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CPAs

“Billings Increased 26%, collections 33% and profit 24%”

By December 13, 2019 No Comments

“Martin and I were both working at Cigna Healthcare, but missed the challenge and excitement of public accounting,” says Todd Raymond, CPA, describing how he and fellow CPA, Martin Henry, joined forces to buy their own accounting firm. “We talked about it for a year or so,” adds Martin, “and then started looking for a practice. In 2002, we acquired a firm and renamed it Henry, Raymond & Thompson. We were in business.”

The partners discovered the reality of running a CPA firm differed from their expectations. “It was a lot of work and it was hard,” explains Martin. “My biggest concern was whether we’d have enough clients to keep us busy, pay us well and keep the wives happy. As it turned out, there was plenty of work; it was a matter of getting it done, of managing our finances, the staff, and the office. But Todd and I were basically trying to do everything. We wore too many hats and staff management was not my strong point.”

Finding capable staff was a critical issue, as Todd recounts: “In the very beginning, we had some good, experienced people in the firm. As they left and we replaced them, the chemistry and ability levels in the office declined. That put quite a bit more pressure on me and Martin to make sure things were done correctly. I would have loved to just give work away and have it done,  but I knew the staff couldn’t handle it. And, as the chief technical person, Martin was particularly concerned with quality.”

“We’d just gone through a series of bad hires,” continues Martin. “One was from an agency and we were unbelievably disappointed with the resource we got. She was incompetent and couldn’t get any work done. Then we picked up another person whom we hoped would be a prospective partner. To his credit, he had good accounting skills, but there were also significant problems. He didn’t want his work reviewed, for starters, and he took credit for everything positive in the firm. He wanted me and Todd to look bad.”

“In addition to the staff stress,” comments Todd, “we were in hot water at home. It’s difficult to work the kind of hours we worked and have a good family life. During tax season, we’d hit 80 hours a week sometimes. We even pulled several 90-hour weeks. The rest of the year, a 50-hour workweek would be a light one.”

It was Martin who, in 2010, encountered the Sterling program. “I received a postcard in the mail which grabbed me. It said accountants may be good at technical work, but that they are not necessarily good managers. Sterling said they’d teach us how to manage. That caught my attention.”

“The firm was running us instead of us running the firm,” adds Todd. “We had decent growth but had no real resources to continue growing. As a result, more and more of the load fell on our shoulders. Our jobs were getting harder and lacked the return we were looking for. We realized we’d never achieve our goals if we continued down that path.”

Thanks to the Sterling program, conditions began to improve for the partners. “One thing that really caught our attention is how Sterling nailed our staff using its personnel testing and interviews,” comments Martin. “They were able to tell us which issues each employee had. It had been frustrating for me and Todd because we knew the problems—we just didn’t know what to do about them. Acquiring the tools to isolate and dismiss a key negative staff member alone was worth the fee.”

To lighten the partners’ loads and streamline workflow, Sterling created an organizing board which called for an office manager. “Sterling identified our need to put an office manager in place,” explains Todd. “We were already thinking in that direction but Sterling verified it. We had a couple of administrative people on processing, answering phones and tasks like that, but they didn’t have the skill set to actually manage the office. So we made some personnel changes and hired our current office manager. She’s taken so much weight off our shoulders. She’s a lifesaver.”

For effective management of the staff and practice, Sterling implemented its management by statistics system. “The use of statistics to measure staff productivity has been invaluable,” continues Todd. “The ‘stats’ create a very logical presentation so the staff understand how they are performing. After starting the Sterling program, we told the staff the level of performance they needed to reach to earn a raise. If they exceeded that level, they’d be entitled to a bonus. They all knew what the numbers were; they saw them every week and still do. It’s so much easier than having a subjective process where you do a personnel evaluation and then possibly give a bonus or cost-of-living raise.”

Upon Sterling’s recommendation, the partners also instituted a major billing change. Martin gives the particulars: “Previously, we would send bills to clients after completing their returns and then wait for them to pay us. We changed our policy to require payment before clients received their returns. Most clients didn’t mind and it accelerated our cash flow and eliminated a lot of collections issues. The results have been dramatic.”

Since starting the Sterling program in 2010, the firm’s billings have increased by 26%, collections by 33% and profitability by 24%.

“We like the way Sterling simplifies things that might seem complicated,” observes Todd. They have solutions for all of the issues we deal with. For us, people are the biggest issue—that’s our business. We need good relationships with our clients and our staff. If our staff can’t interact well with clients and aren’t good team members, then we’ve got a problem.”

“We never thought we had to compete with other firms to grow,” remarks Martin. “We can grow independently, but we didn’t have the resources, structure and management capabilities to grow as much as we wanted. Now we feel like we do. We’re acquiring other practices, making more money and our schedules are more flexible, so we’re not in hot water at home anymore. We may not be perfect, but we’re getting there.”