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Make money with basic accounting software: clients who need help with entry-level programs represent a healthy market for CPA services.


* SMALL BUSINESS ACCOUNTING SOFTWARE is providing new client-service opportunities for CPA firms because clients need just as much help as ever, with basic installation and weekly bookkeeping to higher-value accounting, financial reporting and management consulting.

* THE MARKET FOR ENTRY-LEVEL ACCOUNTING software is large because there are so many small businesses. A handful of multinational companies dominate the production of bookkeeping and accounting software. A CPA's success in this niche requires him or her to learn about the products and their manufacturers.

* FEW CPAs MAKE MONEY IN SOFTWARE, and some provide it to clients free or at cost yet make money by supporting the program.

* THERE ARE THREE BASIC TYPES of accounting software engagements: The new business setup (practitioners help a startup choose, install and operate a new accounting system); system management (accountants oversee the bookkeeping, produce monthly reports and meet with management on a regular basis); and the rescue or recovery (a CPA is called in to clean up data entries or establish a new and workable operation).

* TODAY'S SOFTWARE IS STABLE AND RELIABLE, so much so, in fact, that clients get lulled into a false sense of security that their books may be as trouble-free as their technology. A CPA's success in this niche necessitates a thorough knowledge of small business issues.

* A RELIABLE ACCOUNTING SYSTEM CAN provide a sharp-eyed CPA with a multitude of business insights about a client's staffing needs, compensation issues, redundant processes, marketing opportunities, e-commerce and process improvement.

When low-priced accounting software was first introduced, some CPAs feared that do-it-yourself-minded clients would replace their traditional services such as monthly write-up with cheap and easy-to-use automated packages. Instead, they find business owners need just as much help as ever--from assistance with basic installation and solutions for a range of setup problems to higher-value CPA services, financial reporting and management consulting. In fact, the widespread popularity of entry-level small business accounting software appears to be providing practitioners with fresh client-service opportunities.

The software may be cheap, but the catch For owners is that learning how to use it correctly requires an investment in training. "You've got to let the client know that," says John McCabe, CPA, sole owner of the four-person John E. McCabe, CPA, PC, a firm his grandfather founded, in Norcross, Georgia. "I tell clients, 'You can pay me now to go through the proper setup with you, or you can pay me later when something goes wrong,'" he says. McCabe's firm makes money from providing small business clients services connected to the administration of entry-level accounting software. This article explains how he and many like him are doing it.


The small business market for entry-level bookkeeping and accounting software is huge. According to the Census Bureau, there are 5 million companies with 20 or fewer employees and annual revenue of $5 million or less. The major, global technology companies--discerning that all businesses have books to keep--set their sights on that software market early, and a few now dominate production for it. A CPA's success in this niche requires him or her to learn about those products and the fitness of the companies that manufacture them. Besides understanding clients' needs and characteristics and the particular software's operating features, the practitioner must evaluate each vendor's business viability; strategic plans and capacity to deliver ongoing support. (For more information see "Vendors," page 70, and "A Strategy for Finding the Right Accounting Software," JofA, Sep.03, page 39.)

Ilene Eisen, CPA, CITP, of ie Solutions in Monterey, California, says practitioners should take a sensible approach to building entry-level software business and specialize only in a small number of products. "There are two or three really important ones in any given area," she says. "You have to know them well and use them in your own practice before you can be secure in helping clients with them."

Natalie Hoffmann, CPA and partner-in-charge of the six-person information systems department at Honkamp Krueger, a 155-person firm based in Dubuque, Iowa, agrees practitioners must understand a product thoroughly before recommending it to clients. She says, "You have to know the package and the vendor inside and out." When evaluating products and vendors, CPAs also must

* Consider whether they need to obtain certification and how extensive the training for staff and clients will be.

* Perform the necessary due diligence (that is, read about the product, talk to vendors, get feedback from users and research the vendor's financial health) before joining a software vendor's channel marketing program. (A channel marketing program is the package of goods and services--including technical and sales support--a vendor offers dealers, referral sources such as CPAs, support service organizations and personnel for its product.)

* Figure out whether there's enough demand in the CPA's local market to develop significant new business. Besides talking to clients, networking at chamber of commerce and industry conferences and meetings is a good way to get a sense of what the business community needs.


For the most part, entry-level accounting software is an off-the-shelf product that sells in retail stores in shrink-wrapped boxes for reasonable prices--some products are less than $101). Few CPAs charge for it, sources say, but sometimes practitioners provide accounting software free or at cost as part of standard services. Often a CPA's decision about what software to emphasize may evolve from working with a client who bought and installed a product he or she now desperately needs help using.

