Magazine of the
New Jersey Society of Certified Public Accountants
Business Growth SELL Isn’t a Four-Letter Word, p. 4 Having a Business Development Plan: D.TER Your Competition, p. 6 Converting Prospects to Wins: Getting a Home Run, p. 8 Corporate Finance CPAs Contributing to Business Growth, p. 10
July • August 2016
July • August 2016
features
Ralph Albert Thomas, CGMA Chief Executive Officer & Executive Director rthomas@njcpa.org
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Ellen C. McSherry, CGMA Chief Operating Officer emcsherry@njcpa.org
Don Meyer Chief Marketing Officer dmeyer@njcpa.org
Rachael Bell Managing Editor rbell@njcpa.org
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Editorial Advisory Board Daniel R. Arcuri, CPA Neil B. Becourtney, CPA Salvatore A. Collemi, CPA Rebecca B. Fitzhugh, CPA Catherine Z. Horn, CPA Barry S. Kleiman, CPA Victoria Kosuda, CPA Ryan J. Lapinski, CPA David A. Lopez, CPA Anthony F. Marone, CPA Marc D. Mintz, CPA Sean Stein Smith, CPA Michael R. Steiner, CPA Margaret Van Brunt, CPA
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#njcpamag Read New Jersey CPA digital at njcpa.org/newjerseycpa.
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3 Having a Business Development Plan: D.TER Your Competition – Marketing, finance and analytics are just a few ingredients of a strong business development recipe. Learn how the D.TER method will give your firm the edge it needs to outsmart competition.
Close Up New NJCPA President Wants to “Pay It Forward” Professional News Assessing the Impact of the New Department of Labor Overtime Rule
12 A&A Buzz Evolving Financial Dexterities: Melding Consulting and Compliance 14 Best Practices Determining the Success of Your Firm’s Marketing Efforts
Converting Prospects to Wins: Getting a Home Run – Winning prospects for your firm is critical, but you won’t gain 16 Corporate Finance new clients without scouting for Transforming Financial the right prospects. Learn gamePlanning and Analysis to winning tips to earn more clients. Increase Accuracy and Efficiency Corporate Finance CPAs Contributing to Business 17 Financial Planning Growth – As more and more Insurance Linked Securities: CPAs join corporate finance, their A Great Diversifying Asset roles and contributions to the Class growth of companies are becoming more critical. Here’s how to thrive in this role.
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The New Jersey Society of Certified Public Accountants 425 Eagle Rock Avenue Roseland, NJ 07068-1723 973-226-4494 njcpa.org
SELL Isn’t a Four-Letter Word – Selling isn’t as intimidating as you might think. You already do it with prospective clients by telling them how you will provide the 2 best solutions to their problems. Here’s how to master selling.
18 Small/Sole Practitioner Staff Training and Development Are About More Than Just CPE 19 Tax Talk 990 Updates and Filing Issues 20 Tech Center Workflow in a CPA Firm 28 Young Professionals Nine Skills You Need to Make an Impact in the Face of Change 30 Legislative Views NJCPA Plays Key Role in New Business Advocacy Coalition, Opportunity NJ 32 Member Profile From Poverty-Fighting Achiever to Award-Winning Entrepreneur Society Pages 2016/17 NJCPA Chapter Presidents, 22 Member Benefits, 23 Get Involved, 24 Classifieds, 26
New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068. Issue No. 58 Copyright © 2016 New Jersey Society of Certified Public Accountants. Annual membership dues include $9 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues. Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723. The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.
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New NJCPA President Wants to “Pay It Forward” B Y DON MEYER, NJCPA C HI E F M ARK E TI NG O F F I C E R
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ecently inaugurated NJCPA President Walter Brasch, CPA, has been fortunate to work with many great leaders over his 42-year career. They encouraged him to pass the CPA exam, guided his ascent to managing partner at three firms, provided counsel during firm mergers, and eventually helped him assume the role of NJCPA president. “There have been so many NJCPA members and colleagues who have helped me navigate challenges I had to confront in my career,” says Brasch, who resides in Little Silver with Ann, his wife of 41 years. I recently spoke with Brasch about his goals for 2016/17 and the importance of looking to the future.
How did you become involved with the NJCPA? I began my professional career with Touche Ross in Newark in 1974 and passed the CPA exam in 1977. The NJCPA has been an integral part of my professional life since I first volunteered with the Monmouth/Ocean Chapter in the early ’80s. I served as a chapter committee chair, officer and president and later participated on state-level committees, the NJ-CPAPAC and the NJCPA board of trustees. It’s been a wonderful ride for more than 30 years. The NJCPA not only has helped me to grow professionally in the practice of public accounting but also has been instrumental in my personal development as a leader. The NJCPA has been an important driver in developing countless long-standing relationships with fellow colleagues, other professionals and so many phenomenal individuals.
What are your presidential goals? Our profession continues to go through significant changes, requiring us to
develop both current and future talent in an environment of unprecedented regulation and evolving technology. The NJCPA has responded to these challenges faced by our members by approving a new strategic plan that will guide us over the next five to seven years. During my term, I intend to focus on the following key initiatives: • Image Evolution (Advocacy) — Work with leadership to establish the NJCPA as a leading voice on matters important to our profession, the NJ business community and the public interest. • Membership — Focus on continuing to serve members’ needs as well as attract future members to the NJCPA. • AICPA/NJCPA Collaboration — Work with the AICPA and NJCPA leadership to ensure our core values and CPA services are preserved. • Pay It Forward — Focus on the future generations of CPAs and leaders. I ask everyone to join me and make a special commitment this year to “pay it forward.” Make a commitment to go out of your way to be an ambassador for our CPA profession.
Any final thoughts? I am a person who has always embraced change. I believe that leadership has the ability to influence others by empowering them to leverage their abilities to the maximum for the collective benefit of those around them. I ask all NJCPA members to embrace the changes we must make as a profession and an organization in order for us to remain relevant and shape our future. I look forward to collaborating with our NJCPA leadership and management team, the board of trustees, committee leaders and volunteers, and all of our fellow members to help lead the NJCPA to the next era of prosperity. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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Lastly, I want to mention my daughter, Cate Moore, and her husband, Herb, along with their three wonderful children — Trey, Andrew and Julia — and acknowledge my son, Walt Jr., who is also a member of our profession and has practiced at Deloitte for the past 14+ years, and his wife, Alex. As an aside, my wife, Ann, and I are both second oldest of six and have 24 nieces and nephews — many of whom now have their own children. I wanted to invite them all to the NJCPA Annual Convention & Expo, but the hotel said there weren’t enough rooms.
View Walter’s “Meet Your President” video at njcpa.org/about/trustees
2016/17 Board of Trustees EXECUTIVE COMMITTEE President – Walter J. Brasch, CPA President-Elect – Edward I. Guttenplan, CPA Secretary – Michael VanderGoot, CPA, CGMA Treasurer – Lynn L. Albala, CPA Immediate Past President – Frank R. Boutillette, CPA CEO & Executive Director – Ralph Thomas, CGMA TRUSTEES Jean I. Abbott, CPA Amy Y. Both, CPA Robert J. Brown Jr., CPA Melanie A. Cobb, CPA Carol Donatiello Iocca, CPA Sarah Krom, CPA Roy H. Kvalo, CPA Stephen O. Richard, CPA William J. Ryan III, CPA Kyle M. Sell, CPA Audrey J. Sherrick, CPA Lorenzo T. Vanore, CPA
PROFESSIONAL
news
Assessing the Impact of the New Department of Labor Overtime Rule
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n May 18, the U.S. Department of Labor released a final rule amending the requirements for overtime pay that would dramatically increase the salary thresholds for exemption for CPA firms and other businesses here in New Jersey and throughout the nation. Under the Fair Labor Standards Act, employees who work more than 40 hours a week are entitled to overtime pay, unless they meet the requirements of wage level and duties tests. The new rule doubles the minimum salary threshold from $23,660 to $47,476 annually and raises the exemption level for what are considered “highly compensated employees” from $100,000 to $134,004 annual salary. The Labor Department estimates that this rule change will directly impact approximately 4.2 million workers across the United States not currently eligible for overtime and may reclassify an additional 8.9 million salaried workers as nonexempt. Businesses nationwide are assessing the effects of the new overtime-pay rule, with many companies saying the regulation will lead them to reduce workers’ hours, cut benefits, or limit flexible office arrangements. Companies
will have until Dec. 1, 2016, to make determinations on which employees to reclassify as nonexempt and implement the changes. In New Jersey, CPA firms and clients alike are expressing concern about the rule’s impact. “The rule may be well-intentioned but is likely to have unintended consequences,” said Ralph Albert Thomas, CGMA, CEO and executive director of the New Jersey Society of CPAs. “Expanding the pool of overtime-eligible employees will force firms and companies to resort to costsaving measures to maintain current payroll levels. The Labor Department received 270,000 public comments on its proposal, many from employers who believe the rule will force them to cap workers’ hours, slow the hiring of full-time employees, and shift salaried workers to hourly schedules.” While most accounting firms will work to absorb the additional payroll expectations, the overtime rule will have a significant negative impact on smaller accounting firms. Of particular concern are the impacts the change in overtime has on major decisions such as hiring, expansion, the offering of benefits, and the ability to offer flexible working arrangements. Further, the rule does not take into consideration the seasonal nature of the accounting profession, nor the numerous small firms that are unable to increase the salaries of their employees to comply with the exemption threshold, while also meeting the demands of tax season each year. In a statement released after the rule was issued, the American Institute of CPAs’ (AICPA) President and CEO Barry C. Melancon, CPA, CGMA, said, “The proposed revisions fail to modernize or streamline the regulations, N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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are not reflective of the realities of the modern workplace and a changing workforce, and would adversely affect both employees and employers. The Labor Department’s modifications to the rule did little to lessen the likelihood that CPA firms and countless other businesses will be forced to curtail hiring — and may even have to reduce the size of their workforce.” The NJCPA will work with the AICPA to urge Congress to intervene in the process so that regulations governing overtime pay reflect the evolving workplace in a manner that is economically productive. For more information on this issue, go to njcpa.org/DOL.
