Insight Magazine - Winter 2019

Exploring the issues that shape today’s business world

BECOMING A FIRM OF THE FUTURE

From Charity to Philanthropy

The Evolving Role of Today’s CFO

Setting a Hardline on Harassment

Succession: All in the Family

Hemp and CBD Accounting

Winter 2019

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ILLINOIS CPA SOCIET Y 550 W Jackson Boulevard, Suite 900, Chicago, IL 60661 www.icpas.org

Publisher/President & CEO

Todd Shapiro

Editor Derrick Lilly

Creative Director

Gene Levitan

Copy Editors

Nancy Clarke | Mari Watts | Jennifer Schultz, CPA

Photography Derrick Lilly | iStock

Circulation John McQuillan

ICPAS OFFICERS

Chairperson

Geoffrey J Harlow, CPA | Wipfli LLP

Vice Chairperson

Dorri C McWhorter, CPA, CGMA, CITP | YWCA Metropolitan Chicago

Secretar y

Thomas B Murtagh, CPA, JD | BKD LLP

Treasurer

Elizabeth Pittelkow Kittner, CPA, CGMA, CITP, DTM

International Legal Technology Association

Immediate Past Chairperson

Rosaria Cammarata, CPA, CGMA | CDK Global Inc

ICPAS BOARD OF DIRECTORS

John C Bird, CPA | RSM US LLP

Brian J Blaha, CPA | Wipfli LLP

Jennifer L Cavanaugh, CPA | Grant Thornton LLP

Jon S Davis, CPA (AZ Ret ) | University of Illinois

Stephen R Ferrara, CPA | BDO USA LLP

Mary K Fuller, CPA | Shepard Schwartz & Harris LLP

Jennifer L Goettler, CPA, CFE | Heinold Banwart Ltd

Jonathan W Hauser, CPA | KPMG LLP

Scott E Hurwitz, CPA | Deloitte LLP

Joshua D Lance, CPA, CGMA | Lance CPA Group

Deborah K Rood, CPA, MST | CNA Insurance

Seun Salami, CPA | Teachers Insurance and Annuity Association of America

Stella Marie Santos, CPA | Adelfia LLC

Andrea K Urban, CPA | ThoughtWorks Inc

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Please send requests to lillyd@icpas org

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Insight is the magazine of the Illinois CPA Society Statements or articles of opinion appearing in Insight are not necessarily the views of the Illinois CPA Society The materials and information contained within Insight are offered as information only and not as practice, financial, accounting, legal or other professional advice Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication It is Insight ’ s policy not to knowingly accept advertising that discriminates on the basis of race, religion, sex, age or origin

The Illinois CPA Society reserves the right to reject paid advertising that does not meet Insight ’ s qualifications or that may detract from its professional and ethical standards The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within Insight, and makes no representation or warranties about the products or services they may provide or their accuracy or claims The Illinois CPA Society does not guarantee delivery dates for Insight The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering Insight Insight (ISSN1053-8542) is published four times a year, in spring, summer, fall, and winter, by the Illinois CPA Society, 550

today’sCPA

Mentor

full disclosure, I don’t consider myself a mentor While I’ve always thought of myself as a teacher or coach, I’ve never been assigned as someone ’ s mentor nor has anyone informally or formally requested that I mentor them When it comes to managing people, my goal has been simple: help them become better businesspeople But, I recently had a candid conversation with a fellow Society staff member that has me thinking differently

As we talked about things like feedback and the challenging, and sometimes difficult, business decisions leaders must make and how these things influence others throughout their organizations he challenged that I am a mentor whether I choose to be or not Truthfully, I try to be a transparent and highly visible CEO to both the Society’s staff and its members a leader that is engaged in all areas of the organization but not micro-managing The staff member who I was conversing with stated that my actions inevitably position me where people watch what I do, learn from me, and are influenced by me So, he concluded that while I may not formally mentor a single individual, I informally mentor many inside and outside the organization

As I noted, I’ve always thought of myself as a teacher or coach and have taken great pride in helping people move forward It’s a responsibility that I take very seriously and conscientiously as a business leader I guess you could say I at least have the makings of a mentor mindset Maybe that’s why this conversation led me to wonder how many others, due to their position, skill, or management responsibilities, are in positions where they are developing, influencing, and guiding people but never consider that they should be operating with a mentor mindset My concern now is that many of us in leadership positions are leaving the mentoring to others

In a manufacturing environment, hard assets, such as machinery and equipment, are carefully cared for and maintained maintenance schedules are strictly adhered to and downtime is critical In the accounting profession, our number one asset is people Yet, too often, we watch our staffs get burned out or disenchanted We passively refer to management and leadership as soft skills, so we often pass up formal development of these critical areas We don’t intentionally operate with a mentor mindset and then we wonder why we see poor retention rates across the profession

We are part of a profession that is facing significant change over the coming years Baby boomers will be retiring in mass, passing on their torches to new generations of firm and corporate leaders Technological advances are impacting both who we hire and how many staff we hire When I think about these shifts in our business landscape, of which there are many more, it becomes clear to me that the need for a mentor mindset is more critical than ever

We all have a stake in moving the profession forward and should strive to leave it in a better place than when we came into it How we accomplish this is by recognizing that we all have a responsibility for mentoring others, whether formally or informally, no matter our level, or title, or place in public accounting or corporate finance So, I encourage you to be the coach, to be the teacher, and to be the mentor that you are With intentional mentor mindsets there are no problems too big for us to solve because, together, we will move our profession forward

Yes, You Are a

As business leaders, we must recognize that the actions we take and the decisions we make always affect the people around us.

INSIGHTS FROM TODD SHAPIRO, ICPAS PRESIDENT & CEO @Todd ICPAS

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LEGISLATIVE INSIGHTS FROM

MARTY GREEN, ESQ , ICPAS VP OF GOVERNMENT RELATIONS @GreenMarty

#MeToo and You as a CPA

Are you compliant with new legal requirements for sexual harassment prevention training?

You’veundoubtedly heard about the #MeToo movement and its repercussions throughout the business world But you probably didn’t think the outing of high-profile compulsive sexual harassers across the nation would ever hit home for you It will now

The Illinois General Assembly passed legislation during the spring legislative session that impacts not just you as a CPA but every employee and employer in the state of Illinois Gov J B Pritzker has signed into law two operative pieces of legislation House Bill 4953 and Senate Bill 75 requiring holders of professional licenses, like CPAs, and Illinois employers and employees to complete sexual harassment prevention training

Approved training courses, at a minimum, will detail forms of sexual harassment, what should be done if someone experiences or witnesses unwelcome sexual contact, how to report sexual harassment within a place of employment and to outside entities, and the types of protections in place for whistleblowers I’ve heard from many firms and companies that this is a burden to comply with, but this should be viewed as an opportunity to further strengthen the integrity of our profession

First, HB 4953 (Public Act 100-762) relates to professional license continuing education requirements and sexual harassment prevention training The bill amends Department of Professional Regulation Law by adding section 15 5, which requires professions with continuing education requirements to include at least one hour of sexual harassment prevention training for new applicants and licensees renewing or restoring his or her license on or after Jan 1, 2020

The Illinois Department of Financial and Professional Regulation (IDFPR) adopted Administrative Rules (68 Ill Adm Code 1130 400) in May 2019 to implement the requirements of HB 4953 What this means for you as a licensed CPA is that you must now complete one hour of sexual harassment prevention training as part of the 120 hours of continuing education required for maintaining your CPA license Be aware this one hour of specialized training cannot be counted toward the four hours of ethics training Conversely, registered CPAs do not have a continuing education requirement and are not required to complete sexual harassment prevention training for renewing their registered status

Most importantly, the sexual harassment prevention training must be provided by an IDFPRapproved continuing education provider, such as the Illinois CPA Society, or providers that are approved by the National Association of State Boards of Accountancy (NASBA) The training also must be presented in a classroom, webinar, or online setting and must fulfill all other requirements of continuing education as outlined in sections 1420 70 and 1420 72 of the Illinois Public Accounting Act Administrative Rules

Next, SB 75, or the Workplace Transparency Act (Public Act 101-221), enacts sweeping changes across Illinois’ employment law landscape This far-reaching legislation imposes inter alia reporting, training, and contracting requirements that will impact your respective firm as an Illinois employer as well as your respective clients

The Act “ encourages employers to adopt and actively implement policies to ensure their workplaces are safe for employees to report concerns about sexual harassment without fear of retaliation, loss of status, or loss of promotional opportunities ”

What this means is that all Illinois employers must provide mandatory sexual harassment prevention training to all Illinois employees annually beginning in 2020 The legislation requires the Illinois Department of Human Rights (IDHR) to produce a model training program and make it available to employers online at no cost

Many CPA firms are closely looking at HB 4953 and SB 75 to identify training opportunities that fulfill the requirements of both of their respective public acts Let me caution you that if you want to satisfy the requirements of both with in-house training, your firm would need to be a licensed Illinois CPE provider or a NASBA CPE provider

In addition to employee training requirements, the Workplace Transparency Act establishes employer disclosure and reporting requirements Beginning July 1, 2020 and every July thereafter Illinois employers must report adverse judgments and/or administrative rulings to the IDHR, including equitable relief ordered against the employer, the number of adverse judgments for sexual harassment or discrimination, and the number of settlements entered within the last five years

The Act also allows the IDHR to share substantiated findings of civil rights violations by professional licensees with the IDFPR, which could lead to professional license suspensions, revocations, or refusals to renew

The Illinois CPA Society’s Government Relations team negotiated with the respective legislative caucuses on this massive legislation, particularly in the use of pre-employment and employment agreements for arbitration This is an area of extensive federal pre-emption Section 1-25 limits the use of pre-employment and employment arbitration agreements for resolution of workplace discrimination and sexual harassment Employment agreements that include arbitration clauses to resolve unlawful employment practices require arbitration clauses to be negotiated and require the employer to provide consideration to the employee or future employee in exchange for such an agreement In these cases, employers should have the employee sign a written acknowledgement that they knowingly negotiated the arbitration agreement and that they are agreeing to arbitrate unlawful employment claims in exchange for consideration

Finally, the Act prohibits employers from restricting employees from testifying before an administrative agency or legislative or judicial proceeding when subpoenaed or ordered by the court to appear

While the Illinois CPA Society will continue to be an advocate for the CPA profession, the Illinois General Assembly has and will continue to change Illinois’ employment landscape It’s best for you to become familiar with these new professional licensure requirements and employer mandates that are guaranteed to impact you as a CPA and every employer and employee across our state

Author’s Note: This column includes my personal observations of the evolution of the legislative environment and are not necessarily the views of the Illinois CPA Society

Sexual Harassment Prevention Training

Warming Up Your Winter Watchlist

Our columnists share their favorite and must-see movies–with an accounting twist

BY NANCY CLARKE

Youcan’t feel your face, your toes, or your fingers, and you're fairly certain that your ears now resemble two frozen Jimmy Dean sausage patties Welcome to winter in Chicago! With the frigid temperatures setting in, now ’ s the time to warm up with a good oldfashioned movie night

Here are some must-see accounting-themed favorites, according to our Insight columnists

Mark Gilbert: “The Shawshank Redemption”

It’s a movie that portrays accounting skills in a very favorable light Tim Robbins as Andy Dufresne is nicely portrayed as the unfortunate victim of “the system” as he is unfairly jailed He uses his accounting skills to gain the trust and respect of the prison warden, which ultimately affords him the opportunity to enrich himself The morality of Andy’s actions is somewhat questionable, but it’s all shown to be a part of the greater good, which makes this a very enjoyable movie

Marty Green: “The Accountant”

In one instance, you have an accountant with an everyday practice

By all appearances, he’s very smart if not brilliant Then, the mysterious side starts coming out with the accountant keeping mass weapons and large amounts of money squirreled away in a hidden trailer The plot deepens when there’s an attempt to murder him and others after he is retained by a business to resolve its accounting issues Without spoiling anything, I think the ending is particularly good as the movie closes to the theme song of Sean Rowe’s “To Leave Something Behind ”

Tim Jipping: “The Accountant”

It’s like watching a documentary of my own life

Art Kuesel: “The Wolf of Wall Street”

