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5 posts!

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Supercharge Your CPA Firm’s External Audit Capabilities

CPA firms face a tricky balancing act when it comes to offering external audit capabilities. Clients expect quality, accuracy and timeliness in their audits. CPA firms, meanwhile, are juggling the need to offer an expanded range of services without sacrificing quality or cost control. Expanding the internal team means firms have to compete to recruit top audit talent in a tight market and commit to a significant investment in training and infrastructure. On the other hand, working with a traditional offshore audit provider often raises concerns about communication, control, and expertise.

Looking for trusted growth partners for external audit services? Click here.

The Pitfalls of Traditional Offshore Outsourcing

CPA firms often turn to traditional offshore audit providers to cut costs, access a wider talent pool, and manage workload fluctuations. However, this approach can create challenges; differences in time zones and language cause communication roadblocks, leading to misunderstandings and delays in the audit process, while limited oversight over the offshore team’s work can also spark worries about data security and compliance with regulations. More importantly, a lack of familiarity with specific US accounting standards can lead to inaccuracies or inconsistencies during the audit procedures. Issues here can go on to negatively affect the final audit financial statements contained in the report. And, when you receive the report, integrating it with your engagement team’s efforts can be time-consuming and cause further discrepancies. These challenges can lead to missed deadlines, increased errors, and a decline in client trust. Another challenge is that, all too often, outsourcing firms are really just task-based contractors. As they have no real interest beyond completing the task, there is little sense of urgency or ownership, which means the ability to provide strategic support or “joined-up” thinking on your projects can be lacking.

Rethinking the Outsourcing Approach for External Audits

A more effective solution to expanding a CPA firm’s external audit capabilities in a way that maintains the high standards of your firm is to partner with a provider that works as an extension of your engagement team, genuinely invested in your and your clients’ success. To make this more collaborative and strategic approach work for your CPA firm, consider the following:

Find expertise that matches your needs: Look for a partner whose team has experience and deep industry knowledge relevant to your clients. This ensures a thorough understanding of the specific accounting nuances and relevant regulatory environments that your clients have come to expect in your audit engagements.

Consider a 24-hour workday: By partnering with a team in a different time zone, your firm can achieve round-the-clock productivity, ensuring that work continues even when your in-house team is off the clock. This approach can significantly reduce turnaround times and enhance efficiency.

Communicate with a dedicated point of contact: Clear and consistent communication is vital. Working with a dedicated point of contact at your outsourced audit provider helps make sure that everyone is on the same page with regards to both processes and expected quality, and questions can be resolved quickly – giving your in-house team some much-needed peace of mind.

Leverage technology for efficiency: Modern audit management software automates routine tasks, reducing the risk of human error. Advanced data analytics tools can identify potential anomalies and areas of increased risk, allowing for a more focused and insightful audit approach. At Scrubbed, for instance, we use cutting-edge technology to streamline the audit process and ensure accuracy and efficiency, which translates into faster turnaround times and cost-effectiveness. When you work with the right audit provider, your CPA firm gains the benefits of up-to-date technology without having to make a capital investment in it.

Pay close attention to security: Data security and privacy are critical when handling client accounts, and your audit partner must have strong security mechanisms in place. At Scrubbed, for instance, alongside our rigorous data privacy and security measures, we ensure that all US-based data is handled within a remote desktop, so the information never leaves US soil.

Beyond Numbers: A Strategic Partnership

Maintaining and sustaining the delivery of high-quality external audit services to your clients is possible with the right external partner but it means going beyond simply outsourcing tasks to an offshore auditing firm. It relies on you building a strategic partnership where engagement and outsourced teams work together to understand your clients’ unique challenges and goals to help them succeed. At Scrubbed, we like to work not as simple order takers but as a true extension of your team and take responsibility for the quality and success of your audit offering. We invest time to understand your practice and exercise a sense of urgency, ownership, and accountability in every engagement. As our expertise goes beyond the “nuts and bolts” of the audit, we can also offer strategic insights, allowing you to provide your clients with actionable recommendations—a little bit extra— that contribute to their long-term financial health and success.

How Scrubbed Can Help

Our experienced audit team is composed of professionals with Big 4 backgrounds. With deep experience in multiple industry sectors, our team understands the specific accounting nuances and regulatory environments relevant to your clients. This in-depth industry knowledge allows us to provide not just accurate number-crunching but also valuable insights that can benefit your clients’ long-term strategies. And, since we pride ourselves on flexibility, our team can adjust quickly to different audit seasons, handling the fiscal busy season, the Single Audit season, and the EBP audit season with ease, and we are at home in both the for-profit and nonprofit sectors.