Online learning opportunity: Hot Topics: New Department of Labor Overtime Rule Thursday, Sept. 22, 2016 Noon-1 p.m. EST Members: $25 Nonmembers: $39 Learn more and register at njcpa.org/webinars
SELL Isn’t a Four-Letter Word It’s no secret that the typical accountant doesn’t like to sell. The problem is that firms need to expand their client base to grow, or even stay in business. This requires accountants to sell.
By Eileen Monesson, CPC PRCounts LLC
The ability to sell effectively can be cultivated and mastered. Selling is a stepby-step process you can learn, customize and continuously improve upon. You don’t have to be the most outgoing, enthusiastic person to be successful. All you need is to understand the basic sales process, develop and nurture a relationship, listen to your prospect, and have a genuine passion for what you are selling. The bottom line is that your prospect has a problem, and you likely have the solution. All you need to do is educate your prospect on why your firm is the best provider of that solution.
Sales 101
To have a successful outcome, you must take your prospect through the buyer’s journey. Here is a basic sevenstep process:
1. Invest the Time to Prepare Make sure you are prepared for a sales call: • Understand your firm’s service offerings. • Know the unique value you bring to a relationship. • Be able to clearly articulate your value proposition. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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• Research the companies and people you plan to meet. This includes reading about them on social media and reviewing their LinkedIn profiles. See if prospects are connected to anyone you know and reach out to mutual connections for further insight. • Develop a list of potential hot buttons commonly faced by companies in a prospect’s industry. • Identify possible solutions offered by your firm. • Prepare a list of potential objections and your responses. • Package marketing collateral to showcase your expertise. Include brochures, team biographies, testimonials and relevant articles. • Have a positive mindset.
2. Build a Relationship The first few minutes you spend with a prospect set the stage for the rest of your interaction. First impressions are everything. Your goal is to develop relationships with prospects based on trust. • Be confident and professional, but also personable. • Mirror their speech and behavior. • Begin with general questions and small talk. • Show genuine interest in your prospects and their business. • Notice and comment on their office environment. • Find some common ground on which to relate. • Be seen as an expert, to build trust and respect.
• Confirm that the answer you provided has overcome their objection by asking if they agree.
6. Close
3. Discuss Problems, Needs and Wants Ask open-ended questions to discover your prospects’ hot buttons, needs and wants. Also ask why they are interested in your firm, who is involved in the decision-making process, and what their selection criteria are so you know where to focus. • Let your prospects talk. The longer they talk, the more insight they will provide you (80/20 rule). • Ask open-ended questions to get them talking and ask clarifying questions to follow up on their responses. • Listen intently and repeat back information to acknowledge that you understand. • Remember that the meeting is about finding a solution to their problem, not about how wonderful you are. • Know more than enough to discuss relevant business and industry hot topics.
4. Present Your Solution Once you have a solid understanding of what your prospects are looking for, or what issue they want to resolve, you can present your solution. • Explain how your firm will solve their problem or meet their needs.
• Illustrate your points by telling anecdotes about the solutions you have provided to clients with similar issues. • Focus on the benefits they will realize by working with you and your firm. • Watch their behavior as you speak. Ask further qualifying questions in response to their body language and comments. • Give prospects an opportunity to ask you questions or provide feedback on the solution you discussed. • Ask closed-ended questions to gain agreement (aka, the mini-close).
5. Overcome Objections As you present the value of working with your firm, ask open-ended questions to uncover objections and monitor your prospects’ body language. Expect objections to arise and be ready to address them. • Repeat the objection back to them to ensure you understood them correctly. • Empathize with what they have said and give a thoughtful response. • Offer proof that you have the solution by presenting statistics to support your claim, telling a client success story, providing a report, etc. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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Prospects are not ready to buy until you have presented a solution to their problem, educated them on the value they will realize by working with you, and addressed all of their objections. It is important that you do not close too soon. Ask yourself: • Does the prospect agree that there is value in your service? • Does the prospect understand the benefits of working with you? • Are there objections you still need to address? • Are there other factors that could influence the decision to buy? • Have you minimized the risk involved in engaging your firm? Here are some questions you can ask to determine if it is time to close: • Would you like me to help you implement a [solution]? • Should we get started? • Can I send you an engagement letter?
7. Deliver Awesome Client Service Keep in close contact with your new clients to ensure that they are happy with the decision to hire your firm and, most importantly, that you delivered the solution promised during the sales process. Over-promising and under-delivering can ruin your relationships. Invest the time to exceed your clients’ expectations. Selling is really about helping a prospect find a solution to a problem. Approaching sales with a helping mindset can ensure that, at least in your mind, SELL isn’t a four-letter word. Eileen Monesson, CPC, principal with PRCounts, is a strategic marketer and coach. PRCounts, a NJCPA member benefit provider (njcpa.org/marketplace), creates market dominating brands. Eileen can be reached at emonesson@prcounts.com or 848-459-3130.
Having a Business Development Plan: D.TER Your Competition Whether you are a lead partner involved in the business development committee at your firm, a controller of a small organization responsible for driving business performance, or a sole practitioner, it is likely that you did not envision your future to include business development.
By Rachel Anevski Matters of Management
Business development is not something to do just when you have time; it is the difference between your organization and its competition. Top-of-class companies employ sound business development plans. In terms of importance, a business development plan runs a close second to your operating agreement. Basically, if you don’t have sales, you don’t have a business. As business consultants and advisors, you know that line better than anyone. So why is it so hard to write it out or practice it? And why do some companies feel they don’t need a plan? There are small companies that function with an unwritten business plan: Basically the owner of the company and perhaps a few key executives are the plan. Eventually, as that type of organization grows, it becomes critical to find a sales replacement workforce. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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Unfortunately, some organizations find that out too late and cease to exist. For example: A small business that functions with the business owner as the exclusive point of sales contact will likely lose value immediately in the event that the owner becomes incapable to run the business. You may call this lack of a succession plan; it can also be called lack of business development sustainability. Some plans are more marketing based and never actually transition into sales. This type of plan frustrates business owners and firm leaders because marketing can be costly and have limited impact on the bottom line if executed poorly. Take the visual of a volleyball game: Your marketing team is on one side with positions of branding, collateral, database management, social media, communications and public relations. They all volley together and are necessary components. With the lack of a strong striker, however, the ball cannot make it over the net. A spike over the net is completed by a sales professional. Therefore, plans that are heavily marketing based and do not incorporate a business development or sales component are missing the win.
Elements of a Business Development Plan Traditional business development plans typically follow the script below:
• An executive summary. • Goals and tactics. • SWOT (strengths, weaknesses, opportunities and threats) analysis and industry analysis. • Financial and organizational structuring. • Expected results, measures of success. • Conclusion. These types of plans take dedicated employees or consultants with significant expertise to draft, implement and hold people accountable; however, they are proven to be very effective if given the right amount of dedication. While this system works, there are other ways to develop a business plan that are equally effective and less demanding. Here is an abridged but still effective pro forma plan that doesn’t steal billable hours away from executives: By (1) isolating a company’s differentiation, (2) developing a sales education strategy and then (3) executing just a few simple tasks, an organization can produce extraordinary results. Plans like these actually start at the end result and work backward. When you know what you look to achieve, you can back into a formula to arrive at it.
Differentiate Develop a value proposition for your product or service in conjunction with a needs assessment to determine your differentiation. Often the product or service from one organization is similar to another’s, and it becomes the experience that sets you apart. Ask yourself: Why should your customer choose you over your competitor? What is the experience your customer receives when working with you that makes you superior to other services? Now write your differentiation story.