Despite the movie being based on the true story of Jordan Belfort’s (played by Leonard DiCaprio) rise as a wealthy stockbroker living a life of crime and corruption, I have to respect that he was an incredible salesperson While he is unscrupulous and uses his talents for illegal activities, I still respect his ability Plus, the good guys get him in the end

Jon Lokhorst: “The Untouchables”

Starring Kevin Costner as Eliot Ness and Robert DeNiro as Al Capone, “The Untouchables” is based largely in Chicago and captures the important role accountants played in getting Capone convicted of tax evasion It also earned Sean Connery, one of my alltime favorite actors, an Academy Award for Best Supporting Actor

Elizabeth Pittelkow: “All the Queen’s Horses”

Produced and directed by Illinois CPA Society member, Kelly Richmond Pope, “All the Queen’s Horses” tells the story of one of the biggest municipal frauds in history that hit Dixon, Ill The movie highlights the importance of ethics in the accounting profession and the need for effective accounting controls

Todd Shapiro: “Dave”

In the 1993 political comedy, Dave (Kevin Kline) ends up filling in for the president because he looks like him Well, Dave takes his role seriously and wants to positively impact America At one point, he visits a homeless shelter He’s told he can save the shelter if he can cut $650 million from the federal budget Dave enlists his accountant friend, Murray Blum (Charles Grodin), to help him rewrite the budget to do just that While the movie is not specifically about accounting and finance professionals, it portrays an accountant in a positive role, using logic to solve complex problems and making a positive impact on society

Keith Staats: “The Producers”

The original 1967 film directed by Mel Brooks starred Gene Wilder and Zero Mostel Wilder plays a young accountant (Leo) who shows up to audit the books of Mostel (Max), a producer of Broadway flops Leo discovers that shares can be oversold in a play that flops and nobody will audit the books because it didn’t make any money So, they decide to come up with a terrible play that will close the first night, they will oversell shares in the play, and then they will take off to Rio with the money I won’t tell you how the plan turns out, but I guess you could say it is a cautionary tale about what can happen to an auditor if they become too involved in a client’s business

Setting a Hardline on Harassment

Both firms and their professional licensees must navigate new Illinois regulations governing sexual harassment prevention training

BY ANNIE MUELLER

Harassment in the workplace is a long-standing issue, one that’s been historically shrouded and shushed The tighter knit the industry, the more severe the risk Those who dared speak out often found few redeeming resources or faced severe retaliation Seeking help could end the harassment or it could end your career This fear of repercussion led to chronic under-reporting for decades, but the impetus of the #MeToo movement is increasingly bringing attention to an issue that went unseen and unspoken for far too long

“There have been more developments in anti-harassment law in the wake of #MeToo than in all the years since harassment was recognized as a legal claim,” says Laura Friedel, partner and chair of Levenfeld Pearlstein’s Labor & Employment Group and chair of the firm’s Women’s Initiative

Attention and care are needed to understand the extents of harassment in general, and sexual harassment in particular Both firms and their professional licensees must navigate new Illinois regulations governing sexual harassment prevention training Many are quick to view new compliance mandates as a burden, but in this case, there is a clear moral case and a business case The issue is much greater than a legal obligation learning how to prevent

harassment simultaneously teaches us how to create a workplace environment where all members are free to do their best work

DEFINING PREVENTION

The first step toward preventing harassment is understanding exactly what it is, says Diane Stegmeier, founder and CEO of Project WHEN (Workplace Harassment Ends Now) and the Stegmeier Consulting Group Stegmeier explains that harassment can include bullying, micro-aggressions, quid pro quo, verbal aggression, and exclusionary behavior, as well as sexual or physical harassment “A firm can’t only focus on sexual harassment,” Stegmeier cautions

Further, uncertainty about what constitutes harassment often translates into inaction; time goes by and it becomes more and more difficult for victims to speak up Stegmeier contends that the burden of preventing workplace harassment does not belong to individuals, particularly those who might be or have been harassed Rather, organizations must address harassment before it occurs and when it occurs

“Millions of dollars can be lost and reputations destroyed if organizations don’t deal with harassment issues immediately,” Friedel warns

EMPOWERING POLICY

Developing a clear anti-harassment policy, accessible to all employees, that provides resources and tools and maps out actions is a good business practice and goes a long way in preventing larger workplace problems And, in the unfortunate situations when harassment does occur, organizations with such policies in place should be able to deal with issues quickly and effectively before greater harm is done, says Marty Green, Esq , the Illinois CPA Society’s vice president of government relations, who participated in negotiations with the legislative caucuses that advanced the bills in Illinois mandating sexual harassment prevention training starting in 2020

“Whether a situation has occurred or not, people should be aware that certain behavior is not appropriate and will not be tolerated,” urges Illinois CPA Society member Irma Bondi, CPA, PHR, senior manager of recruiting at Miller Cooper & Co Ltd A thorough antiharassment policy should emphasize that leadership is serious about preventing and dealing with harassment, which is an attitude that should filter down through the organization

Stegmeier stresses that firms must also acknowledge that harassment can occur not only between employees within the firm but between firm members and their clients In these cases, leadership needs to be proactive

“These are tough issues,” Friedel says, “but you need to protect your firm A clear anti-harassment policy sets the stage by defining harassment, outlining the steps to take if harassment occurs, and designating people and resources to contact If your firm is not large enough to have an in-house human resources person, then establish a designated point person to receive and process any harassment issues, both informal conversations or formal complaints, or contract with an external HR consultant ”

TAKING ON TRAINING

Policy is one part of prevention; training that enables and equips individuals is the other “Mandating anti-harassment training as a requirement for professional licensure will increase awareness, ”

Bondi says Starting in 2020, Illinois employers are required to provide sexual harassment prevention training annually for all employees Recent legislation also requires all professionals licensed by the Illinois Department of Financial and Professional Regulation to take one hour of sexual harassment prevention training as part of their continuing education

“Licensed CPAs will need to complete this one-hour training as a part of the 120 hours of CPE required for license renewal in 2021,” Green explains

“One hour is generally plenty of time to go over harassment definitions, ensure understanding, walk through scenarios, and have conversations about how to handle harassment,” Friedel says However, she recommends an additional module specifically for managers and supervisors “Managers have a responsibility to protect their employees, to stop harassment when it’s happening, and to respond appropriately when someone brings them a formal or informal complaint,” she states

No matter the audience, the best training is interactive and customized Stegmeier suggests employees need to role play scenarios that are relevant in order to truly understand how to respond in actual situations “Customized training shows employees that the firm sees keeping harassment out of the workplace as a priority and empowers employees to speak up with

confidence that their concerns will be heard and that they can be a powerful voice in the workplace,” Friedel adds, noting that getting people to have these important conversations is anything but formulaic

While Illinois law permits sexual harassment prevention training through webinars and other online platforms, Bondi says she personally feels that in-person anti-harassment training has more of an impact Interactive training provides individuals with the tools, scripts, and practice they need to deal confidently with inappropriate behavior The right training enables individuals to speak up and act, both for their own sake or for the sake of their colleagues After all, stopping an off-color joke or innuendo is a responsibility every person can take on, but knowing how to do so in a way that maintains professionalism and camaraderie is important in the business world

DISRUPTING PATTERNS

Disruption is a powerful strategy for preventing or stopping harassment For example, when a conversation veers inappropriately, any individual can disrupt the flow: “Let's get back to the agenda today We have a lot to do ”

This type of conversational disruption can be a simple but powerful tool, especially for junior colleagues or minorities who may feel their positions are somewhat precarious “For more marginalized groups, it can help for them to use disruption It doesn’t have to be threatening Taking a position of authority in any situation, even if you ’ re new, even if you ’ re junior, can disrupt idle talk and bring the attention back to what's important,” Stegmeier says

Of course, some situations verbal and otherwise require a stronger response than a conversational redirect Some words and behaviors must be called out directly and/or dealt with formally In these cases, you need employees to be able to reach to your organization’s policy and follow its steps However, if you ’ re in a situation where there isn’t an existing anti-harassment policy, Friedel advises going to the most senior person in the organization that you ’ re comfortable talking to and discussing the situation with that person

“In extreme cases, when there is no one you can talk to within the organization, seek external resources, such as the EEOC and the Illinois Department of Human Rights,” Friedel advises It’s important to document what has occurred: when, where, what was said or done, and who was present

I n p r o f e s s i o n a l s e r v i c e s f i r m s , p r e v e n t i n g h a r a s s m e n t f r o m a client may be the issue at hand “These are difficult situations,” Stegmeier says, who, along with Friedel, suggests it’s imperative to get the highest level of the firm involved “The senior partner or manager can set the standard for how the business relationship will proceed ”

“The client organization will not want such behavior to continue,” Stegmeier adds “So, addressing it at a higher level, between senior people at both organizations, is a way to disrupt the situation and get it resolved ”

In the end, organizations that provide tools, training, and top-down support reap the rewards: a culture of respect, loyalty, and freedom for every person to do their best work

“Wouldn’t we all be much more productive if we felt like we could give it our all and not worry?” Stegmeier asks “People need to feel more courageous; they need to know that they can make a difference especially when harassment issues come up ”

All in the Family

Like many businesses across the country, small and family- owned CPA practices are facing mounting challenges when it comes to passing the torch to a second generation.

BY BRIDGET McCREA

StevenRemy, CPA, is extremely proud of his seven children, most of whom are grown and enjoying successful careers in finance, education, administration, and veterinary medicine But not one of Remy’s offspring wanted to be an accountant, leaving him in a predicament as a managing member of RVG Partners LLC in Oak Brook

“It used to be that family members would come in and follow in your footsteps and then eventually take over the business,” he says “It’s not like that anymore ”

In fact, one of Remy’s sons was straight up about why he didn’t want to become a CPA “Look Dad, I don’t want to sit in an office like you do; I’m not looking forward to working that hard,” Remy’s son told him “I just don’t want to be in a business where everything is based on how many hours you can work ”

There’s more to this story than just trying to avoid working long hours After all, veterinarians, teachers, and finance professionals are all known for putting a lot of time and sweat equity into their educations and careers The fact is, being a CPA just doesn’t seem to have the same allure that it once did

“Accounting isn’t a glamorous profession,” concedes Remy, who has spent more than 30 years in public accounting “Young people are more drawn to techy, engineering, and finance-type positions these days ” These realities not only impact small firms like RVG Partners, where Remy’s niece is the only family member in the business, but also the broader profession

“I DON’T WANT TO DO TAXES”

The fact that small CPA firms are having a hard time getting family members interested in the business is a major issue in a profession where everything from the “aging out” of baby boomers and lure of sexier careers, to clients increasingly looking online for accounting and finance advice, is making it more difficult for firms to stay in business

Kathleen Orlando, CPA who has no family members interested in joining and/or taking over her suburban Palos Heights firm, Kathleen Orlando & Associates Inc lives with these going concerns daily

“One of my friend’s daughters just graduated from Saint Xavier University with an accounting degree When I approached her

about bringing her into my business, her response was, ‘I don’t want to do taxes ’ In fact, she’s not even sure she’s going to sit for the CPA exam because it’s really not required outside of public accounting,” Orlando says

She also sees online tax preparation software and the Internet as two big competitors “Intuit came in and saturated the market with its software to the point where people no longer think they need a CPA to do their taxes or payroll,” Orlando says “And a lot of clients just don’t see us as a business partner anymore They buy a piece of software and think it can run their business ”

And while succession planning for small and family firms is getting more difficult as family members choose to explore career opportunities outside of the accounting realm, these challenges aren’t isolated to the accounting field According to PwC’s 2019 U S Family Business Survey, just 33 percent of companies last beyond their founder’s generation and only 12 percent survive to a third generation of ownership

“In making the transition from first generation to second, family businesses face the transformation from start-up entrepreneur to a more structured, complex organization,” PwC reports “This is the most difficult transition for family businesses; not all will succeed ” This fact creates another challenge for firms: how do they sustain their family businesses when the family businesses they serve aren’t sustaining themselves?

