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Growing your accounting firm? Let your clients lead the way

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As accounting firms actively prepare their clients for the future, planning for the next phase of growth is always top of mind. 

Whether through expanded services, industries or markets, most firms will prioritize growth as part of their strategy for the year ahead. 

But as accounting leaders have seen over the past few years, a changing environment makes it all the more challenging to place your big bets. But there is one area you can safely bet your strategy on: your clients. 

What I’ve learned throughout my career first as a small-business owner, and now as a chief customer officer serving small and midsized businesses and accountants, is that clients hold the insight into where you should be investing, shoring up or expanding offerings. 

In fact, a customer-first approach to growth helps remove distractions or areas of uncertainty, so you can focus on what will move the needle, and add value to the clients you have and want to have. Here are three ways you can do that. 

1. Deepen connection through authentic communication

As a firm leader or business owner, it’s important to have a pulse on your financials and key metrics that can help you make decisions. Today, businesses have access to real-time dashboards that offer significant value. But when I was running my small business, some of my most powerful “business intelligence” insights didn’t come from a dashboard — but from a direct dialogue with my customers. 

Through those conversations, I could see what products were selling well and why, and through their questions I could see opportunities for new inventory. The same is true for your clients — whether you offer accounting, tax or client advisory services. 

  • Listen first, speak second: Listening is a superpower in business, and it goes hand in hand with empathy. It’s not about waiting for the right moment to make the sale; it’s about getting perspective to help you understand how to add future value. If your clients hold information close to the vest, survey them as a group to spot trends. 
  • Build community: Think of your clients like a community you serve. Look for common themes in that community that connect to your capabilities. Find areas where they can learn from each other, or common problems you can proactively help others solve. In doing so, you help build a community that clients will turn to when they need support, advice or connection. 

One of our customers, Escalon, builds client connections exceptionally well. They are a technology-forward firm and very focused on optimization, and their leaders work to align themselves closely with their clients’ lived experiences. They’ve also invested in nurturing human connections through in-person events and meetings. In driving deeper, more personal connection with clients, they are able to strengthen collaboration, and build long-term trust and loyalty. 

2. Understand and optimize the client journey

We’ve all had that experience as a buyer where we didn’t get the seamless experience we wanted. Customers (rightly) have higher expectations for service and speed every year. Taking time to understand your client’s complete journey and reduce points of friction at each step can help you improve your clients’ experience, and open the door for new ways to add value. 

  • Identify every touchpoint: Your client’s journey doesn’t begin on signing — it starts well before that, when they signal their intent or interest. Think about the complete experience your prospect will take, from identification of a need, to firm research, to initial contact and through service delivery via in-person and digital interactions. Next, document where there are delays or challenges on the client’s side that could be improved or optimized, and start a punch list to address. 
  • Streamline onboarding and communication: Many accounting firms have realized the benefit of a user-friendly client portal to ensure a single source of truth, and one homebase for document sharing, project updates and communication. In addition to ensuring your portal is seamless and easy to use, consider adding “welcome kits” when onboarding new clients and ongoing communication about what to expect, upcoming issues and your insights. It’s critical that communication is two-way, and not just a broadcast, to ensure that the client’s perspective is heard and understood throughout. 
Client Organizer

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Understanding and optimizing the client’s journey also requires connecting different departments or disciplines within your organization. For example, at Bill we recently brought sales and marketing together to find greater alignment and streamline our engagement with SMBs and accountants through the entire customer lifecycle. 

3. Foster long-term relationships with clients

Think about the most valuable asset you have in your company. For many firms, it’s their people, their client portfolio or maybe even a best-in-class tech stack. All of those drive value in an organization, but none of them work without a critical component: trust. 

I believe trust is the most valuable asset because it’s the foundation for your client relationship and your work that safeguards a client’s business and/or ensures the reliability of our markets. Trust is hard to earn and easy to lose — it’s also the key to long-term relationships and client growth. 

  • Deliver on promises: It sounds simple, but ensure your firm shares your commitment to deliver on what you promise, show accountability for your work, and meet deadlines. No matter how small the task might be, demonstrating a say/do ratio of 1:1 will go a long way in building trust. While your firm may deliver quality strategic advice, clients will always notice the details — meetings that start on time, responsiveness in communication, or accountability when things go wrong. Demonstrate your commitment to your client’s success and make it personal. Treat your clients’ wins like your wins. 
  • Embrace change and the future: AI and automation technology will continue to change how every industry conducts business and adds value. What’s critical is that your firm doesn’t resist the future, but considers it as an opportunity to educate your clients, share valuable resources, and explore new offerings that could enhance your relationship and value. Clients want you to be thinking about what’s coming around the corner, so they have one less thing to worry about. 

