April 16

Random SS#

by cfarmand on July 9, 2010 in Gov't Help with No comments

Thanks to my friends at paycor for providing us with this random information:

Starting in June 2011, the Social Security Administration is adopting a new method,
called “randomization”, which will change the way social security numbers are issued. Randomization will keep the SSA from running out of SSNs in certain states and help protect against identity theft.

The following changes will be implemented by the SSA:

• SSA will no longer issue SSNs by geography;

• SSA will issue SSNs beginning with the number “8”;

• SSA will include all possible SSNs with the number “7” in position 1; and

• The High Group list will be frozen.

These changes will allow the SSA the ability to issue SSNs for the next 30 years without having numbering problems. Some aspects of the SSN assignment will not be changed with randomization. SSA will not issue SSNs beginning with the number “9”, “666” or “000” in positions 1-3, “00” in positions 4-5, “0000” in positions 6-9, or with “123-45-6789”.

The SSA will provide education and outreach to all of the stakeholders that may be affected by randomization.

For more information, visit the Social Security Administration website at www.ssa.gov.

Twitter Does

by cfarmand on June 28, 2010 in Technology with 4 Comments

Q: What has Twitter done for me?

A: While on vacation I have found a few minutes to sneak away and blog what I have been thinking about for a while now. Since joining twitter, I have connected with great like-minded professional. The like-mindedness has re-affirmed me that what I am doing is good for me and the industry. I think that most the time, all I am missing is a little validation that I can trust my own judgement. This twitter community (twitterunity), as I call it, allows questions, comments, jokes, feedback (+/-) to passed back and forth without ego’s being bruised. While I have not generated any new business directly from twitter, it has opened the door to a number of relationships and resources that are priceless. Care to share what twitter has done for you?

Dear Abbycus

by cfarmand on June 10, 2010 in Technology, Trash the Timesheet with 10 Comments

Dear Abbycus,

Now I understand why certain people act the way they do in the workplace — it’s a generational thing. In my unsuccessful struggle to change others’ thinking to the way I think, the idea of generational differences has popped up a number of times. Me being at the tender age of 31, I can not tell you how many times I have been compared to the 47 year old tax manager or the 56 year audit manager. I am a self-proclaimed Generation Y junkie. If you have a chance please distribute my following DOs and DON’Ts list to all the late Boomers/early X’er partners out there.

DON’Ts

Money — Try again partner; not really interested. As long as my Corolla has gas in it and there is food on the table, don’t really care about it.

Rigid Billiable Hours — Not for me either. My mind runs a million miles a minute. And with technology today, I am worthless to you in a billable world.

Slow Technology Adoption — See #2. There is an easier way to do things, friend.

Threats — Yeah, see, about threats … If you treat me like a human, I may be loyal to you.

DOs

Challenge me — I am smarter than your 65-year-old pencil pusher in the back office. How do you think I successfully remove half my lunch lodged in the keyboard each day?

Educate me — Teach me what you know. You have years and years of experience, so share it. I love to learn.

Listen to me — That blue and white screen I stare at periodically throughout may appear epileptic to you, but it gets me in touch with like-minded pioneers of the industry.

Technology — Text, tweet, e-mail, Facebook, link, cloud, Google doc, iPhone, Android, Blackberry with me. It’s fun, I promise.

Validate me — If I do something you like, let me know.

Change with me — The QBox has replaced the shoe box, old timer.

Trust me — My comment regarding the threats may make you weary of this action, but if I gain your trust and we can collaborate together, the sky is the limit.

