Decision Vision Episode 64: Should I Fire My Accountant? – An Interview with Brian Woodman, Woodman & Associates, LLC
What are the circumstances under which I should change accountants? How can I tell whether my accountant is doing a good job for me and my business? Brian Woodman joins “Decision Vision” to discuss these questions and much more with Host Mike Blake. “Decision Vision” is presented by Brady Ware & Company.
Brian Woodman, Woodman & Associates, LLC
Woodman & Associates is a professional accounting services firm specializing in CFO services, financial reporting, audit support services and internal accounting assistance, all typically on a project basis for small to mid-size businesses.
Brian Woodman is a senior financial leader with 18 years of proven technical and financial management expertise with a focus on middle market technology, services and manufacturing + distribution businesses from start-up to $1 billion in revenue. He has proven expertise in leading internal and external finance and accounting based projects and teams, business and accounting process development and review, and financial reporting research and implementation expertise under U.S. GAAP. He is a CPA licensed in Georgia.
Michael Blake, Brady Ware & Company
Michael Blake is Host of the “Decision Vision” podcast series and a Director of Brady Ware & Company. Mike specializes in the valuation of intellectual property-driven firms, such as software firms, aerospace firms and professional services firms, most frequently in the capacity as a transaction advisor, helping clients obtain great outcomes from complex transaction opportunities. He is also a specialist in the appraisal of intellectual properties as stand-alone assets, such as software, trade secrets, and patents.
Mike has been a full-time business appraiser for 13 years with public accounting firms, boutique business appraisal firms, and an owner of his own firm. Prior to that, he spent 8 years in venture capital and investment banking, including transactions in the U.S., Israel, Russia, Ukraine, and Belarus.
Brady Ware & Company
Brady Ware & Company is a regional full-service accounting and advisory firm which helps businesses and entrepreneurs make visions a reality. Brady Ware services clients nationally from its offices in Alpharetta, GA; Columbus and Dayton, OH; and Richmond, IN. The firm is growth minded, committed to the regions in which they operate, and most importantly, they make significant investments in their people and service offerings to meet the changing financial needs of those they are privileged to serve. The firm is dedicated to providing results that make a difference for its clients.
Decision Vision Podcast Series
“Decision Vision” is a podcast covering topics and issues facing small business owners and connecting them with solutions from leading experts. This series is presented by Brady Ware & Company. If you are a decision maker for a small business, we’d love to hear from you. Contact us at firstname.lastname@example.org and make sure to listen to every Thursday to the “Decision Vision” podcast. Past episodes of “Decision Vision” can be found here. “Decision Vision” is produced and broadcast by the North Fulton studio of Business RadioX®.
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Intro: [00:00:02] Welcome to Decision Vision, a podcast series focusing on critical business decisions. Brought to you by Brady Ware & Company. Brady Ware is a regional, full-service service accounting and advisory that helps businesses and entrepreneurs make visions a reality.
Mike Blake: [00:00:20] And welcome to Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic from the business owner’s or executive’s perspective. We aren’t necessarily telling you what to do, but we can put you in a position to make an informed decision on your own and understand when you might need help along the way.
Mike Blake: [00:00:39] My name is Mike Blake, and I’m your host for today’s program. I’m a Director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia, which is where we’re recording today. Brady Ware is sponsoring this podcast. If you like this podcast, please subscribe to your favorite podcast aggregator, and please consider leaving a review of the podcast as well.
Mike Blake: [00:01:02] So, today we’re going to talk about whether you should fire your accountant. And we are recording this podcast on lucky Friday the 13th of March in 2020, which means that in the accounting world, we are in the heart of what is known as busy season, which may or may not be extended depending what the IRS decides to do in response to coronavirus. But this is the time when the relationship between the accountant and the client is at its most intense, at least, for most clients. And for good or ill, in many cases, clients talk to their accountants pretty much only this time of year. And we can have a discussion at some point later as to whether or not that’s a good thing or the prudent thing.
Mike Blake: [00:01:50] But this is the time of year when things get tense. Things pop up on the tax return that the client wasn’t necessarily expecting, when phone calls and emails are not returned as quickly as they are through the rest of the year because there’s a traffic jam. And so, the most strain is put on that accountant-client relationship. And at some point, as a client, you may start thinking about, “Well, is this relationship really working for me? Should I be looking elsewhere?” Or “Is this just kind of the nature of the business? And is what I’m experiencing something that I would likely get from somebody else if I switched, and I should just sort of leave well enough alone.” So, I hope that you’ll find it is a timely topic. And if you listen to a podcast from a few weeks ago, we did one on Should We Fire a Lawyer? So, this is an equal opportunity podcast. We’ll haves, should we fire your financial advisor? Should we fire your gardener? Should we fire your Uber driver? Should you fire the person that mows your lawn? So, we’ll go through all kinds of firing kinds of podcasts.
