Insight Magazine - Winter 2012

Datatrac, America’s largest interest rate database,recently awarded Alliant Credit Union the Great Rate Award for our Platinum VISA credit card for the 12 month period ending December 31, 2011. This symbol of distinction certifies that in 2011 Alliant outperformed the national average credit card rates by 9.32%.

Whether

FIRST WORD

A Resolution to Keep

The elections are behind us, the holidays are over and our New Year’s resolutions….well, let’s just say my treadmill soldiers on as a clothes rack, and my Swiss ball is as deflated as my hopes and dreams of getting in shape this year

B u t a s I s i t h e r e c o n t e m p l a t i n g t h e p a c k e t

M&Ms on my desk, I’m struck by a thought. Not all N

d particularly those that strive to make our careers more productive, rewarding and successful

2013 is poised to be a dynamic year, and CPAs are going to be busy. There’s never been a greater need from businesses and consumers for help with fiscal issues. Today’s economy has created even greater complexity in our jobs. As CPAs you need to understand these complexities and be able to make some semblance of order of them for your clients and companies Easier said than done, right?

In an era where every minute and every dollar counts, the Illinois CPA Society is providing you with efficient and flexible solutions to navigate our uncertain financial waters. One example is knowledgehub, our new web-based learning management system which puts content from multiple CPE providers in one easy-to-search place Designed for firms, companies and individuals alike, knowledgehub allows you to tailor development plans for your staff, and ensure they’re receiving training in the topics t h a t a r e m o s t c r i t i c a l t o y o u r o rg a n i z a t i o n A l s o , o u r n e w C P E o n D e m a n d [www.icpas.org/ondemand] provides you with 24/7 access to quality, affordable CPE. What’s more, we all know that learning isn’t delivered solely in traditional classroom and online settings. Thanks in part to the Society’s advocacy efforts, the Illinois Department of Financial and Professional Regulation has expanded what it recognizes as CPE credit Beginning in this reporting period, you are now able to earn credit for a wider range of education, as well as for activities you’re already doing, such as research and reading professional publications (you’ll find more information on page 6 of this issue).

The overarching goal is to keep you up-to-date and competitive and our resolution for the year is the same as it has always been: To advocate for and support the careers of each and every one of our members, whether in public practice, industry & business, government, education, not-for-profit or those only just graduating and starting a career in this wide, varied and rewarding profession of ours.

While my fitness plans may have fallen flat, the Society remains true to its resolution every single year.

Here’s to a successful 2013 for one and all

I N S I G H T M A G A Z I N E

Publisher/ICPAS President & CEO Elaine Weiss

Editor-in-Chief/Director of Publications Judy Giannetto

Creative Services Director Gene Levitan

Creative Services Manager Rosa Garcia

Publications Specialist Derrick Lilly

National Sales & Advertising Natalie Matter DeSoto YGS Group, 3650 West Market Street, York, PA 17404

P: 800 501 9571 x127 F: 717 825 2171

E: natalie desoto@theygsgroup com

Circulation/Member Services Director Carl Siska

Editorial Offices: 550 W Jackson Blvd , Suite 900 Chicago, IL 60661

I C P A S O F F I C E R S

Chairperson, James P Jones, CPA Edward Don & Company

Vice Chairperson, William P Graf, CPA Deloitte & Touche LLP

Secretary, Edward J. Hannon, CPA, JD Freeborn & Peters LLP

Treasurer, Daniel F Rahill, CPA, JD KPMG LLP

Immediate Past Chairperson, Robert E Cameron, CPA Cameron, Smith & Company, PC

I C P A S B O A R D O F D I R E C TO R S

Linda S Abernethy, CPA, McGladrey LLP

Rose G Doherty CPA, Legacy Professionals LLP

John A Hepp, PhD, CPA, Grant Thornton LLP

Margaret M Hunn, CPA, CFE, CFF, CITP, Rozovics & Wojcicki

Geralyn R Hurd, CPA, Crowe Horwath LLP

Paul V Inserra, CPA, McClure, Inserra & Co , Chtd

Leif J Jensen, CPA, Leif Jensen & Associates Ltd

Kathleen M. Kedrowski, CPA, Retired, Navigant Consulting

Michael J Maffei, CPA, GATX Corporation

Marcus D Odom, PhD, CPA (inactive), Southern Illinois University

Floyd D. Perkins, CPA, Ungaretti & Harris

J Bradley Sargent, CPA/CFF, CFE, CFS, Cr FA, Sargent Consulting Group LLC

Marcus F Schultz, CPA, Dugan & Lopatka CPAs PC

Thomas L Zeller, PhD, CPA, Loyola University Chicago

Suite 900, Chicago, IL 60661, USA, 312 993 0407 or 800 993 0407, fax:

of the contents may be reproduced by any means without the written consent of INSIGHT

CPA

requests may be sent to:

550 W Jackson, Suite 900, Chicago, IL 60661, USA

SEEN HEARD

Average percent of total assets invested annually by private companies, versus only 4 percent for similar public firms Source: Sageworks Inc

Are Your Clients Following Your Directions?

The m a jor it y of p eop le who r eceiv e f ina ncia l a d v ice d on’t a ct on it , according to a survey commissioned by financial services firm TIAA- CREF Despite nearly 50 percent of respondents indicating that they’re worried about their financial futures, only 33 percent actually take action after being advised on what to do

Part of the reason could be that a constant supply of general information on how to reduce expenses, streamline budgets, save more and invest effectively for retirement is simply too overwhelming In fact, 74 percent of respondents said they’re not sure which sources of financial advice are reliable

TIAA- CREF analysis suggests that individuals provided with recommendations specifically tailored to their financial situations, objectives, risk tolerances and investment horizons are over 60 percent more likely to utilize the advice than people who receive generalized guidance

HOW TO :

10% Avoid Mistakes on the Job

In an Accountemps [accountemps com] survey, 28 percent of respondents said making a mistake is their biggest workplace fear With that in mind, Accountemps offers these four tips for dodging the bullet:

1 P l a n y o u r w e e k Prioritizing responsibilities and delegating when possible will increase efficiency and confidence

2 A s k f o r d i r e c t i o n If a new project is particularly challenging, share this with your manager so you can work together to overcome hurdles

3 Tr u s t i n a t r u s t e d a d v i s o r When preparing a critical project or communication, tap a mentor for advice or ask a confidante for feedback

4 L e n d a h a n d Volunteering to assist overburdened colleagues and being quick with praise for outstanding work fosters an environment where colleagues regularly help each other

S p e a k i n g o f m i s t a k e s Please note that the Fall 2012 Corporate Financial Leadership First Word column, A Time to Give Thanks, included a name misspelling Our apologies to Illinois CPA Society Diversity Initiatives Committee Chair, Scott D Steffens of Grant Thornton LLP for the error

Expanded CPE Recognition in Effect

Over the last year, the Illinois CPA Society has worked closely with the Illinois Department of Financial & Professional Regulations to broaden the scope of programs and activities that qualify for continued professional education (CPE) credit and meet the requirements for CPA licensure renewal As a result, you’ll be able to earn CPE for more of the job - specific activities you likely already perform, such as conducting research or consultation with outside experts, attending industry group conferences or webinars, and serving on one of ICPAS' technical committees You can even earn CPE credits for reading professional publications, like our own INSIGHT Magazine

Visit www.icpas.org/expandedCPE.htm for more information.

FEATURED APP: Outright

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Outright is a cloud-based solution that uses 256-bit SSL security to ensure data is always protected. Free Outright apps are available for Apple and Android mobile devices.

helping you run and grow your business

just-in-time information | relevant education professional connections

Executive Education

Strategic programs focused on real-world challenges

Workshops

Tactical programs providing practical knowledge

Signature Conferences

National speakers addressing current issues facing finance leaders

onDemand Education Programs on what you need to know, when you need to know it

knowledgehub

Innovative learning management system providing an easy to use, cost-effective way to manage your staff development

CCFL Finance Leaders Weekly

E-pub featuring the latest “must read” stories, videos and audio casts

Technical Resources

Information to help you keep pace with changing rules and regulations

Career Center

Job openings, resume posting, career coaches and development resources

www.CCFLinfo.org

Source: HP/Ponemon Institute

CFOs Wanted for Board Service

There’s an unprecedented demand for CFOs to serve on corporate boards thanks to increasing regulations, difficult economic conditions and the CFO’s broadening skill set, says Ernst & Young’s study, CFO and Beyond: The Possibilities and Pathways Outside Finance The report found that many CFOs are interested in roles that can improve their understanding of boardroom dynamics, generate cross-sector ideas and provide exposure to different corporate cultures In fact, most CFOs said that sitting on the other side of the table helps them fully understand how the boardroom works, and over half see it as an opportunity to learn lessons that have valuable applications in their core roles

Listen Up Emerging Partners

While emerging partners may feel that old leadership models need to be replaced pronto, Jim Boomer of Boomer Consulting Inc advises them to gain a deeper understanding of current partner culture For starters, realize that they have years of experience to tap into, and have paved the way for today’s partners to rise What’s more, they may find it hard to let go of what they’ve helped to build, and deserve respect for their views when new ideas are presented Understanding this will ultimately make for a far smoother partner transition

TRENDSPOTTER:

GREEN YOUR MEETINGS

Socially responsible businesses are increasingly in demand The Vianova Group [thevianovagroup.com] offers these tips for greening your meetings.

n

o n l i n e : Online discussion forums, chat functions, teleconferencing and webcasts all provide ways to connect while reducing carbon footprints and travel/meeting expenses

n

: If you must meet face-to-face, reduce travel time and distance by choosing a centrally located meeting place that’s convenient for all meeting attendees If spread far and wide, consider having only those “must-attend” individuals be present while others participate virtually

n

e s e n t a t i o n s : Project documents onto a screen so all meeting attendees can follow along without needing to print out paper copies All meeting materials can be stored in a central online location for viewing at any time

n R e c y c l e a t c l o s e : Collect and recycle paper, plastic cups, wrappers, trash bags, bottles and cans used in the meeting room Serving food from washable dishes instead of disposables is a smart choice as well

Why Your Staff Won’t Leave You

Whether or not the economy is turning around, keeping an eye on employee retention is always a priority According to the American Psychological Association’s [apa org] Workforce Retention Survey, 67 percent of working Americans stay with their current employers because their jobs fit well with other aspects of their lives A further 60 percent stay because of employee benefits; and 59 percent stay because of either the pay or their enjoyment of the work Despite consistently high unemployment numbers, only 39 percent of respondents said a lack of other job opportunities was a reason for staying with their current employer

GROW. THRIVE.

YOU don’t want to just be an employee — You dream of working with an innovative team of colleagues who support YOU. Who inspire YOU.

YOU want to work in an environment that shapes YOUR career — and YOUR life. YOU want a competitive compensation package that includes incentives that recognize the value YOU provide.

YOU want flexibility — from how YOU schedule YOUR time, to the direction YOU grow YOUR career.

Candidates

2013 heralds a new way of doing things for anyone challenging IDOR audit findings

By Keith Staats, JD

Re c e n t I l l i n o i s l e g i s l a t i o n h a s e s t a blished a new, independent Illinois Tax Tribunal that allows taxpayers to challenge Illinois Department of Revenue (IDOR) audit claim denials The Tribunal will begin operating on July 1, 2013, and will, with certain exceptions, replace the current administrative hearings function within the IDOR

or denials of licenses or certificates of registration, or any other collection of activities; any proceedings of the IDOR’s informal administrative appeals function; or any challenges to an administrative subpoena issued by the IDOR.

Keith is a senior manager of Grant Thornton’s State & Local Tax practice, based in Chicago Previously, he held the position of general counsel of the Illinois Department of Revenue, where he developed tax policy, evaluated and reviewed tax-related legislation, and oversaw tax-related litigation.

