Doug: We really look at every client, individually and uniquely and really look to see what makes the most sense for that client.
From Rea and Associates Studio, this is unsuitable, a management financial services podcast for entrepreneurs, tenured business leaders and others who are ready to look beyond the suit and tie culture for meaningful, measurable results. I’m Doug Houser.
The phrases “outsourced accounting services,” “client accounting services” and “client advisory services” are generating a lot of buzz in the business community these days and more and more professional service firms are throwing around the acronym “CAS.” On today’s show, Matt Long, a principal on Rea’s own CAS team, will explain what he does and how this service can help grow and protect small to midsize businesses.
Welcome, Matt.
Matt: Thanks Doug.
Doug: Good to have you here. Now talk to me a little bit about CAS. When I think about CAS, you know, maybe I’m dating myself here, but I think about like, you know, computers, something, but that’s not what we’re talking about here, right?
Matt: That’s not what we’re talking about. We’re talking more accounting, back office functions, support functions.
Doug: Okay.
Matt: The acronym has changed many times over the years. CAS has seemed to have stuck over the last three, four years. And I foresee it staying CAS for awhile.
Doug: Okay. So we’re finally locked in on that at this point?
Matt: We’ll see. I hope so.
Doug: Okay. So when I think about CAS, you know, some people say, “Well, isn’t that just like bookkeeping?” And yeah, we do that for certain clients or I have an account that does my bookkeeping. So talk to me about how this is different.
Matt: I get that question a lot. And I think really what differentiates bookkeeping versus CAS is bookkeeping is traditionally done after the fact. Bookkeeping, write-up type work is after the fact, while CAS is more real time. And I think what really separates the two is the use of technology and really trying to leverage this technology to make it do a lot of the heavy lifting for us.
Doug: Okay. So when you talk about technology, talking about things like, you know, QuickBooks or other softwares like that?
Matt: Yeah, yeah. Typically accounting platforms and accounting softwares. And then there’s a lot of ad in softwares as well, depending on which industry. The big thing with CAS is we really want that accounting software to be cloud-based, meaning we want it to be Internet based so that we can access it, the client can access it, and we can connect a lot of these other applications to it.
Doug: Okay, so that’s where the real time comes in in essence because it’s cloud-based, anybody with Internet access that has the appropriate obviously authorization to do so can get in and do those things on behalf of the client?
Matt: Yep.
Doug: So if I’m a client, I think, “Well, you know, gosh, if I have a couple of folks in house that do this now maybe I just want to augment their capabilities because they’ve only got so many hours in the day.” What does that look like from a CAS perspective? Is that something where you’re talking about the add-ins and add-ons that we can do some additional analysis and then things like that?
Matt: Yeah, exactly. And I get that a lot and we’re seeing a lot of these types of opportunities where our clients may have a person in house, but that person either does not have maybe the full skillset or the capabilities or the bandwidth to be able to handle all the functions. And so we can come in and act as a support to that person and help improve some of the processes, identify some different softwares that may make things more efficient for them, kind of come in more on a project basis versus long-term and help them revamp some things and then kind of turn it back over to them.
Doug: So it may be set them up for success and develop some tools that allow them to kind of analyze their business better on a real time basis?
Matt: Exactly. And that’s what we want to accomplish is really be that advisor to our clients, help coach them through some of these decisions that they’re thinking about making, really acting as their controller or CFO.
Doug: Okay, so because we’re out there, this is the thing I think of. We’re out there and we see a lot of clients, right? So we get a good idea of what maybe best practices are like in certain sectors and we can say, you know, if we maybe look at things from this perspective or analyze things that way and give them the tools to do that, we’re helping them out. Is that that sort of idea?
Matt: Exactly. Kind of piggybacking off of what’s working well with some clients, taking that and using that for others while also leaning on our folks internally. I have a lot of this industry expertise, have a lot of really good working knowledge of some of the things we’re doing bring them in to supplement some of this as well.
Doug: Okay. So talk to me a little bit about maybe what industry specifically work well for this? I mean, I can think of a couple maybe, you know, manufacturing restaurants. Are those some things where we have experience or where you think you see it fitting well?
Matt: Yeah, so that’s kind of a twofold question. Typically the industries that work the best for us is industries that are service-based and cash based businesses.
Doug: Interesting. Okay.