Train Your Staff Next, determine how to train your staff to sell. Developing an organization of brand ambassadors will increase your sales tremendously and will not leave you blindsided when you look for the next tier of business development executives. Having a sales education
strategy as a part of your overall business development plan helps to determine if your company is best suited for a select sales team, department of sales executives, or hybrid marketing and sales. It also gives your employees further confidence in who and what they represent. Ever hear the story of the audit manager who never sold a tax return because it wasn’t his niche? I haven’t either, and his name never went on the door. Cross-selling services, especially ones that you do not have to complete yourself, is a sure way to drive sales and fast-track your career. Companies often lack the ability to cross-train staff or even educate them about the other services they provide. Simply making staff aware of the diverse products the company delivers will improve the success of developing new business. Teach your people public speaking and writing techniques and give them the opportunity to learn about what others under the same roof do.
Execute The final step is to execute on important goals and objectives, such as understanding how much you need to sell to cover basic operating costs and how much profit can be derived from future sales to sustain growth. Measuring how many prospect meetings will equate to one proposal and how many proposals turn into a new client is all part of the execution phase of a successful business development plan. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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One person should lead this charge and have overarching responsibility for the success of the plan. Identifying sales targets, modifying the training program, increasing market awareness and performing competitive analysis can also be linked to a marketing department’s goals and objectives. Having a business development plan ensures that you are being mindful of the process by which you are successful at acquiring new clients. A business development plan to a business development executive is like internal controls to an auditor: It is required to be able to produce the same or similar results each time with limited risk or exposure. If you remember the steps, you will deter (D.TER) your competitors and gain market share quickly and easily: Differentiate, Train your staff (sales force), Execute, and Repeat. Continue the cycle of celebrating what do you differently, educate your entire workforce on all of your products, and give them the language to talk eloquently about what you do. The whole team will be excited to execute and exceed sales targets. When you find a system that works, repeat it. Rachel Anevski, MAOB, PHR, SHRM-CP, is the founder and CEO of Matters of Management LLC, a growth strategy, executive coaching, talent acquisition and consulting firm. Contact her at rachel@ mattersofmanagement.com.
Converting Prospects to Wins: Getting a Home Run Baseball fans know that while players want to get as many at-bats as possible, at the end of day, they are not rewarded for how many at-bats they had in a day, in a year, or even in a career.
By Howard Dorman, CPA Partner, WeiserMazars LLP
Players are rewarded for their number of hits and home runs. That is what determines if they get into the National Baseball Hall of Fame. Turning a prospect into a client is like hitting a home run. Hopefully, after you read this article, not only will you get the at-bats but you will hit the ball out of the park. As an accountant, the first step should be pretty easy: understanding the importance of evaluating your efforts in converting prospects to clients. This conversion rate is a simple calculation. There are only two numbers you should focus on: the number of qualified prospects and the number of new clients attained as a result of this process. Simple, right? Similar to setting a fitness goal, you will want to develop some initial steps with a sense of structure defined by benchmarks to keep you moving forward. Webster defines a prospect as a possibility or a likelihood of some future event occurring. In this case, it can be defined as the likelihood of N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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a company expressing interest in you becoming its new accountant or service provider. More specifically, a prospect is a potential customer qualified on the basis of his or her buying authority, financial capacity and, most importantly, willingness to secure your services. The first challenge in the process is qualifying the prospect. Are they a desirable client? Do they fit the mold of your typical client profile? Do you have the expertise to address their specific needs? These are some of the questions you should ask yourself when qualifying a prospect. Let’s say that you have been referred to a company by one of your centers of influence (a banker, a lawyer or even a client). The next step should be to find out as much information about the company as possible. See if anyone else in your office has had any interactions with this company or can offer some industry insight. You can search the internet or obtain pertinent information from various business publications and organizations such as Dun & Bradstreet. First Research is a helpful database for prospect-related industry specifics. Another benefit of researching the company is that you can obtain some great talking points for when you are face to face. Congratulations! You have made it to the fun part. It is time to set up a
meeting with your prospect. You now have factors working in your favor: a warm lead and a better understanding of the industry the prospect operates in. You are getting closer to having a qualified prospect. Now is the time to bring in an appropriate partner or a staff member with industry-specific experience. It is good practice to bring someone else with you to visit the prospect, to show that you can provide a qualified team.
Always be prepared. Before going to the prospect meeting, it is helpful to discuss the details of the meeting and desired objectives with your team. What issues do you want to address? Why is the prospect seeking a new firm? Formulate solid questions that will open the door for the prospect to express desired goals and reasons for dissatisfaction in the past. This is where you need to use good listening skills. In real estate, they say the key is
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location, location, location. In winning new clients, it’s listen, listen, listen. Is it expertise within the industry that the prospect wants? Is cost a major factor? This is a critical part of the process. If you are talking, you are not listening. You may be missing the reason that you were asked to visit. If you take the time to listen to the prospect’s concerns, you will be able to respond to them. Set goals for yourself by creating benchmarks regarding prospects and client wins. You can never be too prepared. And remember to carefully listen so that you have a clear understanding of what the prospect actually wants. If you come in with preconceptions or make quick judgments, you could miss the mark. Howard P. Dorman, CPA, is a partner with WeiserMazars LLP, servicing privately held companies and service firms. He is a member of the New Jersey Society of CPAs and can be reached at howard.dorman@ weisermazars.com or 732-205-2040.
Corporate Finance CPAs
Contributing to Business Growth
Many CPAs in corporate finance are at the forefront of the expansion and growth of their employers’ businesses, both through organic growth as well as growth through acquisitions.
By Daniel Arcuri, CPA L’Oreal USA
Corporate finance CPAs analyze their companies’ trends, budgets and actual expenses on a regular basis. They are also heavily involved with financial planning, analysis and forecasting. They compare their companies’ financial ratios and market positions to industry standards and averages as well as to their largest competitors, to try to beat the pace of the market and become the No. 1 brand or company in their industry. CPAs in corporate finance are also constantly challenging themselves and their organizations to increase the topline sales as well as the bottom-line net income. In many large organizations, there are teams dedicated to indirect spending, manufacturing cost management, operating and supply chain cost management, advertising and fuel cost management. The specific teams vary depending on the company’s industry.
Marketing and Advertising In some industries, spending on N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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marketing, advertising and media may be one of the largest expenses on the profit & loss statement (P&L), but it may also be one of the best strategies to attract new customers, attract repeat purchasers, gain market share and increase sales volume. This strategy is especially beneficial for corporations that launch new brands and products on a regular basis and have their products sold in the retail channel. Through print and media, former customers as well as potential new customers can learn about the products firsthand. Some of the largest companies use celebrity spokespeople. It is possible that these customers would not notice the products in the stores if they had not seen the advertisements.
Managing Costs In other industries, manufacturing costs may be one of the largest expenses on the P&L. To grow their businesses, CPAs need to analyze customer contracts to try to negotiate lower raw material and component input costs and increase their margins. Purchasing departments also try to source inputs from other vendors. The purpose is to have a sufficient supply of vendors and potentially reduce the costs of the finished goods that they are producing. These measures allow
corporations to grow organically by focusing on their customers as well as by focusing attention on their sales and profit margins.
Growth by Acquisition Simultaneously managing costs and increasing advertising, large companies that have good cash and low debt positions can seek out other companies to acquire and to integrate within their brand portfolios. Corporate finance CPAs analyze the financial statements of these potential acquisition targets to make the best decision on which, if any, companies to acquire. This strategy is common for large manufacturers and distributors that have multiple brands. Some consumers may not realize that these brands are now owned by another corporation. Corporate finance CPAs also forecast the increase in potential future sales through the acquisition of these companies. The CPAs may prepare pro forma financial statements to see how certain lines on their balance sheets and P&Ls will be affected. These acquisitions may allow companies to grow in their existing markets or enter new markets. Either way, there is an opportunity to gain additional market share. Other corporate finance teams may not be as directly involved with the growth of their businesses, but they still play a part essential to the overall growth process. There are many CPAs behind the scenes, analyzing the internal financial information on a daily basis to track progress and report on potential financial opportunities. Each area of the P&L can lead to growth of the organization, whether it is by increasing sales or reducing expenses. It depends on how one defines growth and what business targets and goals are set internally. Some companies may feel that they are unable to gain new customers or their products are considered infrequent purchases, so they will focus more efforts on reducing costs to increase their margins. This may be the case in the automobile or
luxury goods markets where consumers may purchase only one or a few items every few years or potentially only one in a lifetime. These companies can also review potential price increases, but that strategy may not sit well with potential future consumers. Other companies may primarily focus their efforts on sales and marketing strategies to increase the number of units sold, whether by growing their customer base or by attracting repeat customers. It is more likely that companies are using a combination of these strategies. According to Jack Welch, former CEO and chairman of General Electric, “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” Corporate finance CPAs constantly analyze their companies’ financial positions and N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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business strategies in order to learn, react and grow their organizations. Corporate finance CPAs also deal with several other departments within the organization — sales and marketing, distribution, manufacturing, supply chain, as well as many others. It is through this teamwork and communication that the goals and growth targets are met and exceeded. Regardless if individuals are directly involved with setting the targets or evaluating potential acquisitions, they still have the opportunity to be involved with the growth of the company. Daniel Arcuri, CPA, MBA, is a senior accountant at L’Oreal USA. He is a member of the New Jersey Society of CPAs and serves on the Content Advisory Board. He can be reached at daniel.arcuri1@gmail.com.
