Earmark Podcast | Earn Free Accounting CPE

Eric: Here's the thing. You can't do everything well. There are a lot of big accounting firms out there. You look at their websites, and they offer HR services, and they offer tech... They'll come and they'll take care of your backend IT departments. They'll do investment management. They'll do all kinds of things. And they'll process payroll. It's our philosophy that you can't do everything and be great at everything.

[00:00:30] Thank you to our sponsor, Accountests

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[00:01:07] Thank you to our sponsor, Dark Horse CPAs

Blake: Accounting firm owners, if your firm can only grow as fast as you can find the time to take on new clients, you're not alone. Fortunately, Dark Horse CPAs has built a platform-style CPA firm that will transform your practice. It has the technology, resources, staffing, qualified inbound leads, and community that will enable you to spend your time growing your practice, serving clients, and doing more of what you love. Stay tuned to learn more about how Dark Horse CPAs is saving public accounting, one firm at a time.

[00:01:43] How to Earn Free CPE

Blake: If you'd like to earn CPE credit for listening to this episode, visit earmarkcpe.com. Download the app, take a short quiz, and get your CPE certificate. Continuing education has never been so easy. And now, onto the episode.

[00:02:05] Introduction and overview of what YPTC is and does

Blake: Hey everyone, and welcome to another episode of the Earmark Podcast. As always, I am your host Blake Oliver CPA, and joining me today is Eric Fraint, founder of Your Part-Time Controller. Eric, welcome to the show.

Eric: Thank you, Blake, long-time listener. So nice to almost meet you in person

Blake: I am so honored that you listen to my show, The Cloud Accounting Podcast. It's wonderful to have you as a guest today on the Earmark Podcast. Your Part-Time Controller hit my radar big time this year when it was announced that you made it onto the Accounting Today top 100 firms list for the first time.

Eric: That was a major milestone for us. And it doesn't change anything about who we are, what we do, and how we do it. But it was a nice way to publicly recognize that fact that we do good work, and we wouldn't be on that list if we didn't do good work, if organizations didn't continue to hire us, and mostly stay with us. So, it's a nice form of recognition.

Blake: You're very modest about that. I think a lot of folks who run firms would be tooting their own horn. And I think here's what's exciting about this to me, right? I mean, it is the fact that Your Part-Time Controller is not a traditional CPA firm.

Eric: Correct.

Blake: So, it might not change how you do business. But the way you do business is I think fundamentally different in a lot of ways than many of the firms that have been on this list for years and years and years. And so, I would love if you could give sort of the overview of Your Part-Time Controller to our listeners since I think many of them, this is new.

Eric: Well, I'll give you the short version of how we got started. So, we're coming up on our 30th anniversary in March of 23 will be that anniversary. I'm a CPA. I'm a graduate of the Wharton School at the University of Pennsylvania undergraduate degree, major in accounting. I did my tour of duty for three years in public accounting and did a whole lot of other things after that. The one common theme of a lot of the things I tried to do is I always had this desire to be self-employed. I wanted to start my own business. And I tried all kinds of things. None of them had anything to do with accounting. And my wife always used to say, "You want to start your own company? You're an accountant. Start an accounting firm." And well, actually, if I had listened to her, I would've saved about 10 years of my life.

But anyway, I have to say that as an accountant, I am not embarrassed to say that I enjoy accounting. A lot of accountants are embarrassed with that. And I understand why. But I enjoy accounting. But there was a problem. And the problem that I was facing was that I wasn't getting the sense of fulfillment that I was hoping to get, this kind of fulfillment that I would imagine doctors get from there, where artists get, musicians, painters, and so on, writers, I wasn't feeling that sense of fulfillment. I sometimes compare it to doing a puzzle, a crossword or a Sudoku or whatever, now world. When you do it, if you complete it, you feel good. And then what do you do? You crumble it up if you did it on paper. Or if you did it on your computer or iPad, you move on. There's no sense of fulfillment, at least not for me, that comes from that.

Okay. So, I was unemployed. I was after my last most recent venture now close to 30 years ago. And I'll skip all the details. But basically, I was introduced to an organization by a friend of mine who needed some basic, what we might say is bookkeeping help. And he said, "Go help them. I know you're home." And so married three very young kids at that time. And so, I went. And I went to a few others as friends of mine heard. Later that year, I was introduced to a nonprofit organization. Now, Blake, I knew nothing about nonprofit accounting. This is 1993. But I guess something of a fortuitous stroke of luck, 1993. So, I'll throw out some accounting terminology so that your listeners can qualify for some CPD.

1993 was the year that FASB's 116 and one 17 came out. Now, of course, FASB way of classifying their rules has since changed to the codification. But nevertheless, the fact that I didn't know those rules didn't really put me at a disadvantage because nobody else did. Anyway, I was introduced to a nonprofit. From that nonprofit, I started to get referrals to other, and I had an epiphany. My epiphany was the mission and the meaning behind the work that they do was giving meaning to the work that I was doing, helping them. So, I often say to people, and they ask, "How did we get started?" It was an accident. I didn't plan for that to happen. So, what started by accident, working with one nonprofit and then two and then three, within 12 months, I was fully maxed out on my time. And I started to hire people, first people part-time then full-time, and that's how we got started.

