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Careers In Public Accounting

Posted onJul 04, 2017 in Accounting business

While high-profile companies may seem the best option for many accounting graduates, there are many ways to start your career, especially if you plan to stay in the Washington DC/Baltimore area. We have an abundance of quality of CPA firms in the Metro DC area. Each type of firm has its advantages and disadvantages. Here are some points to consider.

Big 4 Firms. These are the largest Public Accounting firms in the world. They have offices across the country and around the world. They are truly international organizations. These firms have large departments focusing on Audit, Tax, Consulting, IT and Government Consulting. Because of their size, knowledge, experience and geographical reach, the Big 4 firms work for the largest publicly traded, privately owned and government organizations around the world. These firms generally provide the training necessary for advancement. They can provide a rewarding career path for the Accounting professional and pride themselves on hiring the best and brightest graduating accounting students.

If working for a Big 4 firm is important to you, be sure to do your homework. While training opportunities may be similar within all four firms, the make-up of their clients may be quite different. In the Washington DC area, there are several industry concentrations, including Professional Service, Non-Profit, Government Contracting, Real Estate and the Federal Government to name a few. If your interest lies in some other industry, such as manufacturing, you may need to relocate. The idea here is to make sure the city you are considering has clients in your industry of interest.

Additionally, you should also explore the various departments available within a Big 4 firm. Do you have an interest in Financial Auditing & Assurance, IT Auditing, Consulting or Tax? Some areas may require additional degrees to aid/insure your advancement.

National Firms. In many ways, they are very similar to the Big 4 in variety of client base, training and location. The offices in larger US cities will employ “hundreds” of employees, rather than the “thousands” found in the Big 4 offices. National firms also have an international reach. They work on publicly traded, privately held and government organizations. While it may be more likely that a Fortune 100 company will select a Big 4 firm as their auditor, National firms get their share of publicly traded clients.

Again, with National firms, the industry mix and type of work in the local office is varied, though there may be fewer specialties in a specific market than their Big 4 competitors.

Depending on your area of interest, you will want to make sure that department is part of the National firm. Similar to Big 4 firms, various graduate degrees may be important for advancement.

Regional Firms. These firms provide an excellent alternative to both clients and accounting professionals. Regional firms are not as large as the Big 4 or National firms. They also do not have the layers of bureaucracy necessary in a larger organization. Regional firms believe they can provide a more “hands on” or personal service to their clients. They believe they can pay more attention to their staff. Although most regional firms have their own in-house training sessions, some will supplement their in-house programs with programs provided by the AICPA or local State Societies.

As with the other firms mentioned, a prospective employee should explore the characteristics and strengths of the local office. These firms may have clients in various industries, but their local offices may rely on the firm’s expertise – which might reside in the corporate office. Quite often, the quality of expertise for a regional firm may equal or exceed that of a larger office, though they may not have as many experts.

In some regional firms, you may be asked to specialize in an area. Regional firms tend to have a local office with fewer employees than those of larger firms. They may also have offices in smaller metropolitan areas. For this reason, regional firms may provide benefits to accounting professionals interested in “quality of life” issues.

Local Firms. These firms range in size from a sole proprietor with a couple of staff, to over 250 professionals. The larger the firm, the more they will take on characteristics of a Regional or even National firm. They will provide a wide range of services to their clients. They may be part of a national affiliation, where they can share expertise with other similar firms. These alliances/affiliations can help a local firm meet the needs of their clients who are expanding their business in direction and additional locations.

The smaller the firm, the fewer services it generally has to offer. They may only have industry expertise in a few areas. Smaller firms may not do any certified audits. In most cases, they do not have the number of clients necessary to allow them to create the internal structure needed to meet the standards for providing auditing services. Some local firms will perform audits, but not on SEC clients.

The smaller the local firm, the more important tax knowledge is to the firm. Most of them do outsourced accounting where they will maintain their client’s general ledger on QuickBooks or other software. They often do payroll, record transactions, pay invoices and produce financial statements. From there, they will prepare the tax returns for the entity as well the key individuals. Small firms tend to acquire and maintain clients who use them as financial advisors in most matters.

