As CPAs, we live, maybe even thrive, in a world of rules. Rules provide important boundaries on how to do things and get the “right” answer, but rules can also be negative. Rules can slow down your business; they can prevent better customer experiences and they can drive away great employees who don’t want to deal with needless directives. Because CPAs are so rules oriented, we can have difficulty seeing rules that are causing problems, especially when those rules are unwritten. But if you’re willing to take a chance, you may find a few rules that are worth getting rid of, if you ask the people who work in your organization. Here are three steps you can take to come up with a rule or two to get rid of:

  1. Identify regulations vs. rules
  2. Focus on what you can control
  3. Avoid the complaint session

You need to start out by making it clear that we can only get rid of rules we have put in place as a business. There may be accounting standards or IRS regulations that we all hate, but those are outside of our ability to change. Get the team focused on rules created within the company, not from the government or other regulatory bodies.

Even if you get the team focused on company-made rules, there still may be many rules you can’t control. If you are the CFO, your span of control is pretty large, but if you are a department head, the span of control decreases. If you are looking to make changes, help define the scope of rules that could be subject to change.

Finally, in order to avoid turning the elimination of rules into the same old gripe session, focus your team on an important question: “What do you want?” Instead of griping about a rule, get them focused on the solution. What should change? How should the rule be eliminated? What would processes be like if the rule was eliminated? How would that be better?

As CPAs, it might seem a little scary to go about eliminating rules, but think of eliminating rules this way. In a financial report, we focus on material items rather than spend time equally on all items because the material items are what matter. We should take the same approach to rules. Which ones are “material,” that is really matter, and which ones are “immaterial,” and don’t really make a difference. If a rule doesn’t make a difference, why have it in the first place?


Sharing Your Gifts

CPAs tend to be involved in their communities and often serve on school, church and other small service organization leadership boards. Your fellow leaders may bring an abundance of gifts from community contacts, the ability to fundraise or a deep understanding of how to provide the services to the community in the right way. As CPAs, we bring our own unique gift of understanding how financial results are presented, so we are often trusted as the financial eyes and ears of the organization. Such a service can prove invaluable in enabling the long-term viability of the organization, but as CPAs I think it is incumbent on us to do more.

The more is teaching others how financial reporting works and why it is important. The reason to do this is not just for the organization you serve on, but for the benefit of all the other organizations your fellow leaders serve on, as well.

I had a recent example of being a teacher in one group I work with. In addition to producing a profit and loss statement and a balance sheet, the organization produced a cash flow projection for the coming months. The cash flow projection was not very sophisticated. It simply assumed the revenues would be cash inflows and the expense would be cash outflows with no regard to potential changes in the balance sheet. Such a cash projection worked well for an organization that had already paid off its debt from a previous building campaign and tended to have small changes in other assets and liabilities from month to month.

The projection, however, became less useful when revenues were deferred for the first time because a program was delayed until the next fiscal year. Payments to participate in the program were received in one month, but (properly) deferred and recognized as revenue in the next month. The cash flow projection, however, did not take the deferral into account, so in the next fiscal year when the revenue was recognized (and budgeted), the cash flow projection missed by a significant sum because the cash was already in the cash balance and recognizing the deferred revenue did not result in any new cash inflow. This problem turned into a great opportunity to teach the rest of the leaders about balance sheet impacts on cash flow. For example, an increase in a liability usually generates cash while a decrease in a liability uses cash. Now my fellow leaders had a better understanding of how cash flows work and can take that knowledge to other boards they serve on.

Community service is one of the things that makes our profession great, but performing community services doesn’t necessarily mean forgetting about your CPA talents. In fact, using your CPA talents, and teaching others what you know in support of your community, can be some of the best things you can do.

Get Past Presentation Anxiety by Reframing by TXCPA2B Blogger Rachel McKenna

Public speaking: a phrase that strikes fear in the hearts of otherwise confident people is something that seems natural for some, and feels like punishment for others. Still, public speaking is something that we all need to get comfortable with in our profession of choice.

More and more, accountants are serving in an advisory role for companies, and that job responsibility is not likely going away any time soon. As a student who myself wondered when public speaking would ever become comfortable, I thought I would share some of the reframing tools I have used to help me survive (and maybe even enjoy) presentations.

The audience wants you to succeed

From my experience, people have interesting things to say; you just have to listen! For the audience, this is a chance to gain a new perspective on a topic they might not know much about. Since you are the presenter, you have put the time and effort in to become well-informed on the topic you are covering. As the subject-matter expert, the audience is not actively looking to point out your faults as much as they are seeking to understand where you are coming from as the presenter.

Use that idea to your advantage in developing your presentation and see if that makes the preparation process more enjoyable for you. Positive thinking allows you to claim the power to decide how you will approach the situation and shows that you are willing to make the best of the uncomfortable circumstances.

You can turn your anxiety into excitement

Nervousness is a natural physiological response to standing in front of a crowd. We are human after all! How anxiety affects you is entirely up to you, though! Feeling nervous typically makes people more alert and aware of their surroundings. This is something that can be used to your advantage when delivering a message to an audience.

