Accountants are facing unique challenges during the coronavirus pandemic — but the profession is rising to the meet them at all levels, according to leaders from the American Institute of CPAs.
“This is a defining time for the AICPA and our firms,” said Erik Asgeirsson, president and CEO of CPA.com, the technology arm of the institute, on a conference call with leaders of the profession last week. “Leadership is so critical at this time.”
Allan Koltin, CPA, CGMA, is the CEO of Koltin Consulting Group, a Chicago-based consulting firm that specializes in working with professional and financial services firms in the areas of practice growth, practice management, human capital, and mergers and acquisitions. A nationally recognized speaker and industry analyst, Allan has appeared on the CNN, WGN and Fox Television networks and has been quoted frequently in such media as the Wall Street Journal, New York Times, Washington Post, Chicago Tribune, Los Angeles Times, USA Today and New York Post, as well as Bloomberg News, BBC World Service, Business Week, Forbes and Reuters. He has also spoken nationally and internationally at hundreds of conferences including those held by the AICPA, international CPA associations and state CPA societies.For twelve consecutive years, Allan has been named by Accounting Today as one of the Top 100 Most Influential People in the accounting profession. Koltin was also voted one of the 10 Most Recommended Consultants, for the seventh straight year, in the “Annual Survey of Firms” conducted by INSIDE Public Accounting. In 2012, Allan was named by CPA Practice Advisor as one of the Top 25 Thought Leaders in the profession. He was one of the first inducted into the Accounting Marketing Hall of Fame by the Association for Accounting Marketing (AAM). He has also been a recipient of the NACVA Instructor of the Year Award and winner of the Journal of Accountancy Literacy Award. Previously he was recognized by the Illinois CPA Society with the Distinguished Service Award for outstanding service and commitment to the profession. Koltin is the author-editor of three books for professional services firms: CPA Firm Merger Strategies That Work, CPAs That Sell and the AICPA’s Marketing a Consulting Niche. He is a founding member of The Advisory Board, a think tank for the accounting profession, and has served on various advisory boards, including Outsource Partners International (OPI), the Association for Accounting Marketing (AAM), the National Association of Certified Valuation Analysts (NACVA) and H&R Block (HRB Business Services). Previously, Allan was the President and CEO of PDI, Global, Inc. which was the largest publisher of marketing newsletters for professional services firms. Allan originally sold PDI Global to H&R Block in 1998, buying it back in 2008, and then selling it again to Thomson Reuters in 2011. Prior to that, Allan was a Senior Partner in the Chicago-based accounting and consulting firm of FERS, where he served as the leader of the Investment Banking Group, as well as the Law Firm Consulting Group. At age 27, Allan had the distinction of being named the youngest partner in the history of the firm and was also a member of the firm’s Executive Committee. FERS was acquired by H&R Block in 1998. Allan attended both the University of Wisconsin – Madison and the University of Wisconsin – Milwaukee and received degrees in accounting and marketing. He lives in Chicago with his wife, Sharon, and his three children, Jack, Brian and Julia. His passion is facilitating retreats and providing coaching for firm leadership and partners. His specialties include strategy, governance, profitability, compensation, growth, human capital, and mergers and acquisitions.
Kate Risch Choi is a senior product manager for treasury and payment solutions at BMO Harris Bank.
Tom Hutton is managing partner for XL Innovate, the venture capital arm of XL Catlin. After working as a Consultant at McKinsey and Company, Tom served for ten years as the first CEO of Risk Management Solutions, a pioneer and global leader in providing risk modeling software, data and analytic services related to catastrophic risks to the insurance industry. His insurance career continued as CEO of White Mountains Re and board director of several insurance and reinsurance companies including XL Group, Safeco, Montpelier Re, Centre Cat, and Palomar Specialty.
In 2011, Tom founded New Energy Risk in partnership with XL Group. Tom served as CEO until the founding of XL Innovate in 2015, and currently serves as chairman. New Energy Risk addresses opportunities to apply insurance to support the development and financing of clean technology and renewable energy solutions and infrastructure, through an innovative form of insured technology performance.
Tom currently serves as a board director at several private and venture-backed companies including SoFi, a leading fintech company redefining consumer lending and financial services; Lemonade, a revolutionary personal lines insurance carrier; and Slice Labs, a provider of on-demand insurance in the sharing economy. Tom’s investments at XL Innovate also include Embroker, a tech driven commercial distribution company that is radically improving how mid-sized businesses buy and manage insurance coverage. Tom earned his BA in Economics and MS in Mechanical Engineering from Stanford University and his MBA from Harvard Business School. Tom is involved in several non-profit organizations with an emphasis on secondary school education and environmental issues. He recently served for several years as the President of Trustees at Phillips Exeter Academy, in New Hampshire.
As the crisis deepened in late March and early April, “we received hundreds if not thousands of emails from CPAs,” Asgeirsson said. “They were worrying about employee safety, and then worrying about the business.”
Even as the institute became a leading voice in shaping the direction of the federal stimulus, it worked to help firms make sense of the new environment.