“ WE DON’T WANT THAT KIND OF LIFE”

As the owner of six-person CPA firm Holland & Company CPAs in Naperville, Dean R Holland, CPA, runs his company alongside an investment advisory firm owned by his brother The brothers have been working from the same office for 25 years, but both are now facing serious succession planning issues “We’re in the same boat in that none of our kids wanted to get into the business,” Holland says “When my two kids got older and were talking about college, I asked, ‘Well, do either of you want to go to school for accounting and maybe take over your dad’s business or get involved in it?’” Holland recalls Their answer was straightforward: “When we were growing up, we saw the long hours that you worked You weren’t around from January through April; we don’t want that kind of life ”

At that point, a disappointed but not overly surprised Holland realized that his firm probably would never see a second generation of family ownership “It was enough to scare them away, but that’s just part of being a CPA in public accounting,” he says “Your life is pretty much put on hold from January through April I've been doing this for more than 30 years now it does get a little old ”

TESTING THE WATERS

Knowing that they’re not alone in their struggles to bring a new generation of leadership onboard, the Illinois CPA Society members interviewed for this article suggested there are some things that firms can do to help right the ship

For example, Holland sees value in internship programs, which could be directed either at family members or outside candidates who want to test the waters He says the experience can give young people “ a really good, inside look at what the industry is really like ” This is particularly true for small firms, where an intern can be cross trained on various responsibilities (versus a larger firm, where he or she may be placed in, say, the audit department)

“In a small firm setting, you wear a lot of hats,” Holland says, “ so small firms can offer interns many different hands-on experiences

One week we may be working on payroll returns and the next week we ’ re doing write-up work ”

Remy suggests it takes a reversal of perception to get new people interested in accounting Getting people to understand its value sometimes means impressing the point that it’s a very stable, consistent profession that offers very low levels of career risk

“A lot of young people are grabbing for the brass ring and wanting to make millions of dollars,” Remy says “I've created a very good career for myself, as have a lot of others in this business We need to be sharing that message and using it to attract new talent ”

Going forward, all three CPAs say they’re concerned about the small, family-run firm’s future In a world where accounting goes head-to-head with engineering and IT in recruiting analytically minded students and young professionals, Remy says the onus is on the profession to start doing more to win the war for talent “We’re all competing for that same mind,” Remy says, “and let’s face it, it’s a lot more fun to make something than it is to report on it ”

The CPA’s Intro to Hemp and CBD Accounting

To serve one of the fastest growing industries in the country, CPAs must understand how accounting for hemp and hemp - derived CBD is different and why it ’ s a great growth opportunity

BY ANDREW HUNZICKER, CPA

Cannabis,

CBD, hemp, marijuana, THC You’ve surely heard all these terms by now, but in order to fully grasp and understand accounting for the fast-growing hemp and hemp-derived CBD industries, you need to know the different characteristics of the Cannabis plant and the laws governing its growth and distribution

Wrap your head around this: hemp and marijuana are both derived from the Cannabis sativa L plant So, while both are technically cannabis, the first major difference between hemp and marijuana that you should note is that nondrug hemp or industrial hemp was federally legalized under the 2018 Farm Bill while marijuana remains a federally illegal drug under the Controlled Substances Act Why is that?

First, industrial hemp is bred to have a low concentration of THC (0 3 percent or less, per section 10113 of the 2018 Farm Bill), or tetrahydrocannabinol, which is responsible for the psychoactive effects of cannabis when used as a drug (which may have THC levels exceeding 30 percent) Second, industrial-use hemp has a high concentration of cannabidiol (CBD), which decreases or eliminates THC’s psychoactive effects In short, legal hemp can’t

get you high and its industrial and commercial uses reach far and wide think paper, textiles, fuels, edibles, oils, pain relievers, and more In fact, archaeologists suspect hemp was the earliest plant cultivated for textile fiber and the oldest example of human industry Fun fact: Hemp cord was found in an ancient village dating back more than 10,000 years in a region we now recognize as Taiwan

Today, hemp and hemp-derived CBD are experiencing a renaissance But what does this mean for you? New business opportunities With hemp and hemp-derived CBD federally legalized, they are no longer subject to the provisions of Internal Revenue Code 280E This means companies engaged in the hemp and hemp-derived CBD verticals can now take normal deductions just like other businesses This is a game-changer for many existing businesses and opens a vast market for new businesses to enter

GROWING YOUR PRACTICE

Currently, there are more than 500 hemp cultivation licenses issued in Illinois and more are on the way as the industry grows and Illinois farmers seek a means for diversifying away from the state’s two primary crops of corn and soybeans

In order to grow or process hemp in Illinois, a company must be licensed by the state and pay fees All hemp grown in Illinois is subject to lab testing to ensure its compliance with state and federal laws For example, the Illinois Department of Agriculture mandates hemp with THC levels greater than 0 7 percent must be destroyed, which has huge business implications

I often ask my new farmer clients what it costs to grow a pound of hemp If I can even get an answer, I then ask how they do cost accounting That is when I usually get a blank stare or silence, because 99 percent of hemp growers and hemp-derived CBD producers simply have no idea how to do this type of accounting

This is just one example of the many areas within the legal hemp and hemp-derived CBD verticals that you can specialize in think farming and cultivation, transportation, processing (like turning the plant into CBD oil), manufacturing (like turning the hemp fiber in textiles), retail, and more If you can master a niche and become a “VIP” (Valuable Expert, Instructor, and Participant) in that realm, good things will happen for your practice

I have found that attending local or regional industry events is the fastest way to get immersed in this evolving space and identify service areas to address Despite the stigma associated with the entire cannabis industry, what I can tell you from firsthand experience is that serving the federally legal hemp and hempderived CBD verticals carries less risk than serving medicinal or recreational marijuana clients What I can also tell you is that the hemp and hemp-derived CBD markets are growing in Illinois and the businesses operating in these spaces, along with the much broader cannabis industry, are vastly underserved by CPAs due to the nuances and complexities and perceived risks that come with serving them

The primary struggles of hemp and hemp-derived CBD businesses revolve around deciphering complex tax codes, such as 471, 263A, 199A; not practicing or understanding cost accounting or farm accounting; implementing GAAP; poor inventory policies, procedures, and controls; no inventory counts or reconciliations; new industry software; and navigating multi-entity issues and industry consolidations Something worth noting if you ’ re interested in serving the broader cannabis industry is that many of the tools, workpapers, and charts of accounts used to serve the federally legal hemp and hemp-derived CBD markets transition over to state legalized medicinal and recreational marijuana markets

All things considered, there are services far beyond accounting, audit, and tax that you can deliver to clients in these spaces Think CFO services to start, which could include the areas of HR and compliance In fact, compliance is often a significant pain point for CEOs that costs their businesses thousands of dollars in fees and penalties and sometimes even leads to license revocations or jail

time These are all areas where you can establish your “VIP” status and build a successful practice

MORE TO CONSIDER

When it comes to federal taxation, you must truly understand IRC 471, IRC 263A, Sec 199A, and farm accounting Hemp growing is defined as farming, meaning Schedule F can be used when filing Form 1040 The IRS’ 90-page Farmer’s Tax Guide should be read closely You must also be able to determine whether cash or accrual accounting is best for your client In the most general sense, the benefit of cash accounting is that it usually defers taxes, but I would argue accrual accounting gives a more realistic picture of the business and is better for cannabis-related businesses and their needs for raising capital, determining valuation, complying with audits, and strengthening their management reporting

When you add in state and local tax and compliance matters, the challenges hemp and hemp-derived CBD businesses face become more complex In my experience, there are no answers that apply to all clients Your goal must be to understand your clients’ individual businesses and be able to identify the different solutions for their unique issues

There are also many other federal and state regulations outside of tax and accounting that you’ll need to stay current on if you want to be a VIP to your clients For instance, the U S Department of Agriculture (USDA) oversees all hemp production Rules are being written and rewritten regularly, so make sure you are signed up with the USDA to receive email updates Similarly, the U S Food and Drug Administration (FDA) regulates the use of CBD in foods, supplements, and beverages and addresses issues with packaging, labeling, advertising, and claims of medical benefits Even the U S Environmental Protection Agency and Department of Labor are setting new standards and regulations relating to the cannabis industry, which includes hemp and hemp-derived CBD While these agencies will not be addressing accounting or tax, their decision will impact your clients

With 46 states, including Illinois, having their own approaches to hemp and hemp-derived CBD regulation, taxation, law, and licensing, as well as county and city ordinances, there’s no way for you to know all the rules everywhere With that said, I encourage you to at least know your own state’s rules and to keep in mind that hemp and hemp-derived CBD are new and evolving industries for federal, state, and local governments to address I predict the IRS will audit many hemp and hemp-derived CBD businesses in the years ahead So, if you dive in and get up to speed on all things hemp, CBD, and cannabis, you stand to be an invaluable advisor to clients, an advisor they can trust to steer them toward success and away from the fates of early cannabis industry CEOs who faced fines and worse for doing things the wrong way

What Sets Philanthropy Apart From Charity? Strategy.

Facilitating the evolution from charitable donor to philanthropist could be one of the most satisfying things you do for your clients.

By NaNcy E. aNdErsoN J.d., cTFa, caP®, cEPa, adPa

Philanthropy

The word derives from a Greek word meaning “love of mankind ” Philanthropic acts, therefore, imply a humanitarian vision a kind of “seeing ahead” toward an objective

The word charity, on the other hand, comes from the French word chrité, meaning “providing for those in need” or “generosity and giving ” Here, the connotation is responding to a present and apparent need

While the two words have obvious overlap in common usage, drawing a distinction between them is helpful in guiding clients, whether individuals, families, or organizations, seeking to maximize the impacts and amounts of their giving

Here’s one simple example: After a natural disaster, writing a check or volunteering one ’ s time can be considered charity But for some, natural disaster preparedness becomes a humanitarian cause Their charitable intent transforms into philanthropy when they begin to strategize about how to maximize their impact over time

When clients have firmly established priorities and their financial house is in good order, they want to increase their charitable giving Though they may not think of themselves as “philanthropists,” that is nonetheless what they are preparing to become they are ready to move beyond just responding to planning Facilitating this evolution could be one of the most satisfying things you do for your clients

Here are some simple steps to help guide your clients through the transition from charitable donor to philanthropist

Step One: Create a Simple Philanthropic Strategy

Before writing a check or setting up a charitable trust, create a philanthropic strategy:

1 Create a mission statement that includes general categories of strategic focus for example, education, health, art, research, conservation, diversity, or natural disaster responsiveness as well as some specific goals you’d like to accomplish in one or more of those categories

2 Identify the number of organizations you want to benefit

3 Commit to a dollar amount for your annual contribution (to be reviewed each year)

4 Engage your successors to prepare them to carry forward the philanthropic mission and vision

A philanthropic strategy doesn’t have to be complicated It just needs to be sufficient to help your client stay focused on the philanthropic mission Think for a moment about how this kind of simple but profound embrace of strategy could transform giving The amounts given to causes tend to increase when intent is grounded with a clear strategy This creates a win-win situation, because your client is both giving more and more satisfied about that giving Over the course of my work, I have seen philanthropy bring clients together, provide personal satisfaction, increase mental, emotional, and spiritual health, and help create global connections

Research bears this out, too A 2017 study conducted at Indiana University’s Lilly Family School of Philanthropy concluded that “giving makes us happy The study found that giving to charitable organizations is positively related to life satisfaction ”

Step Two: Focus on Impacts and Transfer of Values

There are great tax benefits for your clients who give to qualified charitable organizations However, today’s philanthropists are increasingly making gifts of time and talent to help their communities and causes There has also been a shift in mindset about recognition

In the past, many buildings from libraries to museums and more carried the name of your client making the gift Today, visibility and recognition are less important to philanthropists Instead, they are more interested in the impact the gift will have They want to learn about a recipient charitable organization at a deeper level They want to know who is leading the organization, understand its finances, meet its board members, learn about its outreach programs and reputation in the community

And beyond all this, true philanthropists dedicate time to create a sustainable process that can be shared with the next generation, thus allowing the next generation to become socially responsible and involved in ways that fulfill the life purpose of the philanthropic mission

That generational transfer of values is what I see clients desiring more than anything It starts with values-driven discussions that can form the mission statement, which should in turn inform the philanthropic strategy Then, direct interaction and participation with carefully selected charitable organizations will be inherently connected to the client’s expressed values

Step Three: Actual Giving

With an overall strategy and impact mindset in place, it’s time to help clients get specific about implementing the strategy and making actual gifts In both cases, what’s needed is both vision the very heart of philanthropy itself and discipline to execute a strategy