A&A
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Evolving Financial Dexterities: Melding Consulting and Compliance B Y PAUL URS ICH, CPA, W I SS & C O M PANY LLP
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s accounting continues to evolve, there is a larger demand for consulting and the need to combine this service with tax and compliance. Many firms are transitioning their emphasis toward advisory services, but as technology advances and client demand shifts, countless businesses are recognizing the advantage of blending both advisory and auditing perspectives. When starting your career in accounting and debating which direction you should head, consider these guidelines on the benefits of utilizing both compliance and consulting.
The Ideal Candidate Before interviewing for an open financial position, it is imperative you comprehend exactly what firms are searching for in an employee. Candidates with experience in more than one professional business background magnify their probabilities of getting hired. Having diverse and innovative perspectives can help conquer arising problems others may not have the experience to understand, launching you ahead of other accountants. Having proficiencies in both compliance and consulting is the most effective combination for the firm and your personal professional growth.
Auditing Foundation When commencing your journey through the competitive financial arena, it is wise to begin with auditing. It’s the perfect place to gain awareness across the comprehensive range of the accounting cycle. Measuring risks and internal controls, testing financial
statements and countless other activities provide you with the experience you need to fully comprehend the auditing process. Assessing the efficacy of a company’s internal control complements advisory services, providing insightful and resourceful solutions to certain business situations.
Controller Expertise Financial professionals who recurrently work with bankers, outside auditors and insurance brokers are able to truly shine in an establishment where companies fiercely demand efficiency in auditing. Leading an accounting department and preparing financial statements, overseeing accounting systems, managing accounts payable and accounts receivable, budgeting and many other auditing tasks can provide powerful perspective, contributing to your advisory success.
The Magnitude of Advisory Services With the blend of technology, accounting and implementation knowledge needed to accurately support customers with fundamental business decisions, it’s no surprise that advisory services are continuously expanding. The ability to provide perceptive advice and strategic solutions is developed through meaningful contact with clients. Dissimilar to auditing, this assistance is not likely to be substituted by computers in the future, as customers will always crave the face-to-face interaction of advisory services. Thus, it is essential to add this resourceful skill. As you advance through your promising career, you’ll execute your N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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consulting motions with ease due to the background and knowledge you gained from auditing. You will eventually be able to venture off strictly as a consultant once you’re established as an expert in a particular field of the industry.
Unification From a corporation outlook, if a firm’s employees are proficient in these two areas, the firm will have numerous services to offer its clients and prospects. Consulting and compliance should be assimilated concurrently, as both play a vital role in the evolution of a business. The combination of both domains has the power to influence corporations and mold young professionals into workers of extensive accounting knowledge. The two approaches can help advance a firm in the right direction, while also fortifying employees’ aptitude for properly assessing conditions when working with clients. When submerged in a client’s establishment, workers can provide these services to resourcefully match consumer and business needs. Paul C. Ursich, CPA, is the director of business advisory services with Wiss & Company LLP. He is a member of the New Jersey Society of CPAs and can be reached at pursich@wiss.com or 973-9949400.
BUSINESS DEVELOPMENT PARTNERS TO NJ CPA FIRMS SINCE 1989
Did you stop by our booth at the 2016 NJ CPA Convention in Atlantic City? Give us a call, let’s follow up!
Headquarters Advisory Group works with NJ CPAs to develop successful wealth management practice within their accounting firms. Based on expertise gained from nearly two decades working with CPAs, Headquarters understands the cultural issues involved in integrating comprehensive financial services into a tax organization, and specializes in helping you build on your existing client relationships and bring in new business. Your clients stay your clients and we provide the systems, training and support you need to build your wealth management practice. If your firm is interested in serving your clients better by offering tax optimized wealth management services, call Headquarters Advisory Group today at 973.560.0110.
HQADVISORYGROUP.COM Securities offered through 1st Global Capital Corp. Member FINRA, SIPC. Investment Advisory Services offered through 1st Global Advisors, Inc. Investment advisory services including fee-based asset management accounts held through NFS, LLC are offered through 1st Global Adviosrs, Inc. All other financial planning services are offered through Headquarters Advisory Group, LLC. Headquarters Advisory Group, LLC and 1st Global Capital Corp are unaffiliated entities.
BEST
practices
Measuring Marketing Determining the Success of Your Firm’s Marketing Efforts B Y RHONDA MARAZIT I , W I THUM SM I TH+ B ROW N, PC
M
easuring the success of marketing and advertising campaigns in terms of return on investment (ROI) can be challenging. Depending on the tactic, statistical data may not be readily available, or how success is defined may be unclear. Regardless, marketing professionals need to substantiate their recommendations and strategies to convince their managing partners that the investment in these efforts is worthwhile. This can be achieved with the right tools and by establishing a few Key Performance Indicators (KPIs).
Tracking Leads In the eyes of accountants, the success of a firm’s marketing efforts is ultimately
based on the new business being generated from them. Tracking leads derived from any of the tactics described hereafter is crucial. You need to have a mechanism in place to capture contact information and, just as important, note from where the lead came, such as the website or a conference. If the lead converts to client status, you immediately have that estimated revenue to calculate your ROI. Often you won’t know when a lead comes into the firm, because a phone call or email may go directly to a partner, bypassing the marketing department. Remind your professionals to alert your marketing staff to any potential new business N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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coming in as a result of a marketing effort so it can be tracked. Using a customer relationship management (CRM) tool, such as Microsoft Dynamics or Salesforce, can be the most helpful with tracking, but if your resources are limited, a basic database or spreadsheet program can be used.
Website Your firm’s website should be the central hub of your marketing strategy, content-rich with articles, videos and other thought leadership. Quality content is the top driver in elevating search engine optimization. High page rankings are an indicator of your website’s strength in driving traffic,
which can potentially result in new business to your firm. Using a tool like Google Analytics can help you gather basic metrics on site visits and unique visitors and also more insightful data, such as acquisition and behaviors. These statistics show which channels are driving the most traffic to your website and also drill down on each page of the website, so you can see which articles were read most often or how long a visitor was on an industry page. This is great intelligence from which to base marketing decisions or decide which topics or services are of greater interest to your clients.
Email Whether you have a basic email tool such as Constant Contact or a more sophisticated marketing automation tool like ClickDimensions or Marketo, you can measure a variety of behaviors to determine the success of an email campaign. According to a recent MailChimp survey, emails related to business and finance typically see a 21.31 percent open rate and a 2.76 percent click-thru rate (CTR). With these email tools, you can also generate reports listing who is opening the emails, which can then be shared with business development professionals or partners for followup. This could be particularly good for cross-selling services.
Social Media KPIs for social media channels can be more than just the number of likes or followers, although that is the strongest metric. You also want to look at engagement from specific posts — retweets, shares and other interactions — and the number of impressions, meaning the number of times your content is displayed in viewer feeds. There are many free social media analytics tools and dashboards that track followers and impressions and monitor which posts perform best. Google Analytics can also provide social media metrics.
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Radio and Print Advertising Unless you have a direct call to action in your print or radio ad, such as “call now” or “register for this event,” there is no easy way to determine ROI. You can get circulation or listenership numbers, but for the most part, advertising is about brand awareness — so impressions are the more important metric here. Success can be measured by the feedback received from professionals who either hear or see the ads themselves or who have clients and referral sources comment that they have.
Digital Advertising Digital display advertising is, in the simplest of terms, paying for your ad to be on a website or in an electronic newsletter, sitting alongside the content of the page. In addition to impressions, or how many people see the ad, you also get the benefit of CTR to measure. Typically, advertisers could see a CTR of 0.05 percent and above. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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Conferences and Sponsored Events This is the area where most marketing efforts fall short. After the event is over, it quickly becomes a distant memory. Take the time to input the names and contact information from the business cards you gathered at the event — even better, get the attendee list — into your database or CRM system. Again, be sure to tag each name with the event to track conversion. To make the most of your firm’s marketing spend, measuring results is key. Be sure to have the right mechanisms in place to track leads and establish KPIs in order to define the success of your firm’s marketing efforts. Rhonda Maraziti is the chief marketing officer at WithumSmith+Brown, PC. She can be reached at rmaraziti@ withum.com.
CORPORATE
finance
Transforming Financial Planning and Analysis to Increase Accuracy and Efficiency B Y JEF F AL DRIDGE, DA N TR E NT AND SO L RASHI D I , E R N S T & YO U N G L L P
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or the past two decades, finance organizations have been reinventing themselves to add more insight and value while also reducing costs through automation of transactional data capture and reporting. Early transformation efforts saw many leading finance departments dramatically reduce or redeploy headcount, as well as move a significant number of low value-added tasks to more cost-efficient, shared service centers. Only in recent years has the focus of leading-practice finance organizations shifted to arguably one of the most important and impactful areas of finance: financial planning and analysis
(FP&A). While the words “leading practice” are overused, most companies’ FP&A processes, supporting systems and organizational structures are far from “leading.” Perhaps the hesitation can be attributed to having other priorities or the unwillingness to change such an important and culturally embedded process. However, empirical data from independent research firms and successful clients suggest that the opportunities to improve FP&A carry a very compelling return on investment: • Up to 50 percent more accurate forecasts. • As much as a 65 percent reduction in FP&A full-time equivalent employees.