Some local firms have become the go-to firms for clients in specific industries. For example, in the Washington DC area there are several local CPA firms ranging in size from 50 to over 250 professionals who are extremely competent in the non-profit industry. These firms are large enough to have partner rotation and in house expertise on all pertinent issues relating to the non-profit industry. They often compete for business with the Big 4 and national firms and win competitive bids in the non-profit industry. Their size gives them a price advantage even though their expertise level may be similar to the larger firms. The larger the Metropolitan area the greater chance there will be several local firms that can compete head on with the larger firms.

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It’s Graduation Time! Should I get a graduate degree?

Posted onJul 04, 2017 in Accounting business

If you’ve just received your bachelor’s degree with a major in Accounting, you may be trying to decide whether to begin course work for a graduate degree or sit for the CPA exam. The right answer for you depends on where you see yourself in the next year or two. Take the following two areas into consideration.

Getting Your CPA Certificate Is Important To You. With a concentration or major in Accounting, it’s likely that you have over 120 credit hours overall. Additionally, you’ve probably completed the required core Accounting courses to sit for the CPA exam. Currently, the CPA exam is given in approved testing centers. You can schedule the exam on your own timetable. You can also take the exam one portion at a time. For most people, this is far more preferable than sitting for the entire exam at one time. Taking the test in parts limits the material you have to cover – allowing candidates to focus on specific material. Once a candidate successfully passes all parts of the exam, they get their CPA license after they’ve completed 30 credit hours, bringing their total credit hours to 150.

Having just graduated from college, you should have taken all of the required accounting courses. These are the courses that should have prepared you for most of the CPA exam. In fact, most students take the most important courses during their last 2 years of college, resulting in information that is fresh and top-of-mind. In truth, this may be the best time to prepare for the CPA exam.

If you decide to get a graduate degree, or complete the 30 extra hours needed to get your certificate, the information you gleaned from the accounting courses you took during college, begins to fade. You may actually need to take some refresher courses before studying for your CPA exam.

You Are Interested In Pursuing Other Courses. You may view your accounting degree as an asset to any area of business. Getting a CPA certificate may be less important to you now than studying economics, marketing or business law. You believe that your value as a business person is enhanced by the accounting degree you’ve obtained, but getting a CPA certificate is not key to your future. The extra 30 credit hours you need to get your CPA license can be in any field. So while you haven’t eliminated the possibility of getting you CPA license, now may be the time to further explore your interests.

Your decision is personal. It depends on various factors –

  • Your desire to get a CPA license
  • Your interest in pursuing other fields
  • Whether you want a career in Public Accounting
  • Your ability to retain the accounting information you learned in undergraduate studies
  • How long it will take you to earn the extra 30 hours needed to pass the CPA exam.

If getting a CPA license is important to you, it may be better to start studying to take the CPA exam as soon as you meet the educational requirements required to sit for the exam.

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Where Have All the Senior Tax Associates Gone?

Years ago, many larger CPA firms – local, regional or national – began outsourcing  the preparation of some tax returns to professionals residing overseas. These professionals were well educated and well trained in certain areas of US Taxation. This practice appears to have been a win-win for both the CPA firm and its clients. CPA firms were able to charge less; and clients received quality service. And there was a quality control process in place – while the CPA firm did not do most of the initial preparation of the return, they did review it and had final responsibility for the outcome. This same process continues today, though it has been extended to other areas of tax, as well as to certain areas of financial & IT auditing. The end result of this practice is that it has adversely affected the long term availability of the senior tax associate with 2-5 years’ experience in the US.  

The result for smaller CPA firms. The vast number of CPA firms in the US are local or regional firms. They range from a sole proprietor with 0-2 staff members to multi-partner firms with a staff of up to 50 professionals or more. Some of these firms were successful in “home growing” their tax professionals. Others however, acquired staff from the larger firms when their senior tax associates decided that it was time for a change. Because outsourcing talent was a successful strategy, the number of qualified senior tax preparers seems to have dwindled over the years, thus slowing or eliminating a necessary feeder pipeline to the smaller firms.

Smaller CPA firms have struggled to find senior tax preparers for the last decade or so. While some have tried to nurture and grow their own talent, the work commitment from “Generation Y” or “Millennial” workers has been more fluid than before. These latest generations tend to switch jobs more often, which undermines the effort to nurture and train younger talent. A smaller firm’s investment in training a senior tax associate is questioned, when the talent they’ve developed ends up changing jobs.  

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Steps to Developing Senior Tax Associates

While there may not be an easy solution to the lack of senior tax talent,
there are a few things a company can do to help alleviate the problem.

