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The New Accounting Firm

New York City accounting firms aren't what they used to be. Like many industries, accounting has been transformed by sweeping economic aftereffects of the Great Recession as well as new digital ways of working. These changes are indeed visible at the many local accounting firms that contribute to New York City's role as world financial capital. In the pages that follow, Crain's looks at some key trends shaking up the New York City accounting industry--and the field as a whole--ranging from globalization and more mobile ways of working, to increased demands from aging Baby Boomers for help in selling their businesses. We also look at how accounting firms are pioneering new approaches to workplace flexibility--and how a freelance revolution is enabling independent accountants to tailor this for themselves. As trends expert Daniel Levine, director of The Avant-Guide Institute in Manhattan, put it, "Technology is facilitating this change in the way people work." Read on to find out all about the trends and innovations that are reshaping the accounting field in New York.

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On the hunt for promising new clients, EisnerAmper's accountants spend a lot of time visiting technology incubators and university campuses. While some accounting firms prefer working mainly with corporate clients, EisnerAmper, a CPA and consulting firm with an office in Manhattan, likes to get in on the ground floor with startups. "Our standpoint is we are building something at the early stage to help these companies grow and become our next large client," said Mike Lopez, a partner in the firm.

with their accountants through another tool called PwC Connect, which is also accessible via mobile devices, Brennan noted.

Another hot trend for accounting firms is using "Big Data" techniques to help clients sift through information that was previously hard to analyze. PwC is mining clients' financial records to uncover patterns they may not have noticed. "It allows us to see the totality of the business and get some useful insights that maybe our clients aren't seeing," said

Accounting Goes Digital

big companies. Freyman asks his team to upload sensitive documents to Box, instead of sending it by email.

"Box is not a cheap solution, but it's incredibly secure," said Freyman.

It may be pricey for a small firm, but with many of the big guys going after the same clients, Freyman considers it a good investment. "It's one of the ways we've really been able to distinguish ourselvs from other accounting firms," he said.

EisnerAmper is one of many New York City accounting firms that find technology is transforming their practices. While chasing down the next Google as clients, many are using fast-evolving technologies for both internal work and communicating with customers. They are also staffing up with young, tech-savvy talent.

Today's accountants need to be savvy about anything from firewalls to general IT issues, according to CPA Yigal Rechtman, principal in the litigation and forensics practice at accounting and business consulting firm Grassi & Co.'s office in New York City. "You need to be able to do sophisticated things with databases, and extract large amounts of data from various and complex sources," he said.

Certainly, the new technology is not without its challenges. Many firms have seen an increasing need to invest in Cybersecurity measures that protect sensitive information for clients. "It is a concern for just about every accounting firm we network with," said Thomas DeMayo, director, IT Risk Advisory, at CPA firm O'Connor Davies LLP in Manhattan, in an email.

But that is a cost most are willing to bear to stay competitive. Nationally, many accounting firms are embracing new technologies, and the bar is especially high in New York City, a financial technology capital. Seventy percent of U.S. accounting firms now offer employees remote access to their network; 50% use remote, cloud-based backup; 48% now use cloud-based software and 25% use Skype, according to the 2014 Management of an Accounting Practice Survey from the American Institute of CPAs' Private Companies Practice Section and the Texas Society of CPAs.

Brennan. For instance, if PwC notices that a firm is making 70% of its shipments on the last day of each month, every year, it might mention that to the client so they could use that information for future planning.

Some accounting firms find that with more and more clients going digital, it's become increasingly more necessary to hire accountants with the digital expertise to advise them. Accounting, tax and consulting firm Citrin Cooperman, headquartered in Manhattan, has doubled the size of its state and local tax practice to meet the demand brought on by new technology, said New York City-based CPA David Seiden, the partner in charge of that practice.

"We do a lot of work with companies that are both investing in technology and are building out technology to offer their own services through a digital platform," said Seiden. "What we do here at Citrin Cooperman is help them find a digital platform to help them perform their services."

As accounting firms migrate to digital technology, they increasingly seek out talent that is already accustomed to it. When PwC recruits on college campuses, it looks for a combination of accounting and tech skills. Said Brennan, "We're seeing students get their four-year accounting degree and enhancing that with a master's in information security."

At Grassi & Co., employees with entrepreneurial ideas in areas such as technology and healthcare can request to focus on developing them. So far, a small handful of employees are doing so, said Rechtman. "If someone has an entrepreneurial idea, the firm will consider giving them a certain amount of time to do it," he said.

Working in the field with clients is one key area where technology has transformed the way accounting firms operate. More firms are turning to cloud-based software and storage programs that let their personnel work from anywhere. "If you really can't do things on Android devices, an iPad or other mobile devices, you're going to get left behind," said Bill Brennan, audit partner at PricewaterhouseCoopers office in Manhattan.

It isn't just large and midsize firms that are embracing new technology. New York City CPA Greg Freyman, whose firm, Freyman CPA, has a handful of accountants in Manhattan and Westwood, N.J., has been an early adopter of using electronic signatures through DocuSign digital transaction management software. "Using a software like DocuSign lets clients sign from anywhere on the go," said Freyman.