There are many tools available to your clients for making financial gifts to charitable organizations and implementing a strategy:

• Cash: A gift in cash is the simplest form of charitable giving as the tax deduction will be equal to the amount donated without any retained benefits If you contribute $250 or more, you must prove to the IRS that you (a) made the donation and (b) you didn’t receive any benefits

• Stocks: Gifting stocks directly to a charitable organization is taxefficient for the grantor, especially if the gift consists of long-term appreciated securities There will be no capital gains taxes on the transfer, and the gift can provide a charitable deduction in the grantor’s income tax return in the year of the gift The deduction can equal the full fair market value of the stock, up to 30 percent of adjusted gross income (AGI)

• Donor-Advised Funds (DAFs): These are easily established investment accounts that are administered by a charitable sponsor, such as a community foundation, a financial institution, or other non-profit charity A simple account application and a name for the fund such as Smith Family Foundation will create the

account There is no start-up cost, and minimum contributions start as low as $5,000 depending on the sponsor ’ s guidelines The grantor can serve as advisor or successor advisor and make recommendations for distribution out of the account to non-profit organizations at any point in the future However, the tax deduction for the initial contribution is realized in the year it is given

Some sponsors will accept DAF contributions in the form of appreciated stock, real estate, and other unique assets There is an immediate tax deduction for the full fair market value of the gift Because DAF sponsors are public charities, contributions to them receive favorable tax treatment, including a tax deduction limit of 30 percent of AGI for gifts of stock or property compared to a 20 percent limit with a private foundation as defined on IRC Sections 170(b)(1)(C) and (D)

An attractive feature is that distributions from the funds can be made across multiple charities and there is no specific amount or number of charities required Also, money in the DAF grows tax-free, and there is no legal payout requirement Private foundations, on the other hand, require a minimum annual payout rate of 5 percent, as below

• Private Foundations: These are formalized charitable accounts with a higher degree of regulation than DAFs Private foundations require similar formalities as corporations, including annual board meetings, bylaws, and documentation They allow individuals to retain control of donated assets and only distribute a minimum of 5 percent out to qualified charities Assets in a private foundation can be directed in whole or in part to a DAF

• Charitable Trusts: Charitable trusts agreements allow you to create a lifetime benefit to the grantor or others through a payout distribution and with a split interest to a charity or family depending on the trust type There are two types of charitable trusts: charitable remainder trust (CRT) and charitable lead trust (CLT)

CRTs have been around for decades, and many families create them during their lifetime or at death They allow for a transfer of appreciated assets, avoidance of capital gains, and an immediate charitable deduction The lifetime beneficiaries (grantors) receive a payout for life or for a term specified in the trust documents At the end of the term or grantor’s death, the remainder is paid out to charities This is an attractive planning vehicle for those with highly appreciated investments who want to diversify their holdings without paying substantial income taxation and still enjoy the inflow of annual payouts As you create the CRT documentation, you will be able to identify your preference to receive annuity payouts that are either fixed (“CRAT”) or variable Variable amounts can fluctuate or adjust based on the growth of the portfolio on an annual basis; these are called “unitrust” payouts (“CRUT”)

CLTs have many similarities to CRTs since they have a split interest feature; however, in the CLT, the stream of income from the assets gets paid to a charitable organization each year as opposed to the grantor Each year, the grantor receives a gift tax deduction on the value of the income stream since the charities are receiving the annual income flow The remainder reverts to the grantor or a family member at the end of the trust term This is a great strategy

when using cash or assets with growth potential As with CRTs, the payouts to charities can be fixed (“CLAT”) or variable (“CLUT”)

The only additional consideration when creating charitable trusts is that they require annual administrative management and tax reporting of expenses

• Gift Annuities: Many large nonprofit organizations, including universities, offer charitable gift annuities You can support a cause by making a gift to a charity and you receive a deduction the year of your gift The following year, and each successive year thereafter, you and another person will receive distributions This is a simple contract you can create directly with the charity A portion of the annuity payments is tax-free for the life expectancy of the grantor This may be helpful to donors looking to increase their retirement income and is an alternative to a CRT

• Pooled Income Funds: These are charitable gift options that allow you to generate income while giving a small portion to charity You can “pool” together different securities and even cash to create a larger amount of money and produce income for your lifetime The remainder of the pooled income fund is donated to charity Some charitable deductions for tax purposes may be available

• Retirement Assets: Retirement accounts may also be a good vehicle to pass to charities at death or during a lifetime The IRA Charitable Rollover allows individuals who are at least 70½ years old to donate up to $100,000 to charitable organizations directly from their IRA without the distribution being counted as taxable income The gift must come from a traditional or Roth IRA, and gifts must be made directly to a qualified charitable organization Additionally, no consideration must be received in exchange for the gift A receipt must be obtained from each charity to which a donation is made

A potential further benefit is fulfilment of required minimum distributions (RMDs) from IRAs If the gift-giver does not need the income, yet RMDs are necessary, then channeling the funds to charity via qualified charitable distributions (QCDs) can be an ideal tax-advantaged strategy Be sure to request distribution checks made out directly to the charity though it’s permitted for the account owner to receive the check and present it personally to the charitable organization

• Life Insurance: Charitable organizations may be named as beneficiaries of life insurance policies The gift will be completed at death, providing charitable income tax deductions

Giving USA reports American individuals, bequests, foundations, and corporations gave an estimated $427 71 billion to U S charities in 2018 There’s tremendous impact wrapped up in that overarching figure and there’s even more impact that can be achieved as your clients make the jump from being charitable donors to philanthropists that inspire generations to come to carry on their philanthropic legacy

Nancy E Anderson J D , CTFA, CAP®, CEPA, ADPA, is a senior vice president and head of wealth strategy and trust services at Calamos Wealth Management in Naperville, Ill

The Evolving Role of Today’s

corporate finance leaders face a rapidly changing business landscape.

By carolyN KmET

Today’s chief financial officer is far more than a numbers cruncher Transformed by technological innovations, massive data repositories, and challenging economic factors, today’s CFO is a critical, strategic leader who effects change throughout the entire organization They are technological innovators, data wranglers, and true change leaders

“In a world where they must learn to do more with less, CFOs and their finance teams are moving away from processing transactions to analyzing them in order to make more insightful recommendations to the business,” says Alok Ajmera, president and COO for Prophix, a financial data software solution company

The explosion of data and analytics is one of the main factors propelling the CFO into a much more strategic role Instead of focusing on traditional corporate finance responsibilities, they are devoting more bandwidth to non-finance functions

“It has become the CFO’s responsibility to use the information gleaned from the data to direct and guide management and to hold key stakeholders accountable for the execution of their business decisions,” says Joe Lopykinski, CPA, director for The Overture Group, an executive search and compensation consulting firm He explains that while CFOs still oversee tasks such as accounting, controls, budgeting, and financial planning and analysis, increased insight into data has expanded the CFO’s jurisdiction to include other, more strategic efforts

With wider adoption and implementation of machine learning and automation, CFOs no longer have to devote time to fixing errorprone, manual data entry and reporting Instead, today’s techenabled CFO is empowered to gather and analyze data from both internal and external sources, potentially in real-time, and can then derive insights and make decisions that drive greater corporate profitability This emphasis on technology has altered the foundational knowledge required of today’s CFOs

“I have seen a real shift from just the traditional skill set to a foundational understanding of available technologies, machine learning and, to a lesser extent, AI,” explains Jon Lee, CFO of Universal Synaptics “At its root, CFOs and controllers alike are realizing that financial health monitoring and oversight reduces to cash and data availability ”

To illustrate how different technologies free the CFO from repetitive tasks, standard ERP systems are currently available to provide realtime insight into such metrics as inventory turnover and customer lifetime value Machine learning takes this insight a step further, predicting the optimum time to re-order inventory and identifying when it’s cost effective to re-engage a customer

Automation can also assist with global visibility as compliance gains in complexity, like when countries such as Mexico and Italy implement strict rules for how invoices are transported from sellers to buyers “End-to-end automation that spans the full accounts payable function can offer granular insight into days payable outstanding on a month-by-month basis and per business unit, can capture discounts effectively, and can forecast cash flow impacts tied to a variety of functions,” explains Daniel Saraste, senior vice president of strategy and innovation at New York-based MediusFlow, an accounts payable automation platform

Although technology has driven newfound efficiencies, the finance function continues to be challenged to do more with less “Finance departments in many growing companies are becoming leaner instead of growing in tandem with customer bases and expense

levels,” Lopykinski says, further observing that the decrease in human capital is often offset by increased investment in technology “Technology has, and will continue to have, an important role in the success of finance departments ”

The shift away from human capital toward technology is often hard to navigate, but it will almost certainly have a long-term impact on the finance function “While every evolution comes with challenges, the good news is that implementing automation doesn’t just save time and increase insight, it also reduces risks and costs,” Ajmera says “We will see even more change happen as organizations adopt advanced artificial intelligence-powered performance management software, which is emerging as the next generation of automation ”

Ajmera predicts that this next evolution of finance will include the advent of virtual financial analysts and a new era of planning and analysis where financial professionals will have quick and easy access to real-time data through voice and text that will drive even greater efficiencies Ajmera also believes that cloud computing has the potential to streamline processes and reduce costs, once again enabling the CFO and other finance leaders to focus on more strategic initiatives

“Compared to traditional IT-managed, server-based software, the cloud offers many benefits in security, scalability, increased collaboration, affordability, and the ability to leverage AI This is a game changer for CFOs, giving them the ability to make accurate predictions for faster and more insightful decision-making,” Ajmera explains

Lee agrees, pointing out that the cloud has made technology options less expensive, readily available, and faster to implement However, with that comes new challenges Cloud-based applications tend to be disparate and loosely connected, making initial integration a significant effort, which is driving CFOs to work closely with their CIO and CTO counterparts

“The need for loosely connected applications creates an information system ecosystem that creates value to the CFO and controllers only to the extent that the information can actually be quickly drawn down and consumed,” Lee emphasizes

Furthermore, for CFOs to provide the data-driven explanations demanded of them by shareholders, analysts, and other stakeholders, they need to understand how various applications actually perform “They have to concern themselves with how these applications perform quote-to-cash and procure-to-pay cycles and then translate those processes into value creation or value destruction and understand why,” Lee says

In line with the evolution of the CFO, the role of the controller is also changing Controllers are no longer confined to being report generators Controllers are stepping up and backfilling many traditional CFO responsibilities and are becoming more involved in data collection and analysis According to a February 2019 survey conducted by Dimensional Research, controllers are often responsible for leading firms through specific technical changes, such as business intelligence and data mining functions, digitization of workflows, and integration of financial systems

“Controllers are tasked with working with other business leaders to gather meaningful data and then facilitating the flow of data communication between these leaders,” Lopykinski says

This evolution has also shifted the career path for many controllers as they find their roles expanding to executive management, often rising to chief accounting officers and executive peers to the CFO

“Controllers are still generally charged with the traditional financial package and historical data, but often act as interpreters to operations and finance Thus, they need to be fluent in the language of accounting, operations, and finance,” Lee observes

Interestingly, while technology has significantly impacted both CFOs and controllers, it has also added work in other areas According to Dimensional Research, 78 percent of the finance professionals surveyed reported that the time and effort typically spent on IT management has increased over the past 10 years

Technology is not the only factor driving change in the finance function Economic shifts, such as the lowering of tax and interest rates, are also propelling finance leaders toward more strategic roles

“Low interest rates mean that there are no risk-free returns,” Saraste explains As a result, organizations are pushed to invest money in the stock market in order to generate reasonable returns, thus assuming considerable risk and driving historically high valuations

To this end, CFOs and controllers are championing strategic initiatives to offset that risk According to Dimensional Research’s survey, 69 percent of respondents consider themselves risk managers that oversee internal controls

“With the onset of digital transformation, CFOs have begun to embrace the role of technology to improve the visibility and control of a company ’ s most valuable asset cash,” Saraste says, explaining that in pursuit of risk-free returns, many CFOs and controllers are revisiting the concept of the early-pay discount Through early-pay discounts, organizations can monetize their payables by paying invoices before the due date in exchange for a discount on the invoice amount With cloud-based accounts payable automation, CFOs get the visibility, agility, and control needed to secure the early-pay benefit

“Accounts payable automation provides a level of control that enables finance departments to pay invoices within a given number of days This allows CFOs to focus on capturing different types of early-pay discounts, whether financed on a company ’ s balance sheet or through a third-party,” Saraste explains “The end result is creating opportunities for turning accounts payable into a substantial revenue center for the company ”

This type of automation also elevates the accounts payable staff to a strategic level, creating increased synergies with the CFO “No longer is AP backlogged with paper and inefficient processes; they have the tools and the time to take on more strategic roles, provide valuable data to CFOs, and work with new technologies to drive continued benefits for the entire business,” Saraste says

All in all, the old way of doing things is incompatible with today’s accelerated pace of business CFOs and controllers that efficiently leverage new technologies will be empowered to drive their organizations to be more agile, dynamic, and successful “It is the combination of technology, automation, skills, vision, and relationship building across the business that will make a bright future for finance,” Ajmera says

Of course, despite the substantial shifts occurring in the finance function, the core qualities needed in today’s CFOs and controllers are likely to remain, says Lee: “Uncompromising ethics, strategic vision, and corporate finance and accounting competence ”

BECOMING A FIRM OF THE FUTURE

What does it take? Hint: it’s not just about change; it’s about exponential change. Are you ready?