Try asking yourself: “Why am I nervous?” Oftentimes, the reasons we feel nervous are fleeting and will not be relevant in the long-term. If you think about the bigger picture of your purpose in delivering your presentation, you can form an idea of why your message matters to you. Ultimately, uncovering your motivations behind public speaking allows you to take a step back and realize that your presentation is tied to meaningful goals that you set for a reason, and that can propel you to envision a positive outcome.

Think of the value you are adding

Rather than wishing your presentation to be over, consider why you have been asked to speak in front of an audience in the first place. Chances are, you have completed the time-consuming part of doing your research to prepare for a speech. You want your preparation and knowledge to shine. The best way to do that is to forget about how many people you are speaking to and to think about what are the main desired takeaways for them.

If you take your research further and consider who your audience is, you can gauge what their objectives are from sitting in on your presentation and cater the message to them. When you do this, you are ensuring that they feel they have gained something from the experience and you are adding value in the process.

This is a learning opportunity

Just as the audience wants to learn from you, you should keep an open mind about learning from the audience, too! Think about it – which classes have been the most enjoyable for you? Chances are, the most memorable classes are those that you actively participated in.

Whether your reason for participating in class discussions was to pass the time or because you were genuinely interested in the topics mentioned, this is the type of environment an effective presentation inspires. As a speaker, you should leave the door open for audience interaction and signal to them that you care and want to learn from them as much as they can learn from you.

Are you uncomfortable? That is great—that is a sign that you are growing as an individual and stretching your limits in a positive way! By reframing your thoughts and giving them a positive spin, you will be well on your way to becoming a more effective and confident public speaker. Like with anything else, believe that you can and you’re halfway there!

Student Blogger: Rachel McKenna

TXCPA2B is a blog written by Texas students in pursuit of the CPA certificate. The views expressed here are those of the authors and not necessarily held by TSCPA or our members.

To Blame or Not To Blame

How often have you heard the maxim fix the problem, not the blame? Management gurus point out that by searching for blame when something goes wrong, you simply incent your staff to avoid taking risks or worse, hide the truth when something goes wrong. Those two outcomes are definitely something to be avoided, but never seeking an understanding of what, or who, caused the problems leads to unintended consequences that could be just as bad.

People can talk about how we have to be “permitted to fail” and how allowing failure allows people to take chances that result in successes that might not have otherwise occurred, but people, your team, wants something else too – accountability. If you don’t believe me, just look at what happened after the financial crisis in 2008. Our government leaders were all very proud of how they “fixed” the problem and avoided a meltdown that might have led to another depression. In doing so, however, they failed to do one thing in many people’s eyes – hold those who caused the problem accountable for their actions.

If you think back to the savings and loan crisis and the junk bond problems of the late ‘80s and early ‘90s, there was a big difference. Yes, a crisis was diverted, but lots of people, hundreds of them, went to jail too. Even the Enron and WorldCom disasters early this century resulted in people being held accountable for their actions; that is, going to jail. The public doesn’t like seeing a lack of accountability. So what happened? If Wall Street wasn’t accountable, then government certainly was for their actions and people are holding them accountable. Oh, maybe not by voting the incumbent out of office, but by showing a complete lack of confidence in government institutions that is unprecedented in the history of this country.

So am I saying we need to get out the pink slips and start firing people when something goes wrong? Well, if that something is lying, stealing or harassment, then yes. However, if that something is not morally corrupt, but fixable, then no one needs to be fired, but someone has to be held accountable. Who is that someone? It is you, their leader. Saying it is your fault for pushing too hard or taking on too big of a risk – that is, taking accountability – is as important as fixing the problem.

Holding yourself accountable is the ultimate practice of servant leadership and allows the team to move forward because they know what needs to change and who will be accountable for making that change happen.

ISO Feedback

Most people say they want feedback, but also tend to react badly when negative or even constructive feedback is given. What most people really want is affirmation that they are doing a good job. They want the participation trophy that really doesn’t tell them anything about how they did or what they can do to better themselves. As a result, when people ask for feedback, most respondents either avoid answering or try to get away with giving some platitude like “you are doing fine” or “I wouldn’t change a thing.” The problem is such feedback does nothing to help you improve.

If you really want to improve, you need to ask for feedback in a way that lets other people know you mean it and that they won’t be open for attack the minute they open their mouth. The best way to do that is to limit the request and be specific about the topic. The limit is satisfied by saying “tell me one thing…” The specificity is then up to the requester. Some examples:

  • Tell me one thing that would improve our weekly staff meeting.
  • Tell me one thing that would make my emails better.
  • Tell me one thing that would help you get more out of your periodic evaluation.

Just as too much choice leads to indecision, too much leeway in asking for feedback has your evaluator running a myriad of possibilities through their mind. By limiting the scope and topic, you help the person being asked to give feedback to focus and prioritize. An added benefit of asking for such focused feedback is that it usually ends up being something concrete that can actually be changed.

So are you ready for some feedback that will help you change? If so, ask me one thing….