Blake: So that's fascinating. It was feeling like you didn't have a purpose in accounting. And then you got hooked up with a not-for-profit helping them. And you started to feel like you did have a purpose. And Your Part-Time Controller specializes in serving almost exclusively not-for-profits. That's one of the things that makes it really different than a lot of accounting firms where we send to everything to everyone, especially large accounting firms.

Eric: Yeah. In fact, we do this annual survey of our clients. And the most recent one, it shows that only 5% of our clients are for-profit entities. The rest are either public charities, private foundations, or we have a category of other. As some of your listeners might know, under IRS rules, there's about 28 or 29, depending upon how you count different categories of nonprofit entities defined in law. Most people are familiar with 501(c)3s, that's the most popular. But there's 27 others. And so, we do mostly work for c(3)s, but we also do work for those as well.

Blake: And how many people work at Your Part-Time Controller now? What's your revenue? What got you on the top 100 list?

Eric: So how many people work with us or for us?

Blake: Yeah. How many-

Eric: Whatever number I give you right now, it's going to change tomorrow.

Blake: As of April 2022.

Eric: As of April 2022, I'll say 400.

Blake: 400. Okay.

Eric: We're over that. And I'll speak to the staffing issues because I know that that's a common topic on your podcast. In fact, I did hear David say, David Leary on the first part of your most recent podcast that he doesn't know a single firm that says that they have enough accountants. Well, he's right about that. We don't have enough. But what we find Blake is that our "shortage" is due to our growth. We're not losing people at any higher rate than we might have prior to the pandemic. So, we are scrambling because of the growth and-

Blake: Pretty tremendous growth. Because you said over the survey that you did of your clients, which I think is fantastic. Every firm should be doing something like this. And in 2020 you surveyed 753 clients. And in 2021, it was 1,111 clients.

[00:10:42] How Covid impacted YPTC growth

Eric: And I don't mind sharing how that happened. I hate to say that anything good came out of the pandemic. Thank God my immediate family is healthy, but I have now other members of my family who are testing positive. It seems like lately just about everybody I know has some member of their family who has tested positive for COVID. But this information might prove helpful for some of your listeners. So as the pandemic dawned on us, like everyone else, we were in a state of panic. And the panic was because serving nonprofit organizations, nobody knew what to expect with the pandemic. We weren't even sure how to get our mail delivered to us because when the lockdown happened, we were closed out of our main administrative office, which happens to be in Philadelphia. That was where at that time we were getting our mail. We were in a state of panic. What was this going to do? Because our clients, nonprofit organizations, we just assumed were going to get hammered.

So, like everyone else, we were forced immediately to work in a completely remote environment. And probably more importantly for us, our clients were also forced to work in a remote environment. And I will tell everyone that our preferred mode of working is where we work on-site at our client's offices. We want to be in their office with them. Our work is actually more... It's more efficient for us to be there, even though we spend time getting to their office and coming home at the end of the day. And there are other issues. Once we're there, being with the people who we have to pose questions to during the course of the day really helps us a lot.

Anyway, now suddenly we went from 80% to 85% working on-site to 100% working offsite. And what we have discovered over the last two years is that we can be very successful working remotely. Our preference would still be to be on-site. But by being able to work remotely, what it suddenly allowed us to do was to take on clients regardless of where they are. We have eight physical offices. And prior to the pandemic, all of our clients were around those eight physical offices. But now today we have clients in over 40 cities, 40 states.

Blake: 40 states.

Eric: We have staff who live in over 30 states. Just doing payroll is a problem because keep in track, we're spending a lot more money on hiring other CPAs, other tax experts to help us take care of the taxes.

[00:13:43] How did you originally expand YPTC to different states?

Blake: And what was the geography of those original eight offices? I mean, you've obviously expanded beyond now, which doesn't matter, but-

Eric: So, living in South Jersey, we first got started in Philadelphia, and I went to school in Philadelphia, which I've already mentioned.

Blake: Yeah, Wharton.

Eric: So, after a number of years, things were working nicely in Philadelphia. And we got a call from one of our very large clients at that time in Philadelphia. They needed more help. I went to their office, and we're sitting there, and they have a subsidiary in Washington, DC. And as we're talking, they say, "Well, this subsidiary, they really need help with their accounting." And I said to them, and here's almost a direct quote, I said, "Oh, we could help them." And they looked at me and they said, "Well, how could you help them? Do you have an office in Washington?" Now, you can't lie. I can't say yes, we do, and we don't. So, I said to them, instead, I said, "No, we don't have an office in Washington, but we would love to start one. You could be our first client in Washington."