Next, the CPA will make another set of business decisions about adopting an appropriate business model, including

* What to charge for services and whether you should use bundled services, hourly charges, support contracts or retainers.

* How to perform the initial client needs analysis and how, or whether, to bill for it.

* Whether to position the services as technology or accounting work.

* Whether to take on hardware or networking services.

* Which personnel within the firm accountants or technology professionals--will perform which services.

"We make money supporting a program, not selling it," says Frank E. McQuaid, CPA, and sole proprietor of McQuaid & Associates PC in Okemos, Michigan. McQuaid, whose firm consists of himself and an accountant with about two years of experience, has worked with ac counting software since 1992.

Some CPA firms charge by the hour for such work, but some say they prefer retainers and quarterly or monthly payments over the course of a year. For this fixed-fee arrangement, they guarantee the client a package of services, such as support, report writing and/or management consulting. There are, in addition, many opportunities to help clients with tax preparation, financial planning and operational improvements.

Accounting software engagements encompass at least three types:

* Setup for a new business: Practitioners help a start-up choose, install and operate a new accounting system.

* Management of a system: Accountants oversee the bookkeeping, produce monthly reports and meet with management on a regular basis, often two hours a month,

* Rescue or recovery: A business calls in a CPA to clean up data entries or establish a new and work able operation.

"We just took the old-time monthly write-up methodology and tweaked it for the new millennium," says Brian Price, CPA, a partner in Price Kubecka PLLC, an 11-person firm in Dallas. "We go to the client's location every month, work with his or her staff members and help them maintain their files. At the same time, we also get insight into the client's needs in tax or payroll or personnel." (For more information on developing new business see "How to Succeed With Basic Accounting Software," above.)


CPAs don't need to have high-tech knowledge of computer code or equipment to successfully provide entry-level accounting software services, but they do need to understand small business issues. In fact, most practitioners who perform such engagements refer the hardware and networking-services business to other qualified providers, they say.

"We don't really offer IT services; we offer accounting," says Frank Stitely, CPA and partner in Stitely, Karstetter & Greenfeld in Chantilly, Virginia. The firm of three partners and nine staff has clients in wholesale distribution, manufacturing and professional services. Stitely recalls that about 10 years ago, when accounting software was new, "it 'broke' a lot more and you needed to know more about the technology." Today the software is stable and reliable, he says--so much so that clients sometimes get lulled into a false sense of security that their books may be as trouble-free as the software. But good financial recordkeeping requires judgment a program can't supply on its own.

"We don't make money in software anymore," Stitely says. Instead, his firm trains clients in accounting systems and offers strategic business consulting. The gains from having or putting a client on an efficient, automated accounting system can include a substantial improvement in margin for the CPA firm. "You don't charge any less for the tax return when you have clean numbers," Stitely says.

Hoffmann at Honkamp Krueger similarly oversees delivery of a lot of write-up business, and then, when the opportunity presents itself, she suggests and offers upgraded services such as basic accounting system design and implementation and other process improvements.

Victor D. Puchi, CPA, is one of five partners at R&A CPAs PC, a firm with about 22 staff members in Tucson, Arizona. He agrees that the real opportunities reside in business advisory work. The technology and functionalities built into the software today "can handle a pretty robust business," he says. "So that means we have to be able to help clients with more than just check printing or payroll. We have to help them streamline their enterprise."

To Craig Stack, at On-Site Financial Inc. in Portland, Oregon, the accounting program business consists of "pure customer service" and helps position his firm as a full-menu management accounting practice. Indeed, a good, reliable accounting system can provide a sharp-eyed CPA with quite a few business insights into

* How the client can best use its personnel and determine appropriate staffing needs.

* Compensation issues.

* Redundant processes.

* Marketing opportunities.

* E-commerce.

* Process improvement.

Many CPAs say it is critical to get clients to use the most current version of whatever software system they work with. The cost to a CPA firm of maintaining literacy, licenses and subscriptions for successive versions of multiple software applications can be burdensome, so some practitioners make it a standard service to upgrade clients. The efficiencies in managing only the most current versions across a skein of clients, they say, are well worth it.


For some CPAs, developing a business in entry-level accounting software is a natural extension of both their practice and their individual professional interests. They see the essential marketing element as getting clients to recognize how they will benefit from hand-holding. Some CPAs in this niche get referrals from other practitioners. Others get good results from direct mail, telemarketing and direct sales. Software vendors who refer inquiries to authorized CPA firms often fill yet another pipeline of prospects. Some practitioners say their best source of new business consists of new projects from existing clients. Still, a basic sales and marketing strategy should include cross-selling services outside the scope of the original engagement and checks to ensure ongoing client satisfaction.

Tom Tripp, CPA, at Tripp, Chafin & Causey LLC in Marietta, Georgia--which numbers nine people, including three partners--says the firm's roster of existing clients is an excellent source of new business. Often, Tripp says, clients are dissatisfied with their current accounting system or may have simply outgrown it, which gives him the opportunity to provide a brand-new system. The key, always, with small business is a relationship with the owner: "You can't just talk to the bookkeeper," he says. "You have to have that relationship with the chief executive, because that's the person who really wants the transparency into his company that a good accounting system can provide."

These days, if any businessperson needs a reminder about how important good accounting can be to the success, or even survival, of his or her company, just talk head lines, says Chaim Yudkowsky, CPA, CITP, president of Byte of Success Inc., a technology consulting company. "Enron," he says, "proved what happens when you mess up on the accounting."

"I think CPA firms can transition their bookkeeping service toward more entrepreneurial controllership services," says Roman Kepczyk, CPA, CITP, a technology consultant to CPA firms. Mastering the client's accounting software system gives CPAs a leg up with this since it offers an unparalleled view inside a company. "Because you look at the business on a regular basis," says Randy Johnston, executive vice-president at K2 Enterprises Inc., technology consultants, "you can spend trine with management to explain what the books mean"

There are, it seems, as many business development strategies as there are CPA firms offering accounting software services. Providing those services gives CPAs the means "to do what accountants are supposed to--give management advice based on financial results in short order after they occur," says Johnston. Trusted advisers can use entry-level technology to provide clients with close to real-time business solutions.

A Market With Longevity

About 55% of small businesses have been in existence for more than 20 years.

Source: D&B 1st Annual Small Business Survey.

How to Succeed With Basic Accounting Software

When considering offering entry-level accounting software services, a practitioner should assess a number of issues, including

* Selecting the software applications in which to specialize.

* What training or certification is required.

* Performing the necessary due diligence in joining a software vendor's channel marketing program.

* The needs of his or her existing client base and market opportunities in developing new clients.

* Adopting the appropriate business model and how to charge for services (and whether you should use bundled services, hourly charges, support contracts or retainers).

* How to perform the initial client needs analysis and how, or whether, to bill for it.

* Deciding to position the services as technology services or as accounting services.

* Whether to take on hardware or networking services.

* Determining who within the firm will perform which services (accountants or technology professionals).

* Developing a comprehensive and actionable sales and marketing strategy.

* Deploying cross-selling strategies for unrelated services.

* Ensuring ongoing client satisfaction.

* Determining what to do when a client outgrows entry-level small business software or needs integration with industry-specific applications.

* Deciding whether, or how, to sell or support add-on software available for financial analysis, trend analysis or custom reporting.


Here are some of the leading accounting software vendors. Go to their Web sites for more extensive information on their entry-level products and support services.

ACCPAC International;

ACCPAC, a part of Computer Associates, manufactures and markets ACCPAC Advantage Series, Discovery and Small Business Editions; ACCPAC ProSeries, Small Business Edition; Simply Accounting Basic; Simply Accounting Online and Simply Accounting PRO, Simply Accounting Online.

Best Software

BusinessWorks Gold; ePeachtree; One-Write Plus; Peachtree Accounting; Peachtree Complete Accounting; Peachtree First Accounting.


QuickBooks Basic; QuickBooks Enterprise Solutions; QuickBooks Online; QuickBooks Premier; QuickBooks Premier: Accountant Edition; QuickBooks Pro.

Microsoft Business Solutions;

Microsoft Money Deluxe and Business; Small Business Manager.


MYOB AccountEdge; MYOB Plus for Windows.

NetSuite Inc. (formerly NetLedger)

Oracle Small Business Suite; NetSuite.

Softline Group

BusinessVision 32, Small Business Edition; BusinessVision 32, Standard Edition.


Practice Management Guide Introducing Tax Clients to Additional Services by Edward Mendlowitz, CPA, PFS, ABV, offers guidance about cross-selling opportunities, including QuickBooks services (# 90483JA).

For more information or to place an order, go to or call the Institute at 888-777-7077.

RICK TELBERG is editor at large and director of online content for the AICPA and his views, as expressed in this article, do not necessarily reflect the views of the Institute. Official positions are determined through certain specific committee procedures, due process and deliberation.
COPYRIGHT 2004 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Telberg, Rick
Publication:Journal of Accountancy
Date:Jan 1, 2004
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