Certified public accountants (CPAs) in Nevada are experiencing an interesting shift in their industry as tax laws change and experienced professionals work to train a new generation. Recently, executives in the CPA industry met at the Las Vegas offices of City National Bank to discuss both the challenges and opportunities facing the industry.
Tarah Richardson, editor-in-chief of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.
How has tax Information Changed in recent years?
JOHN WILCOX: One of the things that concerns me is the quality of financial statements we’re seeing after the recession. We have a lot of people trying to do their own statements. As a bank, we’re trying to advise them to at least get them reviewed. The quality of financial statements is something that we’re paying a lot of attention to from a lending standpoint.
BRYCE WISAN: What I struggle with is business owners and managers that don’t necessarily want to have good information, and even more so, those standards of credit, lending assurity and don’t demand better financial information. Even some regulators don’t seem to put good, quality financial information as the priority that it should be.
SHARON MCNAIR: My biggest concern is that clients try to save money by doing their own thing. Then they bring it in and we have to work on it and change it around and it costs more money in the end because of that. I think that was spurred on by the recession – people trying to save money and trying to cut down on costs, and in the end, it doesn’t do so.
How will the New tax affect business?
CURT ANDERSON: [Regarding SB 483], I was actively involved with looking at those proposals with the Chamber of Commerce as a follow-up on the margin tax. A bunch of us looked at that margin tax and were really concerned about the effect of that. My concern with the modified tax is it’s the camel poking his nose under the tent. They addressed a number of the issues that we saw with the margin tax in the way they put the commerce tax together, but yet, every piece of that can be modified. Exemption can be modified. Rates can be modified. It can go anywhere.
DANIEL GERETY: Because it’s a new tax, a lot isn’t even defined yet. You’re going to have a lot of case law coming out afterwards because regulations will not define everything in the law and it will be up to the courts to define it.
BILL WELLS: It’s interesting that the margin tax seemed to get a lot of attention and a lot of uproar from people, but the modifications they made don’t seem to be highly discussed. Either they don’t think it’s a big deal and they’re minimizing it, or they don’t really know much about it. I agree that there’s going to be some interpretations that are going to have to come through later because there’s some gray areas that really nobody knows the answer to at this point.
JASON GAMETT: Companies that are going to be up in arms the most are those that have very minimal margins. They’re getting hit most on the tax because it’s based on gross receipts. Contractors that are cost plus, now are definitely eating into the plus. It’s a direct hit to those guys.
GERETY: There will be real problems trying to figure out what classification we fit in. A lot of businesses fit into multiple classifications. There’s your problem. What classification are you really in?
WISAN: All of us should be concerned about the business environment here in Nevada and this tax could impact it. [For example], there’s talk that conference presenters coming to present at a convention could create a filing requirement here.
ANDERSON: One of the things they used to justify doing this was the exporting of the tax. It was going to be paid by people who were not actually here doing business physically, yet doing business in state. I’m not sure if that’s really a good general business growth philosophy, though.
KIRK JACOBSON: It was sold as an education tax, and if it truly does help our education, then that’s a good thing. But there’s a big question as to where those dollars will ultimately end up. My concern, and a lot of my clients’ concerns, is that they’re okay with paying more money towards education if those dollars get there and if they do good.
Do Nevada schools produce quality accountants?
JACOBSON: There’s projections that say [accounting] will be a huge job in the future. With respect to the local schools, I think UNLV has come a long way. They are a quality provider. They’ve won some national awards this year and are doing the right things. We’ve had great success with their candidates that they send us.
MCNAIR: I’m also impressed with some of the magnet schools here at the high school level that are presenting some of the accounting programs. You hear the complaints about our educational system here and we never rate very highly on anything, but I’ve had some good experience with the high school students coming out and being interns with me.
WELLS: It seems to me that professors are more engaged in the preparation of positioning the candidates. I find that there’s more interaction, more involvement and more engagement by the professors to assist the students. It used to be they would prepare them from a technical perspective, but now I do think they are mentoring them better so they come out with a better vision of what they want to do.
WISAN: The recruiting events that we’ve attended this fall have been, by far, the most heavily attended from a student perspective. The good news is that there are lots of students interested in accounting. The bad news is that we’re all trying to figure out how to train them.
What do you think of the next generation of accountants?
ANDERSON: There’s an old thing that says every generation sees the generation coming behind it as less dedicated. We’re saying that the generation behind us doesn’t want to work that hard, yet I think there’s a certain identity interest that we all have with the Millennials. We, as Boomers, would rather have some balance ourselves and be able to take time off just as the Millennials. I don’t necessarily see that they don’t want to work as hard. They want to work differently and they have different expectations of how they’re going to advance.
GAMETT: The misconception is that they may be lazy or not want to work hard because they want time. I think that’s incorrect. I think they want time, but they’re willing to work when it’s time to work. But if you can offer more time off to people, that’s a big incentive.