Respectfully,

Chris Farmand

Generation Y ’79

Rollover as Business Start-up – ROBS

by cfarmand on May 28, 2010 in Tax with 1 Comment

As the economy struggles to get back to pre-2005 figures, I have encountered the rise of the entrepreneur. When someone won’t hire you, hire yourself!! One obstacle that stands in the way of potential entrepreneurs is funding. A situation recently arose in my office where a client wanted to know if they could use their IRA money to start up a business. After some research and speaking to the IRS, I am happy to say that it can be done. Whether it is feasible is a case by case determination. The funniest part of my research was when I was talking to the IRS, the agent told me to research “rollover as a business” or a ROBS transaction. I can’t make this stuff up folks. While the IRS makes it difficult to execute, I am convinced that the bright CPA’s of America can pull it off. Here is a roadmap I found on a CCH website:

Progressive steps in a ROBS transaction

The following progressive steps make up a ROBS transaction:

(1) An individual establishes a shell corporation sponsoring an associated and purportedly qualified retirement plan. At this point, the corporation has no employees, assets or business operations, and may not even have a contribution to capital to create shareholder equity.

(2) The plan document provides that all participants may invest the entirety of their account balances in employer stock.

(3) The individual becomes the only employee of the shell corporation and the only participant in the plan. At this point, there is still no ownership or shareholder equity interest.

(4) The individual then executes a rollover or direct trustee-to-trustee transfer of available funds from a prior qualified plan or personal IRA into the newly-created qualified plan. These available funds may be any assets previously accumulated under the individual’s prior employer’s qualified plan, or under a conduit IRA which itself was created from these amounts. Note: Because assets have been moved from one tax-exempt accumulation vehicle to another, all assessable income or excise taxes otherwise applicable to the distribution have been avoided.

(5) The sole participant in the plan then directs investment of his or her account balance into a purchase of employer stock. The employer stock is valued to reflect the amount of plan assets that the taxpayer wishes to access.

(6) The individual then uses the transferred funds to purchase a franchise or begin some other form of business enterprise. Note: All otherwise assessable taxes on a distribution from the prior tax-deferred accumulation account are avoided.

(7) After the business is established, the plan may be amended to prohibit further investments in employer stock. This amendment may be unnecessary, because all stock is fully allocated. As a result, only the original individual benefits from this investment option. Future employees and plan participants will not be entitled to invest in employer stock.

(8) A portion of the proceeds of the stock transaction may be remitted back to the promoter, in the form of a professional fee. This may be either a direct payment from plan to promoter, or an indirect payment, where gross proceeds are transferred to the individual and some amount of his gross wealth is then returned to the promoter.

Office Set-up

by cfarmand on May 17, 2010 in Technology with 2 Comments

As I embark on my journey, I have been thinking a ton about the setup of my office and office procedures. I have already made significant changes in my current situation to improve my processes. I feel like a kid in a candy store. Not just any candy store — imagine the biggest candy store in times square…..a ha, like the M&Ms store there, but times 100. My excitement is due to the options that are available for me to run my office as effectively as possible. In this post I am going to talk about a few I am considering.

Email: Hosted Exchange vs. Google
I have been on exchange for the past six years now and I respect the functionality and service it has provided. Rules, alerts, folders, searches, calendars have all been great to me and the way I work. I am not a huge fan of the contacts section; I have tried again and again to clean mine up, but have not been successful. My experience has been not with a hosted version, but a local Exchange server. With up to 13 people pecking at the server all at once, other than the occasional server fart or March madness, the responsiveness has been fair. My Gmail experience has been with a personal account only. When I began using Gmail, the threaded email feature annoyed the $#^* out of me. I have since changed my belief system on the threaded feature — it is great. I have tried to use as many of the settings as possible to get a feel for the functionality and they seem to work great. In addition, Google has come out with a business upgrade, called Google Apps. For $50 per user per year, you get the free Google subscription on steroids which connects to your domain. The Google setup makes sense to me. I could rave for days about the docs, picasa, calendar, reader, video, YouTube, groups, but I want to keep this short.

Leaning toward: Google Apps for Business

Tax Software: SaaS vs Local Environment
I would be a lying dog if in this section I told you I was considering a local environment. First, I can’t afford a server, plain and simple. I am not sure I can afford that slimboy cooling system we have in our server room. Folks, for a small firm (1-5 person team), to maintain servers in 2010, it is like an CPA opening a fish market, just plain insane. I can be up and running, full speed, for under $700 per month. SaaS is the way for me in this category.