By NaTaliE rooNEy

Worried about keeping up with the pace of change facing the accounting profession? You’re in good company no part of society is exempt from change, says Barry Melancon, CPA, CGMA, president and CEO of the American Institute of CPAs and CEO of the Association of International Certified Professional Accountants

“Every firm’s clients are having the exact same challenge,” Melancon stresses in pointing out that he thinks there’s no one better suited than CPAs to help clients through the changes ahead “The trust that businesses have in the CPA profession will become increasingly important,” he says “A significant opportunity is coming ”

Human capital, business models, billing all are transforming Even the traditional organizational model is morphing from a pyramid into a diamond with fewer entry-level positions As a result, the next generation of entrepreneurs and business leaders will expect different relationships with their accounting firms, Melancon suggests “The new generation will want what is relevant to them, which means the firm of the future is one that is evolving ”

F R O M G E N E R A L I S T T O S T R AT E G I S T

Illinois CPA Society President and CEO Todd Shapiro says the pace of change is so fast that the Society is now looking seven years out in its strategic planning initiatives rather than the standard three “In seven years, we may not recognize the accounting profession,” Shapiro cautions “The march toward artificial intelligence and robotic process automation has already begun The profession is facing a real challenge How do we make CPAs relevant and understand the value they add as these technologies advance?”

As technology makes tasks from the mundane to the complex easier and faster, analyzing and understanding data is going to become critical, Shapiro says While some firms are hiring nonaccounting professionals to conduct the analysis, there’s nothing to say CPAs can’t offer that analytical insight themselves But Shapiro predicts artificial intelligence (AI) is eventually going to take over data analysis, too, which is why CPAs need to focus on the next step: becoming strategists

“It requires a massive change of mindset,” Shapiro says “CPAs need to move away from simply executing tasks and procedures to understanding the data, providing the analysis, and becoming the strategists CPAs are positioned to help companies add value and become more profitable That won’t be replaced by technology ”

F R O M N OW T O N E X T

“Because technology completes tasks faster, we can now take that information and offer insight, be strategic, and give advice,” seconds Illinois CPA Society board member Brian Blaha, CPA, growth partner and industry leader at Wipfli “If you ’ re a tax generalist, for example, it’s time to become a strategist and really understand the industries you ’ re serving ”

From his perspective, this means addressing skills gaps now “The profession needs to find its expanded purpose in life,” Blaha stresses, which means redefining the role of CPAs and their firms

For instance, CPA firms are increasingly offering more consultative services, which opens the recruiting and hiring process to people with different backgrounds and talents, Blaha says At Wipfli, interested CPAs can move from tax and audit into consulting The

firm quickly realized that the desire and ability to change are valuable, so it’s increasingly seeking talent that is innovative and possesses an entrepreneurial and growth mindset

This goes hand in hand with firms needing to rethink their revenue models “The billable hour is likened to an Industrial Age methodology,” Blaha says “When you narrow a person ’ s value to a component part of an hour, it doesn’t value their knowledge ”

He suggests firms must explore a revenue model that accounts for the time and value an individual brings along with the investments being made in technology “Firms create their own value and intellectual property that has to be captured in a revenue model

Like any business, we must have a profit margin The billable hour isn’t how we’ll be able to do that,” Blaha contends

Further, every firm every company must be a technology company moving forward, whether you deliver professional services, health care, or widgets For CPAs, that means examining how you ’ re communicating and delivering services The key, Blaha says, is not getting caught up in using technology to simply do what you ’ re already doing

F R O M M A N T O M AC H I N E

Peter Scavuzzo, partner and chief information and digital officer at Marcum LLP, says the technology is available now to deliver an array of new services firms want to offer clients, but the rate of change and volume is challenging humans’ ability to keep up Scavuzzo says harnessing data is an integral part of unlocking value for clients and the organization, but it requires a different skill set than most accounting firms have today Optimistically, he says that adopting new technologies allows firms to create an environment where college graduates want to work As tedious tasks are automated away, new recruits are afforded the opportunity to get into the heavy lifting more quickly, which also appeals to their hastier career goals

“Organizations that don’t have the latest technology risk a cultural problem and it will also slow down their ability to execute long-term strategic plans and to deliver the strategic advisory services clients will need,” Scavuzzo emphasizes “The company that figures out how to bring people and data together and unlock value for clients is the company that moves forward into the future It’s a decision: invest and grow, or not ”

Two years ago, CPA firm Gray Hunter Stenn LLP began exploring AI, and partner Jeff McPherson, CPA, credits Shapiro for spurring the firm’s foray into it “He scared us, ” McPherson says “He said firms are moving to AI, and you either make the transition or fall behind We like to be out in front ”

Proving Scavuzzo’s point about technology’s impact on firm culture and staffing, McPherson notes that the firm’s adoption of AI has assisted in its recruiting efforts “College graduates appreciate we are moving forward,” he says “I didn’t anticipate that as a benefit ”

What’s more, the firm’s clients have shown their support as well “They liked that we were willing to do things differently,” McPherson adds “Their hope is that they can get better information as we are able to use the software more efficiently ”

“We wanted to not only make audits more efficient and effective but also make us more competitive and provide better service,” explains partner Erin Wharton, CPA “We would never adopt a technology if we didn’t expect it to add value Because we adopted the technology early, the company listened to our feedback and is adding functionality It hasn’t transformed our audits yet, but it’s going to add value and efficiency ”

As with any substantial change, there were a few hiccups during the first year of AI implementation, McPherson admits, but this year “is getting better by leaps and bounds ”

For nearly two years, professional services firm Sikich LLP has also been researching different AI-backed service offerings, particularly robotic process automation (RPA) solutions they could offer to middle market clients As more intuitive interfaces emerged, they caught the attention of Sikich’s CFO Ryan Spohn

Software robots, or “bots,” can execute processes to eliminate repetitive tasks our employees have historically completed This “digital labor” is a new low-cost alternative, and the software can handle most manual tasks with a surprising degree of sophistication, he explains

Spohn said the firm’s clients were hearing about these RPA options but didn’t think they could afford their own Enter Sikich “We show clients how these solutions may help Then we develop an offering and get them access ”

The technologies are being tested with clients in two ways:

1 As a classic managed service: rather than performing a normal hourly or outsourced service manually, the firm uses bots to serve clients more productively

2 By directly licensing virtual workers to clients: Sikich unbundles the bots to offer a lower price point and/or a shorter license commitment This allows clients to get access to the same value as large enterprise companies while benefiting from a solution that is in line with their needs

“This technology will become as commonplace as pivot tables and macros, ” Spohn says “Smaller organizations can have the same benefits as large ones It’s a game changer for the middle market ”

Ultimately, Sikich’s employees benefit too As Sikich builds a “culture of automation,” Spohn explains that every technology partner is required to get basic levels of certification in AI and RPA This aids them in identifying opportunities for clients and speaking proficiently about the new offerings

Plus, “if you take the monotony out of the equation, employees can focus on more interesting tasks,” Spohn adds “It’s a retention tool ”

“The accounting industry is positioned to truly be transformed,” Scavuzzo says “Technology opens up an unbelievable array of services to offer to our clients I’m excited to be in this industry I don’t know if I’d want to be anywhere else ”

“Don’t be afraid to try new things,” Wharton encourages “Clients know big data tools are available and expect us to dig into it If we want to keep up with other firms and advisors, we can’t do things the way we ’ ve always done them ”

“It’s our opportunity to lose,” Scavuzzo adds “If you want to be transformative, create that culture immediately and get everyone onboard ”

“Becoming a CPA of the future takes progression,” Shapiro says “Change your mindset Think of yourself as a strategist Educate yourself and others Embrace technology Help your people embrace the changes

“Remember, the end game is becoming a strategist,” Shapiro continues “The data side is important, but the interpretation and strategic insight will be valued If you focus on that, you will have a career and a profession that lasts a long time ”

Tim Jipping, CPA, CGMA Owner, Journey Advisors & CPAs tim@journeycpas com

When Worlds Collide: The CPA’s Future Is Now

Non-CPAs are increasingly influencing the accounting industry So, what can CPAs do about it?

How often do we talk about the firm of the future the one that is three, five, and even 10 years out? What if I challenged that the firm of the future exists today? In fact, your firm is one of them Call me arrogant or call me naïve you can even call me both But I’d like to argue that the game-changing differentiator between the firm of today and the firm of the future is as simple as this: Discomfort

You’ve read a paragraph and are probably convinced that I’ve lost it Hear me out, and consider a few things:

• Intuit now directly offers to consumers (our clients) software and cloud applications in three core business areas of many CPA firms (bookkeeping, payroll, and tax)

• There are major software companies improving payroll administration to such a degree that CPA firms could be pushed out of performing payroll services for good

• The increasingly easy access to outsourced and even offshore bookkeeping outfits, combined with advances in automation, are already resulting in fewer opportunities for CPAs

If you ’ re a CPA, these developments should make you uncomfortable If you run a small or midsize CPA firm, you should be concerned about what your future holds And if you happen to be in a large firm, don’t think you ’ re in the clear The non-CPAs, and even nonaccountants, that are impacting our industry are making it easier for smaller firms to compete with you as the attention of all CPAs must turn to providing more than just traditional accounting, audit, and tax services I predict that the more service displacement we see in the near-term, the fiercer the competition between all firms will get

THRIVING IN DISCOMFORT

The firm of the future is the uncomfortable firm Adapters will win The exponentially increasing rate of disruption in our industry magnifies the importance of adaptability Adaptability, however, is not a one-time thing it’s a continuous process, a consistent state of being Discomfort is a sign that a firm is aware of the challenges and disruptions around it and that it is seeking to adapt in order to thrive

In the martial art of Judo, the technique of Kuzushi is employed to deflect an attack and use an opponent’s momentum against them in order to gain control over them Rather than putting energy toward resisting the changes in our profession, leaders in the firms of the future embrace change as an opportunity and seek ways to exploit the competition of both the non-CPAs and non-accountants entering our space

How do you know if you ’ re a firm of the future or a firm of today? Here are a few examples of how each firm might respond to a few relevant professional topics:

Technology

"There's too many technology options these days, so we stick with what works rather than get bogged down with shiny objects"

delivery

"my clients pay for my time and expertise, and of course we try to be as professional and service-oriented as possible"

Pricing

automation

Non-accountant competitors

"our pricing is based upon effort expended"

"What do you mean?"