• Annual budgets in 30 to 60 days versus an average of 170 days. • Three to five days to produce a financial forecast versus 10 to 15 days. • Scenario analysis in hours versus days. Companies achieving these dramatic improvements have realized the importance of a holistic approach that focuses on the optimization of all three pillars in the chart below. Jeff Aldridge is an advisory partner/ principal and Americas leader, enterprise performance management; Dan Trent is a senior manager, enterprise performance management; and Sol Rashidi is a principal, advisory services, with Ernst & Young LLP.
Accuracy
LEADING-PRACTICE FINANCIAL PLANNING The analysis of key driving factors helps to “change the work” by focusing efforts on what is truly material and volatile and by prepopulating plans.
Improve Planning Processes — Change the Work • Review and improve efficiency of planning cycle/calendar. • Determine appropriate level of detail (strategic plan, financial plan, operational plan) for corporation versus business unit. • Consider rolling forecasts. • Link plans to strategy with driverbased planning. • Use driver analytics to develop targets and prepopulate plans. • Align/integrate financial and operational plans. • Leverage zero-based budgeting of general and administrative expenses.
Optimize Enabling Technology — Gain Efficiencies • Implement a common, leadingpractice planning application. • Provide for specific business unit needs and unique requirements, but standardize where possible. • Create a robust and interactive reporting layer suited for executives and power users. • Manage master data. • Ensure efficient data integration. • Create web-based training materials and instructions.
Efficiency/Cost Savings N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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Design an Efficient FP&A Organization — Operate Effectively • Create a cost-effective and lean FP&A organization. • Retain FP&A — only for material, complex and volatile business units. • Centers of Excellence — corporate groups with members from key business units. Create standards/ policies; produce top-down plans; review consolidated plan. • Global ops — reporting, data integration and first-level analysis. • Consider separating compensation from plan performance to avoid gaming. • Design training programs for FP&A personnel.
FINANCIAL
planning
Insurance Linked Securities: A Great Diversifying Asset Class B Y V. P E TER TRAPHAG E N J R . , C PA, T R APHAGE N I NVE ST M E N T A DV I S O R S
A
lmost all investors know a major tool in helping to reduce portfolio risk is diversification among uncorrelated asset classes. These are investments that are not related and move independently of one another. The lower the correlation of investments within a portfolio, the better you can control and reduce risk. A relatively unknown investment fits this description perfectly — as it has nothing to do with the economy, stocks, interest rates or bonds. Insurance linked securities (ILS) have been around for more than two decades, but they have only recently become available to some retail investors. This article will serve as an introduction to the ILS asset class and provide a starting point for your due diligence. ILS, in a simple sense, provide investors a way to be “in the same seat” as an insurance company without stock market risk. Money is made through the payment of premiums by the insured, and there are losses upon the occurrence of an insurable event. These events run the gamut from hurricanes, earthquakes, and winter storms, to art theft and marine or aviation accidents. An investor could simply purchase the stock of an insurance or reinsurance company, but this approach would entail taking general stock market and specific company risk, in addition to the pure insurance risk. ILS isolate the pure insurance risk, meaning the only source of returns is premiums/ payments, and the only source of losses is from insurable events. This is a very important point in terms of portfolio diversification and risk management.
History The ILS asset class was born in the early 1990s after Hurricane Andrew devastated southern Florida. Many
insurance companies were wiped out, as their risk portfolio was concentrated in one geographic area, covering only one type of peril. After the physical and financial devastation was tallied, it was clear insurance companies needed better risk management. Over the next few years, the practice of insurance companies trading different risks to one another or to dedicated reinsurance companies grew quickly. In the late 1990s and early 2000s, this risk trading expanded into a secondary investor market. The trend accelerated after the 2007-08 crisis, and by the late 2000s, private alternative and hedge fund investments were fairly common in the space. Only in the past three years has this asset class been available to some retail investors in the form of an interval mutual fund. The term interval here refers to the liquidity of the mutual fund: An investor has the option of selling or purchasing the fund once every quarter.
Types of Investments • Catastrophe Bonds: These are the most liquid and simple forms of ILS: actual bonds issued by insurance companies or governments. These tend to be one to three years in maturity and float to protect against rising interest rates. The bonds pay a set rate over a benchmark. Investors get interest and principal back if the insurable event does not occur, but they lose all principal if the event does happen. It is important to note that there is no credit or company risk with the bonds, as a special purpose vehicle is constructed to protect the principal and interest. • Quota Share: This is a true slice of an insurance company’s risk portfolio. Unlike catastrophe bonds, this is more equity-like in the sense that N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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there is no set interest rate, the return is not binary, and there is a higher ceiling for returns. The risk tends to be more diversified, although losses are incurred more frequently. In general, quota share average returns are higher than those for catastrophe bonds. • Private Contracts/Industry Loss Warrants: There is no active secondary market for these products, which are usually negotiated directly between two parties. They can take the form of either catastrophe bonds or quota share.
Performance In addition to having no meaningful correlation to any traditional asset class, ILS have had good average returns over the longer term. The Swiss Re Catastrophe Bond Performance Index has averaged an 8.1 percent per year total return for the past 15 years, while gaining 10.9 percent in 2013, 6.0 percent in 2014, and 4.2 percent in 2015. At the stock market lows in February 2016 when the Standard & Poor’s 500 index was down around 10 percent on the year, ILS were completely unaffected — up one percent over the same period. It is likely average returns will be somewhat lower going forward, but given the enormous diversification and risk reduction benefits, some allocation in a client portfolio could make sense. Investors should consult their financial advisor on gaining access to this asset class, as these securities are considered illiquid and cannot be purchased directly by individual investors. Peter Traphagen Jr., CPA, PFS, is a partner with Traphagen Investment Advisors. He is a member of the New Jersey Society of CPAs and can be reached at peterjr@tfgllc.com.
SMALL/SOLE
practitioner
Staff Training and Development Are About More Than Just CPE B Y P ETER RENZUL L I, C PA, B OO K K E E PE RS 2 GO LLC , A N D L O R I R E N Z U L L I , E S Q. , H A R D I N G L O E V N E R L P
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n accounting firm that provides staff and partners with training beyond the mandatory continuing professional education (CPE) requirements can reap many benefits. Staff members represent the front line for most accounting firms, so it is critically important that they understand the sales side of the practice as well as the up-sell to help grow the firm. Staff members need to be trained not only on how to prepare financial statements but also on how to use those statements to run a business, provide feedback to the client and benchmark. Staff members also need a breadth of knowledge to work with clients’ interdisciplinary teams. Interdisciplinary training is the key to providing highly valued client services. Mandatory CPE is at the core of ensuring that partners and staff members alike have the necessary skills to provide accounting services to clients. The firm should maintain a CPE plan of action so that all accountants are current with the core CPE requirements. Completing the core CPE requirements should not be about taking the most expedient classes or just putting in “seat time.” Live classes also provide your firm’s staff and partners the opportunity to network and potentially share new and innovative ideas about client service. A training plan that goes beyond the core CPE requirements will enhance the skill sets that are highly valued by clients. A robust training plan includes opportunities for employees to gain a deeper set of skills so they can provide great accounting service and consulting advice to clients. The plan should include high-level managerial accounting, benchmarking and data analytics — skills highly valued by owners of small and midsize businesses. Partners and staff members with these
skills will be regarded by clients as team members helping to plan for the future and grow their business. As such, highlevel accounting application training cannot be ignored. More and more clients are relying on interdisciplinary teams to drive their vision. Cross-training staff members and partners in sales, operations and marketing will allow the accounting firm to become a member of the client’s interdisciplinary team and provide the highest possible value to the client. Live cross-functional training is also a great way for the firm to network with other professionals and meet potential clients outside the industry. To focus the training and networking, a firm should consider arranging for classes provided by different industries in which they want to practice. Many universities are offering miniMBA programs for managers who need to gain skills outside their normal scope of work. These programs include classes on social media, marketing and organizational management as well as finance and accounting. A CPA firm can use a mini-MBA to gain industry-specific training, as many of the programs are designed around specialized industries. The classes are typically held over a weekend (or multiple weekends) and are designed to dive deep into the subject matter. The classes also provide a great opportunity to network with people who are in the specific industry or who are interested in gaining more knowledge of the subject. Either way, it’s a great way to grow the practice by meeting people with common interests. Most accountants take classes as a way to gain specific skills or fulfill certain requirements, but they do not think about teaching classes. Teaching training courses is another great way N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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to network and demonstrate the firm’s expertise. The process of working with a CPE provider in designing and presenting classes allows members of the firm to work together while learning even more about the subject matter. If staff members are presenting the material, they will develop confidence and presentation skills that are helpful in providing value and gaining respect from clients. A successful accounting practice is built and maintained by partners and staff members who are well-trained and who identify opportunities to add value for their clients. Core CPE requirements provide the foundation, but completing cross-functional training, taking university courses and teaching CPE classes will set your firm apart from those firms that regard CPE as something to finish until next time. Peter Renzulli, CPA, is president of Bookkeepers 2 Go LLC and can be reached at renzulli@bookkeepers2go.com. Lori Renzulli, Esq., is chief counsel at Harding Loevner LP.