Mike Blake: [00:03:02] But today we’re talking about accounting. And even though I work for an accounting firm, I am not an accountant. If I talk anything about accounting, it’s instantly malpractice. So, joining us today to help us talk about accountants and relationships with our accountants is my longtime friend, Brian Woodman of Woodman & Associates. We go back a long way, at least 10 years. Woodman & Associates is a professional accounting services firm specializing in CFO services, financial reporting, audit support services, and internal accounting assistance all typically on a project basis for small and mid-sized businesses.
Mike Blake: [00:03:37] Brian is a senior financial leader with 18 years of proven technical and financial management expertise, the focus on middle market technology services, and manufacturing, and distribution businesses from startup to a billion dollars in revenue. He has proven expertise in leading internal and external finance and accounting-based projects and teams, business and accounting process development and review, and financial reporting, research and implementation expertise under US GAP. He is a CPA license in Georgia. All around good and sporting his brand-new glasses that I just can’t take my eyes off of. Brian Woodman, welcome to the program.
Brian Woodman: [00:04:13] Thank you, Mike. You reading that makes me sound like I’m bragging. So, I’ve never had that read back to me, my bios. I’m a little embarrassed, but-
Mike Blake: [00:04:23] Well, but some of this-
Brian Woodman: [00:04:24] Thanks for the interest.
Mike Blake: [00:04:24] Some of it’s true, right?
Brian Woodman: [00:04:26] Yes..
Mike Blake: [00:04:29] It’s interesting that you mentioned that. I hate having my bio read as well when I do speaking gigs and so forth. I do want to sort of put my hands over my ears like this. It’s like, yeah.
Brian Woodman: [00:04:29] I’m sorry.
Mike Blake: [00:04:44] My marketing people made me write that. I’m really a bad guy. So-
Brian Woodman: [00:04:51] No worries.
Mike Blake: [00:04:51] … let’s jump into this. And I’m having you on the program for a lot of reasons, but your expertise is that you’ve been in the CPA role. You grew up as an auditor.
Brian Woodman: [00:05:03] Yes.
Mike Blake: [00:05:04] Right?
Brian Woodman: [00:05:04] Yeah.
Mike Blake: [00:05:04] And in public accounting. And now, you’re in a position where you’re doing some accounting work, but I think you’re also coordinating who your clients hire and work with to get-
Brian Woodman: [00:05:17] Correct.
Mike Blake: [00:05:17] … sort of the kind of the bulk work done, right?
Brian Woodman: [00:05:20] Yes, yeah.
Mike Blake: [00:05:20] So, you are sort of a kingmaker. And if you decide that somebody needs to be voted off the island, you’re going to tell the client. And more often than not, they’re going to do what you tell them because why pay for your advice if they’re not going to follow it?
Brian Woodman: [00:05:34] Right, yeah. I’ve been in both sides at this point. On the service provider side, I was an auditor for many years. So, I know what makes clients happy and what makes them upset. So, it’s good for me to have that on the other side to help my client make the right decision about which service provider to pick.
Mike Blake: [00:05:54] Yes. So, I mean, how often do clients make a change? Are clients kind of always looking for a reason to fire their CPA? Or do they tend to come to that decision after a lot of thought?
Brian Woodman: [00:06:11] Well, I think entering a relationship with an accountant is a very thoughtful process. So, especially with small business, your business is tied to your personal life in many cases. So, business is personal. So, you’re sharing your intimate financial details with someone. So, in most cases, at least for small businesses, it’s a somewhat personal decision, and you want to find someone that you trusts. So, you put a lot of thought into that. So, the intent is to go into that relationship to last. So, I would say, how often do the clients look to change their accountants? I would say they’re not looking to necessarily change their accountants unless they have to. So, I’d say not often.
Mike Blake: [00:07:02] Yeah, okay. So, when you come to that decision, and you’re advising, what are the most frequent reasons that clients do decide they’re going to change accountants?
Brian Woodman: [00:07:17] Well, let’s see. There’s a few. Price, unmet expectations. Some of the reasons where it’s not really a choice is if there’s a change in control of the company or with larger companies, a change in the C-suite. So, they may kind of bring their own accountants along or advisors. I mean, so when we define accountant, that could mean several different things. There’s compliance-related work, which is tax returns and audits. And then, there’s more advisory work. So, it kind of depends on who you’re talking about.