Ready to Take the Next Step?

Contact Scrubbed today for a consultation and explore how we can work together to strengthen your external audit offering.

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Valuing Innovation: Accounting for intellectual property in today’s idea-driven economy

Recent decades have brought about a significant shift in the global economy. We’ve moved away from the factories and smokestacks of the past and towards an economy fueled by ideas. Where physical resources and manufacturing prowess were once the primary drivers of economic growth, today, knowledge, creativity, and innovation reign supreme.

Are you looking for Services that can solve your technical accounting challenges? Click here to visit our page!

Innovation has emerged as the cornerstone of economic competitiveness, driving advancements in technology, science, and business practices. At the heart of this transformation is the recognition that intellectual capital, rather than physical assets, holds the key to sustainable growth and prosperity in the modern world.

The modern economy revolves around two key concepts: innovation and intellectual property (“IP”). Innovation fuels progress by continually introducing new products, services, and technologies that respond to consumers’ dynamic needs. Intellectual property provides the essential legal framework to safeguard and incentivize this innovation. Innovation and IP form the bedrock of today’s thriving and dynamic economy.

What’s shaping today’s intellectual property landscape?

The emergence of a knowledge-based economy has reshaped how companies approach IP. With the rise of innovative technologies and the growing emphasis on automation and digitalization, businesses increasingly invest in developing valuable IP assets in-house. This encompasses creating proprietary software solutions tailored to automate processes, catering to the evolving needs of consumers and businesses.

These in-house innovations represent a significant departure from traditional IP acquisition models. The shift poses unique challenges in accounting, particularly in reconciling differences between accounting for acquired IP and internally generated IP.

Intellectual property in the accounting domain

The significant distinction between the accounting treatments for acquired and internally generated intellectual property (IP) lies in their initial recognition and measurement. While acquired IP is generally recognized at cost, internally generated IP is typically expensed unless specific criteria are met. However, once recognized, the subsequent accounting implications for both types of IP are generally similar, including amortization, impairment testing, and disclosure requirements.

Adherence to accounting standards like IAS 38 under the International Financial Reporting Standards (“IFRS”) and ASC 350 under U.S. Generally Accepted Accounting Principles (“US GAAP”) necessitates a thorough understanding of these nuances. This article aims to provide guidance on the proper recognition and initial measurement of internally generated IP, offering insights to appropriately account for their intellectual property assets in today’s era of innovation and knowledge-based economy.

The next section outlines the recognition criteria for internally generated intangibles under IFRS and U.S. GAAP.

Accounting for internally generated IP

Accounting for internally generated software under U.S. GAAP

The accounting treatment for software development costs can differ depending on the software’s intended purpose. This section specifically applies only to US GAAP.

New tax treatment of R&D expenses under the Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (TCJA) has significantly changed the tax treatment of research and development (R&D) expenses. Prior to the TCJA, businesses could generally deduct these expenses in the year they were incurred. However, for tax years beginning on or after January 1, 2022, the TCJA mandates that these costs, for tax purposes, be capitalized and amortized—spread out over five (5) years for domestic research or fifteen (15) years for international research. This guidance can be found under Section 174 of the Internal Revenue Code.

Another notable change under the TCJA is including software development costs within the definition of R&D expenses. This means software development costs are subject to the same capitalization and amortization requirements. It’s essential to note that this change impacts tax reporting only. The financial statement treatment of R&D expenses remains governed by accounting standards like Generally Accepted Accounting Principles (GAAP). While the tax rules have changed, companies must continue to follow their standard accounting practices for financial reporting purposes.

These changes can significantly impact companies with substantial R&D expenses. Even if a company reports a financial loss on its books, the new rules could still lead to taxable income due to the capitalization of R&D costs, potentially increasing the company’s tax burden.

How Scrubbed can help

The diverse nature of intellectual property today can pose challenges in pinpointing the necessary and appropriate accounting guidance to apply, a task that is both crucial and complex. The Scrubbed Technical Accounting Group can assist you in evaluating specific scenarios related to intellectual property and intangibles (IAS 38 and ASC 350). Whether it’s analyzing complex accounting transactions, crafting comprehensive memos, and ensuring adherence to presentation and disclosure requirements under specific guidance and regulatory mandates, our team is equipped to guide you.

Get in touch with Scrubbed to discover how our Technical Accounting Group can assist your business in navigating accounting complexities associated with intellectual property.

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Outsourcing Accounting: 5 Tips to Generate Buy-In

Bookkeeping. Financial reporting. Financial analysis and planning. Tax compliance. Industry regulations. Audit support. These are just a few of the responsibilities your business’s finance and accounting function face. Especially for small or growing businesses without a fully staffed finance department, there can be gaps in capabilities and expertise or simply not enough time for all the complex tasks that need to get done.