Matt: The reason so is managing the inventory brings another element to it. Whereas the service based businesses are easier to do for us and we’re able to do it more efficiently. So restaurants are definitely in our wheelhouse. We also focus on professional services, medical, dental, veterinarian practices, a lot of synergies with a lot of the industries we’re already focusing on.
Doug: Okay.
Matt: Also, in addition to that, that doesn’t mean that we stay away from certain industries. It’s just we take a closer look at them. Not necessarily are we able to do them, but are we able to do them efficiently and add that value that we want to add for the clients.
Doug: Okay. Again, and that makes sense, because if I’m thinking about see manufacturing, then I’ve got to think about perhaps cost accounting and other things that [crosstalk 00:06:34].
Matt: Yeah, and I think manufacturing construction, some of these industries are very nuanced. And there’s a lot of very specific things related to that business or that industry that we can necessarily replicate from client to client and that’s really where we’re able to create a lot of our efficiencies is being able to replicate kind of what we’re doing for one client and doing it for another and doing it very well and very quickly, efficiently.
Doug: Yeah. It brings down the cost for everybody in that way, so that makes sense. Not to say we can’t, as you said, do those other industries. It just may be a little bit different in terms of what exactly we do for them.
Matt: Exactly. What we’re doing for them, how we approach it and and what technology we’re going to leverage.
Doug: Now, when you talk about the team of people that are doing these things, the other thing I think of is, “Well, you know, then I’m guarding against people walking out the door. If I’m an employer and now I’m protected because I’ve got a team at my accounting firm that’s taking care of this for me and not subject to sick days and things like that, obviously that’s a big benefit.”
Matt: That’s a huge benefit and a huge selling point is that we do have a team in place and so you don’t have that turnover, you don’t have that transition pains when you do have people and personnel leaving or coming on board and they don’t have to deal with it, you know, it’s not their problem. Essentially it’s for us to figure out and that is a really nice luxury for our clients. You know, specifically we just started working with a client and there’s five of us on the team and we’re all working on this client in different capacities, but we have the coverage in place so that even internally when our folks want to take some vacation time, when they’re not feeling well, we’re able to just have another person to plug in there and they’re able to pick up without missing a beat.
Doug: Yeah, that’s fantastic. I mean, if I think about it from the business owner’s perspective, right? I’m very good at what I do, my business, but everybody else has their own area of expertise. And in your own company, these type of advisory services, again, that may not be your expertise. So why not think about getting somebody else involved to bring that additional horsepower to the table? Right?
Matt: Yeah, and it’s interesting. We’re seeing a shift, especially with some of these small or younger business owners where that’s all they want to do is focus on their core business and their core operations. And so you’re seeing they’re outsourcing not only their accounting functions but also their IT functions, their HR functions. Really all of this back office and we’re seeing this shift. But I think it was a long time coming.
Doug: Okay. Is there a specific size business that you think this fits well for? I mean, you know, if I’m 50 million in revenue, is that too big or does it really not matter in terms of, you know, the size business operation?
Matt: You know, it really doesn’t matter. And I think that’s part of the beauty of it. We can work with very small business owners that may not have the resources to have someone full time and we can be in there as little as 10 hours a week or five hours a week and fill that role and then we can staff up and ramp up and scale up in order for some of our larger clients to make sure that they have the coverage and really a full accounting department, not just a a team of one or two.
Doug: Okay. So if I’m thinking about the breadth of services, this goes beyond just say the financial statements and the analysis on that. Can you get into payables and all those types of things as well?
Matt: Yep, so our team really focuses on the transactional level work. So handling a lot of the day to day activities, the accounts payable, receivable, invoicing the treasury functions, what have you, then you know, we will assist with the month end close or completely handle the month end close, providing the financial statements. The big thing that we like to do then is, and it’s important to us, is that we’re meeting with these clients regularly and we’re going through these financials and we’re not just glossing through them. We’re digging into them. And I think that’s really the value add there.
Doug: Okay. Because we’re obviously seeing all these transactions take place so you have some color into here’s some ways in which you can improve what you’re doing or you know, again, think about it from this perspective.
Matt: Exactly. Help them really kind of think outside of the box. You know, a lot of times our clients are really in the weeds and so they don’t think, for instance, that they don’t have a good handle on their inventory or that their labor continues to creep up or that their sales have been flat. And so, just an outsider’s perspective on that a lot of times is interesting because they’ve never really thought of it. They’ve just been so entrenched in the day to day.