Okay. So, this client in Philadelphia, I won't mention their name, but they made the introduction. We did have to compete against some Washington firms. But clearly, we had a leg up. Okay. So now we're in Washington. We're there for about two or three years. And one day the phone rings in our Philadelphia office. It's an organization in the Bronx, in New York City in the Bronx. And they say to us, "We know that you guys are in Philadelphia, we're in the Bronx, but is there any way you can help us?" Nonprofit budget. So, our DNA is such that when someone says, "Can you help us?" 99% of the time, we're going to say, "Yes, we can help you."

Blake: And so that's how you grew the offices in the Northeast organically, right? Somebody needed help here starting office, somebody needs help here starting office?

Eric: So that's how New York started with that one client. And we had to scramble to find somebody on our staff who... The closest person we had to the Bronx lived in the Princeton, New Jersey Area. But he was willing to make that commute.

[00:15:58] Thank you to our sponsor, Dark Horse CPA's

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[00:17:35] How did you make the transition to remote work?

Blake: So, let me get this straight. I got to get this straight. So, you had eight offices prior to the pandemic.

Eric: Yes.

Blake: 80%, 85% of your work was on-site and-

Eric: They call it 80%.

Blake: 80%. And then pandemic hits. And you were able to transition to remote. You continued to grow and hire and take on clients remotely. Were you already set up for everyone to work remotely? How did you make that happen?

Eric: Oh, we weren't set up for anyone other than the people who were servicing those 20%. But we had a leg up in the sense that with 20% of our work being done remotely we had some experience. And in one day, we went fully 100% remote. But we have a staff. Our staff are all experienced people. Unfortunately, we feel that we're not able to hire people directly out of college. We wish we could. We've tried over the years, but we need people who have at least three to five years of experience. So, our staff are all experienced accountants, controllers, former CFOs, and such. And everyone's got computers at home that not necessarily all of the equal quality of technology. Everyone's got Wi-Fi at home.

Blake: Right. And I imagine they were probably doing some of their work at home already. Right?

Eric: Actually, no. We actually-

Blake: No.

Eric: … had a policy where again, remember our preference was prior to the pandemic to be on-site. And our clients who hired us, they wanted us to be on-site. So, it works, but two ways. Our policy was always get your work done on-site before you go home. Don't take work home with you. When you go home, go home. And also, clients, it's comforting. It helps build a level of trust when you can see the person who's doing the work. And clients will come over and ask us, "What are you doing? How's it going? What are you working on?" And so on.

No, we actually preferred not to do work at home, except for those engagements where for one reason or another, it was agreed upon that we would be doing some work remotely. They might have been, for example, a nonprofit that had a virtual office. And it might have been a nonprofit that's based in another country where they have a American-related subsidiary, and completely I didn't even... Or sometimes they were just out too far for anybody from our staff to be able to get in their car and drive there.

Blake: Well, so now I'm really confused. How did this work then? How did you make it happen? The team figured it out. They're-

Eric: Well, that will be a long story, but-

Blake: They're experienced people. Right? So, they had experience. They knew how to deal with stuff that comes up, I guess. And y'all figured it out.

Eric: Well, so don't forget that the pandemic was something that happened to everyone. Everyone read the papers. Everyone was watching the news. Everyone knew when governments started to shut down offices, and it became impossible to go to an office. Everybody knew that that was coming. When I said that was coming, within a day or two of it actually happening, people knew that it was coming. And at that point, because we had eight offices, we were very good at communicating with our staff. We were already very good at holding staff meetings. In the old days, all of our staff meetings were in Philadelphia.

And then as we added Washington and New York, we brought all the staff for our monthly staff meetings, we brought them to Philadelphia. Once we opened up Houston and Phoenix, those were our next two markets, now it was becoming too expensive to... So, we actually hired tech companies to film it and broadcast those into our various offices. Got it.

Blake: Got it.

Eric: It was a scramble. There's no question about it. And to look back on it, it seems easier than it was at the time. At the time, we were losing a lot of sleep and me in particular. But our clients needed us. Our clients still had bills to pay. They still had financial reports they needed to generate. They still had grants they were in the middle of applying to or grants and contracts that they had received. They had programs that they were running. I mean, those things and oftentimes didn't just stop. I mean, so our clients needed us.

Blake: And they were in the same place boat that you were. They were in the same boat too, right? If they had a physical office, suddenly they couldn't go there anymore. So, they're adapting too.

Eric: They couldn't go to their office either.

[00:22:29] Are you going to going to go back to onsite?

Blake: Yeah. Well, so let me ask you this. Now that you've made the shift to remote, and you say you prefer the on-site, and the clients prefer the on-site, are you going to go back to that?

Eric: So, no we're not. We have adopted the term that you hear everybody using these days of hybrid. And we know today that we are never going to go back to having any kinds of requirements to work in a physical office. So, Blake, if you ever want to stop doing your podcast, you come call me and you have a job with us and you can work sitting right where you're sitting right now.

Blake: Perfect. Because that's one of my conditions. I've gotten too comfortable in here.