“We are very actively engaged in what we need to do to provide guidance and leadership, and thinking about what a historic time this is for firms in their role as the most trusted strategic advisors,” Asgeirsson said, before adding a warning: “We’re thinking about this in sprints, but we also need to think about it as a marathon.”
For instance, while many firms were able to make the move to remote work relatively quickly, they are also still struggling with the same questions around staffing in uncertain times that have plagued the rest of the economy.
“I have talked to a lot of firm CEOs,” said institute president and CEO Barry Melancon (pictured) on the same call, “and firms basically look at this as a valley that they are working through now. They want to hold onto their people because they know their clients are going to need them. … The profession is pretty well positioned to be successful, if they can hold onto their staff, and I think firm leaders see that.”
He also noted that the impact on firms has varied, depending on their geographic location and size. For instance, “all of the large firms feel good about how quickly they were able to go remote,” he said. “But further down the size spectrum, there’s more uncertainty, particularly around small businesses and how do you see them surviving. Cash flow is a big issue — are clients paying? CPA firms are not generally overcapitalized.”
Overall, he expects to see firm revenue to shrink as much or more than it did during the recession of 2008-2009, and for firms to take other steps to make difficult decisions to make it through the crisis.
“We know there have been certain percentages of people laid off in firms, but not as many as if the Paycheck Protection Program wasn’t there,” he said. “Generally speaking, people are positive about their clients and their relationship with them. And in terms of tax, they’re going to have greater productivity in May, so that’s a positive tradeoff.”
Both the PPP and the postponement of the tax filing deadline to July, as it happens, were major components of the AICPA’s response to the pandemic.
A focus on small business
With the pandemic kicking into high gear in mid-March, just a month before the original April 15 filing deadline, the institute strongly urged Congress and the Internal Revenue Service to push the deadline back to July 15 — not least to create space to focus on other priorities.
“We worked really hard to get the tax extension,” Melancon explained. “We actually had some pushback from our members who didn’t want to extend tax season, but that just wouldn’t work. We said, ‘Where can we make the most impact?’ and that was really the small-business component. We had groups inside the institute working on that, and we said, ‘Congress will pay attention to the big industries, but this is really going to be about small businesses, and they’re critical to the economy.’ So we focused on the small-business component, and said there needs to be a focus on small business as an industry, much the way you might think about, say, the airline industry. There are about 6 million small businesses with employees, most with under a hundred employees.”
The institute and a number of partners strongly advocated for a payroll-based approach to supporting small businesses, and the resulting PPP has kept the accounting profession busy since the minute it was launched.
“Our firms are overwhelmed — clients are calling all the time,” said Mark Koziel, executive vice president for firm services at the American Institute of CPAs “They’re now glad about the delay in tax filing — they’re saying, ‘There was no way we could do all of this and handle tax season at the same time.’”
While the PPP has proven popular, with its initial tranche of funding running out very quickly, there have been some questions about its effectiveness.
“This wasn’t intended to be a perfect program,” Melancon said. “It was intended to be a fast program. And when you look at it, it’s been incredibly effective — though that’s not to say there haven’t been issues.”
“With a program of this size, there are always unintended consequences,” Asgeirsson said. “But in $300 billion of loans, you’re talking about a couple of billion. This is a perfect trusted advisor discussion to have with clients, to be able to help them explain the ‘why’ behind their getting this loan.”
The institute is recommending that accountants and their small-business clients carefully document their “self-assessment of need.”
“What I’ve been advising firms is to think about those issues and document them, because when the question comes, it’s not going to be with a lot of lead time,” Melancon said. “Go back to the intent, and document what you were thinking of.” He also advises firms not to sign PPP applications on clients’ behalf — the head of the business should do that.
Koziel agreed: “This issue hasn’t been new for us to recommend that firms that help clients around the PPP and the federal programs should be documenting their work. It is critical for the firms to make sure it’s well-documented, just like any engagement.”
It’s just as important for firms that have applied for the PPP to document their own self-assessment, he added. “Firms originally only included employees in their applications, and did not include partners, and that will be a positive data point for them down the line — ‘We were focused solely on keeping our staff employed,’” he said.
At the same time, he recommended that firms look beyond the PPP, rather than just responding to client fears and reactions: “They came in like their hair was on fire and demanded to apply for the PPP — but did they step back and consider all the other stimulus that’s available?”
Going forward
As the country makes its way through, and eventually out of, the coronavirus pandemic, the institute leaders stressed the opportunities and responsibilities that accountants bear.
“Just as the medical profession plays a critical role in health, we play a critical role in the health of the economy,” explained Melancon. “The profession is incredibly well positioned to be part of the solution going forward, particularly when you think about small businesses. If you look at history, when it comes to climbing out of negative economic times, our profession has played a critical role.”
He pointed to a number of potential growth areas for accounting firms to pay attention to now and when they come out of the crisis, including private equity and others looking to deploy capital in a recovering economy; the medical profession; the government sector; commercial business clients (particularly in terms of revising their business models and strategic plans); and the many clients who will need help with refinancing in the aftermath of the pandemic.
“There are a lot of opportunities in terms of helping firms with their business models going forward,” agreed Koziel. “A lot of firms are saying their business model won’t be the same after this, and their office models will change, too.”
