement. Shortly after, Rio announced Albanese’s departure and the major writedown, the SEC said.
The SEC charges that having already booked major writedowns following a takeover of Alcan Inc., Albanese and Elliott knew that disclosing a second failure would “call into question their ability to pursue the core of Rio Tinto’s business model to identify and develop long-term, low-cost, and highly-profitable mining assets,” according to the statement. Rio recorded more than $29 billion of charges after paying $38 billion in 2007 for aluminum producer Alcan, company filings show.
The U.K.’s FCA said Rio agreed to settle a breach of disclosure rules at an early stage and received a 30 percent reduction on its penalty. “The FCA made no findings of fraud, or of any systemic or widespread failure by Rio Tinto,” Rio said in a Wednesday filing.