* keith staats@us gt com

Drilling down to the finer details, the Tax Tribunal will have jurisdiction over all IDOR sales and excise tax and income tax assessments, claim denials and notices of penalty liability. However, the Tax Tribunal legislation will not alter a taxpayer’s ability to utilize the State Officers and Employees Money Disposition Act (Protest Monies Act) as a method of challenging an assessment

T h e Tr i b u n a l ’ s j u r i s d i c t i o n w i l l b e l i mited to situations where the amount of tax a t i s s u e f o r t h e s a m e t a x y e a r o r a u d i t period exceeds $15,000, excluding penalt i e s a n d i n t e r e s t I n t h o s e i n s t a n c e s t h a t assert either an interest or penalty assessment or both, the Tribunal will have jurisdiction if the combined total of all penalt i e s o r i n t e r e s t e x c e e d s $ 1 5 , 0 0 0 C a s e s below the $15,000 threshold will continue t o b e h e a r d b y t h e I D O R a d m i n i s t r a t i v e hearings division

The Tribunal will not have jurisdiction to review any property tax assessment or any d e c i s i o n s r e l a t e d t o t h e I D O R ’ s i s s u e o r denial of a sales tax or property tax exemption ruling. And it will not have jurisdiction to review a notice of proposed tax liability, notice of proposed deficiency or any other notice of proposed assessment or intent to take action Proposed assessments, in fact, will continue to be eligible for review by IDOR’s Informal Conference Board

Furthermore, the Tribunal will not have jurisdiction to review any action or IDOR determination regarding tax liabilities finaliz e d by la w, inc luding but not limite d to liens, levies and revocations; suspensions

In general, with the exception of Protest Monies Act cases, a taxpayer cannot contest a matter within the Tax Tribunal’s jurisdiction in any other Illinois court If a taxp a y e r a t t e m p t s t o f i l e a c a s e i n a n o t h e r court, the action, suit or proceeding will be dismissed without prejudice

The Tribunal also will decide questions concerning the constitutionality of statutes and rules the IDOR has adopted, but will not have the power to declare a statute or rule unconstitutional or otherwise invalid on its face. However, a taxpayer challengi n g t h i s c o n s t i t u t i o n a l i t y c a n p r e s e n t t h e challenge to the tribunal to make a record f o r t h e I l l i n o i s A p p e l l a t e C o u r t ’ s r e v i e w Failure to raise a constitutional issue will n o t p r e c l u d e t h e t a x p a y e r o r t h e I D O R f r o m r a i s i n g t h e s e i s s u e s a t t h e a p p e l l a t e court level

What’s more, the Illinois Tax Tribunal Act includes detailed provisions concerning proceedings before the Tribunal. For instance, a taxpayer will be able to commence a proceeding by filing a petition protesting the IDOR’s determination, and the IDOR will be required to file its answer in the Tax Tribunal no later than 30 days after receiving notification of a petition being filed (A $500 filing fee will be imposed )

Taxpayers or attorneys representing the taxpayers can make appearances at Tribunal proceedings. Accountants and attorneys employed by accounting firms may not represent taxpayers before the Tribunal, howe v e r P r i o r t o a h e a r i n g , t h e p a r t i e s c a n choose to jointly petition the Tribunal for mediation in an attempt to settle any contested issues or the case in its entirety

Tribunal hearings will be open to the public, but taxpayers can petition to close portions of t h e h e a r i n g f o r g o o d c a u s e A l l i n f o r m a t i o n received by the Tribunal as a result of a hearing o r i n v e s t i g a t i o n w i l l b e p u b l i c , e x c e p t f o r t a x returns and information received under seal or in relation to any mediation proceedings. Also, taxpayers may petition the Tribunal to require t h a t c e r t a i n p l e a d i n g s o r e v i d e n c e b e f i l e d o r a d m i t t e d u n d e r s e a l t o p r e v e n t e c o n o m i c o r other harm to the taxpayer

The Tribunal will be required to issue written decisions within 90 days of briefs being submitted or by the end of the hearing if no briefs are filed The Tribunal can extend the 90-day period f o r a n a d d i t i o n a l 3 0 d a y s , b u t t h e d e c i s i o n becomes final 35 days after the issuance of the notice of decision The tribunal is required to index and publish its decision in print or electronic form within 180 days

The taxpayer and the IDOR will be entitled to judicial review of a final decision in the Illinois Appellate Court This provision is different than the current administrative hearings system in two respects: First, under the current system, only taxpayers can seek an administrative hearings decision review; second, the first level of judicial review currently occurs in the circuit courts.

The legislation that established the tax tribunal also clarifies the IDOR’s settlement authority in informal proceedings. A new provision explains t h a t o f f e r s o f d i s p o s i t i o n o f a p r o p o s e d a u d i t adjustment may be proposed during the informal assessment review process. The Informal Conference Board should consider disposing of a matter if 1) it’s uncertain whether the proposed audit a d j u s t m e n t i s c o r r e c t a n d 2 ) i t ’ s n o t i n t h e IDOR’s best interest to issue an assessment or claim denial due to factors such as the potential hazards of litigation

D e s p i t e t h e f a c t t h a t a c c o u n t a n t s w o n ’ t b e able to represent taxpayers before the new tribunal, the tribunal has the potential to enhance the r o l e o f a c c o u n t a n t s i n p r o v i d i n g a s s i s t a n c e t o taxpayers under audit As I’ve noted, the legislat i o n e n h a n c e s a n d c l a r i f i e s t h e I D O R ’ s s e t t l em e n t a u t h o r i t y d u r i n g t h e i n f o r m a l r e v i e w process, and once a case is filed with the tribunal an independent body the IDOR arguably has less control over the matter than it does now.

This combination of factors may encourage resolution of audits at the audit level, including the Informal Conference Board process where accountants and accounting firms can, and do, provide valuable assistance to their clients

TAX UPDATES You Need Now

Be Prepared for the 2013 Tax Season

January 9 | Chicago St ate & Local Tax Conference

January 9 | Chicago

IRS Audit Practices and t he Viability of FLP Planning Workshop

January 9| Chicago, Joliet, Moline, Naperville, Springfield, Webinar

Small Business Entity Tax Forms Workshop

Januar y 10 | Chicago

Payroll Taxes, Benefits and 1099 Reporting: Ever yt hing You Need to Know

January 11 | Chicago

Tax Update for Pass-Through Entities: S Corporations, Partnerships and LLCs

January 16 | Webinar

Taxation for the 2 1st Centur y: Why Tax Reform is on t he Table and How to Help Your Clients Understand

January 17 | Chicago

Preparing Individual Tax Returns for New Staff and Para-Professionals

January 18 | Chicago

The Com plete Guide to Preparing Limited Liability Com pany, Partnership, and S Corporation Federal Income Tax Returns

January 28 | Chicago **NEW COURSE**

New Medicine: Key Issues CPAs Need to Know About t he Patient Protection and Af fordable Care Act

January 28 | Chicago **NEW COURSE**

Should Client Expenditures be Capit alized or Expensed? A Guide to t he New IRS Regulations

January 29 | Chicago **NEW COURSE**

Advanced Technical Tax Forms Training -- Form 1040 Issues

January 30 | Springfield

Preparing Individual Tax Returns for New Staff and Para-Professionals

January 31 | Chicago

Corporate Tax Update

January 31 | Springfield

The Com plete Guide to Preparing Limited Liability Com pany, Par tner ship, and S Corporation Federal Income Tax Returns

Register at www.icpas.org

We Wa n t Yo u !

The Military Tax Assistance Program celebrates a decade of serving those who serve our country

By Marty Green, Esq

In a letter to Illinois CPA Society President and CEO Elaine Weiss, Thomas R Lamont, assistant secretary of the Army, wrote:

“On behalf of the men and women of the United States Army and our sister services, I would like to thank the Illinois CPA Society for sponsoring the Military Tax Assistance Program for deployed military members and their families Military deployments take a tremendous toll on our military members and their loved ones The program relieves the anxiety of tax preparation for those deployed and their families Most importantly, it helps to relieve the burden of separation I know that our military members who have benefitted from this program are greatly appreciative of your efforts….[P]lease extend the Department of the Army’s appreciation to your member volunteers who give of their time to assist military members and their families ”

Marty is the ICPAS VP of Government Relations, a practicing lawyer and member of the Illinois Bar and a Lieutenant Colonel in the National Guard He previously served as executive assistant attorney general for Illinois Attorneys General Lisa Madigan and Jim Ryan, and as director of the Governor’s Office of Citizens Assistance and assistant to the Governor for Public Affairs, both under Governor James Edgar

*

greenm@icpas org @icpasgovt

Volunteer Now

To volunteer for the Military Tax Assistance Program, contact Jill Loeser of the ICPAS Government Relations Office, 217 789 7914 or loeserj@icpas org

Over the past decade, more than 300 military members have been served through the Military Tax Assistance Program, which began with Operation Enduring Freedom in Afghanistan and Operation Iraqi Freedom.

P a r t n e r i n g w i t h t h e I R S , C PA s p r o v i d e military tax assistance to members of the Armed Forces (both those on active duty and reserves) who have served in a combat zone or in a contingency operation during the tax year Qualifying military members are matched with volunteers in their community or regional location The volunteer initially meets with the military member or family member for basic information and t h e n s c h e d u l e s a f o l l o w - u p m e e t i n g t o r e v i e w, c o m p l e t e a n d e x e c u t e t h e t a x return. This also can be done remotely via email, phone and fax

As a Lieutenant Colonel in the National G u a r d , I c a n v o u c h f o r t h e f a c t t h a t t h i s program has a huge impact on the lives of military personnel and their families.

You don’t have to take my word for it As Military Tax Assistance recipient LTC Clay Kuetemeyer of the Illinois National Guard explains, “I first heard about the program during a briefing on post-mobilization bene

assistance. Not only did he do a thorough, professional job of reviewing and preparing our returns, but he took the time to get to know us and understand our situation ”

Hensley owns his own practice in Springfield, Ill , specializing in tax, accounting and consulting services He has been a Military Tax Assistance volunteer for more than five years When you visit Hensley’s office, you’ll see a folded American flag that flew over a US base in Afghanistan prominently displayed on his wall. The flag was given to him by a Marine Corps officer he assisted.

When asked why he volunteers for this program, Hensley explains that, “I have family members in the military and I realize that they don’t get some of the benefits of the private sector Military members deserve all the benefits they can get ”

With tax season fast upon us, we’re actively searching for volunteers who can help with this important project. Volunteering is very easy. You can devote as much or as little time as your schedule allows. You don’t have to be a tax specialist, per se; the ICPAS and the IRS provide training materials and resources to help you with the process Ultimately, the ICPAS Government Relations Office works with volunteers to match them with soldiers and airmen who qualify for assistance Even if you only have time to

complete the training and assist one service member, you’ll make a huge difference

“I make it as easy as possible for [military personnel] to complete their taxes,” says Hensley “I typically email them before our meeting introducing myself and sending them some paperwork to complete before they come to the office If they call with questions, my staff has instructions to put them through to me directly. I treat them special ”

I recently spoke with another Military Tax Assistance volunteer who told me the story of a couple who both were in the military and had small children back at home Due to continued, multiple deployments for both, they were behind in several years of income tax filings This was a source of constant worry for them Our Military Tax Assistance Program volunteer went above and beyond to prepare their tax forms and explain their unique circumstances to the IRS, which waived all penalties and interest accrued.

Even though our nation recognizes the beginning of the end of 10 years in Afghanistan and our withdrawal from Iraq, military members and their families still need our help Our friends and neighbors who belong to the Guard and Reserves, as well as service members from Scott Air Force Base in Belleville, Ill and Great Lakes Naval Base in Northeastern Illinois, are still performing hazardous duty in dangerous places

We recognize that your time is valuable By being a Military Tax A s s i s t a n c e v o l u n t e e r y o u ’ l l m e e t s o m e o f t h e f i n e s t m e n a n d women who serve our country I guarantee that it will be both a p e r s o n a l l y a n d p r o f e s s i o n a l l y r e w a r d i n g e x p e r i e n c e o n e y o u won’t soon forget

Please note: The views expressed are not the views or opinions of the Departments of the Air Force or Defense

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FORENSICS INSIDER T h i n k B e f o r e Yo u G i v e

In Ronald Reagan’s famous words, “trust but verify” before giving charitably

By Brad Sargent, CPA/CFF, CFE , CFS, Cr FA , FABFA

The holiday season may have been and gone, and with it the “for-profit” world’s bid for our disposable income, but the desire to give to nonprofits and charities lingers far beyond the festivities for many of us At all times of year, and especially during the winter, churches, homeless shelters, local food pantries, animal welfare organizations, children’s charities, veterans’ groups, community outreach groups, and more, actively seek donations of food, clothes, money and time to help those less fortunate survive

s o l i c i t i n g m a y n o t b e d e l i v e r i n g t o t h e cause Check them out before giving ”

Another caveat: Even the most legitimate charitable organizations may not always exercise an appropriate level of internal due diligence. Many individuals join charitable organizations (accepting lower compensation in the process) for the reward of doing something for a cause in which they believe.

Fraudsters are aware of this altruistic culture and seek to embed themselves within an entity, gain trust and steal at will

Brad is the managing member of The Sargent Consulting Group, LLC, which specializes in forensic accounting and financial investigation He is a frequent lecturer and chair emeritus of the American Board of Forensic Accounting A member of the Illinois CPA Society since 2002, Brad also serves on the Society’s Board of Directors

* bsargent@scgforensics

B u t a r e t h e y a l w a y s w o r t h y c a u s e s ? What if the charity you’re eyeing is, in fact, a scam? Take this scenario: A phone call f r o m s o m e o n e r e p r e s e n t i n g a c h a r i t a b l e organization, looking for donations of clothes and household items, will have a truck m a k i n g p i c k - u p s i n y o u r n e i g h b o r h o o d You’re not home during the day, so you tell t h e c a l l e r y o u ’ l l l e a v e t h e i t e m s o n y o u r f r o n t p o rc h W h o , e x a c t l y, h a v e y o u j u s t i n v i t e d t o y o u r e m p t y h o u s e ? Wi l l t h e n e i g h b o r s t h i n k t w i c e w h e n a b i g t r u c k starts loading your household items when some of them are already out on your front porch? Did you also mean to “donate” your cash, jewelry and electronics?

Floyd D Perkins, Esq , CPA, is a member of the Illinois CPA Society Board of Direct o r s a n d a p a r t n e r a t t h e l a w f i r m o f Ung a re tti & Ha rris , L L P He c onc e ntra te s his practice on counseling businesses and charities on financial and compliance matte rs , litig a ting bus ine s s a nd fina nc ia l disputes, and representing clients in contested p r o b a t e a n d c h a n c e r y m a t t e r s P r i o r t o

j o i n i n g U n g a r e t t i & H a r r i s , P e r k i n s w a s bureau chief of the Illinois Attorney Gene r a l ’ s C h a r i t a b l e Tr u s t s D i v i s i o n f o r 1 4 years, where he was responsible for many of the office’s complex financial and business litigation matters concentrating in the chancery and probate practice.

