Our experts Chris Rivera and Jared Van Arsdale have discussed tax, labor issues, economics, and the importance of legislative engagement in this podcast.
#BKOT 38: BUILD A KICKASS OFFSHORE TEAM
TAX, LABOR ISSUES, ECONOMICS & IMPORTANCE OF LEGISLATIVE ENGAGEMENT
Hosted by: Chris Rivera, Director Client relations, Entigrity Offshore Staffing
Guest: Jared Arsdale, Board of Directors, Arizona Society
Chris: Alright! Happy Monday everybody. Welcome to today's podcast episode number 38 #BKOT. Thanks for taking time out during your lunch or on the west coast in the morning and joining us today. So we have some interesting topics to speak about a special guest from ullmanncpa.com Jared Vandy Arsdale based in Arizona so he's up a little bit early and things we're gonna discuss is tax, recent tax dues some labor issues been a big not just across the states but I'm noticing across the North America and importance of legislative engagement in relation also some economics today. So Jared, thank you for taking time out today so please tell us about yourself a little bit.
Jared: No, Chris I appreciate the opportunity to get to talk with you. I'm Jared Bernard's CPA. I'm a partner with a firm home and company here in phoenix. We're a small firm. We have 10 people, three partners. Everybody here is CPA or will be a CPA. We don't have the normal hierarchical structure of a CPA firm so we don't tend to do a lot of kind of write-up work type accounting practice, are you typically seeing a small firm we tend to stick with our niche areas and our high net worth clients to you know add value you know not the way I explain it to the staff and potential clients. If we can't add value beyond just a commoditized tax return at the end of the day at the end of the year we're not necessarily providing a good service right, so we tend to be very specific to the clients that we're bringing on to the ones we can actually add value with on an annual basis and outside the firm I'm a past chair for the Arizona Society of CPAs and a member of the council for the American Institute of CPAs as well.
Chris: Awesome! So as you and your close-knit group at the firm work, you know income the pandemic and did you see many transitions happen within your firm or were you already kind of that virtual model and where do you see yourself going in like the next three years.
Jared: Yeah so before let's say about 2013 I think at some point we were deemed early adopters of a cloud-based internet service system so most of our team was already working on a remote type of system not necessarily out of the office. We had migrated our servers off-site, so they were used to the environment even though most of them were still in the office daily.
So when we transitioned out of the office it was pretty seamless I think there were a few more devices and things like that we needed to take it was mostly kind of navigating the staffing and personal issues of staff through the code environment and trying to figure out you know Arizona tends to be a little bit more you know we tended to find wild west a little bit better than other states you know and so the governor had removed the worker home requirements pretty quick, it was like midday May 2020. I think is like within like 60 days and so trying to figure out who's going back to the office how we're going to do client engagement yeah we're going to deal with you know potential new referrals getting everybody kind of up to speed on how this kind of new environment is going to work and it's all worked out just fine, you know what I've noticed though you know from a new team member perspective we ended up picking up a couple team members here in the last 30 days or so is that demand from uh the labor force itself has changed dramatically from what we expected last year you know you know last year there was a little probably kind of like a kind of an uncertainty higher you know because of everything kind of going on through the summer of 2020 but prior to that let's say you know december of 19 the labor expectations in exchange for you know services had changed radically and kind of the labor force was just kind of dictating the expectation of the position versus the employers taking the expectation of the position.
So maybe probably some supply and demand issues it's just because of you know I think like new graduates coming out of the university we're kind of they've never worked in an environment that wasn't remote or flexible in some fashion or another so this is their basic understanding of how public firms work type of thought process you know so you know from your perspective have you seen the kind of just expectational change you know from a labor standpoint you know because it was kind of a surprise to us we expected it to be some type of drawback to the office mainly. After all, you know I'm you know maybe leaning towards that kind of back-to-office Arizona we're back at it by summer 2020 type of thought process.
Chris: Yeah so I have worked across several industries and remote work was always an option right and I came into the accounting industry over four years ago and the word remote or virtual was like never before heard, never before thought of, not for anybody and myself for all four years I have worked remotely.
And so when I speak with clients and I am discussing this whole concept of what we do? How do we go about it? What's in it for them advice guidance but anytime they'll mention the word remote or virtual two-three years ago there's a lot of hesitation. Now that's changed I become more comfortable understanding that these specific tasks can be done by anybody and not just anybody in their office.
