Importance of Succession Planning

Executive Summary of CPA Firm-Related News Over the Past Week

• Succession Planning
  • It’s important for CPA firm owners to have a comprehensive succession plan that includes:
    • Operational Considerations – Planning for who will take over operational roles in the event of a key person’s absence, as well as a consideration of multigenerational ownership and leadership capabilities.
    • Financial Considerations – A consideration of regular business valuations, personal guarantees on loans, and the complexities surrounding the transfer of real estate and business ownership.
  • External advisors can help facilitate this work.
  • Adequate succession planning can help facilitate a smooth transition when it’s time for the firm to implement it.
  • “Owners need to run the scenario in their heads and pretend that this all happened yesterday.”
• Developing Future Firm Leadership
  • Firms are facing a leadership transition challenge as senior partners retire without a prepared succession plan of up-and-coming leaders.
  • It’s important to identify and develop future partners with a blend of technical skills, communication abilities, problem-solving capabilities, and leadership qualities.
  • Offering a clear path to partnership and supporting professional growth is crucial for retaining top talent and ensuring the firm’s long-term success.
  • Cultivating these future leaders requires a strategic investment in their development, focusing on enhancing core success skills beyond technical proficiency.
• Cybersecurity Urgency – Cyber attackers are increasingly targeting accounting firms, which illustrates the need for robust cybersecurity measures to protect firms’ sensitive data.
• Tips for Reducing Talent Attrituion When Returning to the Office
  • A disproportionate percentage of high-performing employees are likely to consider leaving their jobs due to return-to-office (RTO) mandates.
  • Recent research from Gartner HR indicates that an RTO mandate could reduce the intent to stay among knowledge workers by 8% and among high-performing workers by 16%.
  • The reduction in intent to stay is more pronounced among women and Millennials.
  • Gartner HR suggests companies looking to enforce RTO mandates while retaining key employees consider implementing strategies to mitigate the risk of losing high-quality talent.
  • Four tips for reducing talent attrition when getting staff to return to the office include the following:
    • “Provide a clear reason behind requirements for working on-site.”
    • “Motivate employees to return to the office rather than mandate that they do so.”
    • “Consider policies that focus on in-site attendance days per year, not per week.”
    • “Enable employees to shape the RTO policy.”

Accounting Today –  Cybersecurity for CPAs: Don’t Get Complacent 

• Cyber attackers are increasingly targeting accounting firms, which increases the need for robust cybersecurity measures to protect sensitive financial data.
• “Modern accountants must take their cyber defenses seriously for the sake of themselves and their clients.”

Accounting Today –  EY Poll: Excitement and Anxiety about AI, in Equal Measures 

• Workers have mixed feelings about artificial intelligence (AI).
• “On the one hand, most believe AI will make them more efficient (82%), more productive (81%), and able to focus on higher-value work (81%).”
• “At the same time, people cited concerns about AI adoption making certain jobs obsolete (75%) [and] negative impacts on pay/salary (72%).

Accounting Today –  Gloom or Boom? Tax Pros Differ on AI 

• Some tax professionals see AI as a tool to enhance their practice, while others worry about its implications, especially in terms of data privacy and accuracy.
• The industry anticipates AI will free up time for value-added services and increase efficiency and profitability.
• “What I am worried about [regarding] AI,” Nadig said, “is the access that it may have to confidential information and what procedures and safeguards will be put in place to monitor misuse.”
• “Whether or not you’re afraid of AI, we’re going to need it to meet the demand for services,” said Scott Kadrlik, managing partner at Meuwissen, Flygare, Kadrlik & Associates, in Eden Prairie, Minnesota.
• While AI can assist with certain tasks, it is not likely to fully replace the need for human judgment and expertise in tax preparation.

Accounting Today –  How Accountants Can Make Remote Work Work 

• Working from home has become a widely accepted practice, with a significant portion of full-time employees engaging in remote or hybrid work arrangements in 2023. 
• Accounting firms are recognizing the need to adapt to this shift in the work environment to attract new talent and promote efficiency. 
• “With almost 13% of full-time employees working remotely, and 28.2% in a hybrid arrangement, accounting firms are coming to see the importance of adapting to the new working environment.”

Accounting Today –  PE Firms Expand Accounting Investments 

• Private equity firms are increasingly investing in accounting firms, with Ascend and Springline Advisory leading recent acquisitions.

Accounting Today –  Voices The Two Sides to Succession Plans for Private Businesses 

• It is important for business owners to have a comprehensive succession plan that includes:
  • Operational Considerations – Planning for who will take over operational roles in the event of a key person’s absence, as well as a consideration of multigenerational ownership and leadership capabilities.
  • Financial Considerations – A consideration of regular business valuations, personal guarantees on loans, and the complexities surrounding the transfer of real estate and business ownership.
• External advisors can help facilitate this work.
• Adequate succession planning can help facilitate a smooth transition when it’s time for the firm to implement it.
• “Owners need to run the scenario in their heads and pretend that this all happened yesterday.”