Perkins offers this simple advice: “Give but give wisely Know who you’re giving to; the cause may be great but the people

Sadly, the very attributes that make these l e g i t i m a t e o rg a n i z a t i o n s e f f e c t i v e i n t h e i r missions can lead to a failure to maintain proper internal controls. Many large-dollar frauds are committed in the charitable sector, but are almost never reported since nonprofits rely heavily on their positive public i m a g e I ’ v e i n v e s t i g a t e d m a j o r f r a u d s t h a t r o s e t o c r i m i n a l l e v e l s , y e t t h e r e s p e c t i v e boards chose to resolve the matters quietly. I urged them to set a more rigorous tone at the top and pursue all means to prosecute the fraudsters, and in return was given a pers o n a l t u t o r i a l o n t h e p r e c a r i o u s n a t u r e o f these entities and their public personas, and a primer on how discretion is essential for their continued existence.

Lisa M Noller, Esq , is a litigation partner w i t h F o l e y & L a r d n e r L L P, w h e r e s h e i s a member of the firm's Government Enforcement, Compliance & White Collar Defense, B u s i n e s s L i t i g a t i o n & D i s p u t e R e s o l u t i o n , a n d S e c u r i t i e s E n f o rc e m e n t & L i t i g a t i o n practices, as well as the Health Care, Medi c a l D e v i c e s , a n d L i f e S c i e n c e s I n d u s t r y teams. She is an experienced trial lawyer, having spent more than 15 years investigating and litigating complex criminal and civil cases Her practice focuses on responding t o g o v e r n m e n t i n v e s t i g a t i o n s , c o n d u c t i n g corporate internal investigations, and litigating a wide variety of civil and criminal matters in state and federal courts.

Noller states that, “The government doesn ’ t d i f f e r e n t i a t e f o r p u r p o s e s o f c h a rg i n g ,

p l e a n e g o t i a t i n g o r s e n t e n c i n g ; f r a u d i s f r a u d C h a r i t i e s a n d n o n p r o f i t s w o u l d d o w e l l t o f o l l o w t h e i r f o r- p r o f i t c o u n t e r p a r t s a n d i m p l e m e n t r i g o r o u s c o m p l i a n c e p r og r a m s a n d i n s t i t u t e i n t e r n a l c o n t r o l s t o detect and combat fraud Doing so doesn’t u n d e r m i n e t h e t r a d i t i o n a l c u l t u r e o f n o nprofits Rather, with strong policies and proc e d u r e s f o r i n t e r n a l a u d i t s , i n v e s t i g a t i o n s a n d r e m e d i a t i o n , n o n p r o f i t s a n d c h a r i t i e s can ‘trust but verify

’”

The “trust but verify” phrase is often attributed to Former President Ronald Reagan, when he addressed the former USSR and its leader, Mikhael Gorbachev Upon hearing Reagan’s proclamation, Gorbachev famously responded, “But you say that at all of our meetings!” In reality, Reagan quoted a Russian saying which he knew would be familiar to Gorbachev

Regardless of the source, these words ring true Arm yourself before you give; look into t h e o rg a n i z a t i o n o r i n d i v i d u a l c o n t a c t i n g you, validate that your assets will be allocated to a worthy cause, and conduct due d i l i g e n c e t o p r o v i d e a s s u r a n c e t h a t y o u r assets will be used wisely and in pursuit of the cause of your choice

make success possible

“An accounting degree would not be an option for me without this scholarship. Even with loans, grants and income from part-time jobs, I could not afford all of my college expenses without your support.”

Andrew Barnes - Scholarship Recipient, SIUE

Help pave the way for tomorrow’s CPAs.

The CPA Endowment Fund of Illinois makes an accounting education accessible and attainable to bright, promising college students who alone cannot keep up with the rising costs of the educational requirements necessary to become a CPA.

Funded solely by voluntary contributions, a variety of scholarship and outreach programs are helping students pursue a career in accounting with support for tuition, textbooks, the CPA Exam and more.

Make success possible. Donate today. www.icpas.org/annualfund.htm

The ins and outs of adding personal financial planning to your practice

By Mark J Gilbert, CPA/PFS

Ithink you’d agree that the best CPAs don’t merely prepare a tax return or an accounting write-up, but rather help their clients make decisions for the future. That’s where personal financial planning (PFP) comes in

As a client’s trusted advisor, CPAs are a natural choice for personal financial planning services. After all, you understand your clients’ hopes and dreams for the future, as well as their finances

For those aspiring CPA personal financial planners out there, here’s a basic guide to adding these services to your practice

PFP Defined

e x a m F i n a l l y, e a c h d e s i g n a t i o n r e q u i r e s three years’ work experience in the field In practice, the CFP is the most common of the credentials The CPA/PFS traditionally emphasizes tax planning, while the ChFC emphasizes insurance planning

A principal in the financial planning

f i r m o f Re a s o n Fi n a n c i a l A d v i s o r s , Inc , Mark’s 25-plus years of finance

a n d a c c o u n t i n g e x p e r i e n c e i n c l u d e s

1 3 yea r s in p er s ona

Personal financial planning is a practice area in which advisors provide clients with direction in any or all of the following areas: cash flow, insurance and risk management, investments, taxes, retirement and employee benefits, and estate planning After thoroughly reviewing a client’s current situation, the advisor provides observations and recommendations for improvement Depending on the engagement, the advisor may implement insurance or investment products as part of the planning process

Designations & Memberships

The personal financial planning marketplace is increasingly demanding that advisors demonstrate their expertise through select professional credentials, particularly the Certified Financial Planner (CFP®), Chartered Financial Consultant (ChFC®) and Personal Financial Specialist (CPA/PFS), which is awarded only to CPAs who are members of the AICPA

Each requires completion of a rigorous

In addition, the CFP and CPA/PFS both require successful

We CPAs know the benefits of belonging to professional associations such as the ICPAS for training, education, problem-sharing and networking The largest financial planner organization is the Financial Planning Association (FPA), while the AICPA’s Personal Financial Planning (PFP) division supports CPA financial planners Financial planners who operate on a fee-only basis (and will not accept insurance and investment product commissions) may join the National Association of Personal Financial Advisors (NAPFA)

Registrations & Licenses

Generally, CPAs and others who advise on i n v e s t m e n t s a s p a r t o f t h e i r P F P s e r v i c e s h a v e t o r e g i s t e r w i t h e i t h e r t h e s t a t e i n w h i c h t h e y d o b u s i n e s s o r w i t h t h e S E C I n v e s t m e n t a d v i c e i n c l u d e s b o t h c l i e n t investment recommendations (non-discretionary management) and buying and selling investments on behalf of clients (discretionary management).

In Illinois, state registration is required when client assets are less than $100 million Otherwise, planners must register with the SEC. Registration takes place at both the firm level (as an investment advisor) and at the individual level (as an investment advisor representative), except in certain solo practices. Also note that financial planners who intend to sell commissionable investment and/or insurance products have to be affiliated with a broker-dealer firm, and become a registered representative of that firm Investment advisor representatives and registered representatives must also success-

fully complete one or more securities license exams in order to do business These exams are administered by FINRA, the Financial Industry Regulatory Authority, which is also charged with supervising broker-dealer firms and registered representatives. Investment advisor representatives have to pass the Series 65 exam, while registered representatives have to pass the Series 6 exam to deal in mutual fund and other investment company products, or the Series 7 exam to also deal in corporate securities, municipal securities, options and direct participation programs

Business Models

At the onset of establishing a personal financial p l a n n i n g b u s i n e s s , C PA s h a v e t o d e c i d e whether they intend to collect commissions on the investment and insurance products they recommend, charge fees to clients for advice or services, or both. Those who collect commissions are able to sell insurance products, and often include lower net-worth clients as part of their target market

M o s t p l a n n e r s , h o w e v e r, c h o o s e t o e a r n compensation through both fees and commissions, thereby expanding their services to the widest market available. This type of dual registration means you’re subject to the compliance requirements of both FINRA and the state or SEC

In light of professional liability, CPA personal financial planners often operate their planning businesses out of a separate LLC or other entity

PFP Benefits

From a business perspective, adding personal f i n a n c i a l p l a n n i n g s e r v i c e s t o y o u r p r a c t i c e helps you to diversify your revenue stream It also smoothes the typically cyclical nature of cash flows during busy season and other tax-filing deadlines.

From a personal standpoint, practitioners can develop their practices any way they want to. If you want to target a niche market like corporate e x e c u t i v e s o r r e t i r e e s o r t e a c h e r s o r a t h l e t e s , you can do so If you want to offer limited services like hourly consultations, or more complete s e r v i c e s l i k e p r o j e c t - b a s e d e n g a g e m e n t s , o r comprehensive services such as ongoing portfol i o m a n a g e m e n t a n d p e r f o r m a n c e r e p o r t i n g , you can do that too

There are thousands of ways to offer some form of personal financial planning The challenge is getting up to speed on PFP practices a n d d e t e r m i n i n g w h a t ’ s t h e b e s t f i t f o r y o u r interests, experience and skill set

Score with the Big Four

Five ways to make yourself the Big Four’s next All- Star recruit

By Derrick Lilly

Whether you’re an accounting student or a young professional still getting your feet wet in the accounting and finance world, there’s likely one thing you’re pining for: Big Four experience

Having a Big Four name on your resume simply looks awesome The only problem is, most of your peers are chasing the very same dream

“The competition is fierce,” says Alyson Ryan, a former campus recruiter for KPMG and PwC, and director of Business Career Services at Loyola University in Chicago “It’s not unusual for recruiters to get 800 resumes during a single four-hour career fair ”

And don’t forget that every applicant is competing for a limited number of widely marketed positions, posted on campuses, at career fairs, on the firm’s website and on job boards across the web, among other places.

Here, then, are five ways to stand out from all that competition

1. Make the right moves

Your first steps: Check your ego at the door, take advantage of every opportunity to make contacts and don’t get discouraged along the way You can absolutely find a position with the Big Four, and it never hurts to ask for help.

“It’s hard to get in if you don’t go through the right channels or get referred by someone within a firm,” says Ryan. “Applicants can’t be shy about using their contacts for referrals If you’re still in college, take advantage of the incredible amount of access to recruiters that you’ll never have again. It’s critical to meet campus recruiters and career advisors, and then stay in contact with them ”

“The most important thing is to keep every line of communication open,” adds Warren Smith, Ernst & Young’s Midwest People Leader, especially for experienced hires. “We’re in a highly relationship-oriented business, and your ability to network and connect with people is

always important About half of our experienced hires are by way of employee referrals.”

Insider Tip: Don’t forget about your campus career center Both Ryan and Smith strongly encourage current students and alumni to turn to campus career centers for help in making connections, locating internships and career opportunities, fine-tuning resumes and honing interview skills

2. Make a good impression fast

“You don’t have a lot of time to make an impression on recruiters at most events, so you have to present yourself professionally, you need to be friendly and approachable, and you have to follow up,” says Ryan

But be forewarned; don’t get too friendly Chances are you’ll get to know some recruiters pretty well if you frequent career events, but you can’t consider them your friends or be too casual; after all, it’s a professional relationship Always keep in mind that recruiters and hiring managers are asking themselves, “Is this candidate someone we would feel comfortable putting in front of our clients?”

“Firms are looking for well-rounded recruits,” says Ryan. “There’s a misconception that being really book smart is all that matters to succeed in public accounting, but that’s absolutely not true. You have to be personable; you have to be someone who can bring in business as you progress in your career.”

“Working everyday hand-in-hand with clients in the professional services business creates a wide range of stressful and challenging situations,” adds Smith. “Being able to flex your style, and connect and engage with different people in different situations, is very important.”

3 Be socially conscious

While a good academic track record is important especially if you’re currently a student candidates also need to demonstrate attributes such as strong technical and soft skills, relevant work experience, the ability to manage commitments and a proven interest in volunteerism.

because clients and candidates are increasingly expecting solid evidence that firms are committed to the community and environment,” says Ryan “Firms expect their staffs to participate in volunteer initiatives, and are looking for candidates who are already active ”

That doesn’t mean you should list each and every club or volunteer initiative you’ve ever been involved in on your resume “It’s not just the fact that you’re involved or have volunteered; we’re looking at what you’ve done during that process,” Smith stresses

“You don’t want to only be able to say, ‘I’m a member and I go to the meetings,’” Ryan continues “You want to be able to say, ‘I was elected to this position, and these are my accomplishments ’”

4. Give a killer presentation

Of course, the best place to detail your accomplishments is on a carefully crafted resume, so get it critiqued by your contacts and career center staff

“It’s really important to have it in a layout that’s pleasing to the eye and free of unnecessary information,” says Ryan “Decisions on who to invite to personal interviews often have to be made very quickly, and I commonly see resumes that make it challenging to find the critical information recruiters look for ”

Including a clear objective statement unique to the opportunity you’re applying for is critical. “People who can clearly state their objectives and why they feel their experiences are valuable are the ones who really stand out,” says Smith “We expect applicants to have

done their homework and to know the organization they’re applying to Hopefully that’s portrayed on their resume ”

Applicants also should pay particular attention to any application rules or requested details to ensure their resumes are accepted in the first place Meaning, if a firm posts 20 distinct jobs and says to apply for one, don’t apply for them all.