Anybody in this world has been refreshing to see the hesitation lower, the anxiety lower, and adopt it however nothing beats the face-to-face interpersonal relationship. I mean the best part of my job was going out and meeting clients throughout the summer months right and so last year scratched that this year started to get back into that slowly. So I think the hybrid environment is perfect and it should be should have been implemented already you guys were ahead of the game doing that so it's perfect but you need to have a mixture of colleagues and peers of mine have also noticed where for example one friend of mine was doing works for the firm here in New York City where I am based out of and they used to always do their month-end close and it's just been stressful and it would get done or just be a little late and it just was always like what could we do.
Now when they move to the remote environment they just everything's getting done early and so when New York city re-opened up they were supposed to go back to the office and they made it optional and they what do you call it, hot dust game right everyone lost their desks but they can come in if they'd like just kind of get your work done. And so that's just very important to set these expectations to offer the ability of a hybrid office. I think it is very important not just in the accounting industry but in all industries you have that option.
Jared: Right, it's funny as you said because I was I had breakfast with a colleague of mine from the state society CPAs, he's a partner at a mid-sized firm here in the valley and he was telling me this same thing is that I think they didn't call it hot desk with this kind of office rotational issue right and partners sharing offices staff sharing offices and I think the one that stuck out in his mind he's like the setting the tone at the top right and saying listen we are doing this everybody's doing it we are rotating in and out two or three days a week whatever you are comfortable for you works for you and your schedule, but partners you're giving up your parking space as well so there are certain things that who might have been defined as like hands-off that get rotated through this process as a means of just setting the tone, hey flexibility is the standard rather than the exception. And so for now this is my pure curiosity. It is from your perspective not on the offshore spot because I recollect that a big portion of the offshore work that you've done is in the middle east right in India. Is there any like in the Philippines or anything like that as well?
Chris: Oh no, India is number one in accounting hands down okay they were reporting into an office and doing client work right. So yeah just because it's remote right people also get that mixed with others oh no not in this case and you must understand that the expectation so they are reporting tonight so there's a controlled environment right.
Jared: But how was the Covid outbreak, I can't remember the variant issue that helped in the last three months roughly. How did that kind of thing modify that remote work environment from India?
Chris: Yeah, it was tough, it was really tough and so our clients, especially our tenured clients, we're offering for their associates to work at home. I am signing off and approving this because it's not a model that we do on a normal basis and it was good right but they put their associate at ease every they're treated on the same level as their onshore team with that flexibility, but this was at the idea of the client so but then still 80 of our resources reporting into the office.
But it's just a feel-good feel good for everybody to understand that we are all on the same page we are dealing with this hard and we had already implemented PPP protection and testing and isolated cases you get those taken care of right away but the staff and the team has done very well through this but it hasn't been easy not so much right because of the controlled environment we have to literally move the computer over to their house right so but to our clients make sure everyone's on the same page it's just understanding that everyone is treated equally and so it was managed but tough to sum it up. What I have done I know you specifically haven't worked with offshore staff but what are your thoughts on it especially about compliance and so to help your local team be more advisory.
Jared: Yeah, from our perspective because we don't provide any kind of we try to minimize the amount of replicative work that we tended to end up handing off to associate so we try to maintain a level of service that is effectively you need the CPA license or the CPA experience CPA to work on but from our experience that from working with clients that have used offshore staffing is that you're structuring your schedule around it but it tends to be stuff that you anticipate be highly reflective you end up seeing a lot of commoditization around write you on the ap transactions the reconciliations the kind of the stuff that you see on a month-to-month basis that kind of just the background work that you're not seeing most firms dealing with that you think of it as kind of commoditizing that bookkeeper type of relationship or maybe even the part-time controller type of relationship that's just not really doing anything else besides the financials on a day-to-day basis it totally makes sense from a compliance standpoint.
I am a tax partner here in our firm and the amount of legislation that I ran through in the last two years has been dramatic and I could take a back seat and just kind of wait for 30 days and wait for someone to summarize it for me and kind of get the headline details and kind of work backward from there as issues come up but after the cares act passed I think within that week I was sitting there reading 800 pages of tax legislation and then the December omnibus bill and then again in march the ARPA law and then this weekend I was reading 200 pages state tax law with the Arizona state budget pass would have a bunch of tax provisions.
And it's simple to identify anything and everything that can affect clients as means that value-add it's like listen there's this is happening it doesn't affect us immediately but it's going to affect us next year and we take that into account what at the state level we are talking about a few percent right a good example is that we represent Arizona just happens to be one of the states that have a pretty large population of private water and wastewater utilities, just deregulated energy market.