Sometimes, the answer is to hire internally. Other times, growing your internal team might be cost prohibitive, or won’t necessarily address your specific challenges. As a solution, more and more businesses are outsourcing some or all of their accounting services to fill internal skills gaps, deliver supplementary support during a busy season, or provide assistance as the business scales. Some of the reasons your business may outsource finance and accounting services include:

·       Cost effectiveness: Rather than hiring internally for all of the finance and accounting skills a growing business needs, it can be more cost effective to outsource some or all of these services as you grow your team over time.

·       Access to tools and expertise: Outside accounting firms are in the business of finance and accounting. They have a range of expertise and tools at their disposal to support you as needed—expertise and tools that may be too expensive for you to hire for or maintain internally.

·       Flexibility: Using a third-party accounting firm gives you flexibility to get the services and consultation you need, when you need it, as well as to increase or decrease their level of support as your business ebbs and flows.

·       More focus on your mission: Outsourcing your accounting services to accounting experts frees up more time and resources to focus on your own expertise—your business’s work and mission—without getting bogged down by the complexities of bookkeeping and accounting.

Despite the many benefits of outsourcing, it can be challenging to convince your stakeholders it’s the right move. Here are 5 straightforward tips to help you discuss outsourcing accounting services to get the buy-in you need:

1. Clearly articulate the challenge outsourcing your accounting services will solve.

First, pinpoint what you need help with. Is there a skills gap on your current team? Do you need to augment internal resources during a busy season? Do you need guidance with tax compliance or an upcoming audit? Clearly articulate the challenge outsourcing will solve.

Also read: 4 Reasons the Outsourced Finance Function Is Trending

2. Provide evidence of how outsourcing accounting services will solve your challenge.

In building your case that outsourcing accounting services is right for your business, be prepared to present your stakeholders with evidence that outsourcing will solve your challenge. This evidence can take the form of case studies or testimonials demonstrating how other businesses solved similar challenges through outsourcing. You may also provide statistics showing the prevalence of outsourcing in your industry.

3. Consider your stakeholders’ concerns and be sure to address them.

Before talking to your stakeholders about outsourcing, think about the concerns they may have that could be a barrier to their buy-in. Are they concerned about cost? Do they have a negative perception of outsourcing? Are they worried about the time it may take to onboard and interface with a third-party provider? Anticipate these potential barriers and be prepared to address them head-on.

4. Be clear about what your accounting services provider will and won’t do.

Outsourcing your accounting services isn’t all or nothing. If you engage outsourced services, what tasks will they be responsible for, and what tasks will they not do? Prepare a list of “will do” and “won’t do” items so that your stakeholders have clear expectations from the start.

5. Back up your request with the expected ROI of hiring an outside accounting firm.

Prior to your conversation with your stakeholders, perform a cost-benefit analysis of outsourcing accounting services. Gather a few quotes from third-party accounting firms, and compare the numbers against the cost of using existing personnel or hiring internally to cover those services. Estimate the return on investment of outsourcing, and present this to your stakeholders as proof that outsourcing makes sense for your business.

There are many ways a third-party finance and accounting services firm can support your business. While talking to your stakeholders about outsourcing such an important function and convincing them it’s the right choice may seem intimidating, going into the conversation prepared will help generate buy-in.

Outsourcing finance and accounting services is cost-effective, reduces risk, and gives your business experts to tap into when needed. Far from detracting from your core business, outsourcing is a great resource to help your business achieve its goals.

Are you ready to have an experienced accounting team on your side? Learn how outsourcing with Scrubbed can benefit your business by solving capacity issues, improving efficiency, scaling effectively, providing support with tax planning, navigating risks, and more. Scrubbed provides full-service accounting, corporate finance, tax planning and compliance, and other financial services to support growing businesses across the globe, with solutions that are scalable, practical, cost-effective, and technology-driven. Contact us to get started.

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New Report Reveals Winning Strategies for Navigating the Accounting Talent Crisis

The numbers are startling: over 300,000 accountants have left the profession in just two years, and projections show that we’re facing 126,500 job openings every year. If you’re running a CPA firm, you’re probably already feeling the impact of these unprecedented staffing challenges. What’s more, traditional approaches that rely on recruiting local graduates or trying to hire more senior accountants away from existing employers simply aren’t working as well as they used to, especially for smaller firms.