“Sometimes applicants think that applying for every single position will increase their chances of getting an interview, but the opposite happens,” warns Ryan “There have been situations where recruiters simply say, ‘You can’t follow directions, I’m not interviewing you ’”

Insider Tip:

If you don’t have your CPA, include your eligibility date on your resume “Recruiters work backwards from that date to determine where you fit in the recruiting cycle,” says Ryan

5. Practice Your Interview

W h e n y o u ’ r e c a l l e d i n f o r a f a c e - t o - f a c e i n t e rview, be ready to shine. Preparation, performance a n d p u n c t u a t i o n a r e t h e “ t h r e e P s ” t h a t m a t t e r, says Smith

First, research the firm you’re interviewing with. You have to understand the organization, what it’s known for, what’s important to it, and what type of person it’s looking for You can learn most, if not all, of this from the firm’s website.

Next, “Be prepared to come in and tell your story,” says Smith “A lot of candidates look great on paper, but in person they’re less dynamic. Those that do well always have a very cohesive story about why they chose to do the things they’ve done, what they’ve learned as a byproduct of their experiences, and why they fit into the firm.”

Insider Tip:

Have a good question ready “One thing that always baffles me is when a candidate doesn’t have any questions for me, ” says Smith. “Surely, you can ask me something that will show me you ’ ve done your homework and are truly interested ”

Finally, it never hurts to show your appreciation “Call me old-fashioned, but I like a ‘Thank You’ note,” says Smith “It demonstrates your conscientiousness and appreciation, and when it’s not done it sticks out ”

“A well-written personalized note that shows a genuine interest in the position can help candidates stand out to recruiters or hiring managers who are still on the fence,” Ryan adds

Remember, though, that landing a Big Four job isn’t the be-all-end-all of your career “There are advantages to working for small and midsized firms, and there are advantages to working for the Big Four,” says Ryan. “You learn these advantages by meeting and interacting with people who work at these different firms; the Big Four isn’t for everyone and there’s nothing wrong with that ”

Can You Keep a Secret?

What privileges and protections apply to Illinois CPAs and their clients?

By Brian J Hunt, CPA/JD

Not all information is intended for public d i s c l o s u r e , a n d t h e l a w r e c o g n i z e s t h i s f a c t .

The two most common legal protections are the attorney-client privilege and the work-product doctrine In Illinois, accountants also have their own privilege, known as the accountant-

client privilege

Of course, an assertion of protection is easy to make But, if contested, a court may rule that p r o t e c t i o n s s i m p l y d o n ’ t a p p l y S t o p k a v s American Family is a case in point.

The Stopkas had employed a builder for a single-family home project. The builder, in turn, hired various subcontractors, one of which caused a fire Subsequently, the subcontractor’s general liability carrier, American Family, was engaged to remediate the construction

Aside from their lawyers, the Stopkas also relied heavily on their CPA and financial advis o r, Wo l o w i c k i , w h o p r o v i d e d a d v i c e a n d

a c t e d a s t h e i r r e p r e s e n t a t i v e i n c o m m u n i c ations with American Family, various remediation subcontractors and their attorney.

When the relationship between the Stopkas and American Family broke down, the Stopkas filed suit against the liability carrier and, as is customary, American Family requested the form a l p r o d u c t i o n o f c e r t a i n d o c u m e n t s T h e Stopkas withheld 22 emails sent to and from Wo l o w i c k i a n d t h e i r a t t o r n e y, a s s e r t i n g t h a t t h e s e i t e m s w e r e p r o t e c t e d b y t h e a t t o r n e yclient privilege, the work-product doctrine and t h e a c c o u n t a n t - c l i e n t p r i v i l e g e T h e C o u r t therefore was forced to decide on the applicability of these protections

The attorney-client privilege is designed to encourage open discussion between attorneys a n d t h e i r c l i e n t s . To b e e n f o rc e d , t h e p a r t i e s have to establish that the communications 1). were made to any attorney acting in their legal capacity, 2) originated in the belief that they w o u l d n o t b e d i s c l o s e d , 3 ) i n v o l v e d l e g a l

a d v i c e , a n d 4 ) r e m a i n e d c o n f i d e n t i a l T h e p r i v i l e g e p r o t e c t s c o m m u n i c a t i o n s flowing from the client to the attorney and vice versa, but is to be construed within the narrowest limits possible.

By contrast, the work-product doctrine p r o t e c t s d o c u m e n t s t h a t a n a t t o r n e y o r party representative creates in anticipation of litigation. A lawsuit need not be underway, “provided the prospect of litigation is not remote ” The protection prevents the d i s c l o s u r e o f p r o t e c t e d d o c u m e n t s o r communications, but doesn’t protect the underlying facts from disclosure

T h e s t a t u t o r y a c c o u n t a n t - c l i e n t p r i v il e g e i n I l l i n o i s , l i k e t h e a t t o r n e y - c l i e n t p r i v i l e g e , p r o m o t e s o p e n a n d f o r t h r i g h t disclosures by individuals using accounting services. It has four requisite elements: 1) the communication must originate in t h e c o n f i d e n c e t h a t i t w i l l n o t b e d i sclosed, 2). the confidential element must be essential to maintaining the relation of the parties involved, 3) the relationship i t s e l f m u s t b e o n e t h a t p u b l i c o p i n i o n believes should be protected, and 4). disclosing the communication would injure the relationship between the parties more t h a n t h e u n d e r l y i n g l i t i g a t i o n w o u l d b e benefited by its disclosure

Furthermore, the accountant-client privilege doesn’t extend to communications disclosed to third parties, unless those parties have a common interest with the disclosing party

Once the Court compared these privileges, it turned to the question of application As for the work-product doctrine, the Court concluded that certain documents were protected insofar as they were created just before or soon after the action was filed. However, it concluded that the accountant-client privilege didn’t prevent disclosure, and further noted that the privilege only protects “accounting services involving opinions on financial statements,” and doesn’t extend to non-financial services

Although the Court acknowledged there were services that could be interpreted as giving rise to the accounting privilege, it concluded that the relevant issue wasn’t the general nature of Wolowicki’s work, but rather whether the specific documents named involved activities that were protected. Ultimately, the Court concluded that the Stopkas failed to carry the burden of proof

For purposes of the attorney-client privilege, the Court separated the remaining emails into two categories: Emails between Wolowicki and the Stopkas, and emails sent to or by one of the Stopkas’ attorneys to Wolowicki and/or the Stopkas.

Under the first category, the Court noted that just because an email doesn’t involve an attorney as a direct sender or recipient, it doesn’t necessarily mean that the attorney-client privilege won’t apply. However, the Court also noted that, irrespective of the sender or recipient, the attorney-client privilege extends only to communications that either seek or give legal advice Concluding that this category of documents didn’t reflect any intention of confidentiality, the Court determined that it wasn’t protected by the attorney-client privilege

Under the second category, the Court noted that the mere involvement of an attorney isn’t sufficient to establish the attorneyclient privilege. Rather, each document has to show all the hallmarks of the privilege. The Court also noted that a privilege can be waived by disclosure to third parties, but that analysis of the attorney-client privilege also has to consider whether the third party is a proper agent of the client

Ultimately, the Court concluded that disclosure of information to Wolowicki, who was a “central cog” in the Stopkas efforts to resolve this matter, didn’t constitute a waiver of the attorney-client privilege Accordingly, it found that, in those instances where the communication was to or from an attorney and originated in the belief of confidentiality regarding legal advice and remained confidential, the attorney-client privilege did apply

For accountants, attorneys and the people who rely on them, the Stopka decision is a useful example of how information should be generated and shared in order to protect it from disclosure, and how a court ultimately will apply those protections

Brian J Hunt is the founder and managing principal of The Hunt Law Group, LLC, which focuses on the counseling and representation of CPAs and other business professionals, and on the resolution of business disputes Brian was recently selected as a “2013 Illinois Super Lawyer in Business Litigation ” Reach him at 312 384 2301 or bhunt@hunt-lawgroup com

Audit Hike

A multitude of factors have conspired to increase audit fee volatility

By Carolyn Kmet

Ten years ago, SarbanesOxley (SOX) was signed into law. Largely considered to be the most significant piece of reform legislation since the Securities and Exchange Act of 1934, SOX set new and enhanced standards for public companies, and management and accounting firms. Since its enactment, financial transparency and compliance have become an absolute must, and auditors are now part of every company’s front-line force

So what has this meant to audit fees?

In 2004, accelerated filers became the first group required to comply with Section 404 of SOX. This section mandated that all publicly traded companies would need internal controls and procedures in place for financial reporting, and that management would take responsibility for these measures As such, Section 404 was expected to be the most expensive section of SOX to implement Audit as well as non-audit fee data disclosed by SEC accelerated filers in electronic filings was compiled into an Audit A n a l y t i c s r e p o r t , Au d i t Fe e s a n d N o n - Au d i t Fees: A Ten Year Trend. According to this report, the average amount of audit fees paid per $1 m i l l i o n o f r e v e n u e i n c r e a s e d f r o m $ 4 0 5 i n 2003 to $596 in 2004, a 47-percent jump

Since then, the report found that audit fees have trended downwards, and in 2011 they reached their lowest value since 2004 $466 of audit fees for every $1 million in revenue.

“I believe the downward trend was due to t h r e e c o n c u r r e n t f a c t o r s , ” e x p l a i n s D o n a l d Whalen, Audit Analytics’ director of research

“First is the fact that many of the initial costs

incurred to implement the requirements of SOX 404 were one-time costs For some companies it may have taken a couple of years to improve ICFRs (internal controls over financial reporting) to the point of effectiveness. But after the i m p r o v e m e n t i s a c h i e v e d , t h o s e p a r t i c u l a r costs cease.”

S e c o n d , s a y s W h a l e n , “ I m p r o v e d s o f t w a r e s y s t e m s a n d o t h e r p r o c e d u r e s e n a b l e d m o r e e f f i c i e n t a c c e s s t o i n f o r m a t i o n , r e d u c i n g t h e costs associated with independent audits. And lastly, audit firms have become more efficient a s t h e p r o c e s s o f i m p l e m e n t i n g S O X 4 0 4 requirements has become more routine ”

H o w e v e r, a c c o r d i n g t o a F i n a n c i a l E x e c utives Research Foundation survey released earlier this year, private companies reported a 7percent increase in external audit fees in 2011, while public ly he ld c ompa nie s re porte d a 5percent increase. The 2012 Audit Fee Survey summarized the responses of executives from 111 p u b l i c l y h e l d U S c o m p a n i e s , 1 3 8 p r ivately held U S companies, four foreign companies and 24 nonprofit organizations

Specifically, publicly held companies reported paying an average of $3 9 million in total audit fees for FY2011 The primary reason given for the increase was more work for internal audit staff and other finance staff. Private company respondents reported an average of $231,200 in total audit fees in 2011 They cited more work for internal audit staff as a primary reason for the increase, as well as inflation.

The 2011 numbers deviated slightly from the trend of recent years In 2008, 2009 and 2010, Audit Fee Survey respondents from both private and public companies reported that fees either increased less than 4 percent over the prior year, or decreased Even so, Andrew Schrage, coowner of Money Crashers, a personal finance blog, points out that the subtle rise over the past few years is nothing compared to the early 2000s.

“Audit fees rose by more than 100 percent from 2001 to 2004, right around the time of SOX and the collapse of Enron and Arthur Andersen,”

Reshma Soni

Alan Sorba

Kent Sorenson

Alain Sothikhoun

Veronica Soto

Fernandez

Megan Sowash

Debora Spagnolo

Alexandra Spellman

Marcin Spik

Sharon Sritong

Ryan St. Joseph

Valerie Stables

Heather Stachnik

Jason Stanckiewitz

Kim Standen

Lauren Stanley

John Starr

Jackie Staudacher

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Stephanie Steinbach

Eli Steinberger

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Ross Stern

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Megan Stockwell

Gregory Stoerger

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Julie Stoller

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James Stonehocker

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Scott Stosek

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Katie Sullivan

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Ming Sun

Ro Chia Sun

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Sunith Suresh

Stella Suryanto

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Michael Sutis

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Azumi Suzuki

Yasushi Suzuki

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T

Miki Takahashi

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Christopher Thiersch

David Thompson

Kyle Thompson

Mark Thompson

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Erin Thorson

YiShan Tian

Celine Tischler

Susanne Tisljar

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Matthew Toczylowski

Denica Todorova

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Molly Twigg

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James Tyner

Sarah Tysk

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Yasuyo Uchida

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Jose Verastegui

Derly Vinchery

Jerod Violett

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Aaron Wilson

Michael Wilson

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Daniel Winiarski

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Matthew Wloczkowski

Jacek Wlodek

Norman Wohlschlaeger

David Wolfe

Benjamin Wolfson

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Tatiana Wood

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Elizabeth Wright

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Kuan-ying Wu

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Xi Xi

Qili Xie

Xiaoqi Xu

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Jin Xun Y

Barbara Yager

Fang Yang

Meng Yang

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Wei-Ning Yang

Olya Yashchenko

Wei Ye

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Jessica Yen

Dong Wan Yeom

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Jessica Yonto

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ILLINOIS CPA SOCIETY 2011 EXCEL AWARD RECIPIENTS

Chiu Yin Edward Young

Fang-Yun Yu Zhaohui Yu

Zhujing Yu

Sheila Yuckman

Jeany Yuen

Igor Yukhvidin

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Wei Zhang

Weiqi Zhang

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Zhifei Zhang

Jing Zheng

Lu Zheng

Qun Zheng

Ying Zheng

Qijun Zhou

Wanqing Zhou

Xiaoxian Zhou

Dan Zhu

Jie Zhu

Puyu Zhu

Tony Zibert

Kelly Zoellick

Oleg Zolotarev

William Zook

Jeffrey Zwier

The Excel Award is granted to Illinois CPAs who achieved a total average score of 90 or more and completed all four parts of the exam within two consecutive testing windows and were in the top five percent of the scores of those who completed all the requirements in 2011 in Illlinois.