Brian Woodman: [00:07:52] But I would say, so, I was in audit, so I know that best. So, if it’s an auditor, and you’ve got a new CFO in place, it’s possible that the CFO kind of brings in the firm that they’ve known, depending on where the company is at at any time. So, change of in control. If an acquisition takes place, so a foreign parent buys a US sub, there could be a reason to change the accounting relationship there. I think I mentioned price, although it’s not always the best reason to change. Oftentimes, clients or companies or required to go out and bid the work out just to make sure they’re still in range. And oftentimes, the change occurs just through that process. Other reasons, a company can grow and kind of outgrow the depth of their current single shingle shop, you could say, and it may require more depth and expertise in a specific area. So, they may have to go and find a firm that can meet their needs there.
Mike Blake: [00:09:02] Yeah, I just had a conversation. I do office hours in Alpharetta, Georgia, an organization called Tech Alpharetta twice a month. And last Wednesday, somebody came in and started talking about research and development, tax credits.
Brian Woodman: [00:09:19] Sure.
Mike Blake: [00:09:20] And I said, “Well, look out. I have a passing familiarity with them, but I’m not an actual CPA. I don’t even do my own tax returns. So, who’s your accountant?” He says, “Well, our accountant is just sort of a guy that we decided to go with because he was the chief business.” I said, “Well, maybe for research and development tax credits, you need more than just some guy.” And that is a case where the complexity of what the client needs outgrows kind of the single shingle that for certain there is maybe a fine accountant, but reaches a technical depth that just you cannot reasonably expect unless that person just happened to be an R&D tax expert at a bigger firm that did that.
Brian Woodman: [00:10:02] And that that is the case. So, hope it doesn’t sound like I’m knocking single shingle.
Mike Blake: [00:10:07] You’re notOr.
Brian Woodman: [00:10:08] It’s just that the single shingle can’t do everything to the depth that, say, a large national firm could probably do. But you may have a boutique shop or a single shingle that may fit your specific need and that might be the right person.
Mike Blake: [00:10:24] Yeah. And, an interesting thing I just thought of because you you mentioned your audit background, when you have an auditor, I mean, firing an order is a little bit trickier because there’s observers who are going to kind of wonder, “Well, why did you fire the auditor?”
Brian Woodman: [00:10:45] Yes.
Mike Blake: [00:10:46] Did you fire the auditor because they legitimately did something from a business perspective that was not cool? Or was the auditor telling you to do something on your financial statements that was the right thing to do, and you didn’t want him to? And you found the equivalent of the break inspector that says, “Ah, for 20 bucks, we’ll let those then brake pads slide and I’ll give you the sticker.” That’s a real concern.
Brian Woodman: [00:11:13] You could call that opinion shopping. So, I think that I go back to my audit days, that was a specific question. We fill out all sorts of checklists as accountants as we go through and QC our work. And in the planning stage in an audit, there was a specific question about how many times has your client fired their accountants in the past, and what are the reasons, and take those into consideration, , in accepting this client; and then, , if you’re comfortable accepting the client, you need to potentially build that into the audit risk, which determines how deep you really need to go in an audit.
Mike Blake: [00:11:53] You know what? That’s interesting. So, as I mentioned at our intro, we did have a podcast talking about should I fire my attorney with Jeff Berman from Berman Fink Van Horn. And one of the things he talked about as is attorneys are kind of reluctant to take on a client that rolls through other attorneys. It sends up some red flags. I had not thought about that from the accounting perspective, but I mean, that’s right. Accountants, for those of you who don’t know, accountants have this process called client acceptance. At least, most accounting firms do. And I think that’s the checklist you’re talking about is should we accept this client or retain and continue the client? And it hadn’t occurred to me, but I guess on that checklist is, does this person make a habit of having a rotating accountant merry go round, basically? And so, if you can develop that reputation of being somebody that does that, you may find it, at some point, hard to find somebody good that wants to represent you.
Brian Woodman: [00:12:56] That’s right. That’s right. The question’s going to get asked eventually.
Mike Blake: [00:12:59] Yeah, sure.
Mike Blake: [00:13:01] And I guess another reason why firms change accountants too is because they receive an investment or even just financing, in general, right?
Brian Woodman: [00:13:09] Right.
Mike Blake: [00:13:10] I know that VCs will often say, “Congratulations! Here’s the check. Here’s also the accountant you’re gonna be working with,” right?
Brian Woodman: [00:13:20] Right. I have actually seen the name of a firm written into a loan agreement.
Mike Blake: [00:13:26] I was gonna ask you about that. Does that work for banks as well?
Brian Woodman: [00:13:29] I’ve seen it.
Mike Blake: [00:13:29] Okay.
Brian Woodman: [00:13:29] I’ve seen it where in order to get the funding, now, I’m trying to think if it was … I mean, it was a debt agreement. I don’t know if it was with a bank, but it did specifically name the firm that was to do the audit of the financial statements.
Mike Blake: [00:13:48] So, it’s conditional.