Eric: Now, we do have plans to open up more physical offices. And what's happening, Blake is as we expand around the country, and I don't think I said this yet, though you may have that we've got over 1,200 clients right now. And when you have that many clients, they've formed various pockets around major metropolitan areas, for example. And as we get a pocket of clients in one city or another city, what we're hearing already is that a lot of them want us to come back, but not necessarily every visit has to be on-site. So, what we're doing now is we're opening up office. Well, we haven't started yet, but we're planning to open up offices in more cities, depending upon where we have these concentrations of clients and who's asking for us to come back.

[00:24:12] What services does YPTC offer? What do they stay away from?

Blake: So, I want to get back to the survey that you did and talk a little bit more about what makes your firm different than a typical CPA firm. So, we've talked about how this is extreme focus, laser focus on serving public charities. 81% of them. 8% are private foundations. So, 90%, let's call it, 89% are charities. You're now serving 97% of your clients remotely some or all of the time. And the service offerings you have are also very focused. So, you don't do tax or audit. Is that right?

Eric: That's correct.

Blake: So, it's exclusively controllership type services. Tell me about what you offer.

Eric: So just to elaborate just for a moment about the things that we don't do. We have never done an audit in close to 30 years, never, not even one. It's a conflict of interest for firms to do audits and provide whether they call it CAS for client accounting services or whether they call it outsourced accounting. Audit firms will say, "Oh, but we separate them out. We do audits for these clients, and we do accounting for those." I'm not going to get in the middle of that debate. So, the first thing that we do is we don't do audits. And by the way, that's one of the ways we hire people because we hire what I sometimes refer to as refugees from the audit profession. And you've talked quite at length on your show about all the various problems with the audit profession.

And by the way, let me just say the outside. I'm not a basher of the audit profession. It was an excellent learning opportunity for me for those first three years that I worked in public accounting. And I would tell any student today who's in college studying to go into accounting, start your career working for an audit firm because you're going to learn things, and you're going to learn them more quickly than you'll have an opportunity doing other things. So great learning opportunity. However, I never enjoyed it. And there's very few people that I know who enjoy auditing. So, it's a good way for us to attract people, tax work. I never enjoy doing tax work either. And I don't even do my own tax returns today. My wife and I, we hire someone to do our own taxes. And the very first year we hired this one person. He found a mistake that I had been making for three consecutive years on my return. It was highly embarrassing. Glad he caught it. But it was highly embarrassing. Fortunately, he's a friend of mine.

And so, we get people who hate doing tax work. So that's a second benefit. There's actually a third benefit. To all of your audit folks who are listening to this because we don't do audits, because we don't do tax work, we're not competing with audit firms. At least we're not competing with those who do primarily audits and tax work. So, okay. So that's what we don't do. Oh, we don't give investment advice also. And we actually put that into our engagement letters. We actually write it to our engagement letters. Here's some things we're not going to do for you. Okay.

Blake: Yeah. That's probably more important than the things you are going to do in many cases.

Eric: So, here's what we do. We do all of the things that you would expect a controller to do or a CFO or a whole range of things. And we'll do everything from basic bookkeeping up to financial statement, preparation to... We prepare packets at the end of the month for most of our clients that they can give to their boards. Nonprofit organizations all have boards, and those boards meet. And almost every month, there's either a board meeting or a finance committee meeting or an executive committee meeting and so on. They need to look at information. We're oftentimes the ones who prepare that information. We not only prepare the information, but we do an analysis of what's behind the numbers.

We teach our staff, what's the story behind the numbers so that those board members whose eyes glaze over when they look at numbers, and let's face it board members are all busy people. They typically come to a board meeting from their job or whatever else they were doing. They're tired. It might be an evening meeting. It's late. So, they don't have time to wait through 10 to 15 pages of financial reports. They need to know... Tell me what I need to know. So, okay. We help with budgeting.

Blake: I'm with you on that. I'm with you on that because-

Eric: I know you are. I know your point of view on a lot of things.

Blake: One of my first jobs as a bookkeeper was for a not-for-profit, small one. And they just brought me in as their bookkeeper. But there was no controller. There was no CFO. So, they asked me to come to their board meetings, and I ended up becoming their defacto finance person. And sort of just by answering the questions that I got and doing my best, I kind of learned what it's like to tell that story. And you can't just give people a report and expect them to understand it.

Eric: You can't do that. it's not fair to them. And we are not producing the kind of value that we really have an opportunity to produce and-

Blake: So, I didn't mean to cut you off there. You were talking about budgets next. That's [crosstalk]-

Eric: So, we help with their budgets. We help them apply for grant funding, grant contracts. We don't write grants that we're starting to look into possibly doing that. But we oftentimes will prepare the numbers that go into grants. And then once organizations, so nonprofit organizations get grants, contracts, they may be getting them from federals or other government sources from foundations and so on. There's usually a follow-up reporting requirement. Reports have to be prepared to comply with whatever the reporting requirements are. These things can get complicated to prepare.

So, we'll help with that longer-term planning, cash flow planning. These are just some of the things that we'll do. So, all the things that I just mentioned, these are really the kinds of things that organizations of all types and all sizes need. And that's another reason why, I mean, we can't hire somebody out of college because they don't have the experience to be able to easily and quickly respond as clients have new needs that come up.