Leaning toward: SaaS

Accounting Software: Hosted vs Local Quickbooks vs QBOE
This one is still up in the air. I have no personal experience with hosted or hosting QB for my clients. Everything I do is local and our server is littered with backups and copies of client files. I am staring to seriously explore the option of hosting QB, solely for the reason I am feeling a little anti-mega-server. I also believe I could better service my clients with a hosted environment. There is nothing better than cleaning up a live QB file, does anyone feel me??? While I have clients using QBOE, its not my favorite product out there. It serves its purpose, but I have expierenced some small nightmares with the online matching bank account. Word on the streets is QBOE will mirror the desktop soon. If that happens, I will reconsider my selection.

Leaning toward: Hosted

Audit Software: Office vs Engagement Organizer
This one comes down to cost vs. benefits. If I grow an audit practice to the point I need organizational software, I will purchase it. Currently, I have such a strong understading of word, excel, and the practice aids, it just does not make sense to invest. Engagement packages, I don’t care what the sales rep tell you, is nothing more than a expensive organizational tool. It keeps all your workpapers, checklist, etc in a nice little folders so next year you can ROLL forward. I’m not buying it yet.

Leaning toward: Office

Tax Research: Traditional Library vs Online
HA, sorry I had to put that one in there. Ok, seriously, I ideally would like my tax research software to sync with my tax software. My experienced has only been with the same suite research software and it works well.

Leaning toward: Online

XBRL Cost/Benefit

by cfarmand on May 7, 2010 in Technology, XBRL with No comments

Question I came across on a XBRL forum:

“As I go through XBRL tagging exercises with my undergraduate AIS class this
fall, I want to do my best to convince my students that XBRL is beneficial to
the financial reporting process. Biases/proponents aside, my experiences tell
me the students are mainly looking at the simplest cost/benefit analysis they
can get. In other words, they do not want to hear my long-winded examples of
potential transparency, efficiency, and effectiveness gains. They are familiar
with the major players in the XBRL software realm (adding Oracle and SAP with
their UB Matrix add-on, Clarity, Fujitsu, etc.), but have no idea the financial
costs the public companies are incurring. Better yet, from an auditing
perspective they don’t know what the Big 4 are paying for the technology
necessary to do their AUPs. Unfortunately, my best answer to their inquiries is
that they “will have to wait until they are hired by a company or firm to find
out.” Even I think this is a copout, but I cannot find public access to hard
cost numbers. I know the cost likely depends on the size of the company/firm
and complexity of the existing system (that needs to be expanded for XBRL
capacity), but can anyone at least give me a range of cost (just of the
software, not installation and other necessary costs) for like the Oracle or SAP
add-on or even the Fujitsu tool, without compromising any proprietary
information (no names are needed so as to protect the innocent)? Any cost
information would be much appreciated by my students.”

My response:

While I believe the costs/benefits are important, accounting technology in whole is changing as we speak. The players who can afford the Oracle and SAP surely are not affected by another measly add-on to their monster accounting package, to tag the financials. Whereas the smaller “required filers” can’t afford the tens of thousands of dollars per year in maintenance fees per year to upkeep Oracle and SAP. The shift to more affordable accounting software, has allowed many more options for XBRL reporting. Some examples of this include, cloud subscriptions, MS word/excel imports, and simple tagging software. When the market becomes saturated with many comparable options, you know what happens….commodity. I don’t think we are there yet, however with the insurgence of cloud computing, it’s not far away. As more and more companies are required to file, I see an opportunity to expand my services through consulting the XBRL process along.

Trashing the Timesheet: Part 3 of 3 (what it is like now)

by cfarmand on April 30, 2010 in Trash the Timesheet with 3 Comments

In my experience, for a process to change there needs to be three parts to the process; what it was like, how it changed, and what it is like now. For starters, the Monday morning meetings I spoke of in my first post no longer happen. The dreaded fear of filing out the timesheet at the end of the day or throughout the day is no longer there. I am working smarter, faster, and more accurate because I can devote all my energy to the engagement without worrying about time. The buzz phrase work/live seems appropriate for post. The phrase has been around for the past five years, and I really did not know what it meant until I began this new process. When I came into the profession, I questioned the rigid time requirements and was immediately told, “This is the way we have been doing it for years.”

