3 min read April 2023 — Joshua LaPan, partner at S&G LLP, spoke on trends in the accounting industry, adapting to new needs and developing a holistic approach to helping clients. LaPan emphasizes the importance of new technology at the firm and AI’s impact on traditional compliance work.
How has the industry changed?
Our service needs in the CPA industry have changed dramatically. Since I started in this profession 25 years ago, audit and tax compliance services made up roughly 90% of our business at that time. Whereas today, we are at 65%% with our goal being to get it down to 50% compliance services and 50% or more on client value add advisory services. A large sector of our advisory services is business transition/exit and value growth planning where our co-managing partner Terry Shepherd is an industry expert. Terry has been an expert panel guest ,written white papers, and recently released a best-selling book that he co-authored that uses case studies to illustrate the secrets to business success and personal happiness. (The Graduate Level of Business Ownership) Taking the proven process that Terry helped develop, we assist our clients in achieving their end in mind goals by making sure their personal goals drive their businesses strategic planning. Additionally we do consulting on various aspects of business operations. We do that through all types of outside of the box services that we render. That’s where I see us going from an S&G perspective. Obviously, the changes in technology pushes us into new areas and allows us the ability to service our clients in a different way than we used to in the past. y. Many of our clients now have operations globally. From that perspective, it’s an ever-changing landscape relative to a firm of our size and the ability to compete with some of the larger players. We have experienced tremendous growth over the last 10 years with many of those years exceeding 15% year to year. However, we pride ourselves in our ability to maintain the office culture that we built the firm on. Consolidation within our industry is constantly happening. Larger firms are gobbling up smaller firms. Even some of the medium-sized firms try to acquire some of the smaller practices, which includes us. We’re always in the market for firms that fit our culture, our revenue and client base size. Firms are trying to acquire talent, which the industry is constantly dealing with — I think that drives the consolidation within the marketplace.
What challenges do you face in gaining clients?
With growth and gaining clients comes a change in client size and complexity. We are constantly educating ourselves and staying on top of the ever-changing laws, the treaties that are involved with international tax as well as the cultural differences of the areas. There’s definitely a lot of changes relative to that, but it’s good and allows people to be able to do business with each other from all over the globe. It’s certainly expanded our footprint from a client perspective, but we have to stay on top of the laws and the differences on the financial statement side of things between GAAP and IFRS. It’s a challenge, but I think it’s one that we need to meet in order to compete at that level.
What trends and changes are you seeing in the market?
Operationally our clients are still adjusting to life in a post-pandemic era. Which includes the continuance of a remote workforce and the impact to training new team members and general office culture moving forward. From a tax perspective, we all understand that there’s been a lot of spending in recent years, especially through the pandemic, that ultimately somebody has to pay for. We are keeping an eye on capital gain rates and where they are headed in the future. One of the key things that we’re dealing with now is the Section 174 Research and Development amortization. That’s been a real critical component which may have a large impact on our manufacturing, construction, computer science and other clients. Instead of immediate expensing, taxpayers now need to amortize these expenses over a five-year period. Legislatively, the industry and tax professionals didn’t believe that this change was going to be something that stuck. Most taxpayers didn’t plan for it. Currently there is a lot of lobbying to have the amortization provision repealed. So, we’re in a waiting pattern, holding off to see whether or not those clients are going to actually have to itemize. That’s been a really critical component to a substantial number of our clients. The Massachusetts millionaire’s tax is also one that’s near and dear to our hearts. We don’t expect a change there. It’ll be interesting to see what that means from a long-term business perspective, because now we’re a high income tax area. We’ve already seen folks move to lower income tax states. The interesting piece will be what that means to business owners that are currently operating in what is already a high cost environment between the labor market and the overhead market. We have a state like New Hampshire that is a zero income tax state right next door to watch logistically. That could potentially become a big concern.
What are your priorities for the future?
I really see the future getting away from the compliance type of services. Obviously, you have to do that work, but being able to offer a larger portfolio of services, whether it be financial services or advisory work, there’s a lot of different things that CPAs now are doing within their own business. It’s continuing to grow our service offerings, as I believe what clients are looking for is a one-stop shop relationship. I don’t believe that we’re too far off with computers being able to do a bulk of what we do from a compliance perspective. I think we need to, as a profession, stay on that and be the true trusted adviser, which we always have been. This profession has always been known to be very ethically sound and we continue to be the liaison between them and what their goals are. That’s the critical component to building relationships and maintaining them. You have to be able to offer more than just tax and compliance type of services.
What would you say to young accountants?
I always tell people, accounting is the foundation for business operations. It’s a great thing to get into and you can always do something else, whether it be marketing, management, or entrepreneurship with your own business. To really understand accounting is a key component to understanding how business transacts. I always recommend getting a strong fundamental accounting base and then growing it from there.
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