To avoid that hazard, PwC has made its audit software Aura accessible from their smartphones and mobile devices. Meanwhile, clients can work

Freyman also sets up all of its clients with Box, a secure cloud-computing solution used for contentmanagement, file-sharing and collaborating by many

Cybersecurity 101

As accounting firms embrace digital technology, cybersecurity has become a top priority. In September 2015, ACCA USA, the U.S. branch of the Association of Chartered Certified Accountants, and Pace University issued a report called "Cyber Warriors with Calculators" that found 58% of auditors and 48% of accountants are more concerned with cyber crime than a year ago.

It should be top of mind, according to Thomas DeMayo, director, IT Risk Advisory, at CPA firm O'Connor Davies LLP in Manhattan. "Organizations assume that just because IT `works,' it works securely; or they operate with the misconception that they are too small or insignificant to be a target," he said in an email. As many organizations are unhappy to discover during cybersecurity audits, that lax attitude leaves them exposed to hackers, say experts.

DeMayo says there are several safeguards every accounting firm should embrace:

? Establish an information security framework. This is a documented set of procedures for putting information security controls in place and managing them.

? Have independent cybersecurity assessments conducted.

? Provide security awareness training for all employees so they don't get tricked by "phishing" emails from hackers and the like.

? Encrypt sensitive data, both in transit and at rest.

? Do due diligence on all third parties that have contact with their data.

It's not just accounting firms that are at risk, DeMayo notes. "Our number-one request these days is helping clients protect their data and/or helping them respond in the event of breach," he said.

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New York Accounting Firms Go Global

With many clients in the financialservices industry looking to attract investors in China, EisnerAmper is wasting no time in making inroads in that market. To make connections that will help its customers, the CPA firm and consultancy sent three of the firm's partners to speak before several hundred fund managers at an investment conference in Beijing earlier this month. The trip was the latest step in a four-year effort to establish a strong presence for EisnerAmper's brand in China.

"We believe China will be the next big market for the financial-services industry," said Charles Weinstein, CEO of EisnerAmper, which has an office in Manhattan. "Our next step will be to actually open an office in China. We're right there on the ground floor."

In an era where technology makes it easier than ever to communicate across borders, many U.S. firms of all sizes are diving into international markets or are working with overseas businesses that want to expand in U.S. markets. This has created new opportunity for the accounting firms that serve these businesses, which often must comply with treaties and laws that govern international transactions. "Clients are driving this need for our firm to be global," said Weinstein.

Many firms have joined EisnerAmper in embracing the global economy. At WeiserMazars, long active on the

international scene, 15% to 20% of the firm's revenue is tied to international business, with about 10% coming from clients who want to do business in the U.S. and 5% to 10% from U.S. firms that are expanding overseas, according to CPA Kathryn Byrne, partner-in-charge of manufacturing and distribution at WeiserMazars LLP "We see the international focus across all disciplines in our firm," said Byrne.

The globalization driving such business shows no signs of slowing down. The value of goods exported globally should pick up to 8% a year by 2017-2020, according to projections by British bank HSBC.

While many firms in the U.S. want to break into markets in China, China is not the only foreign market that is attracting attention from New York accounting firms. In response to a demand from clients, EisnerAmper has recently opened offices in several new overseas locations, including the Cayman Islands, from which Weinstein spoke, as well as Dublin and London. The firm has also started EisnerAmper Global, an international network of independent accounting firms, in which EisnerAmper has an ownership interest, to address the specialized needs of the financialservices industry around the world.

One such area of need for which accounting firms find themselves in demand is in the matter of compliance with the Foreign Account Tax Compliance Act, better known at FATCA. Meeting the requirements of this law

(passed to prevent money laundering) can be onerous. "We see great opportunities for growth in addressing that need," Weinstein said.

Assisting clients in managing their global-tax burden is another growth area. Ryan, an international taxservices firm based in Dallas, has developed proprietary technology to help clients recover overpayments of withheld taxes according to Ian Boccaccio, practice leader, international tax at Ryan's New York office. Many companies' accounts receivable departments make mistakes, such as failing to update the amount they are withholding from year to year to reflect changes in treaties that govern withholding, Boccaccio said. "We are able to recover payments and fix the process going forward," said Boccaccio.

As firms become more international, more are staffing up with talent from overseas. "We have many, many Chinese-born people in the firm in our financial-services industry practice," said Weinstein. "That's what really has driven the presence we have in China."

However, immigration restrictions are slowing this type of staffing. The number of applicants for the H-1B professional visa dwarfs the number of visas allowed by a huge margin and has resulted in a lottery system, noted Robert Fligel, CPA, at RF Resources, a staffing firm in Manhattan. "Suffice to say, firms cannot plan to help fulfill their staffing requirements around such a system," he said.

