CPA Vs Ron Smith Season 2 Episode 5

20 Feb 2023  |  1823
CPA Vs Ron Smith Season 2 Episode 5

In this episode they discuss in detail on how to level up end scale CAAS and VCFO services with offshoring.

(Accountant and Ron Smith run into each other at the park)

CPA: Hey Ron! I didn’t know you jogged in this park as well. 
Ron Smith: Hi! I’ve started doing so recently. What about you?

CPA: Oh, it’s been about three years since I started coming here. As they say, health is wealth. 
Ron Smith: Haha. Absolutely! 

(They take a seat on the park bench)


Ron Smith: So how’s offshoring working out for your firm?
CPA: It’s been great. I’ve been implementing new practices and policies as per your advice and recommendation and the response has been phenomenal.


Ron Smith: I’m glad to hear that. Do you know that firms like yours have been scaling up their Client Accounting and Auditing Services (CAAS) and Virtual CFO (VCFO) services with the help of offshoring?
CPA:  The market talk regarding it hasn’t escaped my notice, that’s for sure. Could you throw some light on it? I would love to know more. 


Ron Smith: I’ll be happy to. Basically, it’s an end-to-end service wherein you provide accounting and auditing services to your clients by utilizing the concept of offshoring, An article by Accounting Today recognizes it to be one of the fastest-growing  areas in the industry. 

CPA: But, isn’t it kind of a distraction? I mean, we are already filled to the brim with deadlines, audits and whatnot. Is it really worth it?

Ron Smith: I’ll give you seven reasons why it’s worth your time, money and consideration.One, it’s a great way to get amazing profit with less number of clients. You see, it's a very different business model we’re working with here. You don’t need hundreds and thousands of clients to make a sizable profit. With as few as 30-40 clients, you can clock in a million dollars in revenue. 

CPA: Are you serious? Tell me you’re joking!
Ron Smith: Serious as a heart attack. Haha. Jokes apart, you have to understand, it’s a value driven business rather than a volume driven one.


CPA: Okay. Say I believe you. But then, why would any business want to hire my services rather than recruiting an employee themselves to do it all?
Ron Smith: Because there is a shortage of talent in the market. Look, any business, especially a growing one, needs accountants, bookkeepers and even CFOs. Hiring individually for each role, is obviously going to put a massive dent in the coffers. Here is where CAAS and VCFO services provided by your firm come into play. According to a recent Xero survey, 77% of business owners would pay someone to stop doing CAS-related activities. 


CPA: What about the engagement? You said a firm could earn about a million dollars in CAAS revenue alone. My question is, how?
Ron Smith: The engagement range is very high. Depending upon the size of the client, anywhere from $30k to $500k is a possibility. This is a very niche service and there are very few players in the market doing it right. The more you perfect it, the higher the engagement. It’s as simple as that. 


CPA: Wow. That honestly sounds like a pretty sweet deal. 
Ron Smith: I told you, didn’t I. This is also a great way to ensure client satisfaction and loyalty. The more solutions you provide to your clients’ worries, the more they stick with you. 


CPA: I’m starting to get it now. 
Ron Smith: Another benefit is the ability to easily spot upsell advisory opportunities. Moreover, It’s a lot faster to complete your compliance work when you’ve been the one handling the books and payroll of the business. Thus, saving time translates to cost saving which subsequently ends up boosting margins.


CPA: Right. So how does offshoring come into play here?
Ron Smith: By utilizing offshoring to provide CAAS and VCFO services, you are bound to gain numerous benefits. Firstly, you can now target acquiring big clients that you would usually be unable to do so. 


CPA: Didn’t you say the engagement depends upon the size of the client?
Ron Smith: I did and that is exactly how catering to such big businesses will help you increase profit and engagement. Just Remember, 20% of such A-category clients will give you 80% of your profits. 


CPA: Yeah. That makes sense.
Ron Smith: Offshoring helps you provide full-stack services to your clients such as transactional work, compliance, controllership, advisory, CFO services, etc. What more? You can also customize the intensity of your services as per the needs of your client.   


CPA: Agreed. But what’s to say, the client himself won’t opt for offshoring such services once he realizes it’s benefit?
Ron Smith: Typically, you require a team of CFO's, controllers, Sr. Accountants, account manager, bookkeeper behind you to provide services. It is unlikely that your client goes offshore for hiring a part-time bookkeeper or accountant when he has you providing value-added shared services right there. Price your services right and you are in a position to make a huge profit. 


CPA: So we would be competitively pricing these, right?
Ron Smith: Correct. Just make sure that the pricing is less than what the client would have to shell out if he were to hire a full time employee or seek out offshoring himself. 

CPA: Of course. Could you give me an idea of what kind of project margins we are looking at here?
Ron Smith: Well, as I said, it depends upon the size of the client and the quality of services provided. But firms that have scaled by offshoring have seen  engagement level margins of 70% and the profitability of 50% and up. 

CPA: Quality of services is the most important. 
Ron Smith: It totally is. We encourage our clients to carry out an elaborate analysis of what their firm would need to provide top quality CAAS and VCFO services and then make certain to have the procedures and processes in place to ensure smooth and efficient running of the entire venture. Effective and efficient communication should also be prioritized by having a single point of contact from your firm that your client can transmit information to. 

CPA: Well, this entire thing has definitely piqued my interest to say the least. 
Ron Smith: I’m glad. I would recommend you to conduct your due diligence and seriously consider incorporating it in your firm. It’s a fantastic way to expand your portfolio, grow your firm and stay a step ahead of the competition. I have seen firms having such efficient processes in place for CAAS and VCFO services that they have ended up acquiring almost 100-200 clients with each individual engagement being anywhere between $50k  to $500k. Having associated with you and your firm for so long, I would say go for it!

CPA: You’ve certainly given me a lot to think about. Thanks Ron, for your sound advice and patient replies to my queries as always. I’ll be in touch with you soon to discuss more about this. 
Ron Smith: You’re welcome. Contact me anytime. Bye!

CPA: Bye!

About The Author

Sia has spent all his career developing business improvement methodologies for Accounting and Law firms. He has created compelling marketing content, professional courses and workshops accredited for CPE, and seminars attended by hundreds of firms worldwide. Sia has enabled hundreds of professional services firms, including former managers of the ‘Big 4’, to resolve issues that impeded their ability to achieve success beyond expectations. Sia’s passion is to instill morality and fair dealing in the business world to cultivate relationships. His key to success has been ‘putting people before profit,’ a strategy that has proven to be profitable.

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