Brian Woodman: [00:13:49] Yeah, yes. So, in order to get the debt, you may have to change your accounting firm.
Mike Blake: [00:13:53] Man, I gotta find that lender and make sure they’re my best friend. That sounds great.
Brian Woodman: [00:13:59] So, I’ve seen some that will say it must be a national firm or big four firm. But I’ve only once seen where it was the specific firm was named. And I thought that was interesting.
Mike Blake: [00:14:11] Yeah. I haven’t seen that either, but I’ve certainly seen it where at a minimum, sort of as part of the term sheet, they say you’re going to adopt whatever accounting firm we say you’re going to adopt to be named later. So, in your mind, as as an advisor to clients that kind of coordinates the work of other accountants, what starts you down the road thinking, “I’m not sure this is the right match. And maybe I’m going to tell the client to start looking at other alternatives”?
Brian Woodman: [00:14:47] I would say, broadly, unmet expectations.
Mike Blake: [00:14:52] Like what?
Brian Woodman: [00:14:52] On price. So, I’ve often seen situations where the bidding process, you’ve got the low bidder coming in. And then, all it is, is coming in with a low price subject to conditions that the client must meet. And if that fine print isn’t read in detail and held to, you’re going to see change orders. So, for every little thing, so that it allows the firm to come in and get the work, but then on the back end, I don’t know. Firms that kind of take that approach, I don’t think that’s a really good long-term approach to going out and generating business because it kind of leaves a bad taste in the clients.
Mike Blake: [00:15:38] You might generate business but you won’t keep it.
Brian Woodman: [00:15:38] Yeah, yeah. That’s right. Yeah. So, I think you’ll have high turnover in those situations, but as far as expectations go, last minute surprises. And I can talk about this from an audit perspective and from a tax perspective. You discuss the communication throughout the year. Why are we having the conversation just before the deadline? Why haven’t we discussed these things? And I’ve been able, fortunately for me. So, I’m sitting on the other side of the table now where the client had asked me before, “Okay, why are we talking about this now at the end of the audit? We’re just about to issue.” So, I go, “Yeah, I get it.”
Brian Woodman: [00:16:21] So, I’m able to have these conversations now where, okay, we’ve had all year, which is not your busy season. So, there should have been time. I mean, I realize everything’s cramming in here at the last minute for everybody, but we’ve had all year to talk about some of these issues. So, let’s try to plan a little bit to be a little more proactive. So, I’d say the more that that happens and the more heartburn accumulates over a couple of years, if that happens a couple of times, you’re going to want to move on or think about moving on.
Mike Blake: [00:16:59] Yeah, it makes sense. I mean, you think about the desired outcome of an accounting relationship, you want them to manage risk and bring stability. If it seems to be at risk and having instability, that seems to run counter to the purpose of what you’re trying to do, right?
Brian Woodman: [00:17:18] Right.
Mike Blake: [00:17:18] And you can appreciate if someone is going to be hit on their personal taxes an additional $10,000 tax bill. And by the way, you’re finding about that on April 13th, that’s a little bit frustrating.
Brian Woodman: [00:17:31] Yes, yeah.
Mike Blake: [00:17:32] And can be financially challenging, right? Or if you find that you’ve been telling everybody, all your stakeholders, you’re expecting a massive profit this year, and then five days before the audit issues, you’ve got a massive write-off you got to take, that’s an issue too.
Brian Woodman: [00:17:52] To be fair, accounting is historical. So, the end result is based on what happened. So, I can’t tell you what the answer is going to be in June for where we’re going to be in December. But I can tell you, okay, here is where we’re at in June. What are your plans for the rest of the year, so we’re not going to have any surprises? Remember, we talked about this. If you were going to buy that building, if you were going to do that acquisition, if you were going to launch a product or not, to make a decision at launching a product or not, or changing out the C-suite, those are things that could affect and change the end results. So, let me know what those are now. Let’s discuss and let’s head those up at the pass versus on April 15th or March 15th or 16th, I think is the deadline, is, “Oh, that’s what happened. Okay. Well, that changes everything now. Your answer is completely different. And it’s the first I’ve heard of it.” So, again, I think being proactive with communication. In my career, keeping the number of surprises down with your client is the best. That’s preventative action to an upset client or client wanting to move on.
Mike Blake: [00:19:18] Yeah, yeah. So, let me ask this, accountants aren’t cheap. I mean, I guess some are, but most aren’t. You’re not cheap. I’m not. My firm is not cheap. The firm we used to work for really isn’t cheap. Is it unreasonable for a client to demand perfection or near perfection?