TAX
talk
990 Updates and Filing Issues B Y SA RAH AV ERY, CPA , F RI E D M AN LLP
I
n its 2016 priority guidance plan, the Exempt Organizations division of the IRS includes a case selection model based on data-driven decision making that is designed to remove subjectivity and identify entities that have the most potential for noncompliance. To reduce your client’s or organization’s exposure to examination, consider these areas of Form 990 that experts consider to be noncompliance hot spots.
1. Number of Independent Voting Board Members Board members, both directors and trustees, get reported on Form 990, Part VII, only if they are a member at any time during the year and have voting rights. A member of an advisory board with no governance authority is not considered a director or trustee. Only those directors/trustees who are serving as of the last day of the year are included on line 1a in Part VI. Directors/trustees are considered to be independent if they have not been paid as an officer or other employee of the filing organization or related organizations, or if they have not been paid more than an aggregate of $10,000 as an independent contractor by the filing organization or related organizations. A low ratio of independent board members to the overall board count exposes the organization to increased IRS scrutiny. Board members are not independent if they participate in transactions reportable on Schedule L, as discussed in the next section.
2. Interested Persons Who Must Be Reported Schedule L is designed to disclose excess benefit transactions, loans, grants, and other financial assistance and business transactions with interested persons. Excess benefit transactions; loans to or from trustees, directors, officers and key employees (TDOKE); and grants or
other financial assistance are reportable transactions regardless of the amount. For business transactions, there are individual and aggregate thresholds below which reporting is not required. Generally, business transactions are reportable if the total payments during the filing period exceed $100,000; however, reporting may be required if all payments from a single transaction exceed the greater of $10,000 or 1 percent of the organization’s revenue. Compensation payments to a family member of a current or former TDOKE that exceed $10,000 are also reportable. An interested person is defined as any of the following: • A current or former TDOKE. • The creator or founder of the organization. • A substantial contributor. • A member of the organization’s grant selection committee. • A family member of any individual listed above. • An entity under at least 35 percent control of an individual or organization listed above. Filing organizations need to document their efforts to identify interested persons, to affirm that TDOKEs and substantial contributors were asked to identify parties with whom there are transactions to be reported.
3. Effective Date of Governance Policies As a result of the Form 990 preparation process, organizations should adopt the policies listed in Part VI, Section B. However, questions can be answered “yes” only if the policy was adopted prior to the end of the year. If a policy was adopted after year-end, a “no” answer can be addressed by disclosing the date of adoption on Schedule O. If a policy is not in writing, it is acceptable to include a notation of the policy adoption in the board meeting minutes. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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4. Compliance With Public Disclosure Requirements The public disclosure requirement is not met by the availability of the organization’s Form 990 on the GuideStar website. Checking the box for “Another’s website” is applicable only if the organization has provided an exact reproduction to another individual or organization and that other individual or organization posted the reproduction to its website. GuideStar obtains copies of 990s independent of the organization. Amended returns are also subject to the public disclosure requirement.
5. Contribution Revenue Contribution revenue (Part VIII, line 1) does not include payments from a third party in exchange for services provided by the filer to the payer; amounts included in contributions that represent payment for goods or services; donated services or the use of materials, equipment or facilities (e.g., rent); or the exchange transaction portion of income from fundraising events that should be reported on Part VIII, line 8a. There are many other hot spots that organizations should be aware of, including reportable compensation to former TDOKEs; third-party compensation; public charity classification on Schedule A; donor disclosure on Schedule B; additional reporting based on foreign activities; completing Schedule K for tax-exempt bond proceeds; reporting transactions with related organizations; and group return filing issues. Sarah Avery, CPA, is a director at Friedman LLP. She is a member of the New Jersey Society of CPAs Nonprofit Interest Group and can be reached at savery@friedmanllp.com.
TECH
center
Workflow in a CPA Firm B Y CHRIS TOPH ER M. CHUDY K , C PA, C I TP, T R APHAGE N FI N A N C I A L G RO U P
W
orkflow is a series of activities between departments necessary to complete desired tasks. In the accounting industry, tax laws and regulations change constantly, but the real challenge stems from evolving technology that changes the business workflow. With the move from paper-based to computerized practice with cloud-based accounting and tax compliance systems, workflow software is involved in every part of the accounting practice. It’s a tool that makes communication with clients and authorities easier and quicker. There is a huge variety of workflow software in the market right now, and each business can pick the most suitable for its needs. The main goal is to have a system in place that will optimize processes and keep strong internal controls. Some companies pick separate pieces of various software programs and combine them; others use collaborative software for both client services and internal operations. The ideal workflow tools manage internal operations (time, billing, due date management) and client services (portal, accounting and tax documents, payroll automation) with a high level of flexibility and reliability. Partners should assess workflow constantly for effectiveness, security and client satisfaction and make sure it flows with the company’s strategy.
Advantages 1. The primary benefits of electronic workflow include convenience and time saving. Using cloud-based platforms, clients and associates can access paperless databases at any time and from anywhere with any device. Associates can submit the necessary reports and access portals remotely from outside the office. Accounting and tax software offer import and export
options, which greatly reduce the time spent entering and processing data. 2. Workflow software serves as a great base for time billing, future engagements and cost estimates. Most software programs have the ability to automatically track time worked and allow users to submit timesheets in real time. This feature helps to manage due dates and the productivity of staff members and the firm as a whole. Workflow systems can also track actual versus budgeted time and then use that information to estimate time needed for the project next year. 3. Scheduling is easier. With workflow software, companies have the ability to keep staff calendars and schedules in one place so management can review and assign tasks. 4. The biggest advantage is being able to know what stage every project or assignment is in: knowing where the file is and who is working on it, and notifying other team members when they need to take their turn. Workflow systems allow management to keep track of every file in the office and to make sure that when work comes into the office, it is assigned, worked on, reviewed and sent out as efficiently as possible.
Disadvantages 1. One of the biggest concerns with using computerized software for workflow is the potential loss of essential client data. Companies should always have a backup power supply, a disaster recovery plan and a reliable anti-virus system. 2. Some all-in-one workflow software programs can be costly. The company has to decide whether it is worth the cost or if it’s more cost-effective to purchase separate pieces of software that will cover essential operations of the business. N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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3. The biggest disadvantage is the time required to set up a system. Also, the entire team needs to be reliable in entering all the information correctly and in a timely manner. For a workflow system to operate at its fullest capability, it demands all the team members to enter their information for every step of the process: for example, reflecting that a file was dropped off, the appropriate staff member was scheduled, and the task was completed. Plus, to gain efficiencies, management must know the system, be able to use reports that are generated, and implement strategies based off what they learn. As with any technology, you need to monitor, review and adapt to get the best output possible. Access a list of workflow software options at njcpa.org/newjerseycpa/ julaug16. Christopher M. Chudyk, CPA, CITP, is a partner at Traphagen Financial Group. He is a member of the New Jersey Society of CPAs Student Programs & Scholarships Committee and is president of the NJCPA Bergen Chapter. He can be reached at chris@tfgllc.com.
Changed Specialties? Earned a Promotion? Taken on New Challenges? LET US KNOW SO WE CAN DELIVER THE NEWS AND INFORMATION YOU NEED TO KEEP ADVANCING.
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DANIELLE DVORAK, CPA | MEMBER SINCE 2009
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IT’S A GREAT ORGANIZATION TO BE A PART OF ... IT HELPED ME GROW WITHIN THE PROFESSION AND AT MY FIRM.
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SOCIETY
pages
2016/17 Chapter Presidents Atlantic/Cape May
Monica Brunetti
Bergen
Essex
Hudson
Ford Scott & Associates LLC
Traphagen Financial Group
Christopher Chudyk
Joanna Marek
Antoinette Marmora
Mercer
Middlesex/Somerset
Monmouth/Ocean
Morris/Sussex
Kenneth Shapiro
Michelle Shapiro
Christopher Stoop
SmolinLupin
Scott Fitzgerald
EisnerAmper LLP
Fedway Associates Inc.
Shapiro Financial Security Group
Passaic County
Southwest Jersey
Union County
W.B. Law & Son Inc.
Untracht Early LLC
Learn more about our chapter presidents and the activities taking place in their chapters at njcpa.org/ chapters.
Dikesh Patel Sankhya LLC
Altheia Leduc
James Massarelli
Gold Gerstein Group LLC
DeVito & Co. LLC
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in growing your practice.