[00:31:18] The management structure of YPTC

Blake: Well, that's what's perfect about the name of your firm is it sets the expectation that these are going to be controller level folks that you're hiring. And so, I mean, what's really interesting about your firm is that it doesn't seem like there's a hierarchical structure the way there isn't a traditional firm where you're pushing work down to lower levels, entry level staff people, then you've got the managers and the partners above them. It seems like it's much flatter. Is that a fair characterization?

Eric: That is. Most of our people have the title of associate, which is intentionally vague. And sometimes people don't like that title because the title might mean somebody who has had the title of controller or CFO who wants to work for us and now has the title of associate. It might seem like a demotion. But people shouldn't worry about that if they're listening. And I mean, they think, "Hey, I might want to work there." But within that title, we have people with years of experience ranging from three to five years up to 35 years. I couldn't even tell you offhand what's the oldest, most senior level person on our staff, probably me by now. So, all with the same title. Now, we know, and we try to take into account different backgrounds and experience as we assign people to clients. So, we do our best to take that into account as we make those assignments.

[00:32:50] Thank you to our sponsor, Accountests

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[00:34:26] Analyzing some of the numbers from their survey

Blake: So, 80% or just about 80% of your engagements are ongoing. You're coming back every month doing the financials. Only 20% is project work. I find that to be extremely interesting because I imagine when you have the predictable ongoing work, that creates a secure revenue stream for you. You're not dealing with these ups and downs throughout the year that maybe an audit firm has, or a tax firm has. And I'm willing to bet you don't really have a busy season either.

Eric: Well, that's correct. As far as the busy season, we're busy year-round. We don't have a tax season. My whole life or at least the last 30 years with Your Part-Time Controller doing this [inaudible] tax season. People always say, "Oh, you must be very busy this time of the year." I'm, "No." Well, I would say actually, yes, we are busy, but we're no busier or we're less busy than we are any other time of the year. By the way, that other approximate 20% of our work that's project or interim, oftentimes they lead to ongoing work. So, an organization, as they get to know us, and as we get to know them, other needs come up.

A growing thriving organization has a constant stream of needs. And our goal is to help them with as many of those needs as possible. And even if they're during the pandemic, when a lot of them did have to cut back on programs, we were able to help them through that as well. And through all the various pandemic-related programs, we helped hundreds of our clients apply fill out the forms. First, we had to figure out how to do it, and then we helped them figure out how to do it.

Blake: So, half of your clients are engaging you two to four days per month. You have a sweet spot, it looks like, in the 2.5 million to 5 million annual expense area, or really, it's... I'm looking at your chart here on this survey. 24% of your clients have between 1 million and 2.5 million in revenue, or sorry, expenses. And then 19% have between 2.5 million and 5 million in expenses. So, sounds like those are not-for-profits of a size where they have this need for the controller, but not necessarily a full-time person. You're a perfect part-time fit for them. And part of the reason they don't have that controller is because they're small themselves, 10 or fewer employees for half of your clients.

Eric: So now, on that same page that you're looking at, there's a pie chart that shows what percentage of our clients actually have a control. And it says 37%. It's 37%, so let's just call it a third. A third of our clients have a controller or a CFO or some other title of a person who's in charge of whatever their financial department looks like. Why do they need us then, that third of our clients? Here's what happens. Quite often, organizations put their chief financial person, regardless of his or her title. They put them in charge of non-financial things. They put them in charge of administration. How often have you seen somebody with the title vice president of finance and administration? They put them in charge of IT. They put them in charge of HR. If there's facilities, they put them in charge of facilities management. They put them in charge of banking. They put them in charge of insurance.

I have to tell you that I went to Wharton school, but I wasn't trained how to do most of that stuff. We just took accounting classes all day long. Most financial people don't have the training necessarily. We're all sort of learning on the job. And so, here's what happens. They, they meaning the controllers and CFOs of these organizations, full-time people. And by the way, they could have an accounting department with 1, 2, 5, 10, 20, or more people, not 20 of them necessarily, 20 or more, but not our clients anyway, they find though that they're so busy doing these non-financial tasks that they don't have time to focus in on financial reporting, on analyzing financial reports, preparing statements and packages for the board, the finance committee, the executive committees. They don't have time for that. They hire us. So, we report directly to that controller or that CFO, and we are able to supplement whatever they need. And that's why it doesn't matter to us whether somebody's got a CFO or controller or not. We can still come in and produce value and do a lot of work for them.

Blake: Yeah, that, that makes total sense to me. The biggest not-for-profit I ever worked with in my brief stint in public accounting, it was the chief operating officer responsible for accounting and finance. And so, she needed a lot of help. She had taught herself a lot about it but needed a lot of help producing those reports for sure. So-

[00:40:08] Accountants and technology

Eric: Then when you look-

Blake: Yeah, go ahead. No.