ICPAS GOLD MEDAL RECIPIENT

Ekaterina Saeva

University of Illinois, Urbana-Champaign

Ernst & Young LLP, Chicago

Richard Reuter

University of Wisconsin, Madison

Deloitte & Touche LLP, Chicago

Fang Fang

University of Illinois, Urbana-Champaign

PWC Shanghai, China

Adrienne Green

University of Michigan, Ann Arbor

FASB, Norwalk, CT

Mathieu Abernethy

University of Notre Dame, South Bend

Deloitte & Touche LLP, Chicago

ICPAS SILVER MEDAL RECIPIENT

Tyler Schehl

University of Illinois, Urbana-Champaign

CNA Financial, Chicago

EXCEL AWARD RECIPIENTS

Dennis Kreiter

University of Miami, Coral Gables

PricewaterhouseCoopers LLP, Chicago

Ellen Rewalt

University of Michigan, Ann Arbor

PricewaterhouseCoopers LLP, Chicago

Benjamin Schnelle

Southern Illinois University, Edwardsville

Millers First Insurance Company, Alton

Geoffrey Bowers

Marquette University, Milwaukee

PricewaterhouseCoopers LLP, Chicago

ICPAS BRONZE MEDAL RECIPIENT

YaoXiao

University of Illinois, Urbana-Champaign

Timothy Fornero

University of Michigan, Ann Arbor

PricewaterhouseCoopers LLP, Chicago

Tania Tomanova

University of Illinois, Urbana-Champaign

Ernst & Young LLP, St. Louis

Justin Knobeloch

Bradley University, Peoria

RLI Insurance Company, Peoria

Daniel Quinn

Indiana University, Bloomington

Ernst & Young LLP, Chicago

he says “This makes the recent 5-percent and 7-percent increases seem paltry.”

Certainly, there were other factors affecting audit fees besides SOX. Tom Thompson, senior associate, research, with the Financial Executives Research Foundation, explains how the increase in internal Section 404 compliance costs reported by some companies was mainly due to the implementation of new IT systems or acquisitions. Other survey respondents reported a decrease due to automated controls and the restructuring of business and financial systems

The 2012 Audit Fee Survey also suggests that risk management will remain an area of focus for finance professionals According to the survey, 73 percent of public company respondents who were accelerated filers said their companies had a risk-management process in place However, of the non-accelerated filers, only 40 percent had such processes in place Finally, of the companies that did have risk-management processes in place, a clear majority of each responding group indicated that risk management lay within management’s jurisdiction rather than within internal audit or the audit committee of the board of directors

“ G i v e n t h e c u r r e n t s t a t e o f b u s i n e s s e s , r i s k m a n a g e m e n t w i l l r e m a i n a n a r e a o f focus for finance professionals,” said Financial Executives International President and CEO Marie Hollein in a press release.

Dr. Thomas Weirich, CPA, is a professor of accounting with Central Michigan University and a former Academic Accounting Fellow with the U.S. Securities and Exchange Commission. He says that, “Audit fees increased not only as a result of SOX compliance, but also due to more detailed audit work as additional scrutiny of an entity’s financial statements was required due to various financial statement frauds With the major frauds being reported, auditors also tried to control audit risk with related litigation issues, which also resulted in more detailed work and thus an increase in audit fees ”

According to the Audit Analytics report, l i t i g a t i o n r i s k e x p o s u r e a l s o h a s i m p o s e d cost pressures on the audit industry “The litigation inventory against the Big Four firms is daunting,” the report states “For example, while not admitting to any wrongdoing, an auditor settled the Parmalat securities classa c t i o n m a t t e r t h a t w a s f i l e d i n J a n u a r y o f 2004, for $149 million These types of payments and the ongoing exposure from outs t a n d i n g l i t i g a t i o n m u s t b e f a c t o r e d i n t o (audit) fees.”

Business globalization is another factor driving audit fees upwards in recent years

Globalization results in a significant expansion of company operations into emerging markets. The Audit Analytics report suggests that these emerging markets lack strong corporate governance and operate under diff e r e n t b u s i n e s s p r a c t i c e s a n d a c c o u n t i n g policies, all of which create additional audit work to consolidate operations and to comply with local legal and regulatory requirements for statutory reporting

On the flip side, it’s possible that a rise in audit fees could be related to marketplace price correction Cameron Keng, founder of Autotax, an SaaS solution, explains. “During the Arthur Andersen years, accounting firms were artificially offering audits at fees well below cost Audits were used as loss leaders to attract lucrative consulting projects The realization rate on $375, or one hour of chargeable staff time, was as low as 20 percent, or $75 ”

Keng also believes that economic conditions artificially deflated audit fees He says t h a t s i n c e a c c o u n t i n g f i r m s a r e g e n e r a l l y d e t a c h e d f r o m s e a s o n a l i t y, t h e e c o n o m y r a r e l y a f f e c t s t h e m “ B u t t h e n t h e w o r l d came crashing down,” and clients started d i s a p p e a r i n g “ A l l o f t h e B i g F o u r f i r m s began to undercut each other. Projects were b e i n g a g g r e s s i v e l y d i s c o u n t e d i n o r d e r t o avoid layoffs ” Firms were willing to do this in order to retain their staff and ride out the downturn “Audit fees are going to continue to rise because they’ve been artificially lowered for years They’re simply returning to market rates according to their real value.”

Certainly, the consensus is that audit fees will rise, and for a variety of reasons. “The P u b l i c C o m p a n y A c c o u n t i n g O v e r s i g h t Board (PCAOB) has proposed a mandatory rotation of external audit firms, something most businesses vehemently oppose,” says S c h r a g e “ S h o u l d t h i s m e a s u r e p a s s , y o u c a n m o s t c e r t a i n l y e x p e c t a s i g n i f i c a n t price jump.”

Indeed, according to the Audit Fee Survey, 95 percent of public company respondents and 85 percent of private company respondents don’t support the PCAOB proposal.

Before panic sets in, Thompson emphasizes that the PCAOB measure is still in the very early stages “At the moment it’s just a c o n c e p t r e l e a s e , ” h e s a y s “ I t w o u l d s t i l l ne e d to g o throug h the propos a l proc e s s B u t i f i t w e r e t o b e c o m e a s t a n d a r d , t h i s could impact a company’s audit fees.”

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Top Jobs for CPAs

The accounting field is bursting with opportunities Here’s where to look for them

By Selena Chavis

It’s a great time to be a CPA A Bureau of Labor

S t a t i s t i c s f o r e c a s t , i n f a c t , i n d i c a t e s t h a t t h e number of accounting and auditing jobs in the U n i t e d S t a t e s w i l l i n c r e a s e 1 6 p e rc e n t ( o r 190,700 positions) by 2020. Specifically, the Bureau believes that demand for comprehensive financial documentation will increase in response to ongoing financial crises and regulatory changes.

“The accounting industry is one of the best c a r e e r f i e l d s a t p r o v i d i n g s t a b i l i t y, l o n g e v i t y and mobility. That’s something we all seek in our careers,” says Jeramy Kaiman, area managing director for Garelli Wong

Kaiman points to Forbes’ recent article, “25 Best Jobs of 2012,” noting that three jobs typically performed by professionals with accounting backgrounds landed in the top 15 financial analyst, accountant and financial advisor

As the supply-and-demand equation continues to tilt in favor of CPAs, many are seeking out those career paths that best equip them for the future

“A CPA designation with specialization often e qua te s to hig he r inc ome , ” e x pla ins M a rily n Bird, Chicago-based district president for Robert Half International (RHI) “That gets a lot of people’s attention ”

There are a number of drivers currently impacting the momentum of certain specializations. The complex nature of IT investments, for example, is driving demand for accountants who understand technology frameworks. And an ever-expanding regulatory environment continues to boost the need for accountants with astute knowledge of compliance issues.

“At a really high level, accounting is a great field to go into for the opportunities, flexibility and variety of experiences,” says Grant Thornt o n M i d w e s t M a n a g i n g P a r t n e r M i k e H a l l

“ W h e n y o u t a l k a b o u t s p e c i a l i z a t i o n a n d what’s hot, you can look at the business environment and simply analyze that ”

The outlook for anything related to analysis is good, says Bird, adding that, “Looking at data and helping an organization formulate a strategy that’s where you see the most investment being made in those with a CPA designation.”

Here, then, are some of the hottest areas for CPAs in the coming year

Financial Analysis

According to RHI’s 2013 Salary Guide, demand f o r f i n a n c i a l a n a l y s t s o f t e n e x c e e d s s u p p l y C o m p a n i e s a r e s e e k i n g h e l p f r o m C PA s w h o c a n i d e n t i f y k e y t r e n d s a n d o f f e r f i n a n c i a l insight into investments With a starting salary t h a t r a n g e s f r o m $ 7 0 , 0 0 0 t o $ 9 4 , 0 0 0 , t h e s e p r o f e s s i o n a l s a n a l y z e f i n a n c i a l d a t a ; p r e p a r e reports and charts to illustrate technical information; interpret data directly affecting investment programs; and monitor economic, industrial and corporate developments through outside sources Financial analysts specializing in M&A valuations in both public accounting and c o r p o r a t e s e t t i n g s a r e i n p a r t i c u l a r d e m a n d , says Kaiman

Business Systems Analysis

Expertise in IT-related initiatives remains a top s p e c i a l i z a t i o n f o r C PA s A c c o r d i n g t o R H I ’ s Salary Guide, companies are specifically seeking experts to identify IT infrastructures that will produce the greatest ROI.

“We’re bringing in more IT professionals just because of advances in technology When you look at clients expanding globally, there are all kinds of technology considerations,” Hall explains, citing cloud computing and social networking as examples

Typically those placed in the role of business systems analyst need knowledge of both financial and business systems in order to analyze the best course for IT implementation, upgrades and enhancement The ability to respond quickly to market conditions and technological advancements is key to this role. Starting salaries typically range from $54,000 to $75,000, peaking at more than $100,000 for management roles

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Top Industries Now Across the board, experts agree that the h e a l t h c a r e i n d u s t r y represents one of the greatest opportunities for CPAs From a rapidly expanding regulatory structure to the need to implement large-scale, complex IT initiatives, demand for CPAs in healthcare is not expected to keep pace with supply

Current initiatives impacting the industry include the Health Information Technology for Economic and Clinical Health (HITECH) Act, the move to the new ICD -10 classification system and pay-for-performance initiatives Accounting expertise will be sought in the areas of business analysis, compliance, financial analysis and tax

F i n a n c i a l s e r v i c e s is another high-voltage sector for CPAs As the economic outlook continues to improve, financial services firms have a need for functions such as trade support, operations, compliance and financial analysis The financial services umbrella covers organizations such as national and multinational banks, insurance companies with an investment arm, hedge funds and other large investment firms

Technical Accounting

“The environment is such that we are goi n g t o s e e m o r e r e g u l a t i o n s , ” s a y s H a l l Which means that skills that address this e v e r- e v o l v i n g a n d i n c r e a s i n g l y c o m p l e x landscape will remain a top-tier specialty going forwards The professional specializing in this area is aligned with research, policy development and SEC, GAAP and IFRS compliance

Adding to the demand for technical accountants are the federal Foreign Corrupt Practices Act, which, amongst other things, addresses accounting transparency requirements under the Securities Exchange Act of 1934, and International Financial Reporting Standards and international tax structures

While not all niche areas of accounting will equate to more pay, technical expertise typically does raise salary levels, says K a i m a n . S t a r t i n g s a l a r i e s f o r c o m p l i a n c e

p r o f e s s i o n a l s i n a l a rg e c o m p a n y r a n g e

f r o m $ 6 2 , 0 0 0 t o $ 8 3 , 0 0 0 a n d p e a k a t more than $220,000 for Chief Compliance Officer roles These roles will be particularly strong in the healthcare arena going forwards, thanks to rapidly evolving regulation of the industry.

Tax Accounting & Auditing

Tax and auditing functions remain in high demand and offer accountants both future flexibility and mobility, Kaiman explains T h e s e p r o f e s s i o n a l s h a v e b r o a d - b a s e d knowledge that intersects with a multitude o f a r e a s , i n c l u d i n g g l o b a l b u s i n e s s a n d forensic accounting.

“There’s such an overlap in skill sets for audit and for tax structuring,” says Hall “If you look at the market, there are shortages. International tax in particular is a hot area ”

Starting salaries for tax and auditing professionals in public accounting firms start in the mid-$40,000s and go all the way up to $58,000-plus in midsized firms. Salaries can reach beyond $183,000 for management-level positions in large firms

Forensic Accounting

Integrating accounting, auditing and investigative skills, the field of forensic accounting provides accounting analysis of financial systems and operations suitable for courtroom deliberations and dispute resolution The most obvious example is an investigation of corporate fraud and embezzlement.