Texas Sunset Commission

Texas state law requires that every state licensure board be reviewed every 12 years to determine if the board should continue. The first step in the review process is a report by the Sunset Commission staff to the Sunset Commission. That step was recently completed when the report was released August 2nd. The full report can be found here. In addition to the conclusion that the Texas State Board of Public Accountancy (TSBPA) should continue for another 12 years, the report included a number of recommendations, with three key recommendations being:

  1. Changes to the composition of the Board of TSBPA
  2. Changes in requirements for non-CPA owners
  3. Changes to peer review requirements

The Sunset Commission staff report recommended that the board composition of TSBPA be changed from a ratio of 10 CPAs and five public members to eight public members and seven CPAs. This recommendation was primarily in response to a recent United States Supreme Court decision regarding anti-trust activity by a North Carolina Dental Board. TSCPA believes that such a change does not guarantee immunity from anti-trust claims, and other changes, including several already implemented by TSBPA, would be more effective in alleviating such concerns.

The recommended changes to non-CPA ownership requirements include eliminating requirements to hold a bachelor’s degree, as well as the requirement to receive 120 hours of continuing education every three years. These changes would not impact CPA requirements in both areas. Requirements for non-CPA ownership around percentage of ownership and responsibility for assurance services would also remain unchanged.

The Sunset staff is recommending that TSBPA amend its Peer Review rules to allow CPA firms to be reviewed on a frequency based on risk factors, such as if the CPA firm performs lower-risk work (compilations) or a low volume of work (only one compilation a year). The facts are that firms that perform only one or two compilations show a high percentage of deficiencies, so these are the very firms that need to be peer reviewed rather than eliminating the requirement. Compilations are included in the definition of attest services in Texas because the public places a high level of confidence in financial statements issued by a CPA. The recent addition of preparation work as a non-assurance service also provides another avenue for firms to provide the services previously provided under the umbrella of compilation services. The Sunset staff also recommended that the Board implement rules to ensure that non-members of TSCPA pay the same administrative fees as members, which would mean that peer review fees would need to be adjusted accordingly.

One other recommendation from the Sunset staff is to require fingerprint-based criminal background checks of all licensure applicants and all current CPA license holders as is required of all new licensees and many other professions, including doctors and lawyers in Texas. I’m sure there are many CPAs who wish this didn’t have to happen, but like it or not, such requirements are the norm these days and going through a background check is really not much of an incremental task to ensure the integrity of the profession. If you would like to see a full copy of the TSCPA comment letter, you can find it here.

The Sunset Commission will hold hearings on August 29th and 30th where the staff report related to TSBPA will be discussed. The sunset process will continue with formal recommendations from the Sunset Commission in November and then passing legislation in 2019 to ensure the continuance of TSBPA. Without a state licensing authority such as TSBPA, CPAs would no longer be licensed in Texas, so TSCPA will be working to make sure TSBPA and your CPA license continue during the next legislative session.

Long-Term Financial Planning by Guest Blogger Olivia Riley, CPA

For years, best practices have recommended long-term planning for organizational operations, upkeep of major assets and healthy continuity of business operations. A common caveat to long-term planning warns that forecasts exceeding 10 years may yield incorrect results. Hence, it is better to calculate forecasts for a 5 to 10 year period.

The market offers many tools for developing and maintaining a solid model to help with long-term planning. The tool one uses is not as important as the ability to insert all the crucial data needed to properly plan for the future. Most models consist of an Excel workbook with linked sheets and assumptions used in the calculation of future activities. An important task to remember is the gathering of all the available data that needs to be considered as one plans for future revenues and related costs.

The initial step needs to include a complete list of revenues generated by the organization. All revenues commonly generated by operational activities should be considered in the long-term plan model. In calculating the 5 to 10 year revenue projections, gathering 3 to 5 years of actual results and calculating an average amount per year is a good start.

Once all demographic and economic impacts have been determined, assumption ratios can be calculated. These assumption ratios will be helpful in growing revenue and costs amounts from year to year for up to 10 years.

Next step, information of all operational expenses needs to be gathered. Actual operational expenses for a 3 to 5 year period will help with the preparation of the long-term plan related to operational costs. As stated above, a yearly average for each type of expense should be calculated for the base year and the assumption ratios will similarly be applied to the base expense year to calculate expenses for the 5 to 10 years projections.

Final step, major improvements and replacements need to be considered for the same period of time that operational expenses are projected. It is highly recommended that an organization spread the cost of replacements over a period of time. Annual amounts should be calculated and a reserve should be funded annually to accumulate the amounts needed for these major purchases.

Once all the above information has been gathered, it’s time to create the plan. Start with a description of all revenues and costs to be forecasted. Separate operating costs from capital replacements and improvements so that operating net revenue can be displayed separately from reserve balances. Columns need to include actual results of activities for comparison with the forecasted amount.

Finally, your plan is created so the fun begins to see how actual results match up to your forecasts. GOOD LUCK!

Olivia Riley, CPA is CFO of the Town of Addison. Before joining the Town of Addison, Riley worked for the City of Cedar Park and spent 20 years in public accounting where she worked as an auditor for counties, school districts and cities. Riley is a member of TSCPA’s Board of Directors and former president of the Austin Chapter.