CFO.com – 46% of Employees Say They Lack Career Support from Managers

• A recent survey reveals 25% of employees are likely to quit within the next six months due to insufficient career development opportunities.
• The survey indicates a strong desire among employees for more regular and meaningful career development conversations with their managers.
• Gen Z, in particular, values regular career guidance and is more likely to seek advice from social media and ChatGPT than managers.
• An investment in learning and development is “cheaper than the cost of turnover, onboarding, and raises. And since 74% of employees think of them as ‘just as’ or ‘more’ valuable than a promotion or title change, offering this programming is a no-brainer.”

CFO Dive – AI Dominates CFOs’ 2024 Budget Hike Plans

• A recent Gartner survey indicated 90% of CFOs project higher AI budgets with none planning reductions.

CFO Dive – CFOs Harbor Data Quality Worries Ahead of AI Push

• CFOs are increasingly relying on artificial intelligence for more transformative insights, but there’s a concern about the quality of the data feeding these systems.
• A survey by BlackLine indicates that 37% of finance chiefs don’t fully trust their organization’s financial data, highlighting the importance of data quality for effective AI implementation.
• As a result, there’s a push towards ensuring clean, streamlined data, with enhanced governance and process improvements.

CFO Dive – Want a Remote Accounting or Finance Gig? It Could be Your Lucky Year.

• Accounting and finance jobs have surged to second place for work-from-home roles, according to FlexJobs’ 2024 ranking.
• The sector has seen consistent growth in remote opportunities, moving up from sixth place in 2020.
• Despite challenges in hiring due to a shrinking talent pool, remote work is emerging as a solution for many firms.

CPA Practice Advisor – The AI Feeding Frenzy Continues

• Accounting firms’ integration of AI is still in its early stages, but it offers real benefits.
• “Key learnings on AI developments include 1) no one AI model will solve all the business problems at hand, and 2) AI will become a part of our products.”

CPA Practice Advisor – Developing Future Firm Partners

• Firms are facing a leadership transition challenge as senior partners retire without a prepared succession plan of up-and-coming leaders.
• It’s important to identify and develop future partners with a blend of technical skills, communication abilities, problem-solving capabilities, and leadership qualities.
• Offering a clear path to partnership and supporting professional growth is crucial for retaining top talent and ensuring the firm’s long-term success.
• Cultivating these future leaders requires a strategic investment in their development, focusing on enhancing core success skills beyond technical proficiency.

Forbes – Leveraging AI: A Global Growth Roadmap For SMEs In 2024

A recent article from Forbes shared the following ways AI can benefit your firm

• Sales – “Consider leveraging AI tools to conduct in-depth market research and market analysis to identify potential new markets or customer segments.”  Then, use AI for “personalizing customer interactions, predicting market trends, automating parts of the sales process, and enhancing online sales strategies.”  Use AI to “create highly personalized experiences, which could lead to increased sales and customer loyalty.”
• Cut Expenses – Use AI for “maximizing operation efficiencies and reducing operating expenses, [including] automating routine administrative tasks…Consider implementing AI-powered chatbots and customer service tools that can handle queries in multiple languages.  This ensures efficient and effective customer support without the high cost of a large, multilingual support team.”

Future Firm – Leave Your Ego at the Door

• It’s important to void letting your ego contribute to poor business decisions that could reduce your financial freedom, time for personal interests, and your accomplishment of your ultimate business goals.
• For example, be cautious against the allure of “getting followers, likes, and engagement on your social media accounts.”

Going Concern – Oxford Study Finds Workplace Wellness Programs do Diddly Squat for Mental Health

• Dr. William Fleming’s research indicates that individual-level mental health interventions, such as resilience training, mindfulness, and well-being apps, do not improve employee wellbeing in the workplace.
• Fleming advocates for organization-level initiatives targeting improvements in working conditions, management practices, and job design as more effective means of enhancing employee wellbeing.
• Wellness programs don’t “undo” the damage of a stressful work environment.

Journal of Accountancy – Return-to-Office Politics: 4 Tips for Reducing Talent Attrition 

• A disproportionate percentage of high-performing employees are likely to consider leaving their jobs due to return-to-office (RTO) mandates.
• Recent research from Gartner HR indicates that an RTO mandate could reduce the intent to stay among knowledge workers by 8% and among high-performing workers by 16%.
• The reduction in intent to stay is more pronounced among women and Millennials.
• Gartner HR suggests companies looking to enforce RTO mandates while retaining key employees consider implementing strategies to mitigate the risk of losing high-quality talent.
• Four tips for reducing talent attrition when getting staff to return to the office include the following:
  • “Provide a clear reason behind requirements for working on-site.”
  • “Motivate employees to return to the office rather than mandate that they do so.”
  • “Consider policies that focus on in-site attendance days per year, not per week.”
  • “Enable employees to shape the RTO policy.”