Sponsored by Scrubbed, a new report, Staffing Strategies: Uncovering Solutions for the Accounting Talent Gap, analyzes responses from 246 accounting professionals and reveals that only 24% of organizations consider their current staffing strategies successful.

“The fact remains that if firms continue down the same path and ‘just go to the same well,’ eventually, there will be no water when they pull up the bucket,” the report warns

However, the early research described in the report shows there’s hope – and actionable solutions – for your CPA firm.

Focus on Building a Positive Work Culture The research reveals that firms that prioritize a positive work environment and provide professional development opportunities see better employee engagement, , with 65% of staff expressing strong feelings of belonging. This isn’t just about keeping your employees happy; it’s about building a competitive edge.

Reimagine Recruitment CPA firms need to find new ways to create sustainable talent pipelines. Strategic academic partnerships, hiring people with non-accounting backgrounds, and expanding remote work options can all help you recruit the people you need.

Improve Efficiency Only 47% of respondents report that their accountants’ workloads are reasonable and 36% say they have significant problems with burnout. Optimizing the workload by using more outsourced or offshore teams and streamlining your processes can help reduce burnout without affecting the quality of your client services.

Strategically Reduce Demand and Workload Reducing the demands placed on your team by decreasing the workload could look like more automation, fewer or different services, or price increases. The report shares how successful firms are finding ways to maximize value while minimizing team stress.

The talent crisis is real, but it doesn’t have to define your firm’s future. The Staffing Strategies Research Report offers concrete, data-driven solutions that are already proving successful in the field. Ready to transform your firm’s approach to talent? Download the preliminary report for actionable insights and proven strategies.

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Unlock Financial and Environmental Gains with Renewable Energy Accounting

In today’s world, the shift towards sustainable practices is becoming increasingly important. One area gaining significant attention is renewable energy accounting. By incorporating renewable energy sources into financial strategies, businesses can reduce their carbon emissions and unlock financial gains. This article explores key considerations for renewable energy projects and their impact on financial and environmental aspects.

Need trusted growth partners for Renewable Energy Accounting? Click here.

What are the key considerations for renewable energy projects?

Accounting and reporting play a crucial role in renewable energy projects. Companies must accurately account for their renewable energy investments and disclose relevant information to stakeholders. This ensures transparency and compliance with accounting standards, such as ASC guidelines, in showcasing the financial performance of renewable energy projects. Moreover, understanding the environmental impacts of these projects is essential for creating sustainable energy practices.

Learn more about common financial reporting requirements here.

How do power purchase agreements impact renewable energy accounting?

Power purchase agreements (PPAs) are vital in driving renewable energy projects. They provide a framework for transactions involving renewable energy credits (RECs) and help companies meet their sustainability goals. By incorporating sustainability considerations in these agreements, businesses can align their financial benefits with environmental objectives. Additionally, the financial gains from PPAs can create a win-win situation for all parties involved.

Curious about other financing options for renewable energy projects?

What are the environmental benefits associated with renewable energy credits?

Renewable energy credits (RECs) offer a pathway to achieve environmental sustainability. They represent the environmental attributes of energy generated from renewable sources and can be traded to support clean energy projects. By understanding the environmental and social impacts of RECs, companies can enhance their commitment to sustainability. Moreover, meeting the requirements for renewable energy certification demonstrates a dedication to clean energy practices.

How do accounting standards address renewable energy projects?

Accounting standards provide guidelines for accurately accounting for renewable energy investments. Companies need to consider impairment factors and make informed decisions regarding financial reporting requirements. Adhering to ASC guidelines ensures that accounting practices reflect the true financial status of renewable energy companies. Proper accounting for renewable energy facilities is essential for owners of renewable energy to make sound financial decisions.

What are the financial implications of clean energy investments?

Investing in clean energy offers various financial benefits. Companies can leverage tax credits and government incentives to maximize their return on investment (ROI) in sustainable energy projects. By implementing strategies that focus on financial gains in renewable energy, businesses can contribute to the energy sector and strengthen their profitability. It is crucial to consider the long-term economic benefits of clean energy investments to achieve financial sustainability.

How Scrubbed Can Help

Navigating the financial intricacies of renewable energy projects can be a complex task, but it’s crucial for the growth and sustainability of your cleantech company. As you face these challenges, remember that you don’t have to do it alone. Scrubbed is more than just a service provider—we’re your growth partner, offering specialized accounting and finance services tailored to the unique needs of the renewable energy sector. Our team of experts is equipped to provide the support and guidance you need to ensure compliance, optimize financial performance, and drive strategic decision-making.

Let’s discuss your renewable energy and clean technology company’s accounting and finance needs and how Scrubbed can meet them by providing the highest quality service.