Brian Woodman: [00:19:39] Yeah, I was going to say perfection. Perfection can be subjective, especially, and you know this very well that this business can be somewhat of an art. The answer on a tax return that’s acceptable to the IRS could be different from … the same exact return prepared two or three different ways could be acceptable to the IRS. So, which one is perfect? Probably the one that as long as is acceptable has the highest refund, but I think that, and especially in your business, and I know you say you’re not an accountant, but your business involves … it certainly involves numbers.
Mike Blake: [00:20:17] I certainly am in the accounting industry. I work for accounting firms, so.
Brian Woodman: [00:20:21] Right. So, I would say that relatively perfect. We’re certainly not perfect, but I would say that generally and materially perfect is a reasonable expectation. But you also have to understand kind of where you’re at. So, if you have the wrong person in place. So, if you got highly complex transactions, and you’re asking a bookkeeper to book those transactions perfectly, and they involve estimates, and they involve a lot of inputs, I would say you shouldn’t, in the first place, expect perfection from that level of service provider. But if you have a bookkeeper at the lowest level, the transactional level, I would say where there’s not a lot of judgment, there’s not a lot of art-
Mike Blake: [00:21:18] Right, it’s just a mechanical process.
Brian Woodman: [00:21:20] Yeah, it’s mechanical, I would say that, yeah, should you could expect something close to perfection there.
Mike Blake: [00:21:26] So, is changing an accountant easy? And let me put some parameters around that because I know this is very much a big it depends answer, but let’s say there’s already been a five-year relationship. The accounting firm is helping both in the tax and maybe the financial reporting side. How hard is it to change accountants? And what is your existing accountant’s obligation to facilitate that transition?
Brian Woodman: [00:21:56] It’s becoming easier. With your accountant having the documents, having the documents that are yours, sourced documents, things that you own that they’re using to perform the work, I think technology has enabled the facilitation of transmission of documents from one place to another. I know that in the past, it was difficult, especially like if you hadn’t paid your bill to your prior accountant, or it was an adverse relationship, it was a little more difficult to get all your stuff, but you really should have any way. And that would be my suggestion is just as a best practice is anything that your service provider, your accountant prepares for you, or documents that you provide them to prepare tax return, or audit, or whatnot, keep files of those yourself. Don’t just let them keep all that stuff.
Brian Woodman: [00:22:56] They stay as organized as they can, but it may not be exactly what you need in order to transition. So, I see a lot of heartburn, heartache in gathering documents that you just don’t have on file. Your old accountant or my old accountant has that, or all the journal entries that were ever booked on my books, I don’t have them in my QuickBooks. My accountant has all of my journal entries that fix all my books for the last five years. And they just rebook those every year. Well, we’ve got to go get that from them. Well, just get those every year from your accountant.
Mike Blake: [00:23:29] So, make that part of the deliverable.
Brian Woodman: [00:23:30] Yes, yeah, yeah. So, yes. I would say that technology is enabling better transmission because those documents would be available there for you to log into your portal. And a lot of firms are doing that now.
Mike Blake: [00:23:44] So, what are some instances where a client might be thinking that they want to change their accountant, but, really, at the end of the day, it’s really the client’s issue, not the accountant’s issue that the client is just being unreasonable and the client needs to kind of weigh the beat and take it down a notch?
Brian Woodman: [00:24:05] Yeah. There’s certain circumstances where it’s always a fee issue. So, it’s never going to be cheap enough for what you’re getting. And then, second is the information and effort that is often required on the client’s side, you’re just never gonna get it. So, it’s like garbage in, garbage out. Well, you’re not getting my tax return done. We’re not getting through the audit. Well, we’re not getting what we need as service providers in order to complete the task. So, if you give us garbage, we’re not going to give you garbage back. You just gonna get nothing. So, I would say clients get hung up on price, and then don’t deliver on their end of the bargain.
Mike Blake: [00:24:59] Okay. And then, I think you’re kind of touching upon this. Are there sources of client unhappiness that they don’t realize is just there’s certain things a client has to do to make the relationship work. And even though they may not love doing it that they just have to understand it’s part of the process. For example, in one of my assignments, I asked for a lot of data. And I don’t apologize for that. I asked for a lot of data because earlier in my career, I’ve given the surprise to the client, and it’s because I didn’t ask for the right data upfront because I was, “They’re not going to have. That doesn’t matter.” And then, it turns out that had I asked for that 45 days ago, my answer would have been radically different and right as opposed to wrong, basically. So, I don’t apologize for that. But I know and I sympathize the fact that sometimes a client is overwhelmed by the data, what looks like a very burdensome data request initially because they start to think, “Well, who’s working for who?” Does that phenomenon occur in your side of the house too on the conventional accounting world?
Brian Woodman: [00:26:12] Well, that keeps me in business.
Mike Blake: [00:26:14] Okay.