Doug: Yeah. It’s interesting you say that and I think that’s something that we take for granted, but truly is a lot of our value in that we see and are exposed to so many different businesses and we absorb those experiences, and to be able to have those and pass those along to clients is really valuable because as you said so often, it’s the only thing they ever know is that it’s all they know.
Matt: It’s all business. Yep. That’s what makes it a lot of fun.
Doug: Yeah, absolutely. So that’s kind of a current state if I think about casts. So talk to me about a future state. Where do you see this, you know, five years from now or 10 years from now?
Matt: Yeah, yeah. Well, 10 years from now, that’s pretty tough to envision that far out especially how quickly things have changed over the last five years.
Doug: Right.
Matt: You know, five years ago some of these cloud-based softwares were just being introduced. They were a little clunky. People were a little resistant to go into cloud-based solutions. And fast forward to now, basically all of our clients have the ability to be on a cloud-based system. They’re all SAS based service as a subscription and they’re all relatively inexpensive and it’s amazing where we’ve come over the last five years from doing a lot of these transactional level work manually, the month end closes on site with the client versus now a lot of it being automated, machine learning, playing a big piece of that heavy lifting and then us being able to do the closes remotely. Where it’s going, it’ll be interesting to see, but I think that we’ll continue to see more and more automation. I think where we’re doing a lot of the transactional level work now will be fully automated.
Doug: Interesting.
Matt: To where we’re not even revealing it. We’re more spot checking it. And looking for anomalies more than anything. They’ll still be some adjusting journal entries and manual work involved with the closes, but I think it’ll be a big shift into even more of the advisory space where we’re helping the clients really analyze the financials, doing a lot of customized reporting for them above and beyond, say your typical balance sheet or P&L or cash flow statement. And so, you know, I also think that while we’re doing a lot of this now, coming in, evaluating their processes, helping them identify potential solutions, helping them stand up those solutions and then kind of turning it back over to them. I think we’re going to see more of that because again, I think the software’s going to do a lot even more of the heavy lifting.
Doug: So more focused on key performance indicators, things like that, as you indicated.
Matt: Yeah. Yeah. Some KPIs, some specific dashboards or reporting or graphs that they may be looking for to help them just keep a pulse on things. Let them know how yesterday went. Let him know how today’s going. Give them some insight on where they’re going to be going over the next week, month, year, stuff like that.
Doug: Now in terms of the automation you talked about, okay, so you know like payables process and all those types of things, how does that we’ve seen that the start of that become more automated. I mean, how does that work when it’s fully automated? If I’m a business owner and I still can’t wrap my head around, well you know, I’ve got a team over here that processes my payables, how the heck can we automate that? Tell me a little bit about how that might work.
Matt: It’ll never be 100% automated because you’re still needing those levels of approval, those levels of review and ultimately someone clicking that button to send the payment and some verification. So, you know, you still want to keep tight control on your cash and on what money’s going out the door. But you know, how we’re seeing it work is basically one, everything is becoming paperless. So now these invoices, instead of receiving them in the mail or coming straight to an inbox, and from there the software’s reading them. They’re reading who the vendor is, they’re reading what the due date is of this invoices. It’s remembering what you told it from last time of how to code this. It’s looking for exceptions. As far as last month, that was a $200 invoice. This time it’s a 20,000. Hey, that’s a red flag. Things like that. It’s pretty cool.
Doug: Yeah, that’s awesome. So I mean, again, the technology allows us to focus on things that are more enjoyable, really and more value added.
Matt: Exactly.
Doug: And if I’m a client too, I’d rather have my own folks focused on that rather than just the mundane as well. So, that’s fascinating. Now, where does the technology advancement come from? Is that the software companies developing this? Are you seeing financial institutions invest in that as well? I mean, how do they fit into … obviously you’re talking about the movement of funds, so you know that there’s a lot of security involved. What do you see in terms of issues around that type of thing?