Be invested
We offer a full range of commercial deposit, cash management and lending solutions to keep your practice moving forward. John W. Celmer VP, Professional Services 973.738.7859 • jcelmer@myinvestorsbank.com Daniel Murphy AVP, Professional Services 732.246.3592 • dmurphy@myinvestorsbank.com
Investors Bank name and weave logo are registered trademarks. ® 2016 Investors Bank, All rights reserved.
Introducing IVDesk: An Outsourced Solution for Your Technology Needs
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• Easy. By utilizing Single Sign-On technology, a premium is placed on the user experience while increasing the level of protection from cyberattack. The user’s desktop appears exactly the same regardless of the device that is used to access the data. This service is available to all NJCPA members at a discounted rate (20 percent discount on one-time setup fee and 10 percent discount on annual subscription fee) as a benefit of NJCPA membership. Plus, IVDesk has agreed to extend the discount to members’ clients. For a limited time, IVDesk is also including a year of IDShield for all employees of participating companies, as a demonstration of its commitment to security. Pricing is simple — an annual subscription calculated on the number of users and the number of applications used. IVDesk even manages your applications, taking care of any updates that could throw a wrench into your productivity. To learn more visit, ivdesk.com/njcpa.
The NJCPA is pleased to introduce its latest member benefit, IVDesk. A comprehensive IT provider, IVDesk develops secure virtualized IT platforms and couples those solutions with 24/7 five-star customer support. IVDesk is: • Safe. All information is encrypted and stored off-site in redundant, cybersecure facilities. • Fast. Information is tiered, enabling the most current files and data to run extremely fast. If there’s a problem, the 24/7 help desk — available to all users — boasts first-call resolution with an average time of seven minutes. • Mobile. Desktops are available to all users anywhere, on any device, at all times. It’s as if every member of the team has a completely secure virtual private network without any additional installation hassles.
View more NJCPA member benefits at njcpa.org/marketplace.
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SOCIETY
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Get Involved
Accounting educators, business deans and other faculty members from New Jersey’s colleges and universities came together in April to find out the latest on CPA exam changes, the accounting pipeline and what’s happening in the profession. Pictured are Leonard J. Lauricella, CPA; Frank J. Aquilino, CPA; and Irene K. Douma, CPA — all from Montclair State University.
Advance Your Career With Volunteer Groups and Communities
Interest groups and committees typically hold six to eight in-person meetings per year (with a call-in option). Interest groups provide attendees with one or more CPE credits at each meeting. Group members can participate online through Connect communities, where members can access meeting handouts and conversations about technical topics. Access your communities from “My Dashboard” when you log in to njcpa.org. Each interest group and committee is helmed by leaders who are excited about connecting with members in their technical areas. Here is the 2016/17 slate of leaders for NJCPA volunteer interest groups and committees:
When you join an NJCPA interest group or online community, you’ll be taking a step to advance your career: • Exchange ideas with the top people in your field or area of practice. • Get an edge on the latest developments important to you. • Develop technical, management and presentation skills. • Immerse yourself in regulatory and legislative advocacy for your profession. • Network with experts and potential leads. Interest Groups and Volunteer Committees
2016/17 Leaders
Community Members
Accounting & Auditing Standards
Elizabeth Harper, CPA Sobel & Co. LLC
305
Business Valuation Forensic Litigation Services
Megan A. Sartor, CPA SaxBST
245
Cooperation With Bankers
Paul Schuldiner, CPA King Trade Capital
142 658
Federal Taxation
Shaune Scutellaro, CPA CohnReznick LLP Paul Dougherty, CPA EisnerAmper LLP
Governmental Accounting & Auditing
Carol A. McAllister, CPA Bowman & Company LLP
145
Nonprofit
Catherine Syslo, CPA CohnRenick LLP
196
State Taxation
Jodi D. Kleuskens, CPA Integra LifeSciences Corporation
531
Student Programs & Scholarships
Henrietta G. Fuchs, CPA CohnReznick LLP
89
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In addition to interest group and committee communities which are accessible only to group members, NJCPA hosts online communities that any member can join. These communities provide a forum for discussion as well as a resource library. They do not have formal leadership and may or may not hold meetings: Open Communities
Community Composition
Community Members
Accounting educators (high school or college), deans, department heads; meets twice a year
118
Accounting Educators Bergen Practitioners
Public practice CPAs in Bergen County
96
Monmouth/Ocean CPAs
Members in Monmouth and Ocean counties
142
Join interest groups, committees and open communities at njcpa.org/groups.
Get Involved Now
Volunteer opportunities are available throughout the year. Let us know how you’d like to be involved at njcpa.org/volunteer. Here is how you can get involved now: NJCPA Student Ambassador — We need student members to reach out on their college campuses to encourage fellow students to consider a CPA career and to publicize NJCPA programs and membership. Student ambassadors can earn monthly rewards plus win a trip to the NJCPA Annual Convention & Expo. Contact Lauren Walsh at lwalsh@njcpa.org or 973-226-4494, ext. 224.
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CLASSIFIEDS Mergers/Acquisitions Traphagen & Traphagen CPAs, a well-established firm in Bergen County with diverse client base and credentialed support staff is seeking small firms and sole practitioners for acquisition or merger. We are looking for firms ranging in size from $300K to $700K. This is an opportunity to align with a quality firm, while continuing to provide your clients with exceptional service. To confidentially discuss this opportunity, please email us at carolynn@tfgllc.com. Essex County CPA firm seeking individual or sole proprietor to work with existing retirement-minded partner for eventual buyout. Interested candidates should email essexcpa@ gmail.com. New Jersey practices for sale: gross revenues shown: multi-location tax franchise, $242K; Ewing tax & bkkg., $150K. Call 800-397-0249 or visit www.accountingpracticesales.com to view all listings and register for free email updates. The Marchese Group, a father-son CPA firm in northern NJ, is looking for retirement-minded practitioners grossing up to $150,000 for buyout or merger. This is an opportunity to assure your clients will have exceptional quality service. Please contact ron@tmgcpa.net.
Seize a merger acquisition opportunity with benefits for you. We are looking for firms ranging from $300,000 to $5 million eager to combine forces as we continue to grow across Northern NJ, Westchester and the Hudson Valley region. Goldstein Lieberman & Company is ideally situated to service all types of industries. Visit www.glcpas.com; email me, Phillip Goldstein, CPA, managing partner, philg@ glcpas.com; or call me at 800-839-5767 to have a confidential conversation. LLI Advisory Group, a Union County-based firm, is looking to expand its practice. If you are a retirement-minded practitioner with a practice grossing $300,000 to $800,000 or a sole proprietor looking for a firm to partner with, please contact Spiro Leunes at sleunes@llicpa. com or 908-358-0503. We are a young and entrepreneurial firm with a successful history of mergers and acquisitions.
Real Estate Professional office space for lease, includes shared conference room, kitchen, gated parking, security cameras, alarm and utilities. Located on Livingston Avenue in New Brunswick, NJ. Call 908-581-3322 or email beatagall@hotmail. com for more information. Newly constructed executive window offices available in Ramsey, NJ. Rent negotiable. Call Connie at 201-474-4016.
Classified Advertising Replies to ads with file numbers should be sent to: File______________________ New Jersey CPA Classifieds 425 Eagle Rock Avenue, Suite 100 Roseland, NJ 07068-1723 To see additional classified listings or to place an ad, visit njcpa.org/classifieds.
ADVERTISERS INDEX Accountants World, LLC accountantsworld.com
25
Accounting Practice Sales accountingpracticesales.com
15
Artha Systems LLC arthasystems.com
C2, 31
CAMICO Insurance camico.com
C4
Capstan Tax capstantax.com
27
Headquarters Advisory Group hqadvisorygroup.com
13
Investors Bank myinvestorsbank.com
23
Provident Bank rutgers.edu
C3
Xcel Federal Credit Union xcelfcu.org
September/October – Coming Attractions Transitions • The Young CPA Firm • CPA Migration – Sectors, Skills Magazine of the
New Jersey Society of Certified Public Accountants
September • October 2016
• The New Retirement • Technology’s Impact on the CPA’s Role
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SOCIETY
pages
Thanks for a Successful NJCPA Convention & Expo
Editor’s Note In the Young Professionals column in the May/June issue of New Jersey CPA, one of the scholarship recipients was inadvertently omitted. Alexis Duke, who will be attending Ramapo College of New Jersey, received a $2,500 scholarship from the NJCPA Bergen Chapter.
More than 1,000 attendees and exhibitors mingled, networked and learned at this year’s NJCPA Convention & Expo at the Borgata in Atlantic City. Our lineup of national and local speakers gave attendees practical and actionable advice on dealing with the unprecedented, massive and highly accelerated change that is transforming the CPA profession and business world. Read highlights of the event and view photos at njcpa.org/convention.