"They are going to realize it's not that simple, and i'll be retired before they are a true threat"

POSITIONING FOR SUCCESS

"We use what's best, until there's something better"

"We obsess over elevating client experience without compromising quality"

"our pricing is based upon value provided"

"it has transformed our practice"

"They are going to realize it's not that difficult, so we need to always be thinking beyond competition"

• Proactively introduce clients to new tools or approaches that could help them achieve their goals (ahem, you’d first have to understand what their goals are to do this, by the way, which is another client engagement opportunity)

Finally, examine your business model Your firm’s structure could be in direct opposition to its goals For example, while your expertise may be in business tax planning and compliance, over the years you may have taken on a substantial amount of payroll administration for your business clients But payroll administration is never ceasing, and the revenue-per-hour ratio is not all that high, which could make it difficult to grow your practice in other areas without making some structural changes

It’s not at all uncommon for client relationships to be in the hands of one individual or a small handful of staff, thereby consuming significant chunks of their time and creating bottlenecks Intentionally shifting points of contact early on in a client relationship could improve service delivery and client experience, while also elevating your team’s ability to serve and communicate with clients This may require more structured training for your team, or even enhanced titles for your team members to improve the client’s perception of their point of contact

Not all the firms of today are going to die off but I’m willing to bet they’re not experiencing meaningful growth or crazy success In order to ensure you ’ re positioned for success as a firm of the future, you’ll need to carefully examine your processes, services, and business model

Start by mapping out your processes, from onboarding clients to service delivery Don’t document what SHOULD be happening; document what IS happening Think of the following: How do you onboard new clients and load them into your platform? How do you define and communicate expectations? Are your clients clear on what will be required of them? How do you obtain the necessary information from clients, and how is it distributed to your team? Have priorities and timelines been properly established and communicated? Do you know if you ’ re on schedule? Do you have defined deliverables? How do you collect payment? What are the routine bottlenecks and obstacles in your processes? Can automation, increased training, improved communication, fewer touch points, or additional people be solutions?

Next, examine your services How much of what you do falls into the compliance category? Realize today that compliance work will only continue to become more automated, offering less work (and declining revenue) for CPAs in the future You must begin to determine how you can spice up your services to be value-focused versus compliance-focused Consider a few of these examples:

• Shift your focus to tax planning versus tax preparation (and charge a premium for it!)

• Provide a few observations and insights with clients’ monthly financials

• Leverage reporting software to elevate your deliverables and provide more insight

• Begin communicating to clients how they compare to industry peers and benchmarks

Also consider creative measures to incentivize your team’s performance And when I say creative, I don’t mean off-the-shelf bonus plans think profit sharing based on performance metrics or establishing an employee-owned entity designed to attract and grow a certain niche Remember, you didn’t get to where you are alone, and you certainly won’t emerge as a successful firm of the future alone

I contend that adaptability, flexibility, and creativity will be the keys to success for firms of the future With firm size and structure having a lot to do with how adaptable, flexible, and creative you can be, I think small and midsize firms can realize the greatest opportunities for success as non-CPAs and non-accountants disrupt our industry If you can get comfortable being uncomfortable, then becoming a firm of the future is about continually reimagining your firm of today

Jon Lokhorst, CPA, ACC Executive Leadership Coach, Lokhorst Consulting jon@lokhorstconsulting com

How to Build Your Personal Brand

Amy was a senior accountant for a multinational company in the hospitality industry * Although she enjoyed her job, Amy was unsettled and longed for “ more ” Her attempts at earning promotions to manager ended in disappointment when she was passed over several times in favor of her peers Amy felt stuck, like she had hit a plateau in her job And while she was tempted to start answering calls from recruiters who regularly contacted her with outside opportunities, she was uneasy about making a move After all, she liked her company and still had hope that there was a brighter future ahead

When I asked what “ more ” might entail, Amy said she had to do something to help her get noticed As Amy shared her dilemma in our coaching session, I asked how she was perceived in the workplace “I’m known for quality work,” she said “My reports are accurate and always on time ” She then conceded it would take more than that to get the promotion she desired

DEFINING YOUR BRAND

I suggested Amy build a personal brand to elevate her performance, add value to the company, and draw the attention of superiors who make promotion decisions I invited her to perform an exercise often used to help people develop a basis for their personal brands: Identify three words that describe you when you show up as your best self This is an important exercise because, when you show up as your best self, you deliver your best value and get noticed in the process

In our next coaching session, Amy announced that she had come up with just one word for her personal brand “Firestarter,” she said “I want to be known as a firestarter ” I thought that was an unusual word for a finance leader to choose and was curious to hear more Amy explained that anyone in her role could generate unending data, reports, and analyses But the thing that would set her apart was the ability to ask pertinent questions and start conversations about how the data could be used to manage the business better

Amy jumped in diligently to establish her new brand She developed a new perspective on her work, going beyond merely reporting data to generating insights that improved business results She was proactive in pursuing strategic conversations at a higher leadership level Within weeks, Amy’s superiors noticed a change in her Within months, she received the promotion that had eluded her in the past

Now, what about you? How can you benefit from building a personal brand that inspires you to show up as your best self ? What three words describe you when you show up as your best self ?

Putting some thought into your personal brand can help you show up as your best self in every business situation.

Don’t overthink it Now is not the time for in-depth analysis You can always make changes later although your first impressions may stick For example, when I first learned of this exercise while listening to a leadership podcast in my car, three words came to my mind: insightful, confident, and engaging They’ve been my three-word brand ever since

It’s okay to be aspirational with your words, stretching for an even better self than who you are right now these words need to be descriptive of how you can deliver your best value to your company or clients Choose words that help you stand out and get noticed; choose words that will open new opportunities for growth and advancement

Next, take the exercise a step further by seeking input from people who know you well Dorie Clark, author of “Stand Out” and “Reinventing You,” suggests asking a half-dozen friends and colleagues to answer the three-word question for you Their responses will help you identify how others perceive you, an can incorporate the emerging pattern into your self-impressi

BE YOUR BRAND

Every presentation, meeting, and interaction is an opportun express and advance your personal brand and profess leadership Yet, we often fail to carry a leadership presenc these situations Instead, we go into them unprepared and regret that we fell short of our true potential

If you ’ ve ever left a meeting or conversation thinking, “I didn’t across very well,” or, “I didn’t add much value to that discus you know what I am talking about

Turning your three-word personal brand into positive self-ta implant it in your mind Rehearsing it as you enter critical situati essential to showing up as your best self This could be as sim looking at yourself in the mirror and repeating your three-word m I often recite “I am insightful, confident, and engaging” before on stage for a speaking event or heading into a critical meeting

Be mindful of the fact that developing and truly living your per brand takes time Like any consumer brand, it takes foc consistent effort to build a brand that others recognize you for requires your willingness to monitor progress and make adjustm along the way I encourage you to build time into your schedu self-reflection Pretend you were a fly on the wall during your recent interactions and ask the following questions:

Did I show up as my best self ?

What words and actions reflected my best self ?

What things kept me from being my best self ?

What can I do differently in the future?

I also encourage you to seek honest feedback from others who see you in action Ask a trusted friend or colleague to answer the four questions above You can also engage a mentor or coach to provide additional insights Your goal is to identify the appropriate changes in behavior you need to make to achieve the personal brand you designed

While you may not experience performance results as quickly as Amy, I can tell you this exercise is worth it When you consistently display your personal brand, you build trust with your colleagues and clients When you consistently show up as your best self, you deliver your best value!

*The name and some facts have been changed to preserve confidentiality

Art Kuesel President, Kuesel Consulting art@kueselconsulting com

Why Small Changes Yield Big Results

I recently had the pleasure of learning about habits more specifically, how to create positive habits It seems the successful creation of positive habits involves making many small increments of changes For example, if you resolve to become more active for health reasons, you wouldn’t want to start by setting a goal of running 10 miles per day starting January 1 Your likelihood of failure is probably 99 5 percent in this scenario However, if you set a goal to walk around the block once a week, your chance of success would be significantly higher Once you can demonstrate success in your weekly walk, you are ready and likely to increase your commitment

How exactly does this relate to business development? In my mind, it’s all about identifying the small, incremental changes that you can make which can achieve outsized impacts on your business development results Consider that the small, consistent actions you execute on a weekly basis can make a difference on a weekly, monthly, and annual basis and can lead to forming habits that last a lifetime

For example, the simple, common business development activity of going out to lunch with a client can ultimately be measured in goodwill, stronger relationships, additional revenue via cross-serving, referrals, and more But when was the last time you thought to account for how valuable these lunches can be for your firm? When was the last time you thought to make the act of client lunches a regular business development process? The act itself is so approachable that all but the most inexperienced staff could say, “I can do that!” And, when you give yourself a wide berth in terms of execution, like all 12 months of a new year, you will have fewer excuses and obstacles in the way If we assume that you didn’t partake in any client lunches this year as part of your business development efforts, I contend that even a small incremental change of committing to four client lunches per year could yield measurable business development results

Taken a step further, you could resolve to engage with your referral sources on a more intentional basis to harness the power of those relationships Your referral sources obviously trust in your expertise enough to send their clients your way, so why has it been months or maybe even years since you saw them last? Rekindling cooling referral relationships and more deliberately maintaining the ones with high potential is a good use of business development time Let’s assume that you struggled to keep promising referral relationships warm in the past A small, incremental change you can resolve to make is to get in touch with all previous referral sources twice in the coming year Assuming you have two or three of these types of relationships, that commits you to just four to six outreaches in the new year

Big resolutions might not be the answer to your hopes for a new year of new business development

Again, it is very easy to visualize success with this level of commitment and then expand upon it once it becomes a habit

Now, how about the other business development opportunities that often lie undiscovered in your professional membership associations, like your membership with the Illinois CPA Society? While being a member of a trade association often gets your name listed in a directory, it does nothing for building meaningful relationships with prospective referral sources, clients, or even existing contacts without intentional effort To extract value from your membership, conventional wisdom calls for you to be engaged, to volunteer on a committee, to contribute to its publications, to attend networking events and participate in or speak at educational conferences where you will build relationships with peers and other influencers and thought leaders in your profession If you commit enough to write your dues check, why not commit to engage in six or eight activities in the coming year as a means for doubling down on your investment?

If you adopted all these recommendations, you would have committed to maybe 14 to 18 additional activities over the span of a year Most people would assign you a high likelihood of success in being able to add these potentially very valuable business development activities to your calendar For some of you, resolving to this level of additional commitment makes you uneasy I’ll suggest taking the small, incremental steps down to just baby steps if it means you will start down the path to better business development Make a single selective commitment if you must, because whatever your commitment, the ongoing implementation of it is surely to lead to a positive business development habit

As one of my business development resolutions for the new year, I’m following my own advice and have committed to another year of writing this column I’d love to use it to help you create positive habits and start down a path to better business development Nothing brings me more satisfaction than seeing someone I have worked with become more successful So, feel free to send me an email with your new year ’ s business development resolutions (or the ones you failed to meet this year) I will do my best to craft columns that are relevant and inspirational and, most importantly, that remind you to be accountable for making your small, incremental changes that will yield big business development results

CPA PAC

The Illinois CPAs for Political Action (CPA PAC) serves as a strong collective voice for CPAs and CPA firms and provides a foundation for successful legislative advocacy. Good citizenship is promoted through the personal and financial participation of Illinois CPA Society members and others in the elective process at the state level of government.

CPA PAC is a respected nonpartisan political action committee that contributes and supports candidates for state offices who support the legislative goals of the profession.

Illinois CPAs for Political Action recognizes the following firms for their support of the CPA PAC.

Thank you to Illinois CPA Society members and their organizations for continued support of the CPA PAC through financial contributions.

SUPPORT CPA PAC

Your support makes these legislative achievements possible. We encourage you to donate to CPA PAC and contribute to future successes.

CPA PAC accepts individual and corporate donations. Contributions may be sent to: Illinois CPAs for Political Action 524 South Second

Mark J. Gilbert, CPA/PFS, MBA President, Reason Financial Advisors mgilbert@reasonfinancial com

What Can the SECURE Act Do for You?

Legislation aimed at revving up retirement savings in America offers new opportunities for employers, employees, and advisors alike.