Matt: Yeah, that’s a good question. And who’s innovating? It’s interesting because there’s a slew of folks and of companies that are doing the innovation and that are developing these products. It could be, we’ve seen products that are working very well that were developed by accountants because they were just sick of the pain of going through certain things. We’ve seen some of this technology developed by clients because they were in the same boat. They wanted a solution and there was none out there. And then there’s these software companies themselves, these big guys that we’ve all heard of that are investing a lot of resources and a lot of money into this and because they know it’s the future. To your point on security, all of it is being audited. It’s all being vetted. You know, when you think of some of these accounting platforms, like a QuickBooks or a Sage, they’re doing their due diligence as well. You know, they’re not going to partner with some of these softwares, unless that they know that they’re a secure.
Doug: Right.
Matt: I think to your point on the financial institutions, we’re seeing a lot of these financial institutions that are using the same technology that we are and that some of our clients are, but, they’ve just rebranded it into theirs. But at the end of the day, it’s all the same stuff and it’s coming from the same provider.
Doug: No kidding.
Matt: It’s kind of cool.
Doug: Yeah. So they don’t want to obviously miss out on potential opportunity there as well. So that’s, yeah, that’s interesting. You know, when you think about the security in today’s world, I mean, some people get still a little bit freaked out about, Oh, you know, my information is all in the cloud. How secure is that? And I think I’m a believer in that it’s better to be in the cloud, protected by whoever the cloud service provider is rather than have it on your own server in house. I mean, isn’t that much more subject to, you know, any kind of cybercrime, I would think?
Matt: Yeah. It seems that internally you’re much more vulnerable. Whereas when it’s cloud-based, typically that information, that data is not even being stored in one spot. It’s being fragmented and segmented throughout many different data servers and data warehouses throughout the country, throughout the world. So even if a specific piece of it is hacked or is compromised, they’re not getting kind of the full information and the full big picture of it.
Doug: Yeah. So if I’m a business owner and I think, “Gosh, you know, it sounds pretty cool. Maybe I’ll think about outsourcing some of this to a firm like us,” is there a kind of a minimum cost level where this makes sense or you know, again, you talked about it doesn’t have to be replacing a full time person. You’re maybe just augmenting what you do. Is there kind of a baseline that somebody needs to think about?
Matt: Well, there’s not necessarily a minimum. What was very important to us is that we come in and really evaluate and spend a lot of time upfront understanding what their pain points are, where there’s room for improvement and really develop a solution around that. It may be that, like I said, we’re able to come in and just revamp some things or train their folks up. It may be that they want to completely wash their hands of it and they’d like someone else to handle all of it. We really look at every client individually and uniquely and really look to see what makes the most sense for that client.
Doug: Again, I think that’s a great approach. As you said, it can be just a single project that maybe improves their own processes and procedures and gives them better information to run their business. Or as you said, it could be an ongoing thing. I mean the ideas get better information in real time and then understand I can make better management decisions.
Matt: Exactly. You know, going back to your initial question, what’s the difference between kind of the bookkeeping, the write-up versus CAS and I had said leveraging the technology in real time. It’s really before the bookkeeping you were doing a lot of it, but it was always more of just to keep score. Just to make sure that come year end, the tax return went as smooth as possible or if you had to have any kind of audit or any kind of financial statement preparation that the accounting behind it was done and done correctly. Now we’re focusing on, Hey, let’s use these financials. Let’s make some really unique reports so that we can use it as a decision making tool for the future.
Doug: I mean, so often the information is not there. I can’t tell you how many clients we tend to walk into and they have no idea how they’re performing and no idea, frankly, where they’re making money or not.
Matt: It’s amazing. It really is. And you know these business owners they’re great at what they do, whether they are a mechanic by trade or restaurateur, whether they own a construction company, they know their trade very, very well and they can live and breathe it, but on the financial side of it, they don’t have a handle on a lot of times and it’s amazing that how successful they are in spite of on having that fundamental financial background.
Doug: Yeah, absolutely. So well that’s great stuff, Matt. I really appreciate you coming in and enlightening our audience and me as well about all the great technology and opportunity there is for folks to run their business a little bit better. So, appreciate that.
Matt: Thanks for having me, Doug. Appreciate it. Thank you.
Doug: If you want more business tips and insight or to hear previous episodes of unsuitable, visit our podcast page at https://www.reacpa.com/podcast. Thanks for listening to this week’s show. You can subscribe to unsuitable on iTunes or wherever you like to get your podcasts, including YouTube. And while you’re there, please leave us a review. I’m Doug Houser. Join us next week for another unsuitable interview from an industry professional.
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