Reflections from a Past President

You may remember that this blog came to fruition under the guidance and creativity of  SCACPA’s Immediate Past President, Eddie Brown. It is my pleasure to share the following reflections from Eddie.  (Emily Allen, SCACPA Communications Coordinator)

Many CPAs have served in a wide variety of volunteer positions.  After all it is just the nature of a CPA to work on someone else’s books, to help other businesses succeed and to accept such admirable challenges in our profession.  If one were to list all the charitable organizations that South Carolina CPAs have served as a board member, the list would probably be overwhelming.  As I reflect on my career, I have had opportunities to serve and still find myself very active on a number of boards.  And serving on the Board of Directors for SCACPA is one task that I have enjoyed immensely. 

While each office was a challenge and a joy, I am somewhat sad that I only have another quarter to enjoy the office of “Past President”.  Oh how sweet it is to be the “past” part of that office.  Well, bitter sweet at best.  I have placed as my top priority to ensure that my input is humble and secondary to the current President, Tim Baker.  And it was in a recent EC meeting that I heard Tim say to our President Elect, “Michael, I will be there for you, just like Eddie has been there for me”.   Hearing those words were fulfilling, but sad at the same time.  I will graduate from this position and step aside as our officers bring their fresh and challenging ideas to the table. 

One enjoys the moment of reaching the mountain top.  But as time moves on others will take us higher and higher, building on the foundation that was laid by those who went before them.  While I have not yet passed the intangible “gavel of Past President” to Tim Baker, I do very much look forward to placing that title into the history books and watching Michael Putich, Sharon Mann and Malynda Grimsley move SCACPA well along into our future. 

Just as I have thanked members of SCACPA for the opportunity to be their President, I once again thank each of you for allowing me the grace to be your Past President.  While I have gone nowhere, I have simply changed hats and remain an active member of this wonderful association.

Contributed by: Charles “Eddie” Brown, SwaimBrown, PA

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Valuation Expertise

George DuRant, CPA, ABV, ASA
Durant, Schraibman & Lindsay, LLC    

Valuation expertise, a notch above…

Among the many jewels of wisdom shared by Warren Buffett this year in his annual letter to Berkshire Hathaway shareholders was this one (referring to the way he looks for investment managers):

It’s easy to identify many investment managers with great records.  But past results, though important, do not suffice when prospective performance is being judged.  How the record has been achieved is crucial, as is the manager’s understanding of – and sensitivity to – risk (which in no way should be measured by beta, the choice of too many academics).  In respect to the risk criterion, we were looking for someone with a hard-to-evaluate skill: the ability to anticipate the effects of economic scenarios not previously observed.

Let’s talk about risk and how we estimate a company’s discount rate.  It is generally accepted in the financial community that some version of the capital asset pricing model (CAPM) be used to develop a company’s discount rate.  Warren pooh-poohs the use of a beta as a reliable means of adjusting the equity premium for risk.  And, unadjusted equity premiums from a book such as Ibbotson or Duff and Phelps just don’t rise to the level of reasonable certainty. Furthermore, equity risk premiums from those sources adjusted based solely on the valuator’s “judgment” and experience (gut) are totally indefensible.

So, how does a CPA defend his or her estimate of a company’s discount rate?  One way is to estimate the forward-looking premium implicit in prices for guideline public company shares.  In other words, solve for the cost of equity capital (k) using the following formula:

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Collaborative Practice – A Unique Learning and Growth Opportunity for Financial Professionals

Have you heard of the term collaborative practice? It is a cooperative, voluntary process to resolve divorce and other family law matters without the need to go to court. With the help of professionals in various disciplines, the parties will work together to create shared solutions for all aspects of the case – financial, emotional and legal.

Going through a divorce does not mean you have to be involved in an acrimonious process and endure the turmoil that is so often associated with going to court. You now have another alternative. You can choose to participate in a process known as collaborative practice that offers couples a respectful, considerate, solutions-based approach to changing their marital status while preserving the integrity of valued family relationships.

