Connect with us

Accounting

Art of Accounting: The vanishing buyers of small practices

Published

on

Complimentary Access Pill

Enjoy complimentary access to top ideas and insights — selected by our editors.

There is no question that there is widespread consolidation of accounting practices, but this is taking place among the larger firms. You can read about a merger or acquisition multiple times a week in Accounting Today. The trend I have seen is difficulty in small practices finding suitable buyers.

I believe the shortage of buyers of small practices is because the potential buyers are not qualified to handle a small practice. When I “grew up” in public accounting, I worked for small firms where I needed to do everything a client needed done. Sure, it was a less complicated period, but I needed knowledge and skills preparing all types of tax returns, as well as financial statements that were mostly compilations but still with a fair amount of reviews and even some audits. I also had to do systems review, not just filling out internal control questionnaires but helping a client work through weaknesses they had discovered or that kept them awake at night. The job involved speaking with bankers about what they wanted, the purpose of the business’s covenants and compensating balance amounts and quality of collateral.

We were reviewing escalation clauses in leases, calming down an IRS revenue officer when a client fell behind paying the withholding taxes, helping a client understand the total costs of their products and their breakeven sales amounts, the layered structure of payments to their salespeople and representatives, how to calculate their interim inventory and industry expertise. We also became sounding boards to our clients and “unlicensed” psychologists. I tell a lot of stories about this in my Memoirs book. 

What has been occurring over the last two dozen or so years is a trend toward specialization or partitioning of skills. The reasons are the growing complexity of tax returns, combined with digitization of the input and many of the repetitive processes, along with the even greater difficulty of financial statement preparation, reviews and audits.

The use of virtual work has been growing over this period, with a great acceleration since the COVID shutdown in March 2020 that has reduced the relational interaction with clients. That was an important driver of queries and discussions, providing insights into a client’s thinking and concerns. A lot of higher-level discussions were with the partner but plenty of them also took place with the “kid” spending that day with the client. None of this is good or bad, it is just different, and while it raised specialized skill levels it also served to reduce the one thing that I felt created the smaller firm’s raison d’être as well as a training ground for future CPA practice owners. 

Do not misunderstand me. The relationships and interactions still exist, especially with older practitioners. But it is a declining skill or talent. The younger staff are not being presented with the opportunities that were ubiquitous during my and some later generations, but no longer so. This means that the skills needed to succeed in a smaller practice have declined and this serves to decrease the pool of available buyers.

Furthermore, moonlighting, which was prevalent in my day, has become less frequent, primarily because of the longer work hours. When coupled with the drop in skill levels needed to properly service smaller clients, it has reduced the staff people’s “desire” to seek out after hours work opportunities. Again, things have changed, not just one thing but a confluence of actions.

Considering what I suggested here, the pool of available buyers of small practices has declined. It has not exactly vanished as the headline title suggests, but I think we are past the beginning of this trend. That has made it harder to sell a small practice and has served to reduce the prices and lengthen the time to consummate a sale, stretching out the exit period.

Twenty years ago selling a small practice was pretty easy since there was an abundance of buyers. That’s not so anymore. This is a trend that is occurring because of changing circumstances, not because of any predestined plan or conspiracy. 

These comments are based on my limited observations of colleagues I have met or spoken with who have had extreme difficulties selling their practices that I know would have been easy sales 20 years ago. The purpose of sharing my thoughts is to provide a heads up of what might be expected, including a longer sale process and a lower sales price. I suggest factoring my thoughts into your planning. If I am wrong, you will have lost nothing.

Comment: My Memoirs as a CPA book has been published and is available in Kindle and print editions at amazon.com. Buy it, read it and enjoy it! Do not hesitate to contact me at [email protected] with your practice management questions or about engagements you might not be able to perform.

Continue Reading

Accounting

Net at Work buys Sage and Acumatica practices from e2b teknologies

Published

on

Business and tech consultancy Net at Work has acquired the Sage and Acumatica practices of accounting and ERP product reseller and developer e2b teknologies.

“We are truly honored to welcome e2b teknologies’ clients to the Net at Work family,” said Alex Solomon, co-founder and co-CEO of Net at Work. “e2b is a staple of the Sage and Acumatica communities, and we are proud to continue their legacy of delivering software excellence. With our shared values of innovation, client-first service and commitment to driving operational efficiencies, we will continue to ensure each client’s technologies and business applications perform at optimal levels in today’s dynamic landscape.”