By now you should be familiar with Illinois Secure Choice, the employer-sponsored retirement plan Illinois employers of 25 or more employees must offer if they do not offer employees another qualified retirement plan I suggested the Illinois law could provide meaningful retirement savings for many Illinois workers in my summer 2019 column, “Can Secure Choice Secure Illinoisans’ Retirements?” Now, Congress is busy debating federal legislation to tackle America’s savings and retirement crises

Enter the SECURE (Setting Every Community Up for Retirement Enhancement) Act, which aims to simplify the provisions to establish and administer employer-sponsored retirement plans In essence, the Act will encourage more businesses and business owners to offer retirement plans which, in turn, should encourage more workers to participate in securing their own retirements The Act received strong support earlier this year, passing in the House by a margin of 417 to 3 in May As passage of the Act in the Senate seems likely, albeit delayed, let’s look at some of the important aspects

FOR EMPLOYERS

The provisions of the SECURE Act continue a trend the federal government began well over 20 years ago: reduce the employer’s administrative and fiduciary burden of providing a retirement plan to employees If more employers offer such plans, and more employees participate in those plans, then the end goal of ensuring U S workers grow their retirement assets over and above their Social Security benefits or their public service sector pensions is more likely to be met

To start, the Act provides for “ open ” multi-employer 401(k) plans, meaning unrelated small employers could participate in a single 401(k) plan This would theoretically drive down the administrative and operating expenses of the plan while providing employers with a more affordable alternative to establishing their own 401(k) plans (Currently, only “closed” multiemployer plans are permitted, which are plans made up of two or more businesses in one industry or established trade association )

Further, the Act provides two $500 maximum annual tax credits (a plan start-up credit and an ongoing credit for as long as three years) to employers who establish either a 401(k) plan or a SIMPLE IRA with automatic enrollments The Act also simplifies the rules related to qualified nonelective contributions in safe harbor 401(k) plans (i e , employer contributions of 3 percent or more of an eligible employee’s compensation regardless of whether the employee contributes to the plan)

Lastly, the Act reduces the liabilities of employer plan sponsors who include annuities as investment options in their plans in the event the insurer fails to meet its financial obligations, including payouts to plan participants currently receiving benefits

FOR EMPLOYEES

The requirement that a worker needs to have 1,000 hours of service in order to participate in a defined contribution plan has been modified to be three consecutive years with 500 or more hours of service The Act also permits employees who participate in automatic enrollment safe harbor plans to increase their contribution rate from the current maximum of 10 percent of pay to 15 percent of pay if their employers permit it

FOR EVERYONE

The Act also affects all participants in qualified retirement plans and IRA-type accounts First, the Act increases the age for mandatory withdrawals (required minimum distributions) to 72 to reflect the longer life expectancies of workers Second, the Act removes the maximum age limit under which a worker can contribute to an IRA Next, the Act expands the permitted use of Section 529 plan account balances to include student loan repayments of up to $10,000 per year The Act also expands the permission of penaltyfree IRA withdrawals to allow withdrawing up to $5,000 to cover qualified birth and adoption expenses Finally, the Act requires that IRAs inherited by non-spouses be paid out over no more than a 10year period, subject to certain exceptions

These provisions reflect a balance of sound retirement policy and real-world practicalities By delaying the first required minimum distribution age by 18 months, retirement plan account balances

are estimated to grow 5 percent or more Lifting the age cap on IRA contributions is also sound retirement policy, as it means workers aged 70½ and older will be able to continue contributing to an IRA And, allowing participants to access their funds prior to retirement in emergency and other certain scenarios should help encourage participation

WHAT’S NEXT

As with any potential legislation, the SECURE Act has winners and losers Among the winners are small employers who wish to offer employees some form of work retirement savings plan but have not done so because of high start-up and administrative costs Other winners include older workers in our economy for whom an age 70½ required minimum distribution commencement is unnecessary and costly Losers might include IRA owners who withdraw funds early for legitimate purposes but find out down the road that the easier access to funds has adversely affected their retirement living standards Non-spouse inheritors of IRAs also could be hurt if they are forced to withdraw funds at a faster clip to comply with the Act’s 10-year payout limitation

Unfortunately, the biggest losers are potentially advisors like us While the Act sits in limbo in the Senate, employers and employees are left to ponder whether it will become law in 2019, 2020, or ever, which could put their financial and tax planning questions on hold until there’s a resolution or immediate need Don’t let this be a lost opportunity to bring value to your clients Be proactive and bring forward strategic ideas and new insights that can better their financial lives When we show our clients that we ’ re invested in helping them achieve their financial goals, we become not only their trusted advisors but also their valued advisors

Elizabeth Pittelkow Kittner

CPA, CGMA, CITP, DTM Head of Finance, International Legal Technology Association ethicscpa@gmail com

The Ethics of Terminating Employees

One of the most difficult experiences you are likely to have as a leader in the professional realm is terminating an employee It can be life-altering for the person being terminated, their family members, and even their colleagues A termination can impact the morale within your organization and the workloads of your remaining employees When emotion inevitably creeps into an event like termination, it is important to keep ethical considerations top of mind, allowing you to make clear, conscious decisions while also caring for the people involved

WHY SHOULD YOU TERMINATE SOMEONE?

Many employers are at-will, meaning they reserve the right to terminate employees without cause However, just because an employer can legally terminate someone at any time does not mean they should Rather, there should be a strategic imperative

Leadership consultant Simon Sinek spoke about the relationship of trust versus performance in employees during a keynote presentation at the AICPA’s 2019 ENGAGE conference His four-quadrant chart helps to define the level of trust and performance an employee brings to their organization, and therefore further helps to identify which employees are moving the organization in the right direction, toward its defined performance objectives and toward a culture of high trust and performance where employees exhibit strong personal character

Low

Performance Trust

Let’s examine the employees in each of Sinek’s quadrants:

High Performance, High Trust: Ideally, we want most employees to fit into this quadrant They are the work product superstars who also demonstrate high emotional intelligence and character These are the employees you want to continue giving work they enjoy and encourage them to serve as coaches and mentors to others within the organization

Low Performance, High Trust: These are the likable employees that fit into the culture well but require extra coaching on work performance Giving them opportunities to share their emotional intelligence behaviors with others can benefit the company, but you will have to determine why their work performance is not strong, figure out the root cause, and work on an action plan Perhaps there is a lack of motivation, skills deficiency, or personal distraction Whatever the case, you will need to determine the course of action best for the employee and the organization

Low Performance, Low Trust: These employees do not perform well and consistently do not exhibit high emotional intelligence Employees in this quadrant take the most work to remediate Coaching for performance and behavioral skills may be possible, but is it worth it? Employees in this category tend to be terminated more often than those in any other group

Keeping ethics top of mind will ensure your decision to terminate is for the right reasons

High Performance, Low Trust: These employees are some of the toughest to manage The organization values their high performance, but people do not generally enjoy working with them Sinek defines these people as “toxic” team members They tend to stay in companies longer than Low Performance, Low Trust employees because their work product is strong, and finding and training replacement talent is often difficult and costly Sinek suggests attempting to coach these employees on emotional behaviors first, but if they prove to be uncoachable, terminating them to protect the overall cultural health and morale of the company is in your best interest

From a leadership perspective, you cannot afford to be impulsive with termination decisions When emotions are running high, it is tempting to terminate someone who is difficult to work with, but consider the remediation steps above If remediation does not seem to be working, consider involving a few people in making the termination decision However, you should also consider that immediate action may be appropriate under certain circumstances, like if an employee demonstrates destructive behavior, such as threatening an employee verbally or physically, viewing illegal material on their work devices, using drugs at work, or damaging company property

HOW DO YOU PREVENT THE NEED TO TERMINATE EMPLOYEES?

Assessing existing employees in the trust/performance quadrants above gives you a starting point for how to coach employees on improving performance and meeting your organization’s cultural values However, reducing the number of terminations could stem from implementing robust hiring practices first Consider implementing skills-testing, assessing values, and involving several people within the organization in the interviewing and hiring process Take all the time needed to hire the right person as opposed to rushing to fill a vacancy or immediate work product need If you require a fast resource hire, consider bringing in help on a contract or a part-time basis to give you more time to decide if a person is a good long-term fit

Reduced turnover and terminations could also stem from better understanding employee satisfaction Think about issuing anonymous quarterly surveys When employees feel both anonymous and heard, they are more likely to share useful feedback, which will help you determine if there are performance or trust issues within your organization that need to be addressed In addition to periodic surveys, a strong show of ethical consideration would be implementing a whistleblower program where employees can provide anonymous real-time feedback on issues they feel are significant to their work experience or the organization overall Ensure whistleblowers cannot be targeted or dismissed, which would dampen culture and could violate whistleblower protection laws

WHAT ARE THE RIGHT WAYS TO TERMINATE EMPLOYEES?

Know the rules Even if your organization operates as an at-will company, you still need to ensure you are not terminating someone for the wrong reasons Further, even if you terminate someone for what you believe to be the right reasons, a terminated employee may still bring a wrongful termination claim against your organization Wrongful termination situations include if a company is discriminating against an employee, retaliating for something an employee reported or refused to do, or the company is frustrated with the refusal of an employee to take a lie detector test Discrimination is one of the most common categories employees report as a reason for wrongful termination The Equal Employment Opportunity Commission enforces several laws against discrimination, including the Civil Rights

Act of 1964, the Age Discrimination in Employment Act of 1967, Title I of the Americans with Disabilities Act of 1990, and the Pregnancy Discrimination Act of 1978

The lesson here is that it is important to document the reasons for termination of an employee and to offer terminated employees benefits conditioned on them signing a claims release form Benefits might include severance pay, COBRA premiums, and job placement services paid for by the company Additionally, you must provide enough time for terminated employees to review the claims release form with enough time allotted by federal law For example, for a release to be compliant for age discrimination claims (employees who are 40 or older), the release must include specific language, a 21-day consideration period, and a 7-day revocation period

Severance offerings should also be consistent based on similar termination situations Many organizations do not publish severance policies to their employees, but they should still follow a basic structure For example, perhaps an organization offers two weeks per year of service Therefore, if an employee worked for four years and received eight weeks, another employee who worked four years should receive similar severance pay Organizations can deviate from policy, but they need to document the reasons for the change For example, perhaps an employee came into the company with a termination provision for severance, or perhaps they negotiated more severance as part of their termination Consult an employment attorney to ensure you are terminating employees for the right reasons and with the correct termination paperwork in place

Terminating an employee is likely to be one of your most difficult experiences as a business leader, but by sticking to a strong ethical framework, you can take comfort in knowing that you are doing it for the right reasons and in the right way

Keith Staats, JD Executive Director, Illinois Chamber of Commerce Tax Institute kstaats@ilchamber org

ICPAS member since 2001

Oops, They Did It Again

Legislation making Illinois sales taxation more complex and unlevel than before passes during the fall veto session.

During the last week of the recently concluded fall veto session, the Illinois General passed additional sales tax legislation modifying and delaying until Jan 1, 2021 the so-called Leveling the Playing Field for Illinois Retail Act (“the Act”) Unfortunately, the legislation does not correct the fundamental flaws of the Act, which was passed last spring and detailed in my fall column In fact, it just modifies the tilt of the playing field and not in a good way

As you might recall, the Act (Public Act 101-0031) modified the Illinois Retailers’ Occupation Tax and the Use Tax in the guise of addressing the tax rate differential between out-of-state sellers subject to use tax and brick-and-mortar sellers subject to state and local retailers’ occupation taxes (ROT) The Act attempted to accomplish this goal by, among other things, establishing a category of out-of-state sellers known as “remote retailers” and converting these sellers from use tax collectors into retailers subject to state and local ROT The conversion occurs even though such sellers have no brick-and-mortar locations or physical presence in Illinois

The Act was originally passed in opposition of the Illinois Department of Revenue (IDOR) IDOR correctly pointed out numerous problems with the Act that would make it impossible to administer, including the fact that the initial timeframe for implementation (July 1, 2020) was too short, and the Act is fatally flawed as a constitutional matter

IDOR has since negotiated modifying the Act with its architects the Illinois Retail Merchants Association and Illinois Municipal League The result was the passage of Senate Bill 119 during the fall veto session

SB 119 contains amendments suggested by IDOR to address technical concerns related to administering the sales tax changes in SB 690, like delaying the effective date of the of the Act until Jan 1, 2021 and adding back some Use Tax nexus language that will allow Use Tax collection if the Act is deemed unconstitutional

Additional amendments account for changes proposed by the Illinois Retail Merchants Association and the Illinois Municipal League with the avowed goal of further leveling the playing field between online sellers and brick-and-mortar sellers However, these changes do not level the playing field or eliminate the Act’s constitutional infirmities Indeed, it is arguable that the Act is now perhaps more flawed Unfortunately, IDOR was unsuccessful in convincing the General Assembly of this