Brian Woodman: [00:26:15] So, I do audit support. And basically, that’s a function where I sit between my client and the auditor. So, I facilitate all of the requests that the auditor needs from the client. So, I’m kind of the buffer in between that takes the burden. My client and their personnel still have to pull documents, but I kind of backed down things. I make sure that the documents are really needed and kind of temper the list. So, yeah, it’s definitely an issue, and it can definitely be overwhelming. And I mean, it’s certainly generated business for me. It’s a need out there.
Mike Blake: [00:27:03] How do you figure out if … as you said, nobody’s perfect. I’m not perfect. I know there are deliverables I would like to have back in my career and have had to take back and fix them. At what point do you decide this advisor just made a mistake that I just sort of can’t live with? How do you kind of come to that conclusion that a mistake or maybe a series of mistakes – I’m not sure if there’s a difference there – but rises to the level that you just gotta make a change? Is there any kind of rule of thumb that you have, or a trigger point, or a threshold that you cross and you say, “You know what? This goes beyond the normal bumps and turbulence of an advisory relationship”?
Brian Woodman: [00:27:57] I would say on the audit side, the ultimate would be a misstatement. So, a financial misstatement. So, something that the auditor didn’t catch that they may have known about. And then, we may talk about accountant liability. But I would say that if the financial statements are materially misstated and your auditor signs off on it, that would be large enough to really, really consider making the decision at that point to go with another auditor. I can’t speak so much on the tax side, but I would say that frequency has something to do with it. Some of some of my clients, I don’t do the taxes, but they have tax providers, and if they’re seeing IRS notices often, that means that someone is not being proactive. So, I think the frequency of IRS notices and issues there can certainly weigh on needing to make a change and needing to choose another firm.
Mike Blake: [00:29:01] So, one thing I’ve noticed that you have not talked about specifically is firing your CPA because the tax bill is too high.We talked about surprises, we talked about mistakes, but I think and I’ve seen that there can be a client tendency to blame the accountant because they’ve discovered that they’re going to have to write a bigger check to Uncle Sam than they wanted to. They don’t have the IRS to strangle in front of them. So, their tax preparer is kind of seen as an extension. So, what I’m curious about is, have you seen that? And is there a point where maybe the accountant isn’t doing enough or hasn’t made enough of an effort to “optimize” tax liability? And how does that in your world kind of play in terms of how you consider that dynamic? We only ask hard questions here on this podcast.
Brian Woodman: [00:29:01] I have seen it, and I’ve seen plenty of tax accountants fired because the tax bill at the end of the day was hefty. And that occurs for various reasons. And I think maybe we come back to communication and the expectations of the client. And also, how you communicate with your client. So, if your client is big picture, if they don’t read paragraphs and paragraphs of an email where you lay everything out for them, understand your client. Understand how they consume information, so you can get the point across. So, I may say, “Hey, if you do this or you don’t do this all year long, we’re gonna have an issue on April 15th.” But they may not read that. And maybe that’s not their fault. Maybe that’s just not the best way to communicate with your client. So, I would say just expectations, no surprises, and find out how to communicate with your client about those things will avoid the real surprises. And have your client … I know I’m speaking from the service provider side. I’m trying to go from looking at our service for providers.
Mike Blake: [00:31:22] Yeah. Well, I mean, you’ve been on both sides of the fence. So, that’s why I have you here because you can speak to that.
Brian Woodman: [00:31:28] Yeah. So, from the client side, demand a proactive approach and tell them how you want to be communicated with, especially when it comes to surprises. And from the service provider side, do the same.
Mike Blake: [00:31:43] That house is really interesting. I want to kind of pause on that because I don’t think I’ve explicitly reflected on that enough or even pushed on that. We’ve had a lot of advisors come on the program, and the theme of communication in terms of a successful relationship comes up a lot. But what hasn’t come up is how you communicate. And that leads me to think in my own personal experience, my wife is terrible with physical mail. If you send her something in the mail, she just will not read it. And so, I have to bring in the mail to make sure that our mail kits are read. And if we have jury duty, or a subpoena, or some bill or something that it actually gets taken care of because my wife just flat out won’t read it.
Mike Blake: [00:32:32] And we wound up firing a service provider over that because it didn’t communicate with my wife about something that needed her attention, but they solely relied upon physical mail, which she never reads. And they did their best to communicate, they met their obligation, but they didn’t take the temperature of their customer well enough to say, “Okay, are we communicating in a way where they have the radio turned to the right channel to receive it?” And the point you bring up there, I think that is so critical. It’s not just about communicating, but communicating the right way.