Collections
If you think the last three posts on this topic have been BS, you may want to read this carefully. Our A/R has never been cleaner in my six years of working. Hey rookie, six years? Get a life! Ok, my dad’s A/R has never been cleaner in the past 35 years of working. Where do you go and request products or services and not know the price until after the product or service is complete? Once I communicate the price to a client, they know what they are going to pay, so pay me now….or half now and half at delivery. It is easier for everyone. In accounting we stress transparency. This process opens up a new transparency I never believed could happen.

In our FPAs, one of the services we include is unlimited access to me and my team, all the way up to the parter. Why not? We are not keeping time — how am I supposed to track a phone call without a timesheet? I can see it now …”FFF is running a special on phone calls for the month of March, only $9.99 per call, so act fast.” Look folks, we have not, in any way, jeopardized the level of service we give our clients. If anything, the level of service has been elevated with this new process.

A small bit on client reaction to the change, which we had 98% overall participation. Our business clients busted out the champagne when we made the change. Do they abuse the unlimited access? Not yet. Some may, most won’t. You show me a client who wants to talk to his CPA five days a week and I will tell you exactly how to remedy the situation. Our individual clients are on the fence. The relationship we have with most our individual clients is transactional. With this new process, we’re hoping to replace the transactional approach with a center of financial influence approach.

In closing, I will not be returning to timesheet environment anytime soon. The firm of the future does not need the timesheet as a metric to motivate team members. There are far better metrics to gauge work performance. This has been a brief overview of the process I have taken to trash the timesheet. Please contact me through email if you would like to discuss the details further.

SaaS not SAS

by cfarmand on April 28, 2010 in Technology with No comments

Cloud
Saas, software as a service, is the ability to use/rent software on an as-needed basis through the internet. Ironically CPA’s who engage in audit and attest services use SAS, Statements on Audit Standards, every day. I would love to be able to tell you that their functions are alike based on the pronunciation being the same, however their purpose is a world apart. Before I get started on my Saas rant, I would like to pull a definition from my trusty wiki to have a common understanding of the acronym. Software as a Service is a model of software deployment whereby a provider licenses an application to customers for use as a service on demand. In laymen’s terms you need no costly infrastructure to run software. You simply activate the service, and use it as you need it. The “other guys” have created the software, built the infrastructure, applied the security, ensured the backup, completed the updates, tested and retested the processes; leaving me with what I know how to do best, make money. The subscription is user based, so if you are a one man shop, you pay for one license. This environment is perfect for the small accounting firm that does not want to pour major cash into servers, server racks, cooling systems, backup drives, battery backups etc. One issue that older partners are obsessed with is, data integrity. Data integrity is a thing of the past in my mind. These guys have their data centers backed up, imaged, saved from here all the way to Moscow. My point is, I would feel safer with my critical data at one of these data centers rather in the back of my civic.

Trashing the Timesheet: How I did it (part 2)

by cfarmand on April 23, 2010 in FPA, Trash the Timesheet with No comments

I would like to start this post with a thanks to the following individuals: Mark Bailey, Vic Christopher, and Chris York.

So you’re wondering how I did it. How I convinced a partner who had been tracking his time for 35 years to never fill out a timesheet again. Or more appropriately, how I freed myself from the bondage of the timesheet. It started with a changed belief system. This was not hard for me, because I did not believe in what I did not understand. Once I convinced myself that I was going to do it, I began searching for early adopters. I came across a gentleman by the name of Mark Bailey out of Reno, Nevada. Mark was mentioned on the verasage site, which happens to be the website of the author of Firm of the Future. I emailed Mark, we scheduled a phone call, and during that call he spent 45 minutes talking about his firm which uses no timesheets. (SIDENOTE: I knew nothing about this man before our call, other than his firm was the two-time winner of “Best firm to work for in the US” in the small firm category (15-24 employees) and he was old enough to be my dad. That is cool). After our call, I had hope that this could possibly work. One of the theories which spun off my talk with Mark was the core purpose of the timesheet. I concluded that the timesheet is nothing more than an illusion of control that partners — in traditional firm vs. firm of the future — think they have over their employees. By illusion, I mean their sole purpose is to keep tabs on making sure the employee stays busy. Partners think they are using them as a metric, when I am 98% confident that the partner knows exactly what they are going to bill for an engagement before they ever start it. I could rant on and on about the level of BS the timesheet is based on, but this post is to talk about “how I did it.” Contact me if you want the rant.