Eric: Well, I was going to say that now with... Now you've introduced technology. Accountants as a profession were very quick adapters or adopters of spreadsheet programs. But I think that as a profession, after that initial adoption of spreadsheet programs, accountants lost the lead in terms of adopting technology. And so, what am I talking about? So, let's just fast forward to today. We have a group at our firm. It's a small group, but we call it our data visualization group, DVG. And we're trying to always do more and more of every day is to use technology to deliver information to our clients more quickly, deliver it to them in better forms and formats to deliver to them in interactive ways, so dashboards where you can filter and sort and do whatever they need to do. We thought initially, so the iPhone came out in 2007, and it took a few years for there to be [crosstalk]-

Blake: Broad adoption.

Eric: ...applications available that can do visualizations. But today, oh my goodness, we do a lot of work with Power BI. We're starting to do more work with Tableau. And that's just the tip of the iceberg about what's available in terms of visualization tools. So, we're introducing these to our clients. Now, they don't have the time, the expertise, the wherewithal to learn how to use these things. So, all those people out there who are worried, if there is anybody listening to this who's worried that technology is going to replace the role of accountants, don't worry. Because-

Blake: Yeah. Good chance. No chance.

Eric: ... every time the technology changes and evolves, which is daily, it's creating opportunity for accountants. We have to learn how to use them. The technologies, there is an investment of time. You have to sift through all the millions of things out there to decide what are the best things that you want to bring to bear with your clients. But the opportunities are not shrinking. They're increasing. And the faster technology evolves, the faster the opportunities evolve.

Blake: And your survey shows an interesting stat about the adoption of QuickBooks Online versus desktop. Won't be surprising. I don't think any of our listeners know that 74% of your surveyed clients use QuickBooks, either online or desktop. And in 2020, it was just over half, 53% were using QuickBooks Online. And that number bumped up 6% to 59% using QuickBooks Online and only 15% using desktop. So, I think we're pretty close to the end of desktop. I mean, if it drops below 10%, that's loss of the market there.

Eric: I think so too. Quite frankly, I'm surprised it's taking this long, but a lot of organizations are resistant to change. People, as the general human nature, are generally resistant to change. But the other interesting thing on that same page, and should I hold this up just so your viewers know? So, I know your viewers can't read this and that's okay, but there's like 13... How many pages of this do we have of charts and graphs? I sent it to Blake. That's what he is reading off of. But interestingly-

Blake: So, our podcast listeners will not be able to see. So, if you can describe for them, that's the best. But if they’re watching-

Eric: So, we have-

Blake: If they're watching on YouTube, they will be able to see these charts.

Eric: So, what I'm about to mention right now from our survey is, and I need to preface this by saying that as our company, we do not sell any software. We do not represent any particular software company. We never have. We tried once about 20 years ago, and that was a disaster. Not because we did anything wrong, but because the software that we chose was a disaster. So, we want our clients to know that if we ever make a recommendation, that we're not getting anything out of it. Okay. Having said with QuickBooks, there are justifiable reasons to bash QuickBooks. But there are many reasons that I hear people say that are not justifiable reasons. So, people will say, "Oh well, we outgrew it." Well, I have news for people. QuickBooks doesn't care how many digits your numbers have, I suppose at some point, that does care. But not that it's going to make any difference to people.

Eric: So, in our survey, of our clients with budgets of over 50 million a year, 65% of those are using QuickBooks. And the number is pretty consistent. Clients with budgets of 20 to 50 million, 78%, and so on, these are big numbers from big organizations. Our firm, we run our firm using QuickBooks Online, and we chose that on purpose because that's where our clients are mostly using. So, we wanted to use what our clients use and things that we learn by using ourselves as a Guinea pig over the years, we can then introduce those to our clients.

[00:45:57] Data on electronic payments vs physical checks

Blake: So, moving on with more technology, you've also got data in here about who is doing electronic payments versus physical checks. Always something I'm fascinated about because for a long time, it was 50/50. But among your clients, they may be ahead of the curve because they've got you helping out, right? 69% are doing electronic payments now, and 31%, so less than a third are doing physical checks only. And that's actually changed a lot from 44% in 2020. So, is that right? 44% in 2020 were doing physical checks?

Eric: Correct.

Blake: Down to 31%. Amazing. I think we're on the right track there. And about a third of them are using bill.com to do their bill pay. And then 19% using their bank bill pay.

Eric: So even before the pandemic, we were beginning to talk to our clients about the benefits of paying bills electronically. Now, not all forms of electronic payment are equal in terms of their internal controls, ease of use, and such. And when we started talking to clients about it three years ago or so, they weren't as good as they are today. So, like everything in the software world, things constantly keep getting better. But nevertheless, it was clear that toss anyway, that it was becoming a best practice. For years, we would tell our clients, "Don't use electronic bill pay." But few years ago, we started to realize that the technology is getting better. Okay. So, we started to talk to our clients about all the benefits. Then when the pandemic hit, and now our clients are all working from home. Well, the check signers, they're working from their home also.

