Mark: Welcome to unsuitable on Rea Radio, the unique financial services and business advisory show that challenges your old school business practices and the traditional business and culture. You'll hear from industry professionals who think beyond the suit and tie to offer meaningful, modern solutions to help you enhance your company's growth. I'm your host, Mark Van Benschoten.
To be successful in business you have to have a solid team behind you, and I'm not just talking about your staff. You have to collaborate with investors, managers, clients, vendors. Then you have to trust that the people you work with are not only easy to get along with, you need to know that they know what they're doing. Today's guest, Heather McNichols, will talk to us about why, sometimes outsourcing may be your best option. Particularly, with regard to your accounting and bookkeeping responsibilities. Heather is the director of accounting services at Rea & Associates, so she knows a lot about this topic. Welcome Heather.
Heather: Thank you, Mark.
Mark: Before we get started, you have two sons.
Heather: I do.
Mark: I understand you like to go to their sporting events.
Heather: I do, my oldest is a well-rounded soccer, football, basketball, baseball, pretty much all year round, we are at a sporting event.
Mark: That's neat. Growing up, I was very active. When I started having children, I was like, "You'll have a boy, you'll go to these sporting events." I've been blessed with three girls, so I get to go to a lot of dance recitals, which I thoroughly enjoy. If my family ever listens to these, which they haven't yet, I don't understand why, they're quite entertaining, but my outlet is dance recitals, kind of exciting though, but a little different than yours.
Heather: Yes. I have to admit this year was the first year he played football, he's nine.
Mark: Nervous?
Heather: I was so nervous. I had always said, "My son's never going to play football," but it was my favorite sport, by far. I loved every single game.
Mark: That's exciting.
Heather: Plus he played quarterback and it was awesome.
Mark: That's really neat. I was reading your bio over the weekend, and I think the question was, if you could be one thing besides working in accounting, you would like to be a teacher.
Heather: Mm-hmm (affirmative). I actually started my college career in the education department, and had started with elementary education. Didn't really like that aspect of it, so I switched to business, but my favorite part of being an accountant and working at Rea & Associates, is teaching fellow staff how to do things, as well as, going out to clients and teaching them how to use their software to better their practices. I feel that I've taken the best of both worlds and put them together.
Mark: Well, I was just going to say, isn't that what you do now, is teaching people? You haven't drifted far from what you set out to be. That's how I view you, as a teacher, so I thought you matched that up, you matched that up very well.
Heather: Yeah, I really enjoy that part of my job.
Mark: Yeah, it's neat. We're going to talk about outsourcing. When you hear that, what does that mean to you? When somebody says, "Oh, I'm going to outsource."
Heather: To me it means, they're going to look for somebody outside of their business to help them with some aspect of their accounting. Whether it be their bookkeeping, their payroll, receivables. Sometimes they can break it down and just have a part of it outsourced or sometimes they can do the whole thing.
Mark: Do you view this as outsourcing, as a permanent, like, "Oh, we're going to outsource this today and that's the way it's going to be forever."
Heather: It doesn't have to be. It can be a temporary solution. We have been outsourced for people who, their bookkeeper went on maternity leave, and they just didn't want to hire somebody for that short period of time.
Mark: Sure.
Heather: We stepped in and did what they needed during that period of time.
Mark: There's some flexibility in outsourcing and the arrangement?
Heather: Absolutely. We can be as flexible on when, or for how long, or what we do.
Mark: That brings up a good point because that's something I hadn't thought about. You can break it in ... I tend to think of bookkeeping, we're going to outsource the bookkeeping, but you mentioned accounts receivable, payroll.
Heather: Yes, we've done that for several clients. We do accounts payable, where they send us the bills, we write the checks, they tell us which ones to pay, and that's the only part of the bookkeeping that we do. They handle their invoicing, in house, and everything else, and we just do the payables. On the other hand, payroll, a lot of people we just do their payroll for them.
Mark: Interesting. I hadn't thought about that. I've been in this business a couple, two, three years. Accounts payable, for example, what's the ... Please don't give the name, but what's the profile of that client that would make them think, "Oh, this is the best ... This is a good use, this makes sense."
