How to Add $8,000 a Month to Your Practice in 90 Days, with KC Truby

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AccountingWEB Workshop: Tuesday, December 12, 2000

Presenter: KC Truby, Founder & CEO of Bridge21

Complete Transcript

KC Truby: As an opening piece of info, Bridge21 has 150 accountants using the ASP platform. They do this to link to clients in real time. Our purpose today is to review the methods we use and the steps to take to do outsource bookkeeping. If you have questions on how ASP works or how to get clients to pay $1,000 to $2,000 a month and up for this service I would love to hear them. Currently over 600 business owners are using the on-line bookkeeping and ASP link that we will be reviewing.

It is great to be here. This morning in Orange County CA I spoke to 30 accountants about the ASP on-line. The first thing I want to tell you is how the ASP works. This works best for accountants who have clients who do not use their software very well and need help. Please feel free to ask questions as we go along.

The ASP is a server farm that holds your QuickBooks exe file and data for your clients. The server uses the same tech and security as your bank, so it is safe. The advantage to the client is that when they use QuickBooks or other software you can see what they are doing in real time. I like this because it leads to two services that sell for great revenue.

Session Moderator: What kinds of assurances are offered when it comes to security - I think this is the number one concern of potential users?

KC Truby: I will address security further if you like? The big question is can anyone see my data? The answer is NO, the reason is simple, we use 128-bit encryption and no one has ever broken NT security. When I'm talking to clients, it comes up as a question, but after a brief answer they agree it is secure and we go on. I explain that their bank, the IRS and their medical records are all on a server farm (version of an ASP) banks do not keep your records in a computer in the basement, they are on a service bureau. After the client hears that everyone else is doing it, security, in real life presentations becomes far less a question. The other thing about security is that on an ASP platform, only the picture of the screen and the numbers you key in ever go over the line. No actual databases ever transfer between the server farm and the client's computer; this makes it even more secure then pc anywhere. Now, if you have further? About security, please ask

Nannette Rochelle: Is the accountant restricted to journal entries when adjusting the company books such as in QB when using the accountant's copy?

KC Truby: Lets talk about the ASP and how it works then. We use a firm in Tacoma WA called insynq, we have also used several others. We tried to set up a citrix server ourselves and it was to expensive and to difficult for the money we thought we would save so we bailed out of that idea. The insynq people have done a great job at hosting accounting software and tax software programs for our accountants and business owners. The way it