As a Sage and Acumatica Authorized Developer, e2b teknologies will continue to provide value-added custom application solutions for the Acumatica and Sage ecosystem. Bill Henslee, CEO of e2b technologies, was confident these businesses will be in good hands with Net at Work.

“e2b teknologies has long recognized Net at Work as the leader in the industry,” he said. “We are confident that Net at Work’s dedicated teams will provide our customers with a premier level of service and resources. Our Sage and Acumatica clients can look forward to exceptional support across a wide array of business technologies as well as the advantage of expanded hosting and professional services to help achieve their business goals.”

This is far from the first time Net at Work, a VAR 100 reseller, has acquired a Sage and Acumatica practice over the years. Most recently, it traded its own e-commerce agency, Pixafy, to India-based e-commerce agency and technology provider Kensium in exchange for Kensium’s Acumatica practice. In 2023, it announced its acquisition of Innovation ERP,  a Sage X3 and Sage 300 consulting firm.  The Innovation ERP team became part of Net at Work. In 2022, it acquired both ProServe solutions, a leading Acumatic partner, and Top 25 firm Eide Bailly’s Sage Practice. Before that, in 2020, it acquired two Sage partners: Planet Earth Projects, a Connecticut-based value-added reseller of Sage 300 ERP, Sage CRM and MISys software, and Sysera, a Sage 300 reseller based in Pleasanton, California.

Continue Reading

Accounting

Learning from your failures | Accounting Today

Published

on

As an accounting firm owner, professor, athletic coach and parent, I spend a great deal of time with young people. Do they drive me crazy at times? You bet! But unlike many boomers among my peers, I have incredible confidence in millennials and Gen Zers, and I look forward to them becoming the next generation of leaders. 

Everyone knows NextGen is great with technology. But I’ve also found them to be more entrepreneurial than earlier generations. They’re not afraid to take risks and they’re less likely to be attracted to corporate life and the notion of security. They’re also more socially conscious and better attuned to work-life balance and preserving mental health than my “grind it out” generation. Again, that gives me hope. 

But I have a lot of concerns about today’s young people and that’s part of what motivated me to write my latest book, Making a Difference: Life Skills You Can Learn from Sports, Academics, Work (and Failure).

Time management

I still can’t get over how many smart, motivated, well-educated young people struggle with time management. From my young staffers to my students to my athletes, they just can’t seem to think beyond what’s due today. Chipping away at assignments and deliverables that will be due next week, next month or the end of the quarter might as well be 20 years down the road because they just can seem to look that far ahead. I don’t know if it’s from all the distractions of their screens and social media, but they have much more trouble staying focused than my young employees, students and athletes did 10 or 20 years ago.

In my book, I devote a lot of time to the power of writing things down (with a pen or pencil, not a stylus). Because when you put things in writing, it seems to have permanence. When you put things in an app, online calendar or spreadsheet, it seems too easy to close it or look the other way. I’ve also found young people today don’t like to check their work. I’m amazed at how fast they get things done — often with great accuracy — but they just don’t have the patience to double-check the numbers, proofread their grammar and spelling, and make sure documents and presentations are presented cleanly and professionally. It’s the same for my students as it is for my young employees. Life just seems like an endless race to check things off the list as quickly as possible. For a Generation Selfie that documents every minute detail of their lives on their phones, they seem surprisingly unattuned to details in the real world.On a related note, young people today don’t seem to want to communicate with their superiors when a task or assignment is completed. They just seem to want to get it done as quickly as possible and then move on to the next thing on the list. I suspect all the time on screens and social media is accelerating their attention span.

Accountability

In my book and in my daily interactions with students, athletes and my young associates, I’m constantly reminding them to take a deep breath, double-check their work, ask themselves if they’ve really given it their best effort. If the answer is yes, then great, let me know you’ve completed the assignment to the best of your ability. Don’t assume I’ll find it somewhere without you letting me know. Perhaps they’re afraid of criticism or suggestions, but eventually they’ll have to document and defend their work. Might as well let your superior(s) know that you’ve turned in your work. I’m not sure why everything in their lives must be a race.

Despite their hyper-accelerated lifestyle, I’ve found that many of today’s young people are procrastinators. Maybe it’s because they operate at hypersonic speed, but it’s almost expected that they’ll wait until the very last minute to get something done before the deadline. It doesn’t seem to matter if we’re talking class assignments, college applications, client work or final preparations for a major athletic competition. Pulling “all-nighters” may be a badge of honor in many circles, but it just creates unnecessary anxiety in real life — which can cause serious mental and physical impairment. In this age of life hacks, participation trophies and helicopter parents, I worry that we’ve insulated our young people too much from failure. I’m all for work-life balance and technological efficiency, but I worry that we have forgotten how to roll up our sleeves, how to grind through adversity and just work hard when we need to. 

