July 23, 2020

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To charge or not to charge for PPP services

Should accountants charge for Paycheck Protection Program (PPP) services? That’s the question posed by Gene Marks over at Accounting Today, and the answer isn’t obvious. A recent survey found that one-third of accounting firms are not charging for the services.

His arguments against charging for services go like this:

  1. Charging businesses money for these services on top of the revenue they’ve lost during the pandemic adds insult to injury and amounts to profiteering.
  2. Business advisors like accountants are at risk of negative press coverage because they are making money off vulnerable businesses during a crisis. Banks have already been the target of criticism.

I don’t find number 2 particularly convincing. Banks have a direct role in administering PPP, meaning that businesses had no option but to work with banks to try accessing a loan. Banks favoring larger customers or refusing to work with non-customers had a direct impact on which businesses were able to secure loans.

Accountants have had a different role. They have helped facilitate the application process through payroll providers, explained how loan forgiveness works, projected cash flows, among many other things. How firms charge for these services varies, but I have to imagine that at least some firms included the application process as “all-you-can-eat” in its payroll offering. So, yes, they’d be charging for the service, but that’s because they were already charging for payroll services.

But I also think that firms that were upfront with their clients about what to expect are fine. No business that’s been working with an accounting firm for even a short period expects them to render services for free, especially when those services are in high demand.

I do find Gene’s arguments for not charging clients to be much more convincing:

By not charging a client (and making sure the client knows it!) you’re not only unselfish, but you’re demonstrating your commitment to your relationship and your concern for their long-term viability. You’re demonstrating that you care by putting your money where your mouth is and absorbing some additional costs … just like they are. That type of skin in the game will likely go a long way once things eventually turn back around.

Accounting firms are rarely hard up for business, so the downside of not earning money for these services is relatively low, while the opportunity to earn social capital—something that is not always in great supply—is very, very high. 

So either way seems fine to me, but regardless of what a firm has done or plans to do, being clear with clients about what to expect is the most important thing. No one likes surprises. I think everyone’s had all the surprises they can handle this year.

Accountants vs. Computers

I highly recommend this Forbes story on the closure of ScaleFactor, a fintech—accountech if you like—company that shut its doors last month. At the time, the company’s founder and CEO Kurt Rathmann explained it this way:

At the end of the day, Kurt Rathmann explained to Forbes last month, customers were craving a person, rather than a computer to do their accounting. “We really thought we could automate the entire back office of a small business,” Rathmann said.

Do businesses really crave a person rather than a computer to do their accounting? I’m not so sure. I think what businesses ultimately want is the accounting done right. Assuming the price is right, the method is more or less irrelevant.

A problem typically arises when accounting is done wrong. Lately, technology has been getting better at getting accounting right—with a few exceptions, of course—and it’s only going to get better at getting it right. Humans, as history has shown over and over, often get accounting wrong, sometimes intentionally, sometimes unintentionally. And when humans get accounting wrong, it causes all kinds of problems: businesses fail, people lose money and their jobs, sometimes people go to jail… So while humans can be good at accounting, they’re also occasionally prone to errors or fraud.

Computers and software, on the other hand, do what they are designed to do. Computers and software that are prone to errors or fraud do not get used. So I think it’s safe to assume that there are many businesses out there that would be just fine if the computers did all the bookkeeping with very little human intervention, so long as they perform as expected. I even imagine that the accountants would be fine with the computers doing the accounting and the accountants just keeping an eye on the computers. The computers can’t talk to clients about their hopes or dreams, how to hire the right people, or manage a firm, after all. That stuff requires a variety of expertise, attitudes, quirks, and social graces that computers don’t have and may never possess.

The ScaleFactor article begins with, “Accounting is the bane of small business, a tedious task made worse by its costly expense,” which is precisely why we should leave the accounting to the computers. They don’t mind that it’s tedious, and the better they get at it, the cheaper it will be.

In short, there’s still a very good case to be made for the computers to do accounting. So long as they get it right. And that leaves the fun stuff to the actual accountants. 

What I’m into this week

Perhaps I’ve mentioned it, but I recently became a parent for the second time. The first time around, I didn’t read any books about what to expect before or after. It’s not that I wasn’t interested, I think I just wanted to go into parenthood with a blank slate. At some point, however, I stumbled across an interesting column written by economist Emily Oster, and learned that she had written a book on parenting called Cribsheet: A Data-Driven Guide to Better, More Relaxed Parenting, from Birth to Preschool. I was intrigued enough by her column and the premise of the book that I picked it up immediately so it could sit on our shelf for two years. 

Now that I have a newborn and a child approaching preschool, I figured it was the perfect time to pick it up, and I’m about 80% finished with it. Oster looks at the myriad of issues that come with raising young kids through the lens of an economist, and that means reading lots of studies and examining lots of data. The best part is that Oster’s writing style is precisely the opposite of academic. It’s accessible, human, and empathetic. You can tell that she’s had her fair share of “Am I screwing up this kid?” moments, and it’s refreshing when she simply goes, “Let’s look at what the data says!” And then you find out that the kid is probably going to be fine.

Fresh from Gusto


Pricing Strategies for Accountants: There’s So Much More Than the Billable Hour with Greg Kyte and me on August 19.

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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