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To Business Owners Who Want to Cash Out, Accountants Deliver Tough Love and TLC

As a partner at Anchin, Block & Anchin in New York City, Greg Wank often speaks with seasoned entrepreneurs who are ready to hand over the reins to firms they've spent years building, so they can retire. Some find the conversion is a jolting splash of cold water. "It's painfully apparent they are not ready to go to market and sell their businesses," he said.

Often, the problem is their accounting. Some have relied on software or an internal team that has not kept records in the meticulous way that a buyer-- especially a sophisticated one like a private equity firm--expects, according to Wank. And that's a possible deterrent to a sale. In such cases, that's when Wank and his team set to work, switching firms to better accounting procedures and making sure financial records are accurate and complete.

Now, more than ever, accountants across New York City are hearing their phones ringing, as many business owners find themselves eager to sell, after waiting out the recession for just the right moment. Nationally, the number of small-business transactions reached a record high in 2014 and has since stabilized, according to BizBuySell, an online marketplace for businesses for sale. BizBuySell found 1,814 businesses changed hands during the third quarter of 2015, down from the 1,987 in the

same quarter in 2014 and from the 1,913 recorded in the second quarter of 2015.

As with homeowners, business owners can be their own worst enemies when selling. They are often unrealistic about what their businesses are really worth, say accountants, because they are emotionally invested in their firms. "They talk to their friend at the golf club who says `I sold my business for 10 times earnings,' and believe what they heard," said CPA Steven Nicokiris, lead managing director at CBIZ MHM, who is based in New York City.

Working with accountants often provides a reality check for business owners. For a complex business that's been around for 30 years, says Wank, "It may be a six-month intensive cleanup period followed by let's have a year or two under our belts of doing things correctly and then going to market."

To speed up the sale of a business, Joel White, managing director of Ansarada, a creator of virtual data rooms for mergers and acquisitions deals, recommends that owners work with their team of advisors to come up with a checklist of documents they will need--including their financials and other important paperwork--and begin assembling this paperwork long before putting a business on the

market. "Often these documents are stored all over the place," said White.

Gathering that data can enable business owners to perform needed due diligence on their own firms, said White's colleague Adam Goodman, director, New York office at Ansarada. Sometimes, owners of complex businesses need to bone up on their financial situation before approaching potential buyers, he has found.

"I've seen situations where the CEO has people running different departments, and revenue is coming in from 10 different revenue streams," said Goodman. "You need to be able to have complete transparency on how the money is coming in, where you're losing money and where you're spending money, such as marketing."

Just as home buyers most likely won't see a property's potential unless it already looks great, business buyers tend to pass over businesses that are not healthy, say industry professionals.

"For a business owner, the most important thing is for them to have a clear story and to articulate to the buyer why their company is a good investment," Goodman said. And for many firms, say experts, precise financial records tell the story best.

"New York City, long the financial capital of the world, has also become home to leading fintech companies and a rapidly growing technology community, both centers of excellence for EisnerAmper"

says Charly Weinstein, CEO of EisnerAmper LLP. "One of our firm's greatest strengths is the ability to connect our clients with the capital markets. Our positioning in both the capital markets and the technology community enables us to connect the two most important drivers of economic activity in New York today: technology and capital."

EisnerAmper is one of the largest full-service accounting and advisory firms in the U.S. The firm provides audit, accounting, and tax services, as well as corporate finance, internal audit and risk management, litigation consulting, forensic accounting and other professional services to clients across all the major industries; working with high net worth individuals, family offices, closelyheld businesses, and start-up, middle-market, and Fortune 500 companies.

Through EisnerAmper Global, the firm is recognized internationally as one of the premier CPA firms providing services to the financial services industry. This expertise in turn fuels our knowledge of the capital markets, helping clients with mergers and acquisitions, debt financing, due diligence, valuation, international expansion, restructuring and more.

EisnerAmper is one of the nation's leading auditors of SEC registrants and maintains one of the largest public company practices of any independent firm, providing services to more than 200 public companies. EisnerAmper is the fifth largest CPA firm in the New York area and represents the alternative to the Big Four.

"What has made us successful is the drive to seek out entrepreneurial leaders. This keeps us active in emerging markets and in turn drives our own growth," says Weinstein. "Our clients' success contributes to our own, and vice versa. Our expertise is in helping companies grow, from start-up through IPO."

We recognize that the fastest-growing, most dynamic companies are imbued with their leader's sense of mission and determination to succeed. Our experience has taught us that while all business owners and CEOs have their own management style, effective leaders share a number of attributes:

n A clear vision of what the organization should be as it grows and evolves. n An ability to find, recognize, and pursue opportunities. n A strong drive to meet goals and immediately establish new ones. n A willingness to make tough decisions about people, finance and strategy. n A n ability to serve as the organization's motivator and conscience. n A n understanding that business is personal; that the relationships we build

are critical to growth and success.

In tune with our focus on finding the next generation of leaders, EisnerAmper has been a proud sponsor of the NYU Stern Business School's Entrepreneurs Challenge, one of the nation's largest and most rigorous business plan competitions.

CONTACT Charles Weinstein, CEO 212.891.4030

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