On November 4-5, 2011 at the Crowne Plaza in North Charleston, SC, SCACPA is co-sponsoring a collaborative practice training opportunity with the SC Bar. The Interdisciplinary Family Collaborative Practice program is an intensive two-day training focusing on developing a team of interdisciplinary professionals to work with family conflict and provide support to clients in reaching a fair and equitable settlement. Trainers utilize a mix of lectures, PowerPoint, interactive exercises, demonstrations and role-play to improve participants’ knowledge and skills in collaborative practice..

This training offers a great opportunity for financial professionals with an interest in this area to network with other professionals and grow their practice, with an added bonus of a unique interactive way of learning which is much different than the traditional classroom lecture setting. Seating is limited, register now.

Contributed by: Reva Brennan, MPA, CAE, IOM, Associate Director of SCACPA

Resources on Collaborative Practice:
Books
Articles
Links

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Re-Evaluate Clients Well Before Tax Season

From time to time we’ll post content from various bloggers outside of the association. I hope that you find the suggestions below both timely and useful. Emily Allen, SCACPA Communications Coordinator

Re-Evaluate Clients Well Before Tax Season
By Suzanne M. Holl, CPA

Now is a good time to screen tax clients for potential problems. There is still ample lead time before tax season for a client to replace you in the event you decide to disengage.

Practice management and risk management are often one and the same concept, and client screening is an excellent example of such convergence. Not only is it the first step in an effective loss prevention program, but client screening can be used to identify less desirable clients that may be keeping your firm from developing more desirable clients.

Re-evaluate your relationships with clients on a regular basis—at least annually. The following checklist highlights some of the warning signs that may be time to disengage from certain clients—ideally after they have paid their bills.

Late Payment, Difficult Client
Does the client pay your firm on time? If not, find the reason for the payment problem and decide whether or not you want to retain the client. Pay special attention to difficult or manipulative clients who do not return your phone calls, are otherwise non-responsive, and often cause delays. Difficult behavior should be explored. Take swift action on your own behalf to investigate.

Withheld Information
When a client does not provide the information you need to complete an engagement, carefully consider the problem. Is it sloppy record keeping, or is the client deliberately delaying or withholding information? Be cautious when it appears that documents are being deliberately withheld, or you are urged by a client to proceed with work without having proper documentation. Client behavior such as this is a red flag, and repeated delays could be the result of unethical or illegal activity.

Deteriorating Relationship with Client
Abrupt changes in a client’s behavior may be a sign of impending liability issues, severe financial problems, substance abuse, or other personal problems. Trying to uncover the source of the problem could help, so don’t ignore the warning signs. If a client continually fails to return your phone calls, or threatens to sue, you should take swift action to remedy the situation, or disengage before the situation worsens.

The “Antacid” Client
Some clients may be great for your firm’s financial condition, but the money they bring in simply isn’t worth the emotional turmoil they create for you and your staff. These are the clients who are nasty to your staff, make unreasonable demands, are non-responsive, complain excessively, argue, and are generally obnoxious. In such cases, you have to ask yourself: Is this client worth keeping? Sometimes, the answer is that “life is too short.”

Changes in Client’s Business
When a client’s business changes, you may need to re-evaluate the relationship. A client may, for example, buy a business that requires work you are not qualified to perform. Or a client may decide to sell all but a small portion of the business, and you may not wish to work for such a small entity. A start-up client may grow and reach a point when it plans to go public, and you may not want to perform the public work. Such changes can alter the professional relationship and lead you to decide to disengage.

Changes in Your Firm
When your firm changes, you may also need to change your client base. The loss of a partner with an area of expertise that the other partners don’t possess will require a decision by the firm regarding continued service to the former partner’s clients. You may decide that you no longer want to continue performing a particular type of work. Or you may decide to grow your business in new directions. Review your client base whenever your firm changes in order to determine whether or not all existing clients still fit the firm.

