By William Hamilton
We just spent an amazing week in beautiful Indianapolis Indiana, hanging out with 1,500+ tax professionals. (The photo accompanying this post is our Co-Founder, Chris, teaching a class on Friday discussing fee increases in the industry)
Being around that many amazing people that have devoted their working lives to this profession, it made me think about what’s really go on in our industry today and if people are really aware of how many changes will take place in the coming decade.
Everywhere you turn, you hear people talk about the changes that are happening in the tax & accounting space, but few people - both inside and outside of the industry - truly understand the real problems that professionals and their clients are dealing with.
What the Numbers Are Telling Us
There are specific, undeniable reasons why year-over-year millions of people are deciding to do their own tax & accounting work instead of hiring a professional.
The “do-it-yourself” category for tax prep is growing 23 times faster than the “professionally prepared” category.
Did you read that? 23 TIMES. I can’t make up numbers like that, you can see for yourself directly on the IRS.gov website.
But what does that really mean? Does that mean in 10 years there won’t be such a thing as a “Tax Professional”? Is the industry going to go the way of the Dodo and the horse & buggy?
No one can predict the future, but my knowledge and research about industry shifts points to the industry not going away but rather seeing a huge period of growth.
What usually happens in an industry that experiences a drastic level of shifting (like ours), is a new normal is established.
Think about the shift in CD and more recently, DVD technology. Just because people have stopped buying CDs & DVDs didn’t mean that all of the sudden people stopped listening to music or watching movies. Simply, the way that they consumed these things changed. The method of streaming music on your phone or watching a movie online became the new normal.
We believe the same is going to happen in the tax & accounting space.
The discussion below aims to shine a light on what’s really going on in our space and highlight tangible areas where firms can make changes to allow for success.
We’re building a company to help make small tax & accounting businesses relevant again. Truly understanding “the problem” is the first step in solving it.
Why this Industry Isn’t Going Anywhere
Thanks to the IRS and the fact that we live in a free-capital, democratic country, people will always need to pay taxes and individuals and business will always need help interpreting the financial part of their lives so they can maximize their wealth.
So we don’t believe this industry is going anywhere anytime soon. In fact, we believe this is the best time in history to be in this industry based on the opportunities being created by the major changes that we’re currently experiencing.
Let’s break this down even further.
Every consumer who buys products and/or services from this industry, is fulfilling two basic needs:
- “I need to make more money”
- “I need to save more money”
The making money camp comes to the industry for things like:
- Help with managing their business so they can increase their revenue & profits
- Help with managing their investments so they can get ahead
The saving money camp comes to the industry for things like:
- Help to pay the minimum possible tax so they can keep more in their pockets
- Help to manage their budget and cash-flow so they don’t run out of money
- Help with compliance requirements so they’re not penalized by the powers that be
The prerequisite element to achieving success in either of these categories is understanding. Having a better understanding of the reality of their situation so the best course of action can be identified.
Now on the consumer side, consumers that need this added level of understanding, will fall into one of two camps:
- People who want to try and gain this insight on their own (the Do-it-Yourself crew)
- People who want someone to help them
Which camp they fall into is determined by a number of factors – the complexity of their problem, their access to available knowledge, their access to available technology, the individual’s confidence in technology, their personal comfortability with finances in general, and their personal desire for service vs. self-effort.
NOTE: Yes, in today’s information age MOST consumers start out researching solutions and educating themselves regardless of which camp they’re in, but the point here is about implementing solutions by themselves or implementing with help from a professional.
So knowing there will always be a segment of the population that desires someone to help them, the best person on the planet to provide this help is you - the Tax & Accounting professional.
Tax & accounting pros are the undisputed, most trusted advisor for their clients and they are the only professional in the client’s life that can provide specific direction regarding the most powerful money making & saving element – taxes.
People will always have a need to make more money or save more money and tax & accounting pros are the best possible solution to provide this help.
That’s why we believe this industry isn’t going anywhere for a VERY long time, and in fact, is on the edge of the greatest profitability curve in history for the firms that truly understand what’s happening around them.
The New Normal for Tax Pros
Tax and accounting professionals in future that will realize the biggest profits and most success, are the ones who will utilize two unique advantages:
1| The best tools to automate & eliminate the “busy work”, and give them intelligent insights into their client data, so they can purely focus on helping clients understand how to reach their goals faster.
2| |A digital workflow that provides the same or a greater feeling of delight over the feeling the client receives when using consumer technology tools (e.g. TurboTax) to solve their own problems.
We’ll break down the first advantage regarding tools later in the article, but right now we need to address the 500-pound angry Gorilla in the room that no one in this industry likes to talk about…
For professionals in this industry to capitalize on the opportunity available in the next decade, they need to make working with them, just as easy as using TurboTax.
The #1 reason why self-prepared returns are growing at a rate 23x faster than professionally prepared returns, is because TurboTax is just flat-out easier to use. Period.
