As a CPA advising clients on how to build their businesses, John Solari of Solari and Sturmer LLC in Reno sees his job as part financial consultant, part psychologist both of which come with extra challenges these days.
"I don't think there's anybody out there who's not stressed out," he says.
Says Reno CPA Mark Bailey: "A lot of the calls I get now from clients are, 'Oh God, I hope you're having a better day than I am.'"
It's an interesting time to be an accountant.
When the economy was going gangbusters, CPAs were busy advising clients through big deals and expansions. Now as companies face cash crunches and shrinking markets, the focus is on improving efficiency, repositioning and finding alternative financing. For a lot of clients it's a matter of holding on until things turn around, and their accountants are helping them keep a grip.
"It's easy to make things work in a good economy," Solari says. "Now I hear more often than not, 'If we break even, I'll be happy.' ... A lot of clients are profitable, but they're concerned with their industries overall."
As a result everything is coming under scrutiny health benefits, staffing levels, scheduling, office space, marketing, vendor relationships and the list goes on. "All the things that were givens before are not givens any more," Solari says.
Much of a CPA's work with clients now is going through what-if scenarios to prepare for uncertainty.
"What I tell clients is you don't ever find a silver bullet that will solve everything. It's a lot of little things," Solari says. "You tweak and make adjustments to all these things to make a difference."
And it's not just about cutting costs.
"Efficiency is finite at some point," Bailey says. "You can't get below zero."
The real key is improving effectiveness finding new market niches to boost revenue, not an easy task for any company in today's economy, including accounting firms. Accounting costs, after all, are among companies' targets for budget cutting, which means they're more willing to change firms for a decrease in fees.
For the first time in several years, client retention, rather than tax complexity or recruiting and retaining talent, was named the No. 1 management issue by private accounting firms surveyed recently by the American Institute of CPAs' Private Companies Practice Section. The AICPA is providing online resources for firms to weather the economy, including customer service tools to retain clients.
Firms that have always maintained close contact with clients are at an advantage. Accounting may be about numbers, but the bottom line is relationships, Solari says.
Despite the grim economy, Bailey projects growth for his firm, which does SEC reporting for public companies, high-level tax work and consulting for medium-size businesses. He attributes part of the growth to his firm's upfront pricing strategy, which he says gives it a competitive edge. Rather than pricing by the hour, Bailey's firm quotes an upfront price for projects and services, no matter how much time the staff ends up spending. That makes budgeting accounting costs easier for clients and makes collecting fees easier for the firm, eliminating the "bill and duck" scenario.
Meanwhile, another challenge posed by the tough economy for accounting firms is growing complexity in auditing.
"The biggest difference is in external pressures from regulatory bodies, which are coming out with new pronouncements, and a tougher look at compliance in banking arrangements," says Brian Wallace, managing partner of Grant Thornton LLP in Reno. "It adds more pressure to get things done in a timely manner and not to interrupt clients' operations."
Determining fair value of assets and liabilities is growing more complex, for instance, because there is little or no trading value of alternative investments. Firms in many cases have to hire specialists to determine those values, which takes more time and resources.
The weak economy is also leading to more goodwill impairment as cash flow and operations drop. And low cash flow is making it harder for some companies to comply with bank loan covenants, Wallace says. Even though a company is paying the loan as required, for instance, low cash flow could put the business in technical default for not meeting certain financial ratios required in the bank documents.
In that case, a company would seek a waiver to avoid technical default, but now banks are scrutinizing those waiver requests more closely, Wallace says. Often they're referring the requests to a special asset group, whose people are outside the relationships the company has with the bank.
"In today's environment, there's more risk from all sides," Wallace says.
When will things improve? Bailey doesn't see the economy bottoming out until next year. Neither he nor Solari are seeing much impact yet, such as a loosening of credit for businesses, from the federal Troubled Asset Relief Program.
Yet Solari remains relatively optimistic and says most of his clients are, too. Once the economy does improve, he says, Reno will be positioned to thrive. In the meantime he keeps his sights on life's big picture. Pointing out his office window to Mount Rose, he says, "It's hard to see doom and gloom when you look at that mountain up there."