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YOUNG
professionals
Nine Skills You Need to Make an Impact in the Face of Change Tips from Maryann Reyes, CPA Senior Manager WithumSmith+Brown maryann1120@gmail.com 1. Managing information overload. News, magazines, seminars, webinars, LinkedIn, newsletters, professional memberships like NJCPA — they all help CPAs stay current. But you can’t read it all. Maintaining regular contact with your network is one way to see what is trending with CPAs, clients, financial institutions and client industries. 2. Being ready to learn, ready to change. Always be ready to learn and to take what you learn and change for the better. It is up to individual CPAs to take new technologies, laws and regulations and apply them to their business or client base. 3. Giving back. CPAs can make the world better by the way they do business. Find ways to give back to your peers, up-and-coming professionals, your community and the world. You’ll be more well-rounded, and your success will go beyond your bonus and your employer’s mission. Tips from Jaime Campbell, CPA CFO Tier One Services LLC jcampbellcpa@ tieroneservices.net 4. Achieving more through time management. Mastering technology frees you from slowdowns and repetitive tasks. With more time, you can focus on performance, professional development and networking, which will turbo boost your career.
5. Committing to continuous professional development. Read articles. Read regulations. Read anything that smells like forefront. Get educated and remember salient details. Mention these details when networking or at team meetings. 6. Building relationships through networking. Join NJCPA groups with practitioners in your areas of interest. You don’t have to schmooze; you can simply talk to people about issues you’re facing and issues that interest you. Whatever you do, keep promises you make in these networking situations. Make promises to follow up, keep in touch, take action. Do it. Tips from Sean D. Stein Smith, CPA Senior Accountant Hackensack University Medical Center ssteinsmith@yahoo.com 7. Analyzing and understanding data. Accounting is not just about financial statements, audits and tax returns; it is about giving business decision-makers the information they need when they need it. The Internet of Things, big data and predictive analytics have become mainstream. CPAs must keep pace. Whether this means obtaining a certification in analytics, data mining or some other quantitative tool or simply getting better at Excel and leveraging existing add-ons, increased analytics are a must. 8. Communicating your ideas and your business. Interactions between people, departments and organizations are what drive organizations forward. CPAs must be part of the decisionmaking process. Decisions are not made in a vacuum: They are made with the N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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information (financial and nonfinancial) that is produced by the organization. Being able to articulate, in written or verbal form, your ideas, concepts and positions is imperative. The ability to successfully advocate for yourself, your position, or your requested budget increase might well mean the difference between success and failure. 9. Maintaining flexibility and adaptability. Every day brings its own set of unique opportunities and challenges. Being able to pivot from one decision to another without losing track of big-picture goals is a quality all successful leaders have. Nontraditional reporting, focusing on corporate governance and sustainability, data analytics, and an increasing reliance on the CFO function to help guide the business mean that accountants must be willing to embrace the new opportunities that a rapidly changing business environment provides.
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LEGISLATIVE
views
NJCPA Plays Key Role in New Business Advocacy Coalition, Opportunity NJ B Y JEF FREY T. KAS ZERMAN, NJ C PA GOVE R NM E NT R E LAT I O N S D I R E C TO R
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n April, NJCPA CEO Ralph Albert Thomas was appointed treasurer for Opportunity New Jersey (ONJ), and I was appointed to its Policy Committee. ONJ is a new grassroots coalition advocating for policies that will create jobs and improve the state’s business climate. ONJ grew out of the New Jersey Business Summit, attended by more than 500 business leaders in September. It will use grassroots outreach to inform policymakers and the public about how proposals out of Trenton will impact the state economy. The 501(c)(4) organization will raise donations from individuals, businesses and organizations. “This is about New Jersey’s economic future and its impact on all New Jerseyans,” said Michele Siekerka, co-chair of ONJ and president of the New Jersey Business & Industry Association. “This coalition affords grassroots groups and individuals the ability at the local level to have a voice in the process.” The coalition’s most immediate agenda involves opposing three economically damaging initiatives that have recently been proposed. These proposals would increase the minimum wage to $15 per hour, constitutionally require quarterly public pension payments, and mandate paid sick leave. Coalition members say these proposals would have a negative impact on New Jersey’s competitiveness and a chilling effect on both job creation and privatesector investment in the state economy. ONJ also strongly supports moving quickly to reduce the state’s onerous death taxes and to find a stable source of funding for the NJ Transportation Trust Fund, which will run out of money this summer. The coalition’s longer term agenda includes reforming the state’s tax structure, funding long-
term investments in infrastructure, reducing unnecessary government regulations/mandates, and maintaining the state’s highly trained workforce. The coalition comprises more than 40 business organizations, trade associations, labor groups, educational institutions and not-for-profits. Individual companies, business owners and employees are also participants.
We Need Your Help The NJCPA plays a critical role protecting the CPA profession in the New Jersey Legislature. No group has more impact on your ability to practice your profession than the governor and the members of the Legislature. One of the most powerful methods we use to influence this group is through direct contacts made by CPAs who have existing relationships with lawmakers. If you have a relationship with any of the lawmakers listed below, we’re asking you to join our Keyperson Program. What do we mean when we ask if you have a “relationship” with a lawmaker? We mean anything from knowing the legislator on a casual basis — for example, you live in the same neighborhood or attend the N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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same church — to sharing a closer relationship based on longstanding personal or business ties. Being an NJCPA Keyperson is simple. Once a year (or less), we’ll ask you to communicate NJCPA’s position on an issue to the lawmaker. You don’t need to be an expert on the issue. We’ll provide you with talking points, sample letters and whatever you’ll need to briefly let the lawmaker know how the profession feels about a particular issue. And NJCPA staff members are available to answer any questions the lawmaker may have. To establish a strong Keyperson Program that will help us to protect your profession, we need your help. Please take a moment to review our list of lawmakers at njcpa.org/keyperson. If you have a relationship with any of these lawmakers and are willing to be a Keyperson, please contact me at jkaszerman@njcpa.org or 973-226-4494, ext. 210. Follow OpportunityNJ on Twitter @opportunitynj, Facebook at facebook.com/OpportunityNJ and online at opportunitynj.org.
MEMBER
profile
From Poverty-Fighting Achiever to Award-Winning Entrepreneur B Y ELIZABETH QUIÑONE S, NJ C PA C ONTE NT SPE C I AL I S T
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orn in a small terrorist-inflicted village in Punjab, India, Jatinder Singh, CPA, relied on scholarships to get quality education at boarding schools. As the oldest of five siblings, Jatinder had to learn how to grow vegetation to help support her family. She also struggled with epilepsy, but she didn’t let that stop her from reaching her academic goals. Jatinder’s first exposure to accounting was as a child, when she saw her uncle working on income taxes. After looking at his books, she liked that accounting required business sense. “I studied business accounting on my own, and I would go and tutor kids to make money,” she said. But Jatinder decided to be a biology major to please her parents. “My parents wanted me to be a doctor. So I left India promising them that I would become a doctor in the United States. But I knew in the back of my mind I would never be a doctor.” After she finished college at Drexel University in 1998, she worked at Temple University in Philadelphia as an office manager. She took accounting classes as an employee of the school. As she continued to learn about accounting, Jatinder worked for a couple of CPA firms and began studying for the CPA exam. She passed in 2007. After obtaining her CPA license, she worked her way up to vice president of finance and accounting for a womanowned IT company in a suburb of Philadelphia. Jatinder then took her accounting career to the next level by starting her own practice, with three clients. “At that point, I wanted to
expand my horizons and get involved in the CPA community.” She became a member of the NJCPA Southwest Jersey Chapter and eventually became the chapter president. Coming from northern India, Jatinder is grateful for the opportunities she was able to capitalize on in the U.S. “I am really thankful for this country. This country gave me the freedom that my country could never give me.” Jatinder wanted to give back and extend opportunities and resources to businesses and professionals in India. She served as president of the U.S. chapter of the U.S. India Investors Forum for two years and is currently president of the U.S. India Business Forum. These nonprofit organizations are designed to help companies in India understand what the U.S. has to offer. Jatinder worked with the U.S. Commercial Service and the U.S. India Business Forum to encourage companies in India to take advantage of incentives the American government created for international companies to move their businesses to the States. Because of her significant contributions to the U.S. India Investors Forum, Jatinder earned the Hind Rattan (translated as “gem of India”), a national award in India. “My parents have the award up on their mantle,” she says, explaining that her parents wanted to keep the award as a reminder of how much Jatinder overcame to accomplish her success. Jatinder believes relationship building is the road to client loyalty, allowing her to keep clients for decades. “My N E W J E R S E Y C P A • J U LY • A U G U S T 2 0 1 6
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relationships with my clients have lasted longer than some marriages. I’m kind of married to my clients!” Jatinder is an advocate for empowering women. She has spoken at New Jersey colleges, encouraging female accounting students to start their own businesses and get involved with organizations that allow them to serve their communities. Jatinder’s path to success wasn’t an easy one with shortcuts or leisurely walkways. She had to work her way out of poverty, trusting her parents to wrangle the money for her plane ticket to the U.S. But she knew that when she hit rock bottom, success was right around the corner. Jatinder hopes to inspire others to make great decisions for themselves. “People say [about me], ‘She really thinks she’s all that.’ I don’t think I’m all that. I know I am. I worked for it. I deserve to reward myself.” Read a more in-depth version of Jatinder’s profile and view her member story video at njcpa.org/newjerseycpa/ julaug16.
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