Until professionals in this industry have and utilize tools that make working with them just as easy as “doing it yourself”, they will continue to lose market share to DIY.
The new normal for this industry is consumer choice.
For consumers that want to DIY – they have that option. For consumers that want help, they’ll be able to receive that help as simply and easily as they would be able to use a DIY consumer software, except with the added advantage of not doing it on their own.
Currently, right now, today – there is no equitable choice.
Consumers have to choose between either the simplicity and convenience of online DIY software or choose to use a professional while losing a significant level of convenience.
We believe it doesn’t have to be this way. We believe consumers should have a choice. We believe that in time it will be totally possible to give them that choice, and that will become the new normal for this industry.
So what are some of the problems that are keeping this choice from being a reality? Let’s discuss.
Tax & Accounting Firm Problems
Problem #1) Most workflows are analog, not digital
Firms lack the data intelligence they need to improve their efficiency and achieve meaningful growth. They don’t know which levers to pull to increase their efficiency or how to make their workflows more effective because they can’t see or access the data.
Not being able to see the critical data you need is like being a doctor without an X-ray machine, you can’t see what’s really going on so solving a real problem happens mostly by guessing or trial & error.
- Some clients are voicing concerns because it’s “feels like” it’s taking us longer and longer to complete tax returns… This is basically a fantasy. There’s no way to tell if that feeling is valid or not.
Data that would help answer that feeling –
> How many steps is each preparer taking to complete a return?
> Is this the right amount of steps? Should there be fewer or more?
> Which step is taking the longest to complete and why?
> How long is a 1040 return taking to complete on average?
Having a digital workflow that tracked this data, then gave the firm access to it in an intelligent way, would give firm management the insights into what levers they need to pull to make meaningful change to their process. It provides a reality baseline that you can then use to make decisions and form strategies.
But when a firm isn’t tracking their work digitally, it isn’t reasonable for them to manually track and calculate all this data by hand.
Key Take Away
Converting every person in the firm to a digital workflow is the only way for firm managers to:
a. access their data and receive valuable insights into what’s really going on in the firm
b. standardize and optimize all of their processes to tangibly improve the quality of their work product
c. proactively start making adjustments to the key levers that will get them closer to their goals
Problem #2) Data is Siloed
Individuals in the firm don’t have access to the same data, so collaboration on tasks is cumbersome and work is often unnecessarily duplicated. Individual team members have important pieces of data that are stored on physical pieces of paper, locked in their email, or in the tax software that a collaborator doesn’t have access to (either because of permissions or because they’re not in the physical location where the tax software is installed).
- Common problem - “Did we get what we needed from the client to start processing this work?”
Commonly, there is no universal communication platform or readily accessible place to find a concrete answer, so three people then spend time working on an answer for that simple question.
Someone thought the client might have sent it in an email, but can’t find the email. Some else is “almost sure” that they called the client requesting the information, but they can’t remember 100%. The front desk has to establish a concrete answer, so now they have to contact the client again because there is no record of what truly happened.
This situation can easily be avoided when firm data actually becomes transparent.
> Everyone in the firm is working with the same database (outside of the tax software to ensure the tax data isn’t unintentionally compromised)
> Everyone in the firm can see key client communications in one place so there’s concrete evidence of what did-in-fact happen in any client scenario
> All team members use a standardized digital workflow to log any important out-going client communication, such as requests for information
> All client documentation is stored in one place so everyone in the firm can confirm existence of, and easily access, any needed data to complete their work
Key Take Away
You are limiting your efficiency and increasing your overall workload if everyone on the team doesn’t have access to the same information. Especially when a specific role doesn’t have access to the data they need for their own workflow.
Implement a solution that gets all important client & firm data in one accessible place for all team members, and start using communication methods that don’t rely solely on siloed email accounts.
Problem #3) Team Collaboration Methods Are Sub-Optimal
Most small firms don’t have a live-chat component in their internal collaboration system. They rely on email, phone calls, and face-to-face meetings. Although all of these methods can be beneficial in certain circumstances, leaving out the live-chat component prohibits internal collaboration optimization.
Speed | When you need to quickly share a piece of data or answer a question without interrupting your work “groove”, no method is better than chat.
Priority Issues | There are many times throughout the day when you might need to get critical information in front of someone or you might need to receive an answer. Chat is an effective method for critical issues because it includes an alert & notification element, can be used by someone quickly even if they are on the phone or in a meeting, and doesn’t require the communicating parties to be in physical proximity to each other.
Having Fun (WHAT??) | I know – work is NOT supposed to be fun…especially not tax and accounting work…right? Wrong. Who says you can’t add an element of fun to your day to make it more enjoyable? Chat helps add fun to your day if you use it correctly. It can help develop your firm culture by keeping team members in closer communication throughout the day, it lends itself to a more casual interaction style vs. phone calls or emails, and it can be content rich with emoji’s, pictures, and GIFs.
