A Paperless Environment Can Enhance Value in an Accounting Practice Sales Transaction

Older owners and accounting professionals love their paper. They love their folders and three-ring binders. When staff accountants sign off on their final workpaper and think they’re done preparing a tax return or other accounting engagement, think again! You still have to print out all the workpapers, the entire tax return, then put hole punches in the paper.

And what if you have a stack of 500 workpapers and find one mistake? You’ll become an expert in printing out one new workpaper, taking a hundred workpapers off a ring fastener, then replacing the superseded workpaper.

Sound like fun? Because when you’re done, you’ll have to find a place to store all those physical workpapers. So be prepared to buy filing cabinets. Lots of them. Oh, and also plenty of space in an off-site storage facility. Because once you fill up the space you do have onsite at your office, you’ll realize you have another three or four years-worth of client files you need to find a home for.

“Maximize Proceeds In Accounting Firm Sales”

Read our featured article, “Maximize Proceeds In Accounting Firm Sales” in the Journal of Accountancy.

The LOI, while admittedly non-binding, is the first document detailing what the buyer is willing to pay for your accounting practice; including the price, terms, and conditions that will guide the sales process to closing. No accounting practice sale should move into the due diligence phase without an LOI that has been agreed to in writing by both parties.

Most LOIs for the sale of an accounting practice should include the contingencies outlined below:

In addition to having a rather large file room, your office will also need space to store 2 or 3 shredded paper bins. And just wait until the first time you accidentally throw a piece of paper away that you weren’t supposed to. The large bins run about 32 gallons. So imagine dumping the equivalent of 32 gallons of paper on to your office’s hallway so you can sift through thousands of pieces of paper looking for the one sheet you accidentally threw away.

So is there any hope for today’s tax and accounting practices? Are we all going to drown in 20-pound weight paper?

Believe it or not, many CPA firms are going paperless.

Many CPA firms, in fact, are already 100% paperless

If you have an accounting practice for sale, chances are your best potential suitors are looking for a practice that already operates in a paperless environment.

Here are 3 reasons why featuring a paperless working environment can affect value in an accounting practice sales transaction and result in more money for you when you decide it’s time to sell your accounting practice:

Conversion time can take 12 to 24 months

It can take anywhere between 12 to 24 months to convert a 100% paper-based accounting practice to a 100% paperless accounting practice.

Prospective buyers may not want to deal with a conversion process that long if there are plenty of other CPA firms for sale that are already paperless.

The conversion process usually involves scanning and archiving existing documents and transferring financial statements and trial balances to a trial balance software program. Then there’s the question of how many prior years need to be archived. This can add several more months to the conversion process.

For a firm that is currently not paperless, the ideal timeline is to start the conversion process a year or two before the current owner or partnership group wants to sell.

A firm that is 100% paperless may mean more motivated buyers…which could potentially drive up the selling price.

Organizing and filing documents is quick and easy

As mentioned earlier in this article, with paper files, it’s more cumbersome to arrange, hole-punch and file a manila folder or three-ring binder. Electronic files are quick to organize and keep up-to-date and can always be done with a click of your mouse.

Because of how easy it is to work with paperless documents, administrative assistants and para-professionals can also be put in charge of organizing and filing, not just accounting professionals. Some CPAs and firm owners are hesitant to let subordinates file documents for fear of losing or misplacing documents. With a paperless system, however, it’s easy to locate documents that have been incorrect filed or misplaced.

There’s also the added expense of storing physical documents. A CPA firm needs to have an on-site file room, which can measure up to several hundred square feet, that holds 2 or 3 years-worth of documents. Documents beyond the previous 3 years are stored in an off-site storage facility.

Being able to quickly search for and find electronic files, instead of physical files, is an important consideration to many buyers in accounting practice sales transactions.

Possible cultural issues from employees

CPA firm employees who have worked in a paper environment for multiple years may be unsure about a complete change to a paperless environment.

For these employees, it isn’t going paperless that they are resistant to, but rather it’s a disruption to a routine that has been established over a number of years, perhaps several decades. It could also potentially be a disruption to clients who have been trained to provide physical documents to a CPA firm. Some clients may not know how to scan or ask their financial institutions for electronic documents. CPA firms may need to invest a small amount of time to train clients how to work in a paperless environment.

An accounting practice sale transition can be made easier if the firm has employees who have prior experience working in a paperless environment or who genuinely seem excited to learn how to work in a paperless environment for the first time.

There may be a learning curve of several months for workers who have spent all or most of their careers working with paper, but as long as the employees are willing to try and change how they work to accommodate the change to a paperless environment, then prospective buyers shouldn’t have anything to worry about.

A best practice for getting everyone’s buy-in on implementing a new paperless office is hand-on training. Begin by demonstrating the capabilities of each software program, including the filing system, Adobe Acrobat and your IT system’s search feature.

Prepare different exercises for your employees to practice on. Include as many scenarios as possible, such as how to process documents initially sent by a client, creating workpapers using Adobe Acrobat or another document software program, how to archive workpapers and documents and how to search documents that have been previously archived.

Our brokerage firm can help you navigate the process of selling a CPA firm

Most owners do not have the time, the patience, or the M&A skills necessary to navigate the process of selling a CPA firm. This is the best reason to hire an exceptional brokerage. A seller wants to be assured they will attain the maximum value for their CPA practice for sale in order to get the most cash at closing. If you are a seller considering engaging a broker, please bear in mind – not all brokers are created equally. No business brokerage understands the value of accountancy practices the way we do. Why? We are the only firm of our type in the nation where 100% of the business brokers are CPAs with significant “Big Four” M&A experience.

We have the largest national database of qualified legitimate buyers for accounting firms. We can guarantee that the buyers in our massive buyer pool are not only actively looking to acquire an accounting firm – they are also willing to compete for your practice.

We have promoted and negotiated hundreds of deals, involving hundreds of millions of dollars in value for sole practitioners, small partnerships, and larger firms. Through our proven methods, we consistently achieve significantly higher sales prices and cash at closing for accounting practices than any of our competitors in the nation.


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The Importance of a Letter of Intent in Accounting Practice Sales
The Importance of a Letter of Intent in Accounting Practice Sales
Minimizing risk should be as important as maximizing the sales price and terms of an accounting practice for sale. Assuming you have used our proven methods and have identified a qualified buyer from a competitive pool, whom you judge to be the right fit for your CPA practice for sale, and who appears to be willing to offer maximum value with the most cash at closing, it is time to draft and agree on a Letter of Intent (LOI).

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