Potential Conflict of Interest
Consider all client situations carefully in an effort to spot potential conflicts of interest, which may affect your objectivity or independence—even if you are not engaged to do attestation work. Examine potential or actual conflicts of interest from a broad point of view, considering the client’s perspective as well as those of other owners, investors, partners, beneficiaries and spouses. Troublesome or emotionally charged scenarios can include a partnership break-up, a trust, bankruptcy, merger, divorce, or anything else that involves opposing or unhappy factions.

In addition to being alert to these warning signs, protect yourself further by educating your clients on their responsibilities within the relationship. Let them know what your responsibilities are to them and what they can expect. Make sure your staff understands that they should inform you of any problems they have with clients. Keep notes and document conversations, advice, meetings, requests for information, decisions, and any payment problems or changes in a client’s behavior. Documentation could be an important part of deciding whether or not to disengage.

Disengagement Letters
When you decide to disengage, seek to terminate the relationship professionally and formally, in writing. Your disengagement letter should always contain clear statements, a description of your work, and a list of any due dates or filings. Done effectively, a disengagement can leave your client feeling that you have acted in the best interest of both parties.

Effective communication is a key factor in any CPA-client relationship, and when you work to stay informed and in control, you are safeguarding your firm. In the end, disengaging is simply good practice management, and knowing how to do it skillfully and professionally will help you grow your practice and avoid liability.

Suzanne M. Holl, CPA, is vice president of loss prevention services with CAMICO (www.camico.com). With more than 18 years of experience in accounting, she provides CAMICO policyholders with information on a wide variety of loss prevention and accounting issues.

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Emerging Leaders

As younger people are joining the ranks of their parents and grandparents generations in the workforce, they are finding that office life is not quite like they imagined when they were in college. There is a bridge that must be crossed as one moves from college student to young professional to a bona fide professional. These are the emerging leaders that will move into positions of power and will shape the office-scape of tomorrow and how it will function. For younger go-getters there are a few roadblocks on the highway to the executive’s chair.

The top seven issues that young CPAs are grappling with, according to CPA Success, the blog of the Maryland Association of CPAs are:

1. Bridging the “gap” between college and the “real world.”
2. Under-developed skill sets.
3. Work-life balance.
4. Limited networking opportunities.
5. Intimidation from bosses (partners and CFOs).
6. CPA exam (time, support, information).
7. Lack of a voice within the profession.

The 2011 Emerging Leaders conference will delve into many of the topics that are pertinent to younger professionals who may not be sure of the rules, or if these rules could – and should – be broken in a changing world. Take the time to enhance your technical and professional skills then enhance your networking skills with fellow CPAs. The Emerging Leaders Conference will take place Aug. 18-Aug. 19 at the Francis Marion Hotel in Charleston. Register for it online at SCACPA’s website.

Blogger: April Blake, Office & Member Services Coordinator, South Carolina Association of CPAs

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Fireworks, Freedom and Family

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” One of the best known sentences in the English language is the second sentence of the Declaration of Independence. Adopted on July 4, 1776, Independence Day celebrates the adoption of this document.

Fireworks, family, parades, swimming, barbecues…the list of activities traditionally celebrated on this holiday is endless. How do you plan to celebrate this year?

If you’re in the South Carolina area, some of the events below may peak your interest!

To all SCACPA members and blog readers, I wish you a happy Fourth of July.

Editor’s Note: SCACPA will be closed on Monday, July 4, 2011 in observance of the holiday.

Blogger: Emily Allen, Communications Coordinator, South Carolina Association of CPAs

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CPA Ambassadors

It’s the time of year that many SCACPA members’ attention seems to have shifted from the “crunch time” of tax season to the “vacation time” of summer season. But for a select group of dedicated SCACPA members, part of the summer season will be spent in West Columbia, SC at the SCACPA office for the 2011 CPA Ambassador Program.  The CPA Ambassador Program, launched in November 2003 by the American Institute of Certified Public Accountants, utilizes state CPA society members to engage the talents of CPAs to help earn the good men and women of this profession their due. This year the content will be focused on Public Interest, Financial Literacy, Recruitment and Small Business.

SCACPA looks forward to welcoming the handful of active leaders who will dive into this day-long program early tomorrow morning.