German philosopher Friedrich Nietzsche famously said, “What doesn’t kill you makes you stronger.”This may seem extreme and this quote certainly gets butchered a lot, but if I’ve learned nothing else in life, it’s that you can get stronger and better at something without going through some adversity.My parents always told my siblings and me that work is a privilege, not a form of drudgery. In my latest book, I’ve tried to elevate the notion of hard work into a mindset that young people can adopt, without risking burnout or jeopardizing relationships with friends, family and significant others. It’s taken me almost seven decades on the planet to realize this, but I’ve found some very simple but impactful techniques for having a successful career and a more fulfilling life: 

  • The incredible power of writing things down; 
  • Making your money work for you 24/7;
  • Treating work as a privilege, not as an obligation; 
  • Showing gratitude for what you have vs. lamenting what you don’t have; 
  • Being accountable for your actions;
  • Committing to lifelong learning;
  • Using failure to your advantage; 
  • Overcoming prejudice and discrimination; and,
  • Tapping the power of positive visualization (envision the ball going into the       net).   

I believe you can set ambitious, but realistic, goals through a disciplined and balanced approach to life. Trust me, it took me a long time to grow up, and I have made plenty of mistakes in my life, but I learned something valuable with each stumble. Hopefully the next generation can learn from the mistakes I made and incorporate those teachable moments into their own lives.

Lessons from mistakes

When it comes to learning from your mistakes, here are four key concepts that I ask my employees, students and athletes to keep in mind at all times: 

  1. Accountability: Acknowledge that you made a mistake. For instance, you filed an incorrect tax return.  
  2. Analysis: Research briefly why it happened. For instance, we rushed the filing without cross-checking all the supporting tax information. 
  3. Check and doublecheck: Put a quality control step in place. We use checklists (requiring two review signatures before we file) so the same mistake does not happen again. 
  4. Understand that mistakes have consequences: Filing an amended return is costly since the client does not pay us for the extra work, and it reflects poorly on our reputation. Acknowledge the mistake, work hard to correct it and make sure it doesn’t happen again. 

From working in a flea market to sweeping floors in New York City’s Diamond District to being rejected by over 500 accounting firms before landing my first real job, my story is one of resilience and inspiration (with lots of perspiration). It’s taken me more than half a century to connect the dots between athletics, academics and work to find my true calling, but they’re all related by putting in the “reps,” bouncing back from setbacks, managing my time, working toward short-term and long-term goals and not taking shortcuts. If that makes me “old-school,” I’m proud to call it my alma mater.

Continue Reading

Accounting

Trump allies fret tax-cut plans at risk with GOP infighting in Congress

Published

on

A faction of President-elect Donald Trump’s allies is harboring doubts about Republicans’ chances of passing a sweeping tax bill in 2025 amid party infighting and strategy disputes.

Republicans broadly agree that there’s little room for error on what is a rare opportunity for the GOP to update the Tax Code without having to make any concessions to Democrats. There’s also time pressure: households and privately-held businesses will see their tax bills rise if Congress doesn’t act by the end of the year.

But Republicans openly disagree on how to meet that deadline. Little progress was made on Wednesday night when Trump met with GOP senators, with the president-elect telling reporters at the conclusion of the meeting that it “doesn’t matter” to him how his allies in Congress plan to get his top legislative achievements passed.

Stephen Miller, the incoming deputy White House chief-of-staff and a vocal advocate for an immigration crackdown, has pushed lawmakers to first pursue a border security bill, before pivoting to taxes, an idea Senate Republican Majority Leader John Thune endorsed during his address to open the new Congress.

That pits them against House Republicans, many of whom want to cram all the party’s legislative goals — immigration, energy production and taxes — into a singular bill. That’s an approach that yields to the reality that the tiny House GOP majority — a fractious group of lawmakers willing to torch members of their own party during heated disputes — will have a hard time passing even one bill, let alone two.

“The best chance for a reconciliation bill that includes tax cuts to pass the House is for the tax cuts to be included in the first one, and preferably in one big beautiful bill,” said House Ways and Means Chairman Jason Smith, referring to the legislative process, known as reconciliation, which allows the majority party to advance its priorities with the votes of the opposing party. 

