Practice Management

Looking to get rid of your Accounts Receivable? Most small business accountants I meet with think this is impossible. Think again!

Unfortunately, tax firms tend to run in SALY (same as last year) fashion. This leads to the old way of doing things, with little change in the industry. If you’re like most accounting professionals, perhaps you bill a 50% retainer or some sort of deposit when a client comes in for tax work. As you know, the client controls the work flow and we often find ourselves at their mercy waiting for complete and accurate information in order to prepare the return. (side note – wouldn’t you love to use that as an excuse on the 4868? “Dear IRS, I’d love to be able to file and get paid for my work and close this case, but my dear client is dragging their feet in getting me their information and what they have given me hardly constitutes complete and accurate information necessary to file the proper returns.” I digress.)

What does waiting on the client for information do to our cash flow? Flash back to my office in 2005, it meant jumping at the chance to finish a return when the client emailed their information at midnight the day before Labor Day, and voila, up all night working on a tax return so I could get paid the next day and pay my bills. In the mean time, I’ve picked up and put down the return 4 times, and used staff to work on the project during the 6 months we’ve had the file, and I don’t even WANT to know the realization on this project let alone think of the fact that we’ve now waited over 6 months to get paid for work we started in MARCH! Phew! For any of the non accountants reading this blog, you now have a glimpse at the hamster wheel of running a tax business.
Now that we’ve exposed the ugly side of a tax business, let me reveal a spark of hope. I can tell you it IS possible to reduce your accounting expenses and eliminate your accounts receivable altogether! How do I know? I’ve done it and I’m working with Certified Tax Coaches all over the country doing it too.
The simple, yet effective secret I’ll share with you on this subject is: get yourself on automated billing, and get paid up front! That’s right, I said get paid up front. It is the only way to take control of the engagement and train the client to work on your terms. When the client pays up front, it doesn’t really matter when they bring in their completed information. No more late nights, no more holidays and weekends. When you are paid up front, clients are forced to work on the terms you set, period.

Certified Tax Coaches use tax maintenance packages to get paid year-round for tax and consulting work. We set clients up on monthly automated credit card billing. Most merchant banks provide a method for automated recurring billing. Quickbooks Merchant Services and Authorize.net are two that offer this capability.

You can reduce your expense even further by integrating your merchant account with your accounting software. One push of the button and all your deposits will instantly sync to your invoices and bank registers. This one step alone saved me $750 per month in accounting fees!

You may feel a little hesitation at the thought of getting a client to pay in advance for services. The secret lies in offering tax strategiesand tax maintenance packages. When you specialize in tax strategies, clients and prospects are so attracted to the savings, they will do what it takes to keep more of what they earn. They will work proactively with you throughout the year. You are able to provide much better service, avoid the late night hours, and eliminate accounts receivable.

One of my summertime favorites is an annual trip to the fair. Although the summer fairs generally feature the same attractions and exhibits year after year, the board of directors find new and innovative ways to market a unique experience each July. The introduction of unique, one-of-a-kind new taste sensations such as deep fried girl scout cookies, Baby Ruth filled jalapenos, deep fried jerky, and even deep fried kool-aid satisfy the curiosity of over 1.4 million visitors annually.

To manage the demand of the masses, the travelling carni’s rely on the assistance of over 5,000 seasonal workers. With seeming ease, the operations run smoothly despite the fact that most of the workers don’t know each other, aren’t familiar with the city, and are typically inexperienced as they shift job assignments as needed. Why does it work so well? Two words: effective systems.

Now before you object to this philosophy of systems dear readers, and say to yourself that “systems are fine for carnivals, but won’t work for a tax business,” hear me out. First, look at why systems work well in other environments. Whether the county fair, or auto factory, any business featuring repetitive tasks work well with systems. Can you think of a business more repetitive than taxes? Same deadlines, same process, year after year. The biggest challenge in a tax business? Variables. Variables can kill any carefully crafted system or procedure without contingency plans. The good thing about a tax business, although chalk full of variables, we know, for the most part, what the variables are. One of the secrets of designing effective systems are controlling the variables.

Give it a try, and start with something simple – something fair-ish like food. How about making coffee in the office? For fun, enlist the aid of your staff and lay out a system for making the coffee. Think of all the steps to make a good cup of coffee every time, and write them down! And don’t forget about controlling the variables! You’ll see once you get started, your very own deep fried 1040’s will be finished on auto pilot!

I love 4th of July. Hands-down it is my favorite holiday. It is the one holiday, when despite political or religious differences, everyone comes together and celebrates the birthday of the United States of America and the adoption of the Declaration of Independence on July 4, 1776. It’s a day of picnics and patriotic parades, a night of concerts and fireworks, and a reason to fly the American flag. Picnics, sunshine, friends and family, what’s not to love?

Can you say the same about your tax business? For me, there was a time not too long ago where my business was everything I DIDN’T want. 5 years into entrepreneurship, my business was sucking the life out of me. The money I was making at the time certainly wasn’t worth as much effort as it took. Why couldn’t I do what I loved to do and get paid really well?

I sat down and I made a list of grievances. That’s right – consider it a “Dear John” letter to my business. Trust me, it wasn’t that hard to do. The things I hated about my business exploded onto the paper like the grand finale of the D.C. fireworks over the Washington monument. I’d had enough. And just like Thomas Jefferson penning the Declaration of Independence as a “Dear John,” letter to England, my list became my own independence declaration. Determined, I set out to gain TAX PRACTICE FREEDOM; I just knew there had to be a better way to live.

Many people have called me a pioneer in the tax industry. I just like to think of myself as a tired business owner that knew there had to be a better way. Positioning myself as an expert in tax planning, and using that expertise to drive my business, I transformed my business into something beautiful. You might even say something as beautiful as picnics, sunshine, concerts, and fireworks. I’ve gained freedom from the burdens of working in a business that was less than I wanted. You can do it too.

Do you have the courage to write your own Declaration of Independence?

On this special holiday, the only one commemorating our country’s freedom, I challenge you to create freedom for yourself. Start by writing your own Declaration of Independence. Make the commitment now to take back your right to pursue happiness, and then create that happiness for yourself.