According to Hall, forensic accounting often crosses into various other specializations, including valuation work and technical accounting “We have a very robust forensics group that deals with issues such as foreign corrupt practices, contract disputes and monitoring Demand for forens i c a c c o u n t i n g h a s b e e n g e n e r a t e d b y large damages cases,” he explains. S a l a r y r a n g e s f o r f o r e n s i c a c c o u n t a n t s s t a r t a t $ 6 0 , 0 0 0 a n d c a n r e a c h t h e m i d$ 9 0 , 0 0 0 s b a s e d o n e x p e r i e n c e . S e n i o r managers in this field can make upwards of $150,000

Cost Accounting

Hiring trends in the manufacturing sector of Chicago have seen particular improvement, says Kaiman And, in fact, the RHI S a l a r y G u i d e i n d i c a t e s t h a t d e m a n d f o r cost accountants will hold steady nationally over the next year

“One of the most high-demand jobs is c o s t a c c o u n t i n g , ” K a i m a n n o t e s “ M o s t companies struggle to fill cost accounting positions at all levels.”

C o s t a c c o u n t a n t s h e l p m a n u f a c t u r e r s institute efficient operational practices and p r o c e s s i m p r o v e m e n t s b y s y s t e m a t i c a l l y r e v i e w i n g t h e c o s t s a s s o c i a t e d w i t h t h e development or distribution of a product Salaries range from the low $40,000s to mid-$60,000s for entry-level positions and those with a few years’ experience Senior managers can earn more than $100,000 a year in a large company.

The opportunities are wide and varied for accountants, and the outlook going into 2013 is extremely positive. “It’s an exciting time for the accounting field,” says Hall “It’s a rigorous profession, and people need to be prepared.”

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The Buy/Sell Guide

10 helpful steps for navigating accounting practice M&As

By Sheryl Nance -Nash

There’s strength in numbers. It's not surprising, then, that during the past few years there’s b e e n a n i n c r e a s e i n m e rg e r a n d a c q u i s i t i o n deals involving CPA firms, especially among a number of regional firms like J H Cohn, LarsonAllen, Dixon Hughes and Baker Tilly

Despite the rarity of “mergers of equals” in the industry (the vast majority are consolidating deals with dominant acquirers), the success of the EisnerAmper merger in 2009 proved the v a l u e o f s u c c e s s f u l l y i n t e g r a t i n g c a p a b i l i t i e s and combining scale

According to Dino Mauricio, a partner with S c h a f f e r C o n s u l t i n g , w h i c h s p e c i a l i z e s i n m e rg e r i n t e g r a t i o n a n d l e a d e r s h i p d e v e l o pment, one of the most interesting CPA deals in the past two years was a global merger involving the acquisition of Weiser, LLP in New York City by Paris' $1billion revenue player Mazars.

“They had to overcome several challenges, i n c l u d i n g c r o s s - b o r d e r i n t e g r a t i o n , c u l t u r a l

gaps and regulatory hurdles, but they are now the sixth largest in the world, generating about $1 2 billion a year,” Mauricio comments

T h e m a r k e t i s c u r r e n t l y v e r y a c t i v e M a n y professional services firms are evaluating their portfolios and building M&A strategies to purs ue hig he r g rowth a lte rna tiv e s , s a y s Jim Tunney, a partner leading the Chicago deals practice of PwC “There’s also been some selling activity driven by motivation to realize gains prior to pote ntia l pos t-e le c tion ta x inc re a s e s . This has created some fuel for an active deal market,” he says

According to Allan Koltin, CEO of Koltin Consulting Group, a Chicago firm that consults with CPA firms on practice management issues, managing partners at the top 100 CPA firms today spend no less than 25 percent and as much as 75 percent of their time on mergers and bringing in high-level lateral talent

“For many, the role has evolved from CEO to part-time investment banker The range of time is usually a philosophical one dealing with how aggressive their growth plans are, as well as how they want to go about growing organic versus lateral talent,” he explains.

There are plenty of reasons for all this matchmaking “Succession issues are driving a lot of transactions,” says Howard Allenberg, CFO of BDO USA in Chicago “ T h e B o o m e r s d o n ' t want to work forever, and some are finding they m a y n o t h a v e p a r t n e r s i n t h e i r f i r m w h o c a n succeed them or want to take on the financial o b l i g a t i o n s a s s o c i a t e d w i t h s u c h c h a n g e s , s o they’re combining forces to settle the leadership/succession issue.”

For many CPA firms, an M&A-driven growth strategy is a priority “But the ability to execute that M&A strategy into tangible results will dist i n g u i s h t h e w i n n e r s o v e r t h e n e x t d e c a d e , ” says Mauricio.

There's much at stake “Essentially, successful acquirers will be able to grow at a faster pace to maintain a competitive edge over those solely reliant on organic growth Other advantages

include the opportunity to selectively acquire niche and industry experts (as the market moves more towards specialists and away from generalists), to proactively deal with succession planning issues and better leverage the firm's cost structure,” he explains.

Although an M&A might be a smart business move, it can create its own chaos Whether buying, selling or valuing a practice, be guided by these 10 critical steps

1. Define your long-term strategy

“Be sure the kind of growth that you seek, whether it’s geographic, new capabilities, longterm profits, acquiring talent, or to solve succession planning issues, is clearly defined,” says Mauricio Cost efficiencies or overhead consolidation can be benefits, but should never be the primary drivers for acquiring CPA firms

2. Be realistic about value

There can be “unreasonable expectations of value….There can be a big disconnect. Sellers need to accept the reality of their particular situation and the marketplace,” says Allenberg.

“Don’t use the old rules because things have changed,” adds John Martinka, of Martinka Consulting, which specializes in business acquisitions “Many years ago the AICPA proclaimed that CPA practices are valued by a formula that is a function of revenue (one times annual revenue with a 25-percent margin either way). This hurts the profitable practice that is not dependent on the owner or one particular partner Valuing the practice based on profit will often yield a higher price ”

“ T h e r e ’ s n o o n e - s i z e - f i t s - a l l a p p r o a c h t o valuing these transactions due to the differing fact situations, differing profitability and differing practice models,” adds Larry Blust, a partner with the Chicago law firm Barnes & Thornburg.

3. Cultural fit is vital

Good cultural fit can vastly improve the odds of M&A and integration success “Understand your own culture and what are ideal cultural characteristics of potential partners that can mesh well,” says Mauricio

Quite simply, “If you wouldn't like going out to lunch with your target, you shouldn't do the deal,” says Mark Basinski, principal with Transition Advisors, specializing in consulting for the accounting profession.

Organizational structure has a big impact o n c u l t u r e F o r s t a r t e r s , “ I s t h i s a C E O - r u n organization that encourages collaboration or an accumulation of fiefdoms where people e a t w h a t t h e y k i l l B o t h c a n b e s u c c e s s f u l ,

however they won’t work well together,”

partner of Transaction Advisory Services, with Grant Thornton in Chicago “If two firms have the same strategy and different cultures, the acquisition won't work, they

4 Find promising candidates

Whether done alone or using third-party assistance, acquirers need to invest the appropriate time and resources into finding target CPA firms that precisely fit their criteria, and must conduct proper due diligence to evaluate client mix, systems, litigation matters and financials, says Mauricio

5. Who controls your clients?

“The most important fact in these transactions is who controls the clients the buyer assumes it will get for the purchase price,” says Blust “Particularly in the case of small firms and practice sales, you need to know where each partner controls his or her own clients. Do those with control of the business have non-compete agreements in place, or are they willing to executive noncompetes that will assure the expected business transfers?”

6. Assess your liabilities

When you acquire your target firm, will you assume the obligations of that firm? What are the firm's liabilities and risk exposures?

A common big picture issue is the unfunded retirement benefits of senior people and how they need to be handled Small and midsized firms often have unfunded n o n q u a l i f i e d r e t i r e m e n t o r t e r m i n a t i o n benefits At the other end of the spectrum, s e n i o r p a r t n e r s w h o c o n t r o l m o s t o f t h e b u s i n e s s p l a n n i n g m a y b e t e m p t e d b y a t r a n s a c t i o n t h a t b e n e f i t s t h e f e w, w h i l e leaving the remaining partners with very little, says Blust

7. Structure a win-win deal

Make sure both parties are satisfied with the structure and economics of the deal, with all “deal-breaker” issues vetted early on in the negotiations.

“This must include partner compensation terms for the seller and expected benefits for the buyer,” says Mauricio. “Rarely do acquisitions of CPA firms succeed when the deal is one-sided; both sides must be engaged and enthusiastic about the merger. Sometimes parties may even build in 'demerger' clauses to reverse the merger at a specified time if certain anticipated synergies are not realized ”

8 Focus on integration

Developing and remaining committed to agreed-upon integration plans that cover the new organization’s structure, staffing, key processes and new business development initiatives is vital to long-term postmerger success. Client retention, in particular, is key

“Assuming client retention as a given is a big mistake,” says Mauricio The more c l i e n t s t h a t s t a y, t h e m o r e v a l u a b l e t h e new entity becomes Most client attrition

happens in the second year of the change, adds Basinski

9. Monitor & measure success

Both parties must be able to track and validate goals. Setting timelines, metrics and key milestones along with a process for periodic evaluation and review is extremely important, says Mauricio Be clear about how you’ll measure success.

“ W h a t s y n e rg i e s d o y o u e x p e c t f r o m top-line revenue? How many clients and staff have remained?” asks Galante

10. Talk to key stakeholders

Employees, clients, affiliated parties and other stakeholders should expect timely and informative communications on the success of the newly combined business and how the anticipated synergies will benefit them in the future

Mergers and acquisitions aren’t likely to slow down anytime soon Says Tunney, “Expect to see continued high levels of M&A activity Given the relatively slow growth in the United States and the recession in Europe, many firms will struggle to grow organically ”

For many CPA firms, it's not a question of if an M&A will happen, but when.

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Serve on an Illinois CPA Society Committee or Task Force

Use your expertise and leadership skills to help govern and guide the work of your Illinois CPA Society.

From developing new member services, to upholding quality assurance standards, to responding to technical issues, your service helps to enhance the value of the CPA profession.

In return, you’ll broaden your knowledge base, receive first-hand information on emerging issues, and develop powerful professional connections.

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Visit www.icpas.org/GetInvolved for full descriptions and to apply. APPLICATIONS DUE FEBRUARY 11, 2013.

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The Blended Generation GEN B:

By Clare Fitzgerald

Ablend of four generations comprises today’s workforce, bringing with it a host of communication, management, recruitment and retention challenges as well as opportunities

Accounting firms in particular, with hiring models that target all experience levels, are keenly aware of generational divides Attracting, managing and retaining talented employees from all generations is critical in an industry that often struggles to find diverse, high-quality talent “A lot of CPA firms are focusing on generational issues,” says Janel O’Connor, director of human capital at Naperville, Ill -based accounting and professional services firm Sikich LLP “The ones that are creating awareness and have a plan in place are the ones that are really a step ahead.”

While achieving the perfect blend of seasoned and fresh talent can boost productivity and bottom-line results, ensuring all generations work together seamlessly isn’t easy That’s why firms of every size are focusing on generational awareness training and offering a range of work and benefit options to appeal to staff at all career levels In the process, they’re fielding their most diverse and innovative client service teams ever.

That said, “I certainly don’t think any firm has it all figured out yet,” admits Terrance Moreno, senior manager of human resources at Baker Tilly in Chicago “It’s something we’re all wrestling with, and we’ll continue to look for ways to boost awareness and generational interaction Despite the weak yet slowly improving job market we’ve seen in the past few years, people have choices Firms need to be innovative and competitive to attract and retain the best people to serve clients.”

“As a firm, we’re focused on continuing to grow, and that’s dependent on having the right people coming in,” says Paula Frerichs, director of recruiting at accounting firm Plante Moran “We want to take advantage of the ambition and ideas of new generations to push the firm into new areas And we’ll have to transition knowledge and clients eventually That transfer of knowledge is a necessity ”

Today’s accounting firms are mobilizing multigenerational workforces to boost productivity and meet client needs.

A Unique Blend

Supporting a multi-generational workforce requires an understanding of the influences on each generation’s attitudes, communication styles and work patterns

According to Amy Lynch, consultant at BridgeWorks, a Minn e a p o l i s s p e a k i n g , t r a i n i n g a n d c o n s u l t i n g f i r m t

a

a

s organizations about generational differences, the four generations at work today break down into the following general groups.

n Traditionalists: Born before 1946, traditionalists account for about 8 percent of the workforce Many are working longer into their retirement years, and some are retirees who have rejoined the workforce in part-time roles

n B a by B o o m e r s : A n e n o r m o

Boomers were born between 1946 and 1964 They comprise the largest chunk of today’s workforce

n Generation X: A much smaller generation, Gen Xers are in their 30s and 40s at the mid-career level and rising.

n Millennials: The newest entrants to the workforce, Millennials (also known at Gen Y), were adolescents in the year 2000. Each has been shaped by the unique historical events and economic conditions of their generation And each brings different strengths to the workforce For example, Traditionalists were influenced by their experiences in World War II and the Great Depress

brought a top-down style to business “The boss was the boss,” explains Lynch “He wasn’t going to ask for opinions He gave a command and expected his people to carry it out ”

Boomers lived through the social unrest of the 1960s and the civil rights and women’s movements. Shaped by economic optimism, they had great expectations and a competitive drive. “In the workplace, Boomers pushed back on the Traditionalists’ style to some degree, but they also learned how to play by the rules and get things done within a multi-leveled framework,” says Lynch “They developed a formal, diplomatic and careful communication style ”

Gen Xers grew up during the great push for globalization and in a time of economic volatility, with a bleak job market, soaring divorce rates and political and corporate unrest Seeing that there are no guarantees in life, they developed a skeptical outlook and a direct, to-the-point style

Millennials came of age during a time of great technological change. They watched tragedies such as 9/11 and the Columbine s c h o o l s h o o t i n g u n f o l d , b u t t h e y w e r e n ’ t d i s c o u r a g e d b y t h e events they witnessed. Instead, they adopted a resilient, can-do, collaborative attitude.