Trump, who made taxes and an immigration crackdown the centerpiece of his 2024 presidential campaign, has waffled on his wishes, further muddying the debate. Over the weekend, he posted that he supported “one powerful Bill that will bring our Country back, and make it greater than ever before.” At a press conference on Tuesday, however, he indicated a willingness to separate immigration from taxes.

“Well, I like one big beautiful bill. I always have. I always will. But if two is more certain, it does go a little bit quicker, because you can do the immigration stuff early,” he told reporters.

Senator Rand Paul, a Kentucky Republican, said following Wednesday’s meeting with Trump that they discussed using tariff hikes as a way to offset the cost of the tax cuts, a politically risky move that could further divide Republicans.

Thune, after meeting with House Speaker Mike Johnson on Tuesday, joked with reporters that the plan for sequencing the legislation is “as clear as mud.”

After the Wednesday meeting with Trump, Thune told reporters they are all united on the goals but lawmakers still have different views on the legislative strategy to get there.

Strategy planning

Congress also must raise the debt ceiling this year — an issue that has routinely caused Republican infighting and soured relationships within the party. Johnson told reporters Tuesday he plans to add a debt ceiling increase to the bill, with the final product put together by “churning it out amongst our colleagues.” He also set an April goal to pass it out of his chamber.

Paul, however, said Wednesday there’s opposition from Republicans in both chambers to addressing the debt ceiling in the bill. 

“We need to do the tax bill in the first 150 days,” said Steve Moore, an informal economic advisor to Trump.

Moore said that he, along with Trump’s former National Economic Council Chair Larry Kudlow and economist Arthur Laffer, urged Trump to tackle taxes first.

“We shouted from the rooftops,” Moore said. “The argument made to Trump that carried the day was that delaying it would put the tax cut at risk.”

The business community has also warned that a delay — or failure — of the tax measure could stymie the economic growth promises Republicans ran on.

“I’m not going to second guess the speaker or the majority leader on the timing of the tax bill, but I will say that from a business perspective, from an investment perspective, a manufacturing perspective, sooner is going to be a whole lot better than later if they truly want to keep their promises that they’ve made,” said Jay Timmons, president and chief executive officer of the National Association of Manufacturers.

Many Republicans also publicly and privately worry that isolating immigration — an issue that has vexed Congress for decades — into an initial bill will take far more time than anticipated and eat up a great amount of political capital and good will, potentially jeopardizing the size, scope and ambition of a tax measure.

History lesson

In 2017, Trump faced a similar legislative strategy quandary on the sequencing of policy when his team spent months trying to repeal the Affordable Care Act only to have then-Senator John McCain, an Arizona Republican, strike down the bill at the last minute. The Trump White House managed to barely pass tax reform that December — and that was with a much larger margin of Republicans in the House. 

That legislation was also hastily written and passed solely with the support of Republicans. At the time, there was a feeling in the Trump orbit that tackling infrastructure or taxes first would have provided the new president with far more political dividends than pursuing the failed health care legislation.

In the closing days of the 2024 election, Trump promised to extend the personal tax cuts from 2017 and expand the state and local tax deduction, while also creating new tax breaks like no taxes on tips, overtime pay or Social Security checks. 

Trump has vowed to Wall Street executives that he would reduce the corporate tax rate to as low as 15%. That laundry list of promises surprised even some of his closest economic advisors, who privately said Trump was unlikely to turn all of this rhetoric into reality. 

Trump, as recently as last weekend, has repeatedly singled out one specific pledge — no taxes on tips — which suggests it could be among the highest priority cuts for the incoming president.

Political calculus

For Republicans, a key calculation is delivering on Trump’s tax promises so the party can hold onto its control of the House of Representatives in 2026. Former House Speaker Newt Gingrich, a close Trump ally, said history shows that Trump needs to pass the tax bill by July 4, 2025, to satisfy voters.

When President Ronald Reagan “did not front-load the tax cuts in 1982-1981, we lost 26 seats in 1982. When Trump did not get the tax bill through fast enough, we lost 40 seats in 2018. We also know that Franklin Delano Roosevelt, by acting aggressively, picked up nine seats,” he said.  

Former Representative Kevin Brady, who led efforts on Trump’s 2017 tax overhaul, said Republicans ought to “educate” — or perhaps browbeat — their colleagues to make a priority of the cuts.

“Failure is not an option. You cannot wreck this economy. You cannot damage this presidency,” Brady said at an event in Washington. “You’re going to find a way to get this done.”

Continue Reading

Trending