So, you might have the person who does the accounting for an organization. He or she is working in their house. If the executive director has to sign, he or she, they're in their house. If a board member or somebody else, if a second signature is needed. And what about if there's a purchase order or if an invoice has to be approved, all these people now are in their homes. Well, if you're on a paper-based system, first of all, you've got a huge logistical problem to get that paper spread around to everyone. And then from an internal control standpoint, it's not the best system. You have paper checks, for example, now being stored potential in somebody's home. And so, I mentioned earlier that when the lockdown first occurred in Philadelphia, which is where our administrative office is, even though there's nobody there, technically it's still there, we were getting most of our payments via paper checks. And that was another reason that we almost went into a panic.

I mean, a company like ours, we thought, "Oh my God, if we can't get our mail, we can't get paid. If we can't get paid, we can't make payroll, et cetera, et cetera." We started to discuss the benefits of bill paying electronically with our clients in earnest. Now, if they're already using something and they like it, fine, they can continue to use whatever they're using. If they're not currently using anything, we try to persuade them that they should. And if they don't know what to use, we are making a recommendation. But I won't say the name of the company because we're not representing that company in any way.

[00:49:38] Why do you stay away from software consulting/recommendations?

Blake: Right. And well, and you said earlier that you don't sell software, you don't resell it. You had a bad experience with that. Tell me more about that. Because a lot of firms that are fast growing are very into software consulting. That's a huge growth area, but you stay away from it.

Eric: We don't recommend any particular software. And yes, we purposely stay away from it. We've been approached many times over the years, and as we've grown, we get approached more frequently. Here's the thing. You can't do everything well. There are a lot of big accounting firms out there that you look at their websites, and they offer HR services, and they'll come, and they'll take care of your backend IT departments. They'll do investment management. They'll do all kinds of things. And they'll process payroll. It's our philosophy that you can't do everything and be great at everything. So, we try to be great. And most days were great. Some days were just good. Every now and then we have a bad day. But we try to stick with these controller functions. And what that allows us to do is pick best of breed.

So, we don't represent any particular payroll company. But if somebody wants a recommendation, we could talk to them about the handful that we've experienced with. If somebody needs a recommendation for accounting software, we could talk to them about the ones that we have experienced with. But here's the other interesting thing, Blake, with accounting software, nine times out of 10, you can quote me on that statistic, nine times out of 10, if an organization says they need to switch accounting software, and our first question to them is always, why do you think you need to switch accounting software? Nine times out of 10, the reason or reasons that they might give it turns out that the software that they are already using, whatever it is, I don't care what they're using, whatever it is, it could probably do what they needed to do.

So why do they think that it can't do what they want it to do? Well, there's a few common reasons. I was going to say two reasons, but I could probably think of more. One reason is that they're not using the software properly. No one's really taking the time to learn how to use it. Second common reason. They haven't set it up properly. So, all of your listeners who are accountants that we all know that, that if your chart of accounts is not properly set up to capture the information that your organization needs, then forget about being able to produce all the reports that your organization is going to need. It doesn't matter what the accounting software is. So-

Blake: It's like a golfer thinking they need to switch clubs, right? Or in my case, a bowler who needs a new bowling ball. Most of the time, the problem is with the bowler or the golfer, not the clubs, the bowling ball.

Eric: What we do is we'll take a look at what they have. We'll listen to what it is they want to be able to do, and we'll tell them if we agree or don't agree. And nine times out of 10, we show them that, yes, you can in fact do everything or maybe almost everything that you want to be able to do. So, there are justifiable reasons for switching software, but that represents one out of 10 of those times.

[00:53:12] What is your opinion on timesheets and the whole debate about them?

Blake: Well, I would love to keep on talking about Your Part-Time Controller and your opinions on many of the issues facing the accounting profession and how to run firms. I know you have very strong opinions about timesheets. We should say, right, that even though... My opinions about timesheets haven't stopped you from listening to my podcast, but part of the reason we're talking today is because we had this wonderful email exchange about how your firm uses timesheets, and you believe that it delivers value to your customers. And I would love to actually hear in the time we have left your opinion on timesheets and the whole debate about it.

Eric: So again, I have to start by saying that the things that I'm about to say don't apply in all situations. The conversation about value billing and value pricing, that's not a new conversation. Because I suspected you were going to ask me, I went into Amazon, just checked out value billing and value price. And there's books going back that I was able to find that my two minutes of research. Going back to like 2009, et cetera, I've got a couple of books in my library. So, it's not a new topic in the profession. Okay. And second thing is I have nothing to stand to gain by convincing anyone to agree with anything that I'm about to say. If you don't want to use timesheets, don't use them. But here's why we use them.

The first reason is that it makes it easier for organizations to hire us. They understand billing based upon time. It gives them some control over our billing. When we hire consultants. And by the way, we hire consultants to do stuff for us. I always insist on paying them hourly because I want to know what they're doing, and I want to have some control over their time. Another thing that happens, why timesheets work for us and why fixed pricing does not. We do good work. And as I said before. And what happens when you do good work is that your clients ask you to do more work. We love when our clients ask us to do more work. And if you have a fixed price arrangement and they ask you to do more work, now you get into this conversation of well, is that part of your scope of work or is that extra scope of work? And we're going to say that's extra scope, and the clients client could say, "No, that's not extra scope."