Another Bill customer and one of the fastest-growing firms in the country, Aprio, is enjoying great success with this approach. As a 70-year-old firm, it focuses on a “growth mindset” at every level of the company to empower its professionals to be proactive, curious and forward-looking to better serve clients and maintain trust. For example, the firm has dedicated resources to its Aprio Firm Alliance, created for future-oriented firms to come together and discuss challenges and solutions for the issues they continually face. Alliance members are given access to professional connections, advice and the technical resources they need to overcome obstacles, seize opportunities and continue to embrace change and innovation.

Key takeaway

No matter what the quarter or year ahead will look like, when you bet your strategy on your clients, you play to win. Staying close to client needs, improving their client experience and customer journey, and elevating your partnership through deeper connections and stronger trust will position your firm to grow with new and existing clients, and be the advisor of choice in an uncertain time. 

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Accounting

Senate unveils plan to fast-track tax cuts, debt limit hike

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Senate Republicans unveiled a budget blueprint designed to fast-track a renewal of President Donald Trump’s tax cuts and an increase to the nation’s borrowing limit, ahead of a planned vote on the resolution later this week. 

The Senate plan will allow for a $4 trillion extension of Trump’s tax cuts and an additional $1.5 trillion in further levy reductions. The House plan called for $4.5 trillion in total cuts.

Republicans say they are assuming that the cost of extending the expiring 2017 Trump tax cuts will cost zero dollars.

The draft is a sign that divisions within the Senate GOP over the size and scope of spending cuts to offset tax reductions are closer to being resolved. 

Lawmakers, however, have yet to face some of the most difficult decisions, including which spending to cut and which tax reductions to prioritize. That will be negotiated in the coming weeks after both chambers approve identical budget resolutions unlocking the process.

The Senate budget plan would also increase the debt ceiling by up to $5 trillion, compared with the $4 trillion hike in the House plan. Senate Republicans say they want to ensure that Congress does not need to vote on the debt ceiling again before the 2026 midterm elections. 

“This budget resolution unlocks the process to permanently extend proven, pro-growth tax policy,” Senate Finance Chairman Mike Crapo, an Idaho Republican, said. 

The blueprint is the latest in a multi-step legislative process for Republicans to pass a renewal of Trump’s tax cuts through Congress. The bill will renew the president’s 2017 reductions set to expire at the end of this year, which include lower rates for households and deductions for privately held businesses. 

Republicans are also hoping to include additional tax measures to the bill, including raising the state and local tax deduction cap and some of Trump’s campaign pledges to eliminate taxes on certain categories of income, including tips and overtime pay.

The plan would allow for the debt ceiling hike to be vote on separately from the rest of the tax and spending package. That gives lawmakers flexibility to move more quickly on the debt ceiling piece if a federal default looms before lawmakers can agree on the tax package.

Political realities

Senate Majority Leader John Thune told reporters on Wednesday, after meeting with Trump at the White House to discuss the tax blueprint, that he’s not sure yet if he has the votes to pass the measure.

Thune in a statement said the budget has been blessed by the top Senate ruleskeeper but Democrats said that it is still vulnerable to being challenged later.

The biggest differences in the Senate budget from the competing House plan are in the directives for spending cuts, a reflection of divisions among lawmakers over reductions to benefit programs, including Medicaid and food stamps. 

The Senate plan pares back a House measure that calls for at least $2 trillion in spending reductions over a decade, a massive reduction that would likely mean curbing popular entitlement programs.

The Senate GOP budget grants significantly more flexibility. It instructs key committees that oversee entitlement programs to come up with at least $4 billion in cuts. Republicans say they expect the final tax package to contain much larger curbs on spending.

The Senate budget would also allow $150 billion in new spending for the military and $175 billion for border and immigration enforcement.

If the minimum spending cuts are achieved along with the maximum tax cuts, the plan would add $5.8 trillion in new deficits over 10 years, according to the Committee for a Responsible Federal Budget.

The Senate is planning a vote on the plan in the coming days. Then it goes to the House for a vote as soon as next week. There, it could face opposition from spending hawks like South Carolina’s Ralph Norman, who are signaling they want more aggressive cuts. 

House Speaker Mike Johnson can likely afford just two or three defections on the budget vote given his slim majority and unified Democratic opposition.

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Accounting

How asset location decides bond ladder taxes

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Financial advisors and clients worried about stock volatility and inflation can climb bond ladders to safety — but they won’t find any, if those steps lead to a place with higher taxes.

