At our November meeting, the Texas Society of CPAs (TSCPA) Executive Board continued to focus on how TSCPA needs to evolve to better help members achieve success. The Board heard about, and provided input on, a number of initiatives, including:
- Membership investment;
- Partnership between the state and chapter organizations;
- Sunset and legislative activities.
Progress continues to be made on maintaining the Texas State Board and licensing of CPAs in Texas. That would seem to be a non-event to many, but there is a growing push to reduce the number of licensing boards across the country and too often, those pushing that agenda sweep up learned professions such as doctors, lawyers and CPAs in their efforts to eliminate state licensing requirements across a large swath of jobs. Usually, those pushing for reduced licensing state they never intended to include CPAs in their efforts, but TSCPA has to keep an eye out on the specific language proposed in bills to ensure the change in law is not overly broad and includes CPAs.
All TSCPA members are members of both the state and a local chapter organization. State and chapter leadership realize that providing value to members is a joint responsibility. The task force working on that partnership is exploring ways for both organizations to better coordinate their activities and resources to produce better results for our members. Similar efforts are being made on the CPE front to better coordinate course offerings by the state and chapter organizations and to fill different needs for large, medium and small chapters.
Finally, I’m excited about the proposed changes on how your professional organization will brand itself to you as members and to the public at large. We are all proud to be Texas CPAs and the new brand will focus on both of those concepts. Please stay tuned, as there will be more to come on that front in the next few months.
While ghosts and goblins may scare most people, professional accountants aren’t easily frightened by such things. Instead, our list of things that wake us up in the middle of the night in a cold sweat is more like this:
10) Having to tell the salesperson that the contract they got signed at 11:59 p.m. on December 31 won’t get booked as revenue because we had not actually delivered any products or services yet.
9) Congress announcing yet another effort to “simplify” the tax code.
8) A client walking in with a shoebox … because we know it is full of receipts and probably only half the information we need anyway.
7) The CFO walking into our office saying they just heard a great presentation from a software vendor that is going to solve all our problems.
6) Realizing all those rounded numbers are off by one when we add them up and compare them to the total at the bottom of the column.
5) Turning on our computer and seeing that blue screen of death … on April 14.
4) Hearing FASB and the SEC say they are starting a project to reduce disclosures because we all know they will eliminate three paragraphs no one was disclosing anyway, but realize that five new pages of information would be very useful to investors.
3) Hearing procurement proudly announce they have solved the current year budget problem by getting our vendor to defer the payment until the next year even though we will get the products and services right now.
2) Realizing it is December 30 and we haven’t completed that pesky ethics training requirement yet to maintain our CPA license.
1) October 15 … because tax deadline day is way scarier than Halloween.
I hope you had a great time on Halloween and maybe a little laugh enjoying this blog.
I want to spend some time talking about the principle “innocent until proven guilty.” There are those who say the principle only applies to criminal proceedings. While I agree that “innocent until proven guilty beyond a reasonable doubt” is a foundation of our criminal justice system, just because the principle is a foundation in criminal courts does not mean that “innocent until proven guilty” is not also a foundational principle in other aspects of our society.
Business and society are based on trust; it is trust that people will do what they say, abide by rules and do what is right. Trust, when described in this way, is really the same thing as “innocent.” We are saying that our leaders, peers and staff are doing the right things for the right reasons. ”Guilty” on the other hand, is the same as saying you don’t trust someone. You believe they have ulterior motives, will lie unless forced to tell the truth and believe in the ends justify the means no matter how bad the means.
When it comes to business, Stephen Covey wrote a great book titled The Speed of Trust, which showed that when people within a company trust each other, the ability to complete projects and provide great service to customers is multiplied exponentially. Trust is founded on the principle of innocent until proven guilty and was something I mentioned time and again to my staff without even realizing it, whether I was leading an accounting policy group or internal audit team. I would tell my team to trust that the person seeking an accounting answer or being audited had the best interest of the company at heart, knew the process and operations of their part of the business better than we did, and was telling the truth until that person proved that they could not be trusted. I realize now I was telling them to believe the person was innocent until proven guilty.
The thing that makes me wonder when people say “innocent until proven guilty” is not a foundational principle of society is that the principle applies equally to both sides. If we say that in society innocent until proven guilty does not apply outside criminal proceedings, then we are saying anyone making a statement about anything (including the “accuser”) is guilty until proven innocent. That means we are saying we don’t believe anything anyone says. In reality, people who say that innocent until proven guilty doesn’t apply outside of criminal proceedings really mean to say that they want to pick and choose who they will apply the principle to and who they won’t. There are many words that are applied to such people – biased, discriminatory, racist – and none of them are positive traits you would like applied to you.
So how do individuals apply the principle of innocent until proven guilty to all sides fairly and equally? They have to look at corroborating facts and evidence and make a decision. This is where the idea that “innocent until proven guilty beyond a reasonable doubt” is limited to criminal proceedings. In society and business, the measurement is “innocent until more likely than not proven guilty.” That means we are making a lot of 51 percent – 49 percent decisions out there and with decisions being made on such a close measure, it is easy for two rational and reasonable people to come to a different decision on which side, innocent or guilty, gets the 51 percent and which gets the 49 percent. The one thing I believe with all my heart is that we can’t say “innocent until proven guilty” applies only in the court of law.
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:
- Identify regulations vs. rules
- Focus on what you can control
- 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?
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.
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.
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….