Carlino: What should firms be doing in this time of controlled panic with clients?  Metzler: The role of every leader is to regulate anxiety within the firm and promote the most positive face to clients.  Meet with them on a regular basis and make them specifically accountable for meeting with clients.  Some firms are in denial about the economy because they are still very busy and Jim is concerned that bad WIP will sneak up on them.  Jim suggested that firms proactively review their strategic plans immediately.  Gallagher: First, they are getting fee pressure from smaller clients and losing some, but at the same time are getting a shot at larger clients that are putting fee pressure on the National Firms. This year CBIZ-Tofias will hold the line on most billing rates, particularly those in industry niches.  They have discussed talking points with clients when the clients ask for no increase (and how to respond with reduced scope).  They are working to promote retainer agreements and limited payment terms.  On the staffing front, it is important that the firm communicate with staff and to exercise good business prudence in controlling expenditures.  This economy provides an opportunity for firms to upgrade their staff and maybe clean up some of the bad hiring decisions.

Carlino: Any opportunities? Metzler: Yes, he is seeing from within the large firm groups that firms are using this is an opportunity but not in cutting costs or reducing the firms marketing and training? Gallagher: Firms should increase  marketing now to keep things going with clients and actually increase training which is needed to keep your people.

Carlino: What should we watch about our clients?  Metzler: Risk management is very important so firms will need to be aware of what is happening within the firms.  Spend more time on the risk assessment standards to help you make sure your firm isn't surprised.  The annual “trip to the bank” will be very different this year in that the people you meet with could be very different.  Firms will have to evaluate the impact on their reputation when having discussions with clients and members in the community.  Gallagher: Last year they invited all the bankers into their office to help them understand the new risk assessment standards and what to look for.  This has led to the bankers asking more questions and providing opportunities for the firm in those cases where other accountants are not delivering.

Carlino: How did the Madoff issue get so out of hand?  Metzler: Money, money, money.  AICPA went to peer review files of the small audit firm and found that they had not been recently reviewed.  It would be difficult to say that the accounting system is broken because of this scenario and that mandating regulation on all small firms would be the best solution.  To resolve this in the future, the AICPA will have to work with regulators on public interest entities. Gallagher: He was amazed at the scenario and say if it “looks too good to be true, than it probably is,” which is usually pretty clear in hindsight.

Carlino: How will Obama presidency impact accountants: Metzler: Now is the time for tax planning for capital gains and losses so firms should start gearing up to understand their talking points.  On a broader level there is no question that you will see all kinds of regulation, particularly in financial markets.  Jim feels this presents an opportunity for CPAs to position themselves to provide greater assurance and continue to solidify the “trusted advisor” position.   Gallagher: Taxes will go up at both federal and state levels, most likely in 2010 because 2010 economy is so fragile.

Carlino: What do you think about current M&A climate? Gallagher: As you are all aware Tofias was acquired by CBIZ.  In the past, firms approached them but they did not have an interest.  They were in a very strong position as they had young partners with a good succession plan and were a very profitable firm.   They found the culture of the other firm was similar and they basically “liked” the other people.   Their overall mission was to be the dominant firm in New England which fit with CBIZ, so it worked.  As they moved their target client up the scale, they could not provide all the specialized services they needed to deliver to them, so it was very beneficial to merge.  One of the strongest motivators was CBIZ had a very strong training culture.  He feels that there will continue to be a lot of mergers.  Metzler: Within the smaller firms, succession has been one of the primary drivers for promoting mergers. For younger firms, this is an amazing time/opportunity to acquire practices where the partners are retiring in other firms. Gallager: Overall, a change in strategy focusing on acquiring “talent” will be more successful than the consolidation strategy of a decade ago where it was all about overall size.

Carlino: XBRL is to be phased in over next three years and what does it mean to most firms?  Metzler: XBRL is basically standardizing the chart of accounts worldwide with standardized tags.  The financial reports produced with XBRL will drive easy access and use of financial reports for data mining and other resources.

Carlino: What about IFRS and potential conflicts? Metzler: SEC Road Map is very specific for 110 companies that must adopt IFRS early.  Roadmap calls for IFRS adoption starting 2011 and transitioned by 2014.  Jim expects there will be very slow adoption until it is required.  However  he feels IFRS will be as big as Sarbanes Oxley. Gallagher: Believes it will provide a lot of opportunities in their client base as more of their higher level clients are already international, which was not a reality for smaller firms.

Carlino: What does IFRS do to accounting curriculum? Metzler: It will be on CPA exam in 2012 and if you go to IFRS.com you can look at presentations.

Carlino: Crystal Ball questions for 2009? Metzler: Flat year for firms but the year will give use an opportunity to optimize productivity and then growth in 2010.  Gallagher: Staying close to clients and staff and firms must invest in personnel training, marketing and technology.  Some firms will not weather it.

EQ: Secret Weapon to Accounting Firm Success-Mary Werner
Emotional intelligence is more critical in managing your firm than intellectual knowledge  and consists of a collection of skills including:
-Interpersonal: Recognize what other want and need
-Intrapersonal: Sense what you want and need
-Adaptability: Integrate our wants/needs with others
-Stress Management: Being able to stay calm under pressure
-General Mood: Act so others like to be around us

A study done of 121 Fortune 500 companies found that for required management skills 2/3 were emotional and only 1/3 were technical.   A study done of CPA firms found that firms with owners having skills in the area of Cognitive skills added 50% more to the bottom line.  If partners also had good Self Management skills they added 78% more to the bottom line, and if they had good social/people skills they contributed 110%.  For those partners where they had all these skills the increased profit was 390% more.  While your IQ peaks at about age 17, your EQ can be improved based on practice, coaching and put yourself into new experiences.  Having poor EQ can limit or derail the careers of even the smartest people.  Critical Note is that a leader’s attitude is organizationally contagious; if they are optimistic, the firm will be optimistic.  If they are in a bad mood, the firm will be impacted the same way.

Financial Armageddon: Outlook on the Economy-Juli Niemann
Everyone's investments were impacted by the economic downturn in that only cash and money market accounts performed well.  Everything else went down. This past year has been bad and economy can still be worse for some time to come.  Everyone was buying  packaged loans but they didn’t all realize that their packages included all this sub-prime garbage, which was being re-packaged and sold up to 40 times. This crisis will have a severe impact on China as well as they are one of the largest owners of these subprime deals.

Should government bailout GM/Chrysler? No-let them go into bankruptcy and reorganize.  Asian cars being manufactured in the US are made at an average labor cost of $48/hour while US automaker is $71.  This is just not competitive. In addition GMAC could not meet its loan requirements so Congress gives them a preferential loan at the cost of Asian vendors that are building them in the US.

One of biggest economic issues is the US is completely dependent on oil. In Europe $6 in tax is very common so they try to be more energy efficient.  In the US, the tax rate should be increased significantly now, so we can repair the infrastructure and be forced to be more energy efficient.

Expect more Circuit City failures with an estimated 12,000 stores projected going out of business in 2009.  This can be good for consumers that do have cash, as there will be good deals on everything as excess inventory clears out.