The choice of asset location for bond ladders in a client portfolio can prove so important that some wealthy customers holding them in a taxable brokerage account may wind up losing money in an inflationary period due to the payments to Uncle Sam, according to a new academic study. And those taxes, due to what the author described as the “dead loss” from the so-called original issue discount compared to the value, come with an extra sting if advisors and clients thought the bond ladder had prepared for the rise in inflation.

Bond ladders — whether they are based on Treasury inflation-protected securities like the strategy described in the study or another fixed-income security — provide small but steady returns tied to the regular cadence of maturities in the debt-based products. However, advisors and their clients need to consider where any interest payments, coupon income or principal accretion from the bond ladders could wind up as ordinary income, said Cal Spranger, a fixed income and wealth manager with Seattle-based Badgley + Phelps Wealth Managers.

“Thats going to be the No. 1 concern about, where is the optimal place to hold them,” Spranger said in an interview. “One of our primary objectives for a bond portfolio is to smooth out that volatility. … We’re trying to reduce risk with the bond portfolio, not increase risks.”

READ MORE: Why laddered bond portfolios cover all the bases

The ‘peculiarly bad location’ for a bond ladder

Risk-averse planners, then, could likely predict the conclusion of the working academic paper, which was posted in late February by Edward McQuarrie, a professor emeritus in the Leavey School of Business at Santa Clara University: Tax-deferred retirement accounts such as a 401(k) or a traditional individual retirement account are usually the best location for a Treasury inflation-protected securities ladder. The appreciation attributes available through an after-tax Roth IRA work better for equities than a bond ladder designed for decumulation, and the potential payments to Uncle Sam in brokerage accounts make them an even worse asset location.

“Few planners will be surprised to learn that locating a TIPS ladder in a taxable account leads to phantom income and excess payment of tax, with a consequent reduction in after-tax real spending power,” McQuarrie writes. “Some may be surprised to learn just how baleful that mistake in account location can be, up to and including negative payouts in the early years for high tax brackets and very high rates of inflation. In the worst cases, more is due in tax than the ladder payout provides. And many will be surprised to learn how rapidly the penalty for choosing the wrong asset location increases at higher rates of inflation — precisely the motivation for setting up a TIPS ladder in the first place. Perhaps the most surprising result of all was the discovery that excess tax payments in the early years are never made up. [Original issue discount] causes a dead loss.”

The Roth account may look like a healthy alternative, since the clients wouldn’t owe any further taxes on distributions from them in retirement. But the bond ladder would defeat the whole purpose of that vehicle, McQuarrie writes.

“Planners should recognize that a Roth account is a peculiarly bad location for a bond ladder, whether real or nominal,” he writes. “Ladders are decumulation tools designed to provide a stream of distributions, which the Roth account does not otherwise require. Locating a bond ladder in the Roth thus forfeits what some consider to be one of the most valuable features of the Roth account. If the bond ladder is the only asset in the Roth, then the Roth itself will have been liquidated as the ladder reaches its end.”

READ MORE: How to hedge risk with annuity ladders

RMD advantages

That means that the Treasury inflation-protected securities ladder will add the most value to portfolios in a tax-deferred account (TDA), which McQuarrie acknowledges is not a shocking recommendation to anyone familiar with them. On the other hand, some planners with clients who need to begin required minimum distributions from their traditional IRA may reap further benefits than expected from that location.

“More interesting is the demonstration that the after-tax real income received from a TIPS ladder located in a TDA does not vary with the rate of inflation, in contrast to what happens in a taxable account,” McQuarrie writes. “Also of note was the ability of most TIPS ladders to handle the RMDs due, and, at higher rates of inflation, to shelter other assets from the need to take RMDs.”

The present time of high yields from Treasury inflation-protected securities could represent an ample opportunity to tap into that scenario.

“If TIPS yields are attractive when the ladder is set up, distributions from the ladder will typically satisfy RMDs on the ladder balance throughout the 30 years,” McQuarrie writes. “The higher the inflation experienced, the greater the surplus coverage, allowing other assets in the account to be sheltered in part from RMDs by means of the TIPS ladder payout. However, if TIPS yields are borderline unattractive at ladder set up, and if the ladder proved unnecessary because inflation fell to historically low levels, then there may be a shortfall in RMD coverage in the middle years, requiring either that TIPS bonds be sold prematurely, or that other assets in the TDA be tapped to cover the RMD.”