Brian Woodman: [00:33:15] Exactly, exactly. And you and I, we’ve been through some leadership courses together. So, you’ve got emotional intelligence. I’m sure you’ve heard of that disk profiles. And there’s all sorts of different versions. They kind of have four quadrants usually and kind of put you into different boxes. Sometimes, that’s social, how you deal with things socially, and then whether you’re detailed or a high level type person in your decision making. So, if you’ve got somebody that’s very high level that makes decisions quickly, usually, higher levels of leadership, they have to act fast, they’re decisive, they don’t need as much detail to make their decisions. So, you give that information to them in bullet points as opposed to a long narrative when you know all the details.
Brian Woodman: [00:34:08] Some people require high levels of detail in order to make decisions or feel comfortable. So, those are just kind of two quadrants of people, and how you deal, you should consider. Actually, I worked for a firm for a brief stint, and I know of, at least, a couple of firms that actually have their clients do the surveys that give you the results of what [indiscernible] and where your emotional intelligence is, what you require as far as communication. And every time they get on the phone with their client, they kind of look at their profile first or even send an email to make a decision about how should I communicate with my client, what I expect from them, what needs to be done. So, I think that’s interesting. I mean, I don’t employ that currently, but I think that’s a good idea. And I try to, at least, get a read on how my client consumes information and needs to get it.
Mike Blake: [00:35:12] Well, and even the communication channel itself, right? I mean=
Brian Woodman: [00:35:15] Yeah, medium. Yeah.
Mike Blake: [00:35:17] My oldest son, who’s about to turn 18, I can’t get him to read an e-mail. But he’ll respond to a text. He’ll respond to a Slack. He’ll even respond to an Instagram. And that’s kind of interesting. You want something creative, yell at your teenager with Instagram. There so many options of angry pictures that you can sort of send and things that depict being left to dead in a ditch and things of that. So, it’s actually quite liberating. It gives you a sense of being creative as a parent basically. But I have clients around me older, not that many. Most of my clients are 35 and younger. But the older ones, for anything in depth, they still want a phone call.
Brian Woodman: [00:36:03] Yes.
Mike Blake: [00:36:04] But then, the younger ones don’t, or they want to do a video conference, which I’m embarrassed to say because I pride myself on being a tech guy, I am still getting used to doing the video conference thing because I’ve got an ugly mug, and I don’t dress in a suit every day.
Brian Woodman: [00:36:22] Don’t say that.
Mike Blake: [00:36:23] And there have been times where I realized, “I’ve got a video chat in five minutes,” and I still have my Christopher Walken. I need more cowbell t-shirt on, and I’m in trouble. I don’t even have pants on, but I got to have a shirt. But that’s sort of a reality of learning how to communicate the right way with a client because if you send the message to a non-receiving medium, you really don’t get points for having sent something that the client has no realistic chance of receiving.
Brian Woodman: [00:36:55] Right. Well, so, when I manage large audit teams, working … so, I guess I’m an X-er. I’m very close to millenial, but I think I’m still categorized as Gen X. The most effective way for me to get an answer was to pick up the phone. That’s the most effective and efficient way. But as my clients have become younger, and I guess as I’ve gotten older, I realized that I would harp on some of my staff when I was an audit manager. I would say, “Just pick up the phone, just call them. Don’t send an elaborate e-mail. Just pick up the phone and get the answer. That’s the quickest way, so we can move on. And don’t send the e-mail, then leave for the day and just be able to clear your mind out. Let’s just get to the issue.” But now, a lot of my clients would prefer to receive a text or an e-mail. So, I guess I’ve aged out of my communication method. So, I need to keep thinking about my clients’ preferred communication method.
Mike Blake: [00:38:02] A lot of younger people don’t even have their voicemails set up, right?
Brian Woodman: [00:38:02] Yeah.
Mike Blake: [00:38:07] They won’t, let alone, return one. They’ll see a voicemail, they’ll delete it because they’ll just assume if it’s that important, you’ll just call back. So, let me ask this. Accounting, like so many services, is a competitive field. Let’s say I’m not necessarily unhappy with my accountant, but I meet somebody else, and they want to kind of work their way in and see if they can knock the incumbent accountant out. That happens.
Brian Woodman: [00:38:42] It does.
Mike Blake: [00:38:42] And as a client, how open should I be to that? And even as as a client, should I see that as kind of all a little sketchy? Is there a kind of turf there or some professional courtesy that’s being violated? Or is that just sort of big boy football, and that’s the way it works, and an incumbent always has to remain competitive and assume that somebody else is trying to knock him out for their business? . How do you think about that?
Brian Woodman: [00:39:17] So, CPA firms, accounting firms are businesses. So, there is a degree of marketing that you’ll see and there’s business development. Otherwise,an accounting firm would have no clients if you didn’t reach out, if you didn’t create a network. The direct approach is fine. I would say don’t waste too much time. I mean, listen to what they have to say. And if there’s something that they say that makes sense that piques your interest, continue the conversation. But it’s more of an unspoken. If you feel like it’s just a sleazy sales pitch, I would say don’t waste too much time with it. But I think if it’s a thoughtful approach, and if you’re in a genuine conversation, and they seem to understand your business somewhat, and you think that there might be something that they could add to it, I’d certainly have the conversation.