Well, we don't want to have arguments with our clients. We're trying to help our clients. So, timesheets eliminate arguments. Timesheets allow us to ramp up as our clients need more help and our clients understand. And then we tell them that, "Okay, you want me to help prepare a report for this federal contract?" We're happy to do that. We think it's going to take us about 10 hours. So, there's what it will cost. They know, and they can decide, yes, we need you to do that, or no, we don't want you to do that. But it helps us generally ramp up. It also helps us ramp down. We want to be as flexible as possible. Sometimes as an organization grows, they may want to replace some or all of the work that we do by hiring a full-time person. And we will not only help them to ensure a smooth transition, but if they want us to help them with the hiring process, we can help do that too and help interview the person if they need that help.

Well, we now need to ramp down. And we can't do that if we have a fixed price arrangement. So, organizations are more comfortable. It's easier for them to hire us and so on. And then now there's another reason which speaks to the management of our company. We're able to better manage our staff because in order for this to work, and we work with nonprofits, and I happen to think that our hourly rates are very reasonable. But our margins are a little bit smaller as a result. And we have to be as efficient as possible. And in order to be efficient, so if somebody comes along and a new client and they think they need us three days a week, well, we have to be able to assign someone who is available three days a week. How do we know who's available three days a week, especially now that we have over 400 people? We have ways built into our system that we built, but primarily it's by looking at their timesheets. So, timesheets is one tool that helps us to allocate our workforce.

Blake: So, most of your engagements are ongoing. Is it fair to say that when you scope out the amount of time that a client is going to need you, you're not really thinking like hour by hour, but more days? So, you need us a day a week or two days or three days. So that's interesting. Because to me, I feel better about using time as a metric when it's not so fine-grained. You know?

Eric: Yes. So, I see where you're heading. So, we will never give somebody a proposal where we say, "We will do this. And it's only going to take us an hour a week." So right. We do try to do it normally in chunks of a day.

Blake: A day. And then when you add a day, right, it's a significant difference where you're not getting bogged down in these details. But I also think it fits really well with the service that you provide. So, I think one of the problems I have with timesheets is that when you have firms that go and fix a price and then still require timesheets, there's not alignment with the timesheet and the price. There's not alignment with... But you are still... Because you're pricing, based on time or days, then it makes sense to track that.

So, I want to thank you for this new perspective that you've given me on timesheets. And also, the insights into your firm that you have shared are incredibly valuable and applicable to everyone in the not-for-profit space, in terms of, what are the type of clients that need our help on a fractional basis? If you want to grow a client accounting services practice, this is really a model to follow. And if you want to join one, and this is a model that's working and growing, and you're not just on the East Coast anymore. You're all over the country, Phoenix, I think you said Houston. What are your plans to grow?

[01:00:16] What are your plans for the future of YPTC

Let's finish out with this. What are the plans for the future with Your Part-Time Controller? And then if anyone is listening is interested in applying, where can they go?

Eric: So, I'll answer the second part first, if anyone's interested in applying. Go to our website yptc.com, YPTC the initials for Your Part-Time Controller. By the way, if you type in Your Part-Time Controller, that will also resolve to our URL. And then once you're there, you'll see how to apply. In terms of plans, well, the short version is that we have some ambitious plans for growth, and they include international and international plans. And I don't know that I have time to get into that in more detail. Quite frankly, I don't have a lot more detail yet to offer. But as I said earlier, the pandemic has showed us that we can be affected working remotely. And if we can work remotely, then we can work internationally. And-

Blake: I just... Go ahead.

Eric: Well, and we want to... Well, no, you go ahead. I finished that thought.

Blake: I just-

Eric: I just want to actually say one other thing, if I can, before we officially run out of time.

Blake: Yeah, please, please. Absolutely.

Eric: I know that a frequent topic on your podcast is how firms, companies of all types and sizes treat their people. And we for many years have participated in these contests of best place to work. And the one that we like is one where our staff's responses, it's run by the business journals, the various business journals scattered around the country. And I'll just say this, that our staff consistently votes us to be a best place to work. We're very proud of that. And you'll have to have me back now where I'll explain why they consider us to be a best place to work.

Blake: I would love to do that. There's many more topics in our possible list of topics. We'll have to do another one, maybe even more than one. I have been speaking with Eric Fraint, the founder and president of Your Part-Time Controller LLC, top 100 accounting firm, no audit, no tax, really a model for a pure accounting firm. We're getting back to the roots of accounting if you ask me. This is accounting. That's where our profession came from. And it's great to see your success. So, thank you for your time as well.

Eric: Thank you, Blake.

Blake: Thanks for listening. I hope you enjoyed this episode and that you learned something new. And if you did, wouldn't it be nice to get some CPE credit for it? Well, I've got great news. My new app Earmark CPE offers free NASPA-approved CPE credits for listening to podcasts, including this one. Visit earmarkcpe.com to download the app, take a short quiz, and get your CPE certificate. That's earmarkcpe.com.