Sense of Team | This category is an important one, especially if you have team members that work remotely. Having a collaboration space where people can feel a part of something bigger than themselves gives them a strong sense of team. “Chat spaces” give team members a window to see what other people are working on or struggling with, and an opportunity to lend a hand. They give each person a quick way to just “check-in” and say hi throughout the day. Overall, they give everyone in the firm a tangible way to feel like they are connected.
Key Take Away
Don’t leave live-chat out of your internal communication system. Use a team collaboration tool that isn’t designed for consumers or for any generic business. Use a tool that’s designed specifically for the needs of modern small firms.
Problem #1) “This isn’t easy for me”
We need to be totally real with eachother for a minute. For 99% of the earth’s population, life is a grind. The only companies that are truly valuable in the lives of your clients are the ones that somehow make their day tangibly easier (Amazon 1-click), or better (Netflix or that delicious bottle of Pinot).
How many of your clients feel that way about you and your services?
Here are some examples of what your clients are really thinking:
Collaboration | “Why do I have to call your office to make an appointment? Why do I have to mail you or bring in physical copies of my documents? Why do I have to log in to this ugly, archaic portal? Why can’t I live-chat or text you when I have a quick question? Why can’t I see what’s going on with my tax return (I bring you my stuff then you disappear and I have to guess when my return will be ready)? Why don’t you do a better job reminding me of important things I should be doing that could affect my taxes? Why can’t we just do this over Skype, Google Hangouts, or Facetime?”
Pricing | “You’re charging me by the hour, our goals aren’t aligned. You’re charging me for each form in my tax return (making the form a commodity), HR Block said they’ll do the same form for cheaper…”
Just having to deal with another human | “I’m tired, stressed, and have been working hard all year long – working with you and your staff is a pain even though I really like you…why can’t I just do this online myself?”
Key Take Away
You have to be doing everything in your power to make collaborating with clients more convenient for them – not just for you. If you aren’t using technology to make your process easier or if you’re digging in your heels on an old process that works for you but doesn’t make life easier for your clients, it’s time to make changes.
Problem #2) “I’m not getting what I need from the relationship”
Every business transaction is a relationship, no matter how small or short the transaction is. A relationship is two entities coming together to share something of value for mutual benefit. Why is it, every year, more clients are choosing to have a “relationship” with TurboTax over a tax professional?...
In reality, your client’s financial lives consist of –
- Finding time to balance all the demands in their life and their business so they can hold on to the more important things (family, sleep, health, memories with kids, etc.)
- The grind of making money and not knowing what to do with it once they have it - so they don’t lose everything but still can live the lifestyle they want to live
- Battling constant feelings of inadequacy around doing a good enough job operating their business or managing their career
- Real, intense fear of being audited or accidently making a bad decision financially some way
That’s the cold reality of where many of your client’s heads are, and that’s for the successful ones that have money. Taxes and accounting are just small pieces of their lives they’re trying to make better.
Knowing that reality, what are you doing to bring real, tangible value to the relationship?
“This relationship is all about compliance when what I really want is help” | “If all you’re doing for me is helping me meet minimum government imposed requirements for dealing with my money, then I can use software for that. What I really need is someone who can tell me what it all means so I can get ahead, someone who is going to tell me that I’ll be ok, and someone who is going to make my life easier in some way.”
Problem #3) “I think I might be able to just do this myself”
The easiest thing for anyone to do is to do nothing at all. That’s why the default position for most people is to first ignore a problem, then if it gets bad enough, they try and solve it themselves. Bringing in outside help is the third and last choice. Even though outside help might be the most direct path to the best possible outcome, it requires the most amount of mental, emotional, and sometimes physical effort, therefore, it’s the last choice.
Remember your client will only pursue help from you if you give them a tangibly easier and better way to do it through you vs. them just trying to do it themselves, or ignoring their problem altogether.
You have to be 10x better than the other options in order to get sustained and replicable action from clients.
How to be 10x better
a. Use intelligent and transparent data inside your firm to produce a higher quality product for your clients
b. Focus on making your clients lives easier and better
c. Be the partner your clients really want in a relationship
I hope this discussion helps you see there is an easier way to thrive in this industry. I hope that now when you hear or read someone else talking about the changes in this industry you’ll have a new perspective that you can share and that gives you confidence about the opportunity that every single tax & accounting pro has in front of them.
Above all, I hope that you see the “new normal” that we’re all marching towards and that you want to have a full part in making this a reality as soon as possible. Why? Because we can’t keep going the way we’re going and expect to thrive.
Our clients need more from us. Our clients want more from us. If you can give your clients more, you will see more rewards in the next 10 years than you ever thought possible.
Here at SmartCenter, we’re working to build the tools that you and your clients will need to be a part of this new reality. If you want to learn more about what we’re building, please drop us a line. We’d love to meet you.