Mike Blake: [00:40:21] Now, let me change gears here. And this will be, I think, the most uncomfortable question I’m going to ask you all day. And that is, as we talked about, mistakes happen. In your mind, where is the line between a mistake, stuff happens, people are not perfect, and then you have to start thinking about, was their malpractice?
Brian Woodman: [00:40:50] I think that it’s a matter of severity and materiality. As accountants, there’s certain guidelines that we have to follow. When it comes to an audit, we’re auditing under GAAS, which are auditing standards, the generally accepted accounting principles. So, we have to stay within the confines of those. And if there is a big material miss there, then that’s an issue. I would say that whether you know about it, if you knowingly … so, as an accountant, whether you knowingly look over something that’s material, that to be considered a crime. So, I think that would probably fall more heavily into malpractice. If there’s a misrepresentation that’s intentional that you know you’re deceiving or skirting, maybe it’s not your client, but you’re helping them skirt the loan covenant, meet earnings, something like that, I would say that that falls along the lines of malpractice. Is that a good answer? Is that-
Mike Blake: [00:42:08] You tell me. I think so. I mean, yeah. I mean, yeah. I think what you’re talking about is understanding kind of what professional standards are, right? And is the mistake big enough that it costs the client a lot of money, basically?
Brian Woodman: [00:42:28] That’s usually-
Mike Blake: [00:42:28] And is this something that they should have caught, right, had they been doing their job correctly?
Brian Woodman: [00:42:35] Right. And then, even if they don’t know about it, were they negligent? So, were they just not following the rules and negligent in the performance of their service to not catch something material?
Mike Blake: [00:42:49] So, when your client is thinking about maybe changing accountants, do you advise a client to maybe try to do something to salvage the relationship? Maybe, is it a conversation or different kind of engagement parameters? Or maybe you talk to the accountant instead and say, “Hey, look, we got an unhappy client. You’ve got to kind of fix these things.” But other other pre-cursor thought processes that you would recommend if you’re thinking about changing accountants before you actually pull the trigger and do it?
Brian Woodman: [00:43:28] It should not be a knee-jerk decision. So, in my experience, and you know me, I often find myself as in the position of a mediator. So, I see-.
Mike Blake: [00:43:40] Which you’re good at.
Brian Woodman: [00:43:41] Yeah, and I see both sides. And people, for some reason, kind of open up to me. So, I’m able to see different perspectives. Now, in some cases, I’ll give people the benefit of the doubt to my own detriment, but I can see where someone is making a knee-jerk decision or wants to make a knee-jerk decision based on just one thing that went wrong. So, we’re coming down to the wire, getting the tax return done. It’s rush, rush. It’s high stress. People want to make a knee-jerk decision just because of the pain in that moment. Let’s step back and look at the entire relationship. Just because it’s high stress right now, and we may miss a deadline, what else is this firm doing for you? And then, at the same time, I can talk to the firm and say, “My client is really having a heartache with these last-minute decisions, and always coming down at the wire on the audit. Is there something that we can do or something that they’re not doing that can make your job easier?” So, let’s, at least, have these conversations before we make a decision to part ways. So, I think it’s worth it to just step back before you just make a decision based on one event.
Mike Blake: [00:45:02] So, we’re running out of time, and we can’t cover sort of every possible scenario. But if one of our listeners is kind of thinking about whether or not they should be changing accountants, could they reach out to you? Would you be willing to help them out?
Brian Woodman: [00:45:17] Oh, sure, sure.
Mike Blake: [00:45:18] What’s the best way from the contact you?
Brian Woodman: [00:45:20] You can either ping me directly at email@example.com or firstname.lastname@example.org. You can reach me those ways.
Mike Blake: [00:45:33] So, somebody actually reads info at woodmanscpa.com?
Brian Woodman: [00:45:37] Yes, yeah.
Mike Blake: [00:45:38] Okay, good.
Brian Woodman: [00:45:38] I think they all go to the same inbox.
Mike Blake: [00:45:43] Well, I’d like to thank Brian “Info” Woodman so much for joining us and sharing his expertise with us today. We’ll be exploring a new topic each week. So, please tune in, so that when you’re faced with your next executive decision, you have clear vision when making it. If you enjoy this podcast, please consider leaving a review of their favored podcast aggregator. It helps people find us, so that we can help them. Once again, this is Mike Blake. Our sponsor is Brady Ware & Company. And this has been the Decision Vision Podcast.