Here are a few suggestions.

Consider conducting joint training with other CPA firms of similar size. Joint training helps to spread the cost around, making it more efficient for all firms involved. Joint training can also add significant benefits or drawbacks – depending on how the firm thinks. For example:

  • Does the mixing of young talent increase the chance of switching jobs? Some firms feel that the added networking gives young workers more opportunities.
  • Perhaps we should assume that many of these staff members may already know each other. They may have attended school together or attended various CPE seminars presented by the AICPA or various State Societies. If they already know each other, joint training sessions may actually take the mystery out of working for another firm.
  • They “know” each other through the internet. These young professionals may already know each other through social media sites, such as Facebook, so attending a joint training session does not introduce them to anyone new.

Put more effort into the professional development of young talent. Young workers are ambitious. It’s important then, to pay better attention to their career ambitions, needs and wishes. Here are some of the issues that seem important to members of Generation Y:

  • They want a work life balance. While young workers are generally not afraid to work hard, they often have a balanced attitude about life in general. Working for long periods of time, spending too many hours in the office, may prevent these workers from having their desired quality of life.
  • They want to be challenged. Working their way up to new levels, new responsibilities, is important to most of these workers.
  • If they like and respect you, they will work longer and harder. Not unlike many of us, our passions often dictate our work ethic.
  • They like technology and the efficiencies it provides. If your firm is not using current technology, you will probably lose them no matter how well you train or pay them.
  • They want to feel part of something meaningful; it is just not the paycheck. Again, it’s the passion showing through.

What do you think? What other ways can the public accounting profession ensure that there is an adequate supply of senior tax associates in the pipeline? Does your firm have a solution? Are you doing something in particular to build or nurture this talent. We’d love to hear from you. Please email me and give me your feedback. Let me know if I can share it in a later newsletter.

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Explaining Executive Search Fees

“What are your fees and what is your guarantee?”
It’s a question often asked of an executive search firm.
The answer depends on the complexity of the search.
Consider these factors:

  • Are there only a handful of people capable of performing the duties and responsibilities of the job?
  • What is the level of the position?
  • What is the effort that will be needed to identify/screen and evaluate potential candidates?
  • What is the environment of the company doing the hiring? Is it conducive to attracting top candidates?
  • Finally, is the compensation package being offered sufficient to entice passive candidates to explore the opportunity?

There are ranges that exist in the market place for fees and guarantee periods.

Range of fees:

  • Search firms typically charge a percentage of the first years expected annual compensation.
  • First year annual compensation might be base pay plus expected bonus, or solely base pay.
  • The percentage may range from a low of 22.5% to a max of 33%.

How are fees paid?

  • Typically all executive search firms require a retainer paid up front. This retainer is non-refundable and is earned by the search firm at the time an engagement letter/contract is signed.
  • This upfront retainer can range from 1/5 to 1/3 of the expectant fee.
    • Example: If the expectant first year compensation is 150K, and the agreed upon percentage is 30%, then the total expectant fee is 45K. In this case, the upfront retainer may range between 9K and 15K.
  • Firms that charge 1/3 of the expectant fee as an upfront retainer typically require two additional 1/3 payments.  The second would be due and payable at the time the executive search firm presents their “short list” of candidates and the client agrees to interview them.  The final 1/3 payment is typically due and payable on one of the following events:
    • An offer is made to a candidate.
    • The offer is accepted by the candidate.
    • The day the candidate starts work.
  • Other firms may have different formulas/timelines for the additional payments. A few will not require payment until the successful candidate starts work.

Guarantee Period:

  • Executive search firms typically guarantee their work for a period of 6 months to a year.
  • The key to setting this timeframe depends on how long it will take a company to evaluate the new employee to determine whether he/she is  a good “match”. The Executive Search Firm should stay involved after the hiring to help with the communication and feedback from both the new hire’s point of view and the company’s point of view.
  • This guarantee usually does not involve a refund of fees, but a guarantee to find another acceptable candidate for no additional cost.
  • This guarantee assumes that the company did not make any major decisions/changes that directly affect the ability for the candidate to perform. Such changes may include:
    • Elimination of the position.
    • Reduction in new hire’s compensation.
    • Reassignment of duties and responsibilities from original specifications.
    • Significant unanticipated reduction in staff levels under the new hire’s control.

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