If you are interested in participating in this program or in finding other ways that SCACPA can connect you to success, please contact any of SCACPA’s team.

Also, be on the lookout for more information about similar SCACPA programs in the CPA Report.

Blogger: Emily Allen, Communications Coordinator, South Carolina Association of CPAs

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Are You Prepared to Weather an Emergency?

CPAs know how to handle a financial crisis, but do you know how to handle the emergencies that arise in the summer months? In South Carolina the weather can turn violent unexpectedly and quickly. Know how to keep your office and your home ready for any weather related disasters that may crop up this season by taking stock of your emergency supplies using this list from ready.gov, and creating an emergency kit that is easily accessible by all inhabitants of the building. The main ingredients for a well-stocked preparedness kit for the office should include (but not be limited to):

  • Water (a supply of a gallon per person for three days)
  • Food (non perishable ready to eat items, three day supply)
  • Battery powered or hand crank radio
  • Flashlights, batteries
  • Lighter or matches
  • First aid kit
  • Blankets
  • Toilet paper, paper towels
  • Utensils and can opener

Once a kit is assembled and in a known location, make sure that all employees are aware of what to do in the event of any kind of hazardous weather situations. Plan where to assemble in case of fire. Know evacuation routes in case of a hurricane or other cause for evacuation. In the event of a tornado warning, make sure all staff knows to go to a windowless part of the building and how to properly assume a curled position with their head and eyes covered. Keep all staff aware of any changes to the emergency plans, and keep a current record of emergency contact information for all employees. Consider sending multiple staff members to become certified in First Aid and CPR. The Red Cross offers a downloadable emergency preparedness checklist on their website .

No one likes to think about extreme natural disasters occurring and ruining their communities and disrupting their daily lives, but in the case of a real problem, knowledge will keep each of your employees calm and level headed while they work together to ensure everyone’s safety. Take the time now to minimize the potential impact later.

Blogger: April Blake, Office & Member Services Coordinator, South Carolina Association of CPAs

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Throw Your Graduation Hats in the Air ‘Like You Just Don’t Care’

Except… in this economy everyone who needs a job really does care. They care if they’ll be able to get jobs and avoid moving back in with their parents, and keep making their car payments, and then if they’ll be able to pay the student loans off that will inevitably come rolling in. Luckily for accounting grads, CPA candidates, and high-schoolers with a penchant for math, 71% of the largest firms in the country anticipate an increase in hiring in 2011 and beyond. Demand is certainly outpacing the supply of accounting professionals in today’s world. Luckily for whoever is paying for the student’s schooling, 2/3s of accounting graduates earn their degrees at public universities, which are significantly less expensive to attend than private colleges.

More affordable schooling options means that accounting graduates are becoming a much more diverse group than your stereotypical accountant. Numbers are nearly equal when comparing the amount of men to women in accounting programs. The combined percentage of ethnicities other than white is about 30% as of 2010, a number than is increasing each year (these numbers are based on the combination of BA and MAs in accounting).

The real number in question for these fresh faced young people who want a paycheck from following out their accounting passion is “How many minutes after I graduate before I get a job offer?” 

Of course, that can only be determined by the particular graduate by way of their grades, demeanor, interview skills, and technical assets that they bring to the table. Relax young accountants and CPA candidates, while the Comparative Literature majors may be heading to the local mall for job applications, you’ll be heading into an office in your interview finery in no time.

Blogger: April Blake, Office & Member Services Coordinator, South Carolina Association of CPAs

All statistics are from the AICPA 2011 Trends In The Supply of Accounting Graduates and the Demand for Public Accounting Recruits.

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We Want to Hear From You!

If you have been with us for a while, you may have noticed that this blog has switched from one main contributing author to a variety of authors.  While the SCACPA staff enjoys providing content, we want to be sure that it’s pertinent to you, the member. If you would like to submit content, be it technical, educational or whimsical, please contact Emily Allen (eallen@scacpa.org).

Also, if you have ideas for content that you would like to see in this blog, please speak up!

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