Next step in the process was to begin collecting data and literature on what is called a Fixed Price Agreement (FPA). Our FPA details what we are going to charge for an engagement. It lists the client’s expectations of the engagement and the corresponding price we will charge for the service. Of course we have a separate engagement letter which accompanies the FPA. I have attached a copy of one of our sample FPA letters to the end of this post. My dad and I took a couple of months to work out the wording we wanted to use.

My biggest fear in the switch was client reaction. “WHAT WAS THE CLIENT GOING TO SAY????????” The fear was mildly valid because most my dad’s clients have been doing it the same way for the past 35 years. My mentors in this process assured me that the clients who ran from this would be doing me a favor. So to ease the shock factor, we issued a written statement to all of our clients explaining what we were going to be doing and attached a sample FPA to the statement. Some clients signed the example and mailed it back, others called to praise the change, and some had no comment.

Lastly, we set the date to be January 1, 2010, as our starting point to CRUISE the timesheet. Come back in a week to read about “what it is like now.”

Disclaimer: This is a overview of what went into the transition from billable hour to FPAs. Please feel free to contact me to discuss my full experience and ask any questions.

Click here to view our sample FPA.

Trashing the Timesheet: What it was like (part 1)

by cfarmand on April 16, 2010 in FPA, Trash the Timesheet with 1 Comment

After a careful study of Ron Bakers book Firm of the Future, on January 1, 2010, I trashed my timesheet. Well, there was a little more to it than just Ron’s book, but I can say with all honesty, the book was the inspiration. For the past six years, I have been so confused with this idea of keeping every six minutes of my work day accounted for. I did it, I did not understand it, and I despised it. Billable, Billable, Billable; all we have to sell is our time, I would chant repeatedly over and over in my head in a methodical drill sergeant’s tone. My goal in this three-part submission is to share my expierence on what it was like using timesheets, how I did it, and what it was like without timesheets.

The billable days were filled with Monday morning WIP meetings. Hmmmmmmmm, a WIP meeting consisted of my dad and I talking (screaming) about what, when, how much and where we were going to bill our clients. It took up most of the morning and always set a cheery tone for the entire week. Then we had to deal with a bill going out late, purposely dodging Monday morning WIP meetings and bitching clients. I began to question professional service work and wondered if I truly had the thick skin to deal with this for the rest of my career. One day, mid-2009, I was reading my Twitter account and there was a post from the JOA citing Ron Baker and the death of the billable hour. I watched the video; it didn’t make sense at the first sitting. The video challenged the billable hour formula versus value pricing. While it did not make sense, I knew I was not going to last in this profession repeating an action I did not understand. I ordered the book and began tearing though it. DISCLAIMER: “Trashing the timesheet” is only a piece of the big puzzle. I quickly learned that it would take a giant overhaul of attitude, mind and faith for this to work. The more I read, the more it clicked. This led me to interview early adopters of the process and study the theory behind value pricing. All arrows were pointing up. Once I felt comfortable talking about the topic, I approached the partner (my dad) on this idea. To give you a little background on my dad, he and his brothers are celebrating their 35-year anniversary this year as a public accounting firm in Jacksonville, Fla. For the past 35 years, he has accounted for every six minutes of his work (you can imagine how our first conversation about changing this went). The more I approached him with substance, the more he listened. In late October 2009, during one of our conversations, he agreed as of January 1, 2010, we would no longer track our time. There was no turning back now. In my next post I will explain how I transitioned away from the timesheet to Fixed Price Agreements.