And the so we end up representing a number of them you think of like small hoas with a well that everybody uses or a small town that the municipality doesn't want to effectively doesn't have and doesn't want to necessarily manage the water and wastewater so they privatize it and so those clients in order there's a specific portion of their life that's a relationship with the developer and they're called contributions in native construction and one of the SM that small portion of the that small population of CPA firms end up dealing with unless they're dealing with utility clients was in this tax law but now I can communicate that to clients say listen this is a thing that's not going to be taxable going forward you have to change all your deferred tax calculations, you're going to have to go through and revise your estimates revise your budgets associated with state taxes and kind of go from there and is it going to affect them today tomorrow is it an amendment opportunity to go back and claim some state tax revenues back.
So there's so much entrenched in the value that we can deliver simply by being more privy to what's happening in our state legislators for federal legislatures in advance or very quickly after and a lot of people end up devaluing it because it's incredibly time-consuming and no one necessarily wants to read tax legislation or any legislation in the fact but it there's a being aware of who the players are and what things are happening inside those the functionalities of our state local governments gives us so much of a wake up simply because one we can interpret it, communicate it into English right and deliver it and at the same time add a tremendous amount of value that isn't connected to the billboard right and kind of re-strengthen those relationships.
Chris: Yeah as it seemed like it was over a two-year tax season it just continued one into the other and then yeah it was already 2019 was right into 2020 and 2021 came out of nowhere and it's like wow right and so that as we move along and hopefully now everything's kind of leveled out but as far as tying in with the latest news and also economics I mean you see any areas of opportunity or do you see anything in the future that closely relates to the accounting world?
Jared: I think it's just a matter of identifying the clients that we see have tremendous upside versus the complete opposite ones. Unfortunately for because of Covid we have a necessarily large cloud base we have some clients that they've learned that the community and society as a whole can live without travel, we can live without going to restaurants, and we can live without leisure for a short time. So they quickly or identified as very ancillary services, for ancillary products or ancillary things that were disposable right and so we have several clients who have like music venues or we have one particular client that has retail locations inside airports right and they were completely decimated by Covid and most of them like some of the music locations as of today still haven't opened their door to a single event the retail locations at the airport kind, they'll be I think they opened up their major stores towards Christmas of 2020 and they're kind of re-staffing slowly as stores reopen and as particularly as volume returns at the airports but so there's that one client base that's been absolutely decimated simply because of the industries to which you observe they work in and then you have other ones that it's the best years I have ever had in 2020-21.
I mean obviously there's correlations based on industries but I don't think anybody would have identified which ones would have seen just an absolute explosion versus just kind of a steady climb and the one some of the manufacturing clients one particular is he was a broker of ethanol between farmers and manufacturers and ethanol happens to be a prime ingredient in hand sanitizer and his entire life exploded for an entire year as the most money yeah most money made in the 70 year he had been practicing he happened to be pretty old when he was still doing this brokerage work, but the economics way is in Arizona, this is what I am having trouble really understanding I don't have an economics degree but it's incredibly interesting is Arizona happens to be expanding pretty aggressively, there's a lot of development home prices are relatively let's just call them partially insane and it's blamed on maybe population shift, let's blame maybe on just sheer demand, built up demand over a 12-month-15-month period but at the same time you think of it is that we didn't expand population these people are if it's population where are they coming from.
There has to be a loser on the other end of that transaction if we are coming from Northern California shouldn't I see prices as something decreasing somewhere else in the country. It doesn't seem like that's the case it seems like there's just unlimited prosperity in certain industries and maybe just asset prices in general but it seems like there's hard to find the population or this geographic area that's losing in today's economy, which is really interesting it could be out there I just might not have been able to identify it but we are because we are positioned directly from California and there's this kind of push if people think they're leaving the state we might be one of the prime beneficiaries of that but shouldn't we see a negative in economic impact to the state of California if that were the entire reasoning and I am not seeing it right housing prices still there are astronomical as well.
So there are some really interesting issues at play and I try to particularly our younger clients out there, young entrepreneurs in their late 20s mid-30s or something like that say listen you're in one business cycle give it 15 years we might be in a completely different business cycle so we take our wins where we can get them we structure ourselves but we still have that plan B in place for next time because there's going to be another business cycle that's not necessarily going to be beneficial to us in some fashion or another and we have to be able. If it never happens great it's you know rainbows every day going forward but if it does happen at least we are prepared and we have the anticipation of what we are going to do from a firm perspective or even from a client perspective by being diversified as much as possible and don't have any large concentrations, that's going to cause any problems but sometimes it's unavoidable.