WELLS: Our mission is to learn from [Millennials] and have them change the culture because they are the future. Some of the programs that we’ve instilled are things around community service. They want to be more involved in their community. We’ve talked to them a lot about group mentoring where they’ll sit down and mentor each other on how they can help each other be more successful, because they do like to work in teams.
WISAN: We’ve been talking about Millennials with experts, and one of the best ways to engage them is by getting involved personally in their careers and having a little bit more openness about what they want versus what we have. If we can help them get what they want, whether or not it involves us, then I think we can get the best out of them while they’re here.
WILCOX: Those are individualized plans. It’s not one size fits all. We’ve got to paint a picture of a life well-lived, while applying yourself to 110 percent of the job. They’re willing to work really hard to achieve their professional goals, but the family and the life has got to be part of it.
What’s the Key to long-term employees in this industry?
ANDERSON: If you want people to learn and become advisors, you can’t burn them out on the paperwork. You hire more people who sometimes do the same amount of work, but you spread it out to be able to keep the people working less burn-out hours. They stick around and you benefit from the longevity and the retention.
JACOBSON: One of the problems is we’re setting a terrible example. The question that always comes up is, “Why would I want to be a partner? Why would I want to work 60 or 70 hours a week?” That’s one of the reasons we’re losing people. They look at our work/life balance and say, “that stinks.” There is definitely a void where they see us working too hard.
GERETY: It’s working with the staff constantly, but also making sure that you have the best training possible. It’s making sure we’re not cheap on our education budget. The key is being in the meetings so they can see how the senior person presents and maybe take some notes from that.
RICHARD BOWLER: It’s important that those at the highest level in the firm be involved in on-the-job training with those at the lowest level in the firm and everywhere in between. There’s no substitute for it.
Are firms continuing to merge in this economy?
JACOBSON: Nationally, it’s huge. It’s happening everywhere. You look at the law firms who set the example. They have been merging left and right for the last four or five years. It’s sad to see some of those old firms disappear. As a profession, we’re at risk for that.
GERETY: An easy way for those firms to get growth is to buy another firm. It’s immediate growth. Everybody comes along, clients with it. It’s an easier way to grow rather than just bringing in new business.
WELLS: Our industry is no different than most other industries that achieving scale is critical. Not only scale from a relative perspective on the succession, but also scale to be able to offer more product and services because it’s become so specialized. It used to be that we all knew a little bit about everything, but now it isn’t that way.
Are firms selling as a retirement strategy?
GERETY: When you see people selling, it’s because they’re looking for a way to get out. How do I retire and get value from my firm? The easiest way is to sell.
ANDERSON: If you have a strong management team, you can either sell internally because you sell to people you know and trust, or you can sell externally and that management team is going to be important to those third parties. The starting point is building a management team that runs the business effectively and minimize your time and involvement in the specifics of running the business.
How competitive is this industry?
GERETY: I’m a one office firm, so if I’ve got international stuff, I’m calling in a specialist from another firm. I’m now a client of theirs so they can advise me to advise my clients. There’s another group that I use that are all ex-Arthur Anderson multi-state specialists. Their clients are the CPA firms, so they give me that specialty.
ANDERSON: We get referrals from other firms and we refer to other firms. There’s certain kinds of work that we don’t do. When somebody needs public company work, we don’t do that. We’ll put them together with another firm.
GAMETT: We’re a smaller firm that does primarily tax work, so we don’t do audit or review work. We definitely refer out for audit people.
JACOBSON: If we work hard and we work right, there’s plenty of opportunity for all of us. That’s why we get along as professionals. There’s going to be opportunities that come that you lose, but you’re going to get another one. I enjoy the camaraderie amongst our profession.
How does the future look for your industry?
GAMETT: If the governing bodies keep making more rules, we will be well-employed because things will keep changing and people will keep needing our help to roll with the punches.
BOWLER: What we have is not too many rules, but too few rule followers. The challenge is not to make more rules. The challenge is to figure out a way to enforce them. There needs to be some kind of reasonable, logical system so if you mess up as an auditor and don’t catch the problems, there’s some kind of penalty attached to it that is significant. Many of the rules that have come post-Enron are basically putting all the responsibility on the auditor and ignoring others who are participating in the production of the financial information.
GERETY: The clients that we picked up that had returns or tax work done the prior year are already in line. We’ve got substantial growth this next year. We’re going to be short people and we’re going to have to be hiring. Our growth in just August and September was 50 percent over last year.
WELLS: I do think you’re going to have to be smart about growth, because there are people shortages. Smart and planned growth will be important so you can actually keep service at that high level that you’re accustomed to. It’s more of the ability to find the man power to do it.
ANDERSON: The organic growth of existing clients is actually back in business, but it won’t be that spin up that drove us all crazy back in early 2000’s. This is a more realistic growth which, I hope, will allow us to staff accordingly and keep our quality up.