Consider this: SB 119 grants operators of marketplace platforms who are also sellers, and their related companies, a significant sales tax rate advantage over unrelated Illinois sellers on marketplace platforms Effective Jan 1, 2021, sellers on marketplace platforms are subject to state and local ROT based on destination sourcing, unless the seller is also the marketplace operator or a related company

The concept of “related company ” and “unrelated company ” is introduced in SB 119, but there isn’t a definition for “related company ” There is a definition for “affiliate” that was included in the original version of the Act, which has a 5 percent ownership requirement The definitions of marketplace facilitator and marketplace seller use the term “unrelated third party,” a different and undefined term from “affiliate ” As a matter of statutory construction, it appears clear that a “related company ” was meant by the General Assembly to be different than an affiliate However, without a definition, “related company ” could include any company to which the marketplace operator is related in any way Thus, Illinois sales tax law could encourage companies to become “related” to owners of marketplace platforms to avoid becoming subject to ROT and the destination sourcing requirement for marketplace sellers

So, under SB 119, here is how Illinois consumers buying products on a marketplace platform will be treated:

Let’s revisit my fall column example where I decided to buy a printer this time from a marketplace seller like Walmart or Amazon

When the sale is not made by the marketplace operator or one of its “related companies,” the sale is by a marketplace seller In such instances, the transaction will be subject to ROT without regard to whether the marketplace seller has a brick-and-mortar location in Illinois The local ROT rate (state plus local sales tax) will be based on my delivery location (i e , 10 25 percent in Chicago and 9 75 percent in Springfield)

When the sale is by the marketplace operator or any of its “related companies,” the sale is not a sale by a marketplace seller Therefore, if the printer is delivered to me from a location in Illinois

(shipped from either the related company ’ s Illinois location or from an Illinois-based fulfillment center) the local ROT rate is based on the origin of the sale

When the printer is purchased from the marketplace operator or one of its Illinois “related companies” and is shipped to me from out of state, only Illinois Use Tax at the rate of 6 25 percent is due because the sale will not be deemed made by a marketplace seller subject to ROT

In summary, the sales tax rate charged to me when identical products are purchased through a marketplace platform will vary based on who makes the sale and, in the case of marketplace operators and their related companies, whether the sale is fulfilled from an Illinois-based or an out-of-state warehouse This means marketplace operators and their related companies that fulfill sales from out-of-state inventories will have a price advantage over other sellers on their platforms

Further, SB 119 also modified the tax treatment of brick-and-mortar retailers who also sell through marketplaces operated by unrelated third parties According to SB 690, an Illinois brick-and-mortar retailer that sells items through its own website or through a thirdparty marketplace is responsible for charging the state and local sales tax rate in effect at its selling location (generally the location of its brick-and-mortar location, or origin sourcing) Thanks to SB 119, effective Jan 1, 2021, such sales remain subject to ROT, but the tax rate is no longer based on the seller’s selling location but the buyer’s location

As you can see, the more complex Illinois sales taxation becomes, the more unlevel the playing field grows

Your

State legislators want to hear from YOU on important issues, not only as a constituent, but also as a CPA. Your exper tise brings clarity and credibility to issues

Being heard is easy

We have brought grassroots advocacy literally to your finger tips When there is an issue we need you to contact your legislator on, we will send a LEGISLATIVE ALERT email

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By clicking on the TAKE ACTION button in the email, you will automatically connect directly with your respective legislator where you can then CALL, send an EMAIL, or post a T WEET.

Questions: Please contact Mar tin Green, Esq , Vice President, ICPAS Government Relations at greenm@icpas org

From Ghana to Global

BY JEFF BADU, CPA

As a teen, I was headed down the wrong path Now, I am a 27-year-old millionaire who owns several companies I’m a serial entrepreneur, a licensed CPA, and founder of Badu Enterprises LLC, a multinational conglomerate of several companies, including Badu Tax Services LLC, a CPA firm that specializes in tax preparation, planning, and representation for individuals and businesses, and Badu Investments LLC, which is primarily a real estate investment company that acquires residential and commercial real estate properties to restore traditionally underserved areas, such as Chicago’s South Side

Eleven years ago, though, I was a student at Uplift Community High School in Chicago’s Uptown neighborhood and was involved in the wrong activities I was on a path to where some of my friends are now in prison or dead But a summer visit to my native Ghana in 2008 changed everything

In returning to the country I moved from when I was eight years old, I saw how people were living in Ghana, how so many were homeless including a few of my family members and I knew I just couldn’t have a life like that I had become a bad kid surrounded with the wrong things; I had almost been put in handcuffs, and I knew that had to change From then, I started going to church, and my goal became to help an infinite amount of people who have a profound desire to do better in life

I have always had an entrepreneurial spirit It’s very hard to find a job in Ghana, and if you really want to start to make money, you have to be an entrepreneur As a five-year-old, I would sell the chocolates and candies I was given on the streets of Accra I followed the examples of my parents who are both entrepreneurs my dad a real estate developer, my mom in real estate and retail

I started my first business plan as an 18-year-old during my freshman year at the University of Illinois, where I earned my bachelor’s and master’s degrees in accounting from the Gies College of Business I formed a client base by volunteering to do taxes for family and friends while I went to school and built that base to 100 people by the time I was 24 years old and working at PwC

When I hit my 100th client, I quit my full-time job to officially start Badu Tax Services LLC in September 2016 In the three years since, my company serves 1,500 clients in all 50 states and in Canada, China, Russia, Liberia, and India I now have 21 independent tax preparers working as contractors under my firm’s umbrella My goal within the next 12 months is to have 50 contractors and an office in the United Kingdom Within five years, I plan to have 10,000-plus clients, 250 independent contractors, and offices around the world We want to have a global company We’re trying to do something very, very big, and we ’ re looking to become the top tax firm in the world

I became a millionaire in 2018 that had been my goal and I want to be a billionaire by age 30 and have the financial freedom to change lives in the philanthropic world I want to be a positive example for Chicago and for the world; I also serve as the second vice president for the Chicago Chapter of the National Association of Black Accountants and the treasurer of the Ghana National Council of Chicago My goal is to help people live the lives they truly desire

How a summer trip inspired me, an unlikely CPA, to become an emerging power in the profession.

Angela Carlomango

Director of Accounting, Portillo’s Hot Dogs LLC

Interviewed by Eric Scott

Don’t be surprised if you ’ re craving a Chicago-style hot dog with a side of cheese fries by the end of this column For the last 22 years, Illinois CPA Society member Angela Carlomango, CPA, has gladly gone to Portillo’s nearly every day But, you won’t find her anywhere near a grill or mixing up a heavenly rich batch of chocolate cake shakes at one of Portillo’s many restaurants

As director of accounting in the Portillo’s restaurant support center in the west Chicago suburb of Oak Brook, Carlomango has watched the company grow from a small conglomerate of family-owned restaurants to a corporate powerhouse of dining hotspots that now serves customers in eight states Carlomango has relied on a solid background of business experience and leadership examples from mentors as she has overseen vast changes at Portillo’s but the skills needed to succeed today are different than when she first began her accounting career

What skills do accountants need to have on day one?

In the early days, things were explained strictly “by the numbers ” Presenting financial reports used to be black and white, balanced or out of balance Today, I have to be a storyteller Presenting financial results is about providing insights and telling the story behind the numbers so your business partners can understand them I’m spending more time broadening the details and adding value as an advisor

What’s also different today is that you have to come into organizations being very analytical and open to learning new systems You have to get up to speed very quickly and know how to collaborate with diverse groups of people

How has your career changed at Portillo’s?

I was hired in 1997 as an accountant because the business was growing and there was no CPA on staff Our CFO needed someone with higher credentials to help the company maintain its growth and I was later promoted to accounting manager

In 2014, the company was sold Following the sale, we became a large, complex corporation, and I was promoted to director of accounting My various roles exposed me to many different facets of accounting, banking, annual projections, and working with various departments

You credit your success to mentorship. How should leaders approach mentorship?

One of my mentors was a former boss She always kept me challenged We always had open conversations She was very compassionate Watching how she interacted with people really helped me learn how to be a mentor to my staff

My approach today is to find out what’s important to each individual I want to learn how they can best help the organization and how we can play to their strong skills rather than focus on their weaknesses If I have to talk to someone about a weakness, I look at how we can overcome it and help them along in their career

It’s also important to set clear expectations

What’s the best part about your job in corporate finance?

The best part is that you never know what the day is going to bring You really have to be flexible and be willing to work for a wide variety of departments

I also love the Portillo’s brand! I’ve enjoyed being here for so many years because you have a great leader who is interested in you and treats you well You stay for the development piece and human interaction When Mr Portillo owned the company, he instilled standards that everyone had to abide by, not just the restaurant team members He expected hard work, and he held people accountable He believed in systems as well as quality, service, attitude, and cleanliness Today, we are building and expanding on that foundation

So, what’s your favorite thing to order at Portillo’s?

The chopped salad!

S tay Smart

Get today’s must-have skills!

Conferences

January 16 State and Local Tax Conference (In-person & Simulcast)

March 19 Controllers Conference (In-person & Simulcast)

May 5 Government Conference - Springfield

May 6 Government Conference - Rosemont (In-person & Simulcast)

May 19 Estate and Gift Tax Conference (In-person & Simulcast)

May 12 Employee Benefits Conference (In-person & Simulcast)

Special Events

January 22 Women's Committee Event: Self-Defense Workshop

February 19 CCFL Networking Breakfast: Implementing RPA at Your Company

May 8 Women's Leadership Forum

Courses

January 6 Best Federal Tax Update Course (In-person & Simulcast)

January 7 Fiduciary Income Tax Returns - Form 1041 Workshop With Filled-In Forms (In-person & Simulcast)

January 8 Financial Statement Analysis (In-person & Simulcast)

January 9 Business Valuation - A Practical Approach (In-person & Simulcast)

January 13 Forms 1120S and 1065 Return Review Boot Camp for New and Experienced Reviewers (In-person & Simulcast)

January 13 Essential Leadership Skills for Front Line Managers and Supervisors

January 14 Form 1040 Return Review Boot Camp for New and Experienced Reviewers (In-person & Simulcast)

January 16 The New Yellow Book: Government Auditing Standards, 2018 Revision (In-person & Simulcast)

January 23 Developing Your Emotional Intelligence: The Key to Better and More Powerful Relationships

January 27 Project Management Skills for Non-Project Managers

January 31 Impacted: Organizational Behavior and Ethics (In-person & Simulcast)

February 3 Time Management & Personal Effectiveness Skills

February 10 Influencing Without Authority: Achieving Results Regardless of Your Personal Power

February 19 Form 990 Tax Half-Day Workshop (In-person & Simulcast)

Webinars

January 8 Nuts & Bolts of Cryptocurrency Taxation and How to Deal with IRS Notices

January 9 Construction Tax Update - News You Can Use

January 22 As the Accounting World Turns

January 22 Grants and Contributions for Not-for-Profits

January 23 The Road to a Harassment Free and Respectful Workplace (qualifies for sexual harassment CPE credit)

January 27 Blockchain Technologies - What Every CPA Should Know

February 19 MS Excel: Formulas and Functions

February 19 Effective Business Writing Skills

February 24 Situational Adaptability — Adapting the Approach to Address the Shifting and Ever Changing Workplace Demands

March 2 Essential Leadership Skills for Front Line Managers and Supervisors

March 12 Effective Presentation Skills: Delivering Presentations With Power, Persuasion and Impact

March 17 Core Communication Skills: Best Practice Interpersonal and Assertive Communication Skills

March 18 MS Excel: Database Analysis & PivotTables Made Easy

March 23 Coaching and Counseling Skills: Having the Difficult and Crucial Conversations

March 30

Conflict Management and Resolution: How to Invite, Embrace and Effectively Use Conflict/Disagreement to Achieve High Performance

April 8 Developing Your Emotional Intelligence: The Key to Better and More Powerful Relationships

April 16

Customer Service Skills and Excellence: The Competitive Advantage and Differentiator

April 22 Project Management Skills for Non-Project Managers

April 27 Creating Effective Teams and Teamwork: The Skills Driving High Performance Organizations

For a full listing of all upcoming education programs visit www.icpas.org/education

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