Chris: Well said!! yeah very well said I absolutely agree and made you realize the value importance of everything I mean the funny story on the side is I am very a ritual with cutting my hair every week I go to the barber right and it's just it's a good feeling I do a lot of videos I going to have a haircut well I will come to pandemic, I cut my own hair and I taught myself and I have been learning it and you just it now it becomes something that I own and I don't need anyone else to do this and so like as you're saying certain industries we are getting affected in different ways and so I mean on a personal level it made me realize that I was like I felt better I mean I have a good relationship with my barber right and the same thing small business good relationship but they're currently and so but I no longer go there and I haven't been there in such a long time and so the ups and flows of what happens but it's just so important that your firm is geared for anything like literally anything I mean us like I said I work remotely pandemic came I was like oh well I guess I am stuck here all day all my outlets were taken away social events, networking, meeting friends, gym things like that but day-to-day business I mean the increase has started pouring in because we are already geared for that and so as a firm owner partner director you always going to be planning ahead and too much thinking in the now, working in the business you got to work on your business make sure you're ready for anything.
Jared: We do I what I saw from some of my staff members that you and I probably was a victim of this myself is that during middle summer of 2020 we allowed ourselves to be sucked into the now right we allowed ourselves particularly think of the client base that was just being completely decimated by what happened and just as a kind of altruistic trying I am trying to help them as much as I can type of thought process and what ends up happening is you end up sacrificing the level of attention, the level of hours or so if I told my wife if I could find it some way to make the five hours of sleep, I get productive I would take it but you sacrifice one relationship in exchange for the other so if you're not able to take a step back and have a macro thought process to identify say yeah I got this portion of clientele they're just being absolutely decimated.
We can sign a couple of staff members to kind of help them get through this process but we have some that are just off to the races and they need just as much attention, so just as much services or just as much thought process and guidance that we have to be able to step back and think who's going to be at who's going to be here at the end of two years who's going to who industries are still going to be working in five.
And if we see some that are is there in an easily identifiable business model is being disrupted and disengaged in two to three years maybe even 10 years it's like you got to say okay we'll help see what we can do to help them see if they can figure out a way out of this business model or to adapt as they need to but it's impossible if there are business cycles economically there's business cycles in certain industries there's going to be business cycles a certain clientele that just might not make it to that next benchmark. When we get in as firmware is that you get a step back macro and kind of devolve that to the rest of the team to say listen yeah and understand what we are trying to do what we going to do but we got everybody else that's going to be here in five or ten and we have to be strategic on the use of our time in regards to the same in regards to the clients that you're bringing in as well as the ones that you're servicing on day-to-day.
Chris: Exactly, yeah it's not every business is managed the same you going to understand it going to understand their future to help them out and I said they're killing it now great find different ways to manage that for the future growth and then if they're not doing so well right now how can you help them it's not all the same playing field.
Jared: So we've seen it like this other business models is that you if they see a lot of consolidation or things like that I think of software clients tend to get beaten up pretty quick smaller ones as they start generating they get beaten up and they tend to rotate quite quickly because there's a lot of MA transaction software startup from what I identified is they're consolidating their business industry and you have to find a way to add value at the end of finding a way to be advisory in those transactions because you're going to get consolidated out as a firm right because at some point their your service is no longer needed because they've been consolidated and needed by another firm or another practice as they get bigger and bigger and bigger so if you're not adding value beyond these commoditized services that just kind of be the same thing every year. As disruption happens you're going to be one of those commoditized services that just gets disregarded like the phone system right it's like I don't need that anymore just turn it off.
Chris: Spot on yeah very insightful today. I want to thank you Jared just for the way you approach it, the way you think about it. I really appreciate your time and any final thoughts for the audience today before we go.
Jared: No, I think we are covered as much as we can in about 20 minutes right.
Chris: Yeah no this is good it's there another hour very easy to talk to I appreciate it so thanks again for your time. And so to our audience thank you again for your time taking the time I hope you learned some insight into the day-to-day operations how you can make your firm better how can you help out your clients right and just everyone's on a different playing field and you got to make sure that you're agile and adapt to be able to help manage them. So for now take care, we'll be back soon with more guests, and thanks for your time Jared take care bye.
Jared: Thank you.
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