A Voice for All

Having a multi-generational workforce in place is one thing, but managing it successfully is quite another. A c c o r d i n g t o Ly n c h , c o m m u n i c a t i o n i s t h e p l a c e t o s t a r t . “Awareness training is important,” she says, “but if you can get the communication right, teamwork, trust and innovation will follow Each generation has very different, and often at odds, modes of communication,” she explains

For example, Boomers may need to dispense with some formalities and learn how to be more direct and transparent with Gen X

“Find ways to attract, retain and leverage the contributions of all generations to continue to breathe new blood into the organization.”

professionals. On the flip side, Gen Xers may need to adopt a little finesse when communicating with Boomers And Millennials may need to do a better job of knowing the right time and place to express their opinions, and how to present ideas more formally than they might when working with a fellow Millennial, and so on

“People need to be trained on how best to present something so they are more likely to be heard by different generations,” Lynch advises “Be yourself, but adapt so that people can hear you That’s the key ”

Terms of Engagement

When it comes to perks and benefits, Lynch advises organizations to provide a range of options and to focus on the things that all generations value time and independence.

“Having control over one’s time is important to everyone, even if for different reasons,” she says “The more control people have over their time, the more rewarded they feel.”

Traditionalists and Boomers may be looking for reduced workloads, Gen Xers may need to leave early for a child’s school function and Millennials might be pursuing advanced degrees Accommodating personal needs and offering options like flextime and the ability to work from home will go a long way towards engaging employees at every level

“Leaders need to recognize that times have changed We’re working in a 24/7 world, and when their roles allow it, people need to be able to work at their own pace in their own space,” says Lynch

“Offer flexible benefits that allow people to pick and choose what they need based on their life stage,” adds Jan Ferri-Reed, consultant and president of KEYGroup, a Pittsburgh-based consulting firm that helps companies create workplaces that attract and retain talent.

At Sikich, a holistic approach is taken to employee benefit programs “We strive to appeal to our professionals at all stages of life, whether they are single, nearing retirement or starting families,” explains O’Connor

For Moreno, offering options is the key to supporting a diverse workforce. “We need to attract and retain the best talent, so we need to be sensitive to their work needs ” At Baker Tilly, that means offering robust flexible work arrangements and other additions to traditional benefit plans, such as gym memberships and paid time off to volunteer with charitable organizations, to name a few

Demonstrating a commitment to career development and continuing education is a bit of a no-brainer, with savvy firms providi n g v a r i o u s t r a i n i n g o p t i o n s a n d o f f e r i n g r e i m b u r s e m e n t s f o r tuition, professional licenses and professional membership dues.

Lynch also advises managers to be open to nontraditional career paths. Gen Xers and Millennials, for example, may want to try a role in a different department or take on an assignment outside of their job descriptions Embrace that sentiment, and leverage your employees’ enthusiasm for the benefit of the firm and your clients.

Bringing it All Together

Building and supporting a multi-generational workforce doesn’t automatically give you a workforce that’s interacting and working together well It takes constant effort and monitoring

Ferri-Reed suggests that leaders find both formal and informal ways for the generations to regularly interact, ensuring that junior

generations, and that older generations tap into the technological capabilities and new ideas of younger generations

Sikich is reinvigorating its mentoring program with precisely this goal in mind. The firm matches junior talent with more seasoned professionals and encourages an open-door policy The same open style is emphasized at Plante Moran, where “Junior staff can walk into a partner’s office, and our client engagements allow for regular interaction across all levels,” explains Frerichs. And at Baker Tilly, “Accessibility is built into who we are, and we know that’s something Mellennials value,” says Moreno “They want to talk to partners to find out what their journey was like. That’s why our partners are very involved in mentoring our staff members and in our college recruiting process ”

These efforts are especially important to professional services firms, which too easily fall into a “this is the way we’ve always done it” attitude, explains Ferri-Reed “Professional services firms tend to err on keeping the status quo in terms of what has worked in the past But they need to work on ways to diverge from that mindset to keep young talent longer,” she says.

Maximizing the Generational Mix

Firms that successfully integrate fresh ideas from younger talent with the wisdom and experience of seasoned professionals will see positive effects on staff retention and the bottom line, says Lynch.

“You’ll discover the managers that get results, and you’ll be able to appoint your best communicators to key positions Holding on to the wise Traditionalists and Boomers, productive Gen Xers and collaborative Millennials will help to draw more clients to your firm. Firms will find that their client base starts to mirror their own workforce,” she explains

“You’ll be able to appeal to organizations that have an older person at the helm as well as to the startups and other organizations that are infused with youth,” Ferri-Reed adds Plus, “Firms that are progressive in this area and that do things sooner rather than later have a much stronger employer brand They become known as a great place to start and develop your career.”

“We’re always looking at ways we can work more effectively a c r o s s g e n e r a t i o n s a n d b u i l d m o r e c o l l a b o r a t i v e c l i e n t - f a c i n g teams,” O’Connor remarks And at Baker Tilly, “We hire at a variety of levels, ranging from directors with significant experience, to the mid-level and the entry-level right out of school, so that naturally creates quite a diverse workforce And we need that diversity from a business and client service standpoint,” says Moreno.

Essentially, F e r r i - R e e d r e c o m m e n d s t h a t f i r m s , “ F i n d w a y s t o attract, retain and leverage the contributions of all generations to continue to breathe new blood into the organization and to sustain and grow its client base and profits.”

And what of those that don’t make a strong effort to bridge generational gaps? “Roles aren’t clear and deadlines don’t get met when people can’t hear each other,” says Lynch “Organizations can lose valuable input and see high-volume turnover.”

paper less

super savings

Bolster your firm’s bottom line by opting for cost-saving, productivity-boosting green technologies.By

Derrick Lilly

The rapid advancement of green technologies has made both bottom line-focused and sustainability-minded CPAs a happy lot.

“Most CPAs are profit-oriented When it comes to technology, we only buy into what will help us become more profitable,” explains Al Kutchins, president of tax and accounting firm Kutchins, Robbins & Diamond Ltd In Kutchins’ case, making the commitment in 2008 to stay “on the cutting edge, not the bleeding edge,” led his 52-person firm to adopt technologies designed to support a paperless, digital office The result: Approximately 50percent volume growth and continuing efficiency gains and cost savings.

Kutchins, Robbins & Diamond isn’t the exception “Far and away, the paperless movement is THE big green thing for accounting firms,” says Bill Niles, owner of strategic IT consulting firm IS Consulting “By going paperless, you’re absolutely going to reduce costs and increase efficiencies; documents will be at your and your clients’ fingertips, communication will improve, and you’re going to attract the talent and clients that are increasingly looking at a company’s green status ” All of which ultimately helps to bolster the bottom line

Of course, maximizing the perks of a digital office requires the right technology investments

Scanners: Increase capacity

Scrapping the file room for digital documents is going to cut waste and expenses beyond the obvious paper, toner and postage costs Niles says he has seen “firms recover up to 10 percent of their office space that can then be reused for things other than filing cabinets, which can lead to better space utilization or a smaller space with reduced rent.”

“Scanning all of our paper files allowed us to reclaim 600 to 700 square feet of office space,” Kutchins estimates. “What was once our file room is now revenue-producing offices and work stations that have increased our capacity without us renting more space or moving to another building ”

choosing a scanner for your home photo collection,” cautions Dave McClure in an article for The Progressive Accountant “For the accounting office it is far more important to have networking capability, a Twain-compliant driver…and the ability to output the finished scan to email, to fax or to a folder.” McClure also recommends selecting a scanner that includes a quality OCR software package so you’ll be able to instantly convert scanned files into editable documents.

You’ll have no trouble finding intuitive and energy-efficient businessclass scanners for firms of all sizes from leading manufacturers like Brother, Canon, Epson, Fujitsu and Xerox, to name a few

Multiple Monitors: Ease workflows

Kutchins has sought further efficiency gains by arming each workstation with multiple monitors, making it that much easier and faster to work with multiple digital documents.

“With two monitors, we’re able to look at last year’s work papers and tax returns while doing this year’s, for example,” says Kutchins “But what’s better is three monitors Because we also need to keep track of time, monitor email, and run other programs, the third monitor serves as a utility screen that allows everyone to run at their greatest efficiency ”

Benchmarking Survey found that 90 percent of firms are using at least two monitors, while 38 percent are using three, 11 percent are using four or more, and 40 percent are deploying dual monitors with employees heading into the field.

How green is running multiple monitors? There’s a wide variety of low-wattage, ENERGY STAR-qualified monitors available from popular manufacturers like ASUS, Dell, Lenovo, Philips and Samsung that produce little to no heat and run on only a few dollars worth of electricity annually In a paper-heavy industry, the costs of multiple monitors can certainly offer a long-term advantage

Server Vir tualization: Save on power

The 2011 Paperless Benchmarking Survey points out that 45 percent of firms have already transitioned to a virtualized server environment, and that number is expected to grow thanks to the remarkable reduction in hardware, software, maintenance and energy costs virtualization solutions offer

Essentially, virtualization allows you to harness the computing power of multiple servers or computers through one super server “Typical accounting firms need multiple servers for their email, operating syst e m s , Q

example; it used to be that every service needed its own physical server that ate up power, generated heat and required maintenance,” Niles

The Simple Stuff

“The pieces people often forget when talking about green technology is the simple stuff, like eFiling, online bill pay, online payroll, direct deposit and wire transfers, all of which easily replace the traditional mailing of documents, checks and what not,” says Niles

Cloud-based paperless payroll and HR solutions from Intuit, for example, integrate with Intuit’s other products (like QuickBooks) and include a payroll solution specifically designed for use by accountants who fulfill payroll management functions for their clients The same goes for ADP, CompuPay, Paychex, Paycom, and SurePayroll, which all offer a variety of accountant-specific solutions as well as versions designed around the payroll, tax and HR needs of businesses of all sizes So not only can you us e thes e paperl es s products for y our fi r m, but y ou can al s o potentially offer new green services to your clients if you aren’t already active in this area

explains. “Now, we are able to use virtualization software to leverage new or existing hardware to host multiple servers.”

A c c ording to Te c hTa rg e t’s Vi r t u a l i z a t i o n D e c i s i o n s 2 0 1 1 P u rchasing Intentions Survey, VMware is king with 73 percent of the server virtualization market It also comes highly recommended by Niles But server virtualization solutions from the likes of Citrix, Dell, Microsoft and Red Hat can all lend a hand in helping firms reduce their footprint in a number of ways, including reducing h a r d w a r e n e e d s , e l e c t r i c i t y a n d H VA C u s e , a n d s e r v e r s t o r a g e space, etc

What’s more, the servers themselves are becoming increasingly powerful and energy-efficient ENERGY STAR estimates companies can save $100 or more in annual electricity costs per server b y u s i n g E N E R G Y S TA R - q u a l i f i e d e n t e r p r i s e s e r v e r s s o m e o f which use 54-percent less electricity over unqualified models. ASUS, Cisco, Dell, HP and IBM are all ENERGY STAR-awarded or recognized energy-efficient server manufacturers, and 15 manuf a c t u r e r s n o w p a r t n e r w i t h E N E R G Y S TA R t o e n s u r e c o n t i n u e d improvements

DMS: Boost productivity

A document management system (DMS) is a cloud-based solution that helps to automate the process of gathering, scanning, converting, storing, organizing, retrieving, updating and delivering digital d o c u m e n t s s o t h a t y o u a n d y o u r s t a f f c a n e a s i l y a n d s e c u r e l y access all of your data from any Internet connection The AICPA and the Texas Society of CPAs estimate that top performers work 3 - p e rc e n t l e s s a n d e a r n 7 2 . 4 - p e rc e n t m o r e t h a n a v e r a g e f i r m s thanks to systemized document management workflows

“ S i x y e a r s a g o w e s t a r t e d t a k i n g b a b y s t e p s t o t r a n s i t i o n t o cloud-based DMS because we saw an opportunity for huge labor savings,” says Kutchins. “People were spending too much time updating their systems, walking to the file room, searching for files, making copies, and then refiling whatever they were working on. We also found that people were forgetting to save their work onto our internal network, so not everybody was always working on the

Client meetings are another area ripe for business greening “We just installed a big-screen TV in our conference room so we can star t doing Skype conferences,” says Kutchins “With a suburban office, if I can cut out just one downtown meeting a month I c a n s a v e t h re e h o u r s o f t r a v e l t i m e , t o l l s , f u e l a n d p a r k i n g expenses It’s an instant payback, and if I multiply that by just the number of my par tners, there’s potential for huge savings

”There’s a wide variety of web-conferencing and collaboration tools to choose from Some of the industr y leaders include AnyMeeting, Cisco’s WebEx, Citrix’s GoToMeeting, and Skype and ReadyTalk And those must-attend meetings can be paperless too “More people are getting comfortable going to the cloud, so our next step may be doing client presentations on iPads We’ll bring four or five to distribute at a meeting to look at the reports and then we’ll just bring them back; all the files and data we need is accessible through the client portal,” says Kutchins

most up-to-date documents. Our cloud-based solutions solve all of these challenges ”

Kutchins’ DMS is part of a cloud-based tax & accounting suite from Thomson Reuters Solutions from Acct1st, CCH, Doc It, and Thomson Reuters are all highly rated in CPA Practice Advisor’s “2011 Review of Document Management Systems ” Drake Software and Intuit also have document management offerings that integrate with their products, and it’s expected other leading vendors will follow suit as demand grows

Client Por tals: Cut down on costs

Cloud-based document management systems and client portals work hand-in-hand to expand accessibility, protect files and elevate the client service capabilities of your firm These portals two-way gateways for transmitting all file types and sizes to and from your clients via a secured Internet connection provide a safe and instant alternative to the traditional methods of storing and delivering sensitive client documents, CDs and jump drives through the mail and even email

What’s more, client portals designed with tax and accounting firms in mind, like those from CCH, cPaperless, Office Tools Pro, ShareFile, SmartVault and Thomson Reuters, ensure compliance with increasingly complex regulations protecting client data

“Although the U.S. Postal Service probably isn’t happy,” jokes Kutchins, “we moved to using a client portal so we wouldn’t be sending out nearly as many printed tax returns or financial statem e n t s N o w, o u r c l i e n t s c a n s e c u r e l y a c c e s s t h e c l i e n t p o r t a l through our website to upload or download all of their important documents whenever they need to. Even if the client doesn’t want to go to the portal themselves, it’s so much easier for our admin staff to use it to find and deliver client documents.”