READ MORE: A primer on the IRA ‘bridge’ to bigger Social Security benefits

The key takeaways on bond ladders

Other caveats to the strategies revolve around any possible state taxes on withdrawals or any number of client circumstances ruling out a universal recommendation. The main message of McQuarrie’s study serves as a warning against putting the ladder in a taxable brokerage account.

“Unsurprisingly, the higher the client’s tax rate, the worse the outcomes from locating a TIPS ladder in taxable when inflation rages,” he writes. “High-bracket taxpayers who accurately foresee a surge in future inflation, and take steps to defend against it, but who make the mistake of locating their TIPS ladder in taxable, can end up paying more in tax to the government than is received from the TIPS ladder during the first year or two.”

For municipal or other types of tax-exempt bonds, though, a taxable account is “the optimal place,” Spranger said. Convertible Treasury or corporate bonds show more similarity with the Treasury inflation-protected securities in that their ideal location is in a tax-deferred account, he noted.

Regardless, bonds act as a crucial core to a client’s portfolio, tamping down on the risk of volatility and sensitivity to interest rates. And the right ladder strategies yield more reliable future rates of returns for clients than a bond ETF or mutual fund, Spranger said.

“We’re strong proponents of using individual bonds, No. 1 so that we can create bond ladders, but, most importantly, for the certainty that individual bonds provide,” he said.

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Accounting

Why IRS cuts may spare a unit that facilitates mortgages

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Loan applicants and mortgage companies often rely on an Internal Revenue Service that’s dramatically downsizing to help facilitate the lending process, but they may be in luck.

That’s because the division responsible for the main form used to allow consumers to authorize the release of income-tax information to lenders is tied to essential IRS operations.

The Income Verification Express Service could be insulated from what NMN affiliate Accounting Today has described of a series of fluctuating IRS cuts because it’s part of the submission processing unit within wage and investment, a division central to the tax bureau’s purpose.

“It’s unlikely that IVES will be impacted due to association within submission processing,” said Curtis Knuth, president and CEO of NCS, a consumer reporting agency. “Processing tax returns and collecting revenue is the core function and purpose of the IRS.”

Knuth is a member of the IVES participant working group, which is comprised of representatives from companies that facilitate processing of 4506-C forms used to request tax transcripts for mortgages. Those involved represent a range of company sizes and business models.

The IRS has planned to slash thousands of jobs and make billions of dollars of cuts that are still in process, some of which have been successfully challenged in court.

While the current cuts might not be a concern for processing the main form of tax transcript requests this time around, there have been past issues with it in other situations like 2019’s lengthy government shutdown.

President Trump recently signed a continuing funding resolution to avert a shutdown. But it will run out later this year, so the issue could re-emerge if there’s an impasse in Congress at that time. Republicans largely dominate Congress but their lead is thinner in the Senate.

The mortgage industry will likely have an additional option it didn’t have in 2019 if another extended deadlock on the budget emerges and impedes processing of the central tax transcript form.

“It absolutely affected closings, because you couldn’t get the transcripts. You couldn’t get anybody on the phone,” said Phil Crescenzo Jr., vice president of National One Mortgage Corp.’s Southeast division.

There is an automated, free way for consumers to release their transcripts that may still operate when there are issues with the 4506-C process, which has a $4 surcharge. However, the alternative to the 4506-C form is less straightforward and objective as it’s done outside of the mortgage process, requiring a separate logon and actions.

Some of the most recent IRS cuts have targeted technology jobs and could have an impact on systems, so it’s also worth noting that another option lenders have sometimes elected to use is to allow loans temporarily move forward when transcript access is interrupted and verified later. 

There is a risk to waiting for verification or not getting it directly from the IRS, however, as government-related agencies hold mortgage lenders responsible for the accuracy of borrower income information. That risk could increase if loan performance issues become more prevalent.

Currently, tax transcripts primarily come into play for government-related loans made to contract workers, said Crescenzo.

“That’s the only receipt that you have for a self-employed client’s income to know it’s valid,” he said.

The home affordability crunch and rise of gig work like Uber driving has increased interest in these types of mortgages, he said. 

Contract workers can alternatively seek financing from the private non-qualified mortgage market where bank statements could be used to verify self-employment income, but Crescenzo said that has disadvantages related to government-related loans.

“Non QM requires higher downpayments and interest rates than traditional financing,” he said.

In the next couple years, regional demand for loans based on self-employment income could rise given the federal job cuts planned broadly at public agencies, depending on the extent to which court challenges to them go through.

Those potential borrowers will find it difficult to get new mortgages until they can establish more of a track record with their new sources of income, in most cases two years from a tax filing perspective. 

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