Heather: Something that I think of often is a small client, because they don't need a full-time person to handle that aspect, but sometimes it's hard to find a good person who's willing to only work part-time. Where, if they only need us two or three hours a week, that's not a problem for us.
Mark: Sure.
Heather: Another thing that we've been told by a lot of clients, is that they love the aspect that they don't have to train, and they don't have to look for somebody. If somebody leaves Rea & Associates, we hire somebody else to fill that place and it's not the responsibility of the client. We had somebody, not long ago, come in to have us outsource their payables, simply because he was tired of turnover. He had trained somebody and within six months that person left, so he was training again. He said, "I just want that to be your responsibility."
Mark: That's a great fit. I'm learning a lot of things today. That seems to make a lot of sense. I also think it gives some ... Say Person A is working on this accounts payable project, that person, from Rea, can go on vacation and the work's still going to get done because we'll step in, we'll backfill with Person B.
Heather: Absolutely. We almost always have a team that works on a client, so that if you call in and Person A is off, Person B is right there to take your question. You don't have to wait for that person to come back from vacation or wherever they may be that day. There's somebody that can help you, pretty much, all day long.
Mark: We talked about, you went through bookkeeping, payables, receivables, is there ... I'm trying to come up with the correct term, a higher level service that also might fit? Maybe it's, they have a bookkeeping staff come in, but we're maybe doing the final closing entries, would that be considered outsourcing?
Heather: It could be, absolutely. We have a number of clients who use QuickBooks, and they give us what they call and accountant's copy. QuickBooks has actually created a copy in their program to fit this outsourcing. They make this copy for us, we bring it in, we make adjustments that are needed or changes, or help them figure that out, and we send back another file to them, that just merges in with their working copy. They don't ever have to stop production.
Mark: That's great, it was a higher level, so it's not processing.
Heather: Right.
Mark: Interesting. You mentioned QuickBooks, talk a little bit technology. Are there technology constraints or hurdles that you have to overcome to be able to have a successful outsourcing relationship?
Heather: Not necessarily. I would say that we have the technology on our side, that the person that's outsourcing doesn't have to ...
Mark: Worry about it.
Heather: ... Know anything about technology. We've dealt with Amish clients, for example, that obviously are not using big computer programs or things like that, they bring us paper, we produce everything, and they never have to deal with a computer.
Mark: That's interesting. Does technology help though, if there is some technology involved?
Heather: Yes, it does. There are aspects where we can go into the client's computer through portals or across ... There's websites that we can log right in and be able to either do work on their computer, or a lot of times I've done a lot of QuickBooks consulting. They pull up their computer and say, "Help me, I'm stuck," and I can talk them right through because I can view ...
Mark: You're looking at the same screen that they're seeing.
Heather: Exactly.
Mark: I bet that's rewarding, to solve those things.
Heather: Absolutely. Solving the puzzle.
Mark: There's nothing like a happy client.
Heather: Yeah.
Mark: A happy paying client.
Heather: Absolutely. Solving puzzles and helping a client figure something out or that moment, I always call it, the ah-ha moment, when you're trying to explain a concept to them, and then all of a sudden, you hear them go, "Ah, that's it." That's the best feeling.
Mark: Somebody at Rea calls you and says, "Heather, we have a potential candidate for outsourcing," what would your next step be?
Heather: My next step would be to sit down with that person and find out more about the client. How much volume do they have, what are they interested in, what types of services are they looking for? Then, we go from there.
Mark: Is there any industries we wouldn't do, shouldn't do, would like to do?
Heather: So far, we haven't found any limitations?
Mark: Tattoo shops?
Heather: Haven't done any, but that would be fun.
Mark: Get all tatted, maybe you can offer that as a ...
Heather: Get discounts.
Mark: I'll pass. We'll give mine to somebody else. I could see that, you're there providing a service for the benefits that you talk about, don't have to train, don't have to have the turnover aspect, use of technology is more on our end, versus, their end. What about when somebody would say, "Oh, that's too cost prohibitive," how would you address that?