If you’re anything like Kutchins, who started his career using fountain pens for work papers, the pace of change may feel a bit challenging at times But he’s now the one who sits in meetings with a BlackBerry in one hand and an iPad in the other. To put it plainly, tech-savvy CPAs are integral to the accounting firm of the future

BuIld A BusINEss lEgAcy

Legacies are defined by their staying power.

Almost two decades ago, little-known researchers Jim Collins and Jerry Porras coauthored a book based on a project at Stanford University It became one of the best-selling business books ever. Their burning question was a simple one: Why are some companies able to achieve and sustain success through multiple generations of leaders, across decades and even centuries? They systematically studied what separates the great from the merely average Even now, years later, Built to Last: Successful Habits of Visionary Companies, is used in classrooms and boardrooms as a blueprint for how to build an enterprise that endures.

Professional services firms face a unique challenge when establishing a legacy Their “product” is often intangible and based on not only accuracy and foresight, but also the ability to earn client trust In order to persist, these firms have to outlast the tenure of any single charismatic leader, allow for change in everything but a core set of beliefs and values, establish a strong and vibrant culture, and leverage homegrown management rather than outside hotshots.

C r e a t i n g a f i r m w i t h s t a y i n g p o w e r and an impactful brand is harder than it used to be.

By Kristine Blenkhorn Rodriguez

While most of the tried-and-true methods of building a legacy hold firm, today’s business environment has complicated matters Shorter employment tenures in a competitive marketplace, a digital generation of clients who expect more than just operational excellence, a competitive environment that now includes firms from around the world all these factors contribute to the hurdles companies now have to navigate.

While “legacy” is one of those all-encompassing terms that could mean a multitude of things, for the purposes of this article, we’ll approach the concept from three angles: brand, corporate citizenship and, of course, succession

Brand Legacy

Bruce Freeman, a national columnist on entrepreneurship and president of ProLine Communications, still thinks of brand legacy as a m a t t e r o f b u i l d i n g g o o d w i l l “ I f y o u u s e a d o c t o r, a d e n t i s t , a n accountant, etc , and he or she retires, they’ll generally tell you who will be taking over the practice And even if you’ve never dealt with this person, I’d say 80 percent of us will go to the recommended replacement. Why? Because we trust the person making the recommendation.”

While this scenario still holds true, technology has added layers to the equation The rise of digital consumers, in large part due to m o b i l i t y a n d c l o u d c o m p u t i n g c o n v e rg e n c e , h a s c h a n g e d t h e branding game Facebook, for example, has expanded into a fertile breeding ground for firms committed to developing relationships with clientele of all ages.

“Almost any company I see today, even the older established brands, have moved to cyberspace,” says Ellen Rudnick, executive director of the University of Chicago’s Michael P Polsky Center for Entrepreneurship “You have to use multiple avenues to get to people and meet them on their preferred turf For most people under 35 or 40, that’s cyberspace ” Rudnick sees this trend increasing over the next few years as the next tech-savvy generation enters consumer and employee ranks.

Building a brand means more than people knowing the quality of your work Given a level playing field, younger generations will choose the professional whose values most closely match their own.

Procter & Gamble

capitalized on this both during and after the 2012 Olympic Games According to branding consultancy Interbrand’s 2012 Best Global Brands study, “Celebrating the role that mothers play in raising Olympians, the ‘Thank You, Mom’ campaign tapped into universal sentiment by honing in on the contribution that mothers make in raising successful, well-rounded children. Launched 100 days before the Opening Ceremony, Procter & Gamble’s biggest campaign in the 175-year history of the company was a huge success, with the supporting brand films garnering almost 15 5 million views around the world There’s not a product brand in sight, yet its emotional power is unprecedented The real success of this campaign, of course, is that, without explicitly promoting itself, P&G has accomplished what most marketing efforts fall far short of: inextricably linking the corporate brand with universal human values like family cohesion, mutual love and support, and the dreams of greatness we all have for ourselves and our loved ones.”

Proving the power of this approach, Interbrand studied consumer associations with this year’s sponsors in the period leading up to t h e O l y m p i c G a m e s , a n d f o u n d t h a t P & G e n j o y e d t h e g r e a t e s t i n c r e a s e i n b r a n d s t r e n g t h s p e c i f i c a l l y a r o u n d v a l u e s s u c h a s credibility and authenticity

S u s a n L e w i s , o w n e r o f h e r o w n C PA f i r m f o r 2 5 y e a r s , s e e s y o u n g e r c l i e n t s l o o k i n g f o r t w o t h i n g s : “ O n e , y o u m u s t b e absolutely electronically astute that’s huge We are on Facebook, we are on Twitter, we have a blog If you’re not, you’re seen as less than cutting edge As a 53-year old, you’re tempted to say ‘Really? Can’t we just be good at what we do?’ But it’s the norm today. Two, younger clients look for partners that are socially conscious. We contribute 100 percent of the expenses for Showers of Hope, an IRS 501C3 organization. We cook for the Ronald McDonald House twice a year We sponsor local youth sports I’d do this anyway, but it shows potential clients what we’re about ”

Corporate Citizenship

In the old days (read: just a few years ago), corporate social responsibility was a media darling for some, and a bitter pill to swallow for others Those entrenched in traditional business cultures found themselves dismayed that performance excellence was no longer enough

you’RE NothINg WIthout VIsIoN

The ability to formulate a company vision is something many downplay as a soft skill Business leaders, however, who have turned their firms into successful legacies, thriving beyond their tenure, will tell you a different story

Andrew Clarke of Ground Floor Partners, a consultancy advising entrepreneurs and business owners on designing and growing their organizations, sees it as an imperative

“The businesses I see succeed are those that have a vision, have a plan to achieve it and ensure they execute against it Most businesses fail at all three which is why most businesses fail What most entrepreneurs have to remember is that a large comp a n y h a s s o m u c h m o r e l e e w a y I t s d e e p p o c k e t s a l l o w i t t o weather the inevitable downturns of business, particularly those dips companies without a vision are bound to undergo A small

to earn client loyalty. A new generation of clients wanted something more: Good corporate citizens

Many firms either leaned harder on their philanthropic team (if they had one) or delegated a partner to oversee corporate citizenship Separate from the firm’s primary culture, this offshoot was generally seen as an expense, and therefore wasn’t mainstreamed into day-today operations

Today, the concept of “philanthropy” has expanded into “corporate citizenship ” And, according to Interbrand, this corporate citizenship reflects how a company interacts with six key constituencies: Employees, customers, suppliers, the government(s) responsible for both regulation and assistance, the communities in which business is done, and the larger environment the business shares with the whole planet

In Interbrand research and client work, the firm found that consumer perception of a brand’s performance in any one of these six dimensions has a type of halo effect on the other five dimensions. This is good news: It gives companies license to laser-focus on an aspect of social engagement that suits their brand identity, and they can expect to see returns in perception as a result Over time, these perceptions, if they remain steady or increase, create a legacy that defines the firm in both clients’ minds and public perception

For some companies and firms, such as S C Johnson and Sundance, a social legacy is central to their purpose of being. And indeed, among Rudnick’s students, organizations such as these are a definite draw.

“It’s not enough anymore for a firm just to offer a good salary,” she says “Young jobseekers are looking for a firm that is a good corporate citizen They’ll weigh the pros and cons I can make 5 or 10 thousand more dollars at Firm A, but their values aren’t compatible with what I believe in, so I pass on the opportunity and go to Firm B where I’ll make a bit less but will be happier ”

This lure for tomorrow’s most promising leaders brings us to the third aspect of legacy-building: Succession

Successor Prep

The most traditional definition of business legacy refers to having a torch to pass; tangible assets to entrust to the next generation of leaders. A 2012 study by global search firm Russell Reynolds found

or mid- sized firm without that vision as a compass tends to flounder,” he explains

Nancy S Bishop, who has more than 30 years of marketing experience in the professional services sector, now counsels startups and small businesses through SCORE Chicago, a nonprofit a s s o c i a t i o n a f f i l i a t e d w i t h t h e S m a l l B u s i n e s s A d m i n i s t r a t i o n

“When people start a business, unless it’s a creative endeavor or a f a m i l y b u s i n e s s , m o s t o f t h e t i m e t h e y d o n ’ t h a v e a v i s i o n They’re too worried about the short term when they will break even or have enough money to hire more people,” she says

Like Clarke, Bishop sees a vision as an imperative for success

“Nearly half of startups fail But, those you counsel who have a strong sense of what they want the firm to be tend to weather the early storms better and persevere. They’re more likely to be around a few years from now, ” she explains

that the most successful firms are those that address succession p l a n n i n g b y c o n s t a n t l y a s s e s s i n g a n d d e v e l o p i n g r i s i n g l e a d e r s from within (which is consistent with the findings in Built to Last) While you might think family businesses have succession down to a fine art given the fact that sons, daughters, nephews and nieces likely have been molded for the role of leader from day one, you would, in fact, be quite mistaken Although according to the Family Business Institute, 88 percent of current family business owners believe the same family or families will control their business in five years, only about 30 percent of these businesses survive into the second generation, 12 percent are still viable into the third generation, and only about 3 percent of all family businesses operate into the fourth generation and beyond

Family or not, succession planning is the key to building a lasting business legacy. In his SmartBlog for Leadership article, “How to f i n d a n d m e n t o r f u t u r e c o m p a n y l e a d e r s , ” p e r s o n a l l e a d e r s h i p coach Joel Garfinkle offers these tips for identifying rising stars:

1 Actively look for star performers Who excels at their work, consistently produces desired results and adds value to the firm? These are the people prime for mentoring

2. To help you in your search, let fellow executives know that you’re looking for someone to mentor.

3 A c k n o w l e d g e t h e e f f o r t s o f t h o s e e m p l o y e e s w h o a c t i v e l y seek to promote themselves We’re not talking about employees who constantly brag, but rather those individuals who consistently get credit for their work. These are the people who care about their future in your firm.

Establishing a strong culture is also critical, says Rudnick “In a class I’m teaching, we’ll cover a case study on a couple of startups i n v o l v i n g o n e e n t r e p r e n e u r N o m a t t e r h o w c o m p e t e n t t h e employees he hired were, if they didn’t fit his corporate culture, they didn’t work out. It’s that critical. The fit has to be there and be obvious.”

Building a business that lasts isn’t the game it used to be, largely d u e t o t h e r i s e o f a t e c h n o l o g i c a l l y s a v v y n e w g e n e r a t i o n t h a t holds a different set of priorities close to its heart What this promi s e s f o r t h o s e b u s i n e s s e s t h a t g e t t h e l e g a c y e q u a t i o n r i g h t i s a bright, dynamic, profit-generating future.

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4 T ips for Overcoming Networking Anxiety

If the thought of attending a networking function gives you heart palpitations, you’re not alone Many young professionals dread these events but realize they’re an important aspect of their jobs Here are some pointers to help you approach your next event with confidence

1 Consider the type of event you’re attending Look for something that has a built-in activity that will help to break the ice Knowing there’s something to do when you attend will reduce the panic of walking into a room and striking up a conversation with a stranger

2 Prior to attending an event, check the news so you’re armed with conversation topics Many people will tur n to current events for small talk and you don’t want to be left with nothing to say

3 Per fect your elevator pitch so you impress ever yone with your introduction Making a great first impression will help you stand out at a crowded event

4 Most impor tantly, relax and be yourself You’ll be an exper t at making connections in no time [SH]

I s i t t i m e t o m o v e o n ?

We young professionals often jump at the first full-time gig we can get, not taking the time to evaluate how good a fit it is Young Money’s ar ticle “Good Reasons to Look for a New Job,” points out that it’s time to star t looking elsewhere if:

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