Heather: I would ask them to take a step back and look at their actual costs in the individual that they would have to hire. So often people think, "Well I pay this much per hour, and you're charging me way more than that." If you take a step back and say, "What are the taxes you're paying as an employer? Are you offering insurance, are you offering a retirement plan? Those are all costs in that employee, and by having us step in for this costs, we might be able to help you save that money."
Mark: In the example you provided, having somebody two to three hours a week, it's hard to find a good employee for only two to three hours a week.
Heather: Absolutely, and some of these small companies, that's all they need. Sometimes they don't even need somebody every week. A lot of people that we work with, we only cut checks on the 15th and the 30th of the month. To find an employee who's willing to work two days a month for maybe, three or four hours ...
Mark: Tough.
Heather: Yeah.
Mark: It's real tough. You said small, is there a size limit? Is it too big, it doesn't make sense?
Heather: Not really. We can look at, sometimes, it helps us to hire an employee to take care of that business and that's on us if we need to do that. We've helped, especially in the payroll arena, we've done payrolls for employers of three, four hundred employees. It's not just the small shop down the road.
Mark: Sure. With the changes to affordable healthcare, and so forth, I would think that would ... Another reason somebody might go to outsourcing to take that burden, because I assume we can help with that compliance.
Heather: Absolutely. That's a big benefit of outsourcing your payroll, is the fact that there are so many laws and they change so quickly. For one payroll individual to keep up on all of that, that's difficult. Rea & Associates, that's our business, so we provide the training for our employees, we are staying on top of that information. That becomes, again, our burden and it's off of the employer.
Mark: Back to my large company, I could see on the accounts payable disbursements, we've talked on here, with Joe Welker, about fraud, and also Annie Yoder, about fraud, and so forth. I think on the accounts payable disbursements, that we could add maybe, a layer of control that they might not be able to get internally.
Heather: Absolutely. We have a layer, just within our offices, that if one person's cutting checks, we can have another person do the bank reconciliations, so we are offering that level of control ...
Mark: That they might not be able to get themselves.
Heather: Right, they're not going to want to hire two people.
Mark: To do that. That's a great aspect. In today's society of lawsuits, I would think we have an insurance policy, we have now practiced insurance that they might not have internally, that would be a benefit also, if something did, unfortunate happen, there'd be some insurance money available.
Heather: Absolutely.
Mark: Seems to make a lot of sense. We talked about QuickBooks, are there other platforms, Peachtree, that would limit or just across any accounting package platform?
Heather: We are breaking into Peachtree, the Sage products. We are having more and more people that are asking for those services, and we are training our people, and sending them out.
Mark: Being the nimble, flexible business people we are, we'll take those on as they come and get up to speed.
Heather: Absolutely.
Mark: How have you perceived the outsourcing within Rea, are people excited about it?
Heather: I think so, I think that the staff are excited that we're able to help our clients. It's just one more layer that Rea can offer to these clients to make us better advisors.
Mark: I love your answer because I agree. Somebody comes to you, they have a moment of need, and to be able to help them with a solution is just tremendous, versus, well, "Call so-and-so," that we can do that. We'll be closer to it and we'll be able to understand. It doesn't need to be for life, it could be short-term. We got people that can do it. It is very comfortable, so I really enjoy your answer on that. How did you get started on your outsourcing career? You've been working for Rea for fifteen years, I believe.
Heather: Yes.
Mark: How did you get into the outsourcing arena?
Heather: There was a need and I said, "Sure, I'll work on that." That's where it all started.
Mark: There you are, yeah. Do you have any outsourcing success stories, that maybe you could share with us? Things that, maybe, you step back and say, "Wow, that was a great solution we were able to provide?"
Heather: I can tell you that we've been able to help clients even identify problems within their own business that they didn't know were there. We had a payroll client that, we did their payroll, their employees actually submitted the hours to us, we would print the checks. They were in multiple states, so we would send those checks out for them. It turned out that an employee was committing fraud ...
Mark: My goodness.
Heather: ... By adding hours to their own paycheck. We noticed week, after week, after week, this person had more and more overtime.
Mark: Wow.
Heather: We contacted upper-management, and they identified the problem and were able to stop it.
Mark: That must have been a great feeling.
Heather: It was. It was good to help the client.
Mark: They were probably too close to it, just processing it along, and they had no idea, but somebody slightly removed from the process can step back and look at that, and add that layer there.
Heather: Right. That's exactly what it was, just a second set of eyes to say, "Oh, this looks a little odd." Sometimes it's not always wrong. We can ask the question and they'd be like, "Oh, no. They've been working on a project for us."
Mark: You hope that they appreciate the question, that we're taking that critical eye to it and adding a value add there.
Heather: Right. We're just looking out for them and their best interest.
Mark: How do you set client's expectations for the outsourcing as to what it's going to do and what it's not going to do?
Heather: We usually set up an engagement letter, that is pretty specific, laying out, as far as, "This is what we will do, here's what we need from you, and this is the product that we're going to give you with that."
Mark: Any confusion on the client's side, or is it pretty ... They grab a hold of it quickly?
Heather: They usually grab ahold of it pretty quickly. If not, they understand, down the road, just with a little explaining and taking back to that engagement letter and saying, "If you remember here, we talked about this is what we were going to do," they're pretty agreeable.
Mark: Do clients have access to their information on a monthly basis? It's a Saturday, a business owner wakes up and says, "Oh, I wonder how I did last month?" Would they have access to that information?
Heather: It would depend on how they want to have things set up. If they have the program in their system, and we are just updating their system, absolutely, they have access to that at any point. Some of the clients that don't want to maintain the system, would only have access when they request it, but we're willing to print those reports off at any point that they ask for. That brings me to another item that sometimes is a benefit for outsourcing, is just the cost of a computer program.
Mark: That's a good point.
Heather: If they aren't interested in paying for the software, we have those licenses and we maintain those on our system.
Mark: They don't have to worry about maintenance on that, upkeep, getting the latest version, we're taking care of all that?
Heather: Yes.
Mark: That's another great point. As I was looking at this, it doesn't appear to be cost prohibitive, access to information, some layer of insurance policy, maybe additional layer of internal controls, it's not a life long commitment. It could be short-term, it could be whatever fits. I assume it could be tweaked over time, too, that we were doing receivables, now we're doing payables, next week, we'll do payroll. We can have some flexibility to it.
Heather: Yes, we can do whatever section of their accounting work they need. As you said, we can change that over time. Maybe right now, you want all parts of your accounting taken care of, and then maybe you do find a part-time person that can handle your payables. Now we're just going to do your payroll. Something that a lot of people find a comfort when we do their payroll, is that not everybody has access to salary information.
Mark: It's a sensitive issue?
Heather: That is a very sensitive issue. If somebody outside of the firm is handling all of that, then there aren't as many chances that somebody inside the business can get ahold of that.
Mark: It sounds like people should take a hard look at this, a lot of benefits not just some of the ones I easily come across for potential outsourcing. Somebody might be out there thinking, "Oh, maybe I should give that a shot," and it seems like it's, again, flexible, that it could fit a lot of different situations.
Heather: Yes.
Mark: Heather, I really appreciate you taking the time here. Before we wrap up, there's a question we ask everybody. We're going to ask it of you now.
Heather: Okay.
Mark: If you could have one super power, what would it be?
Heather: I would have to say it would be elasticity. If you remember in The Incredibles, the mom's arms could stretch in every direction. That would be amazing with two little boys.
Mark: That's a good point there. As I'm hobbling around with a sore knee, my range of motion, so I wish I was a little more flexible as we sit here today.
Thank you for joining us today, Heather, and thank you to our listeners for tuning in. We have a lot of great resources available on the web, at www.reacpa.com/podcast, and always, don't forget to subscribe to unsuitable on iTunes or SoundCloud. Bonus points if you can convince friends and family to subscribe. Do you have a question of a topic you think we should cover in an upcoming episode? Send us an e-mail at podcast@reacpa.com. We would also like to invite you to provide us some feedback. All right, until next time, I'm Mark Van Benschoten, for unsuitable on Rea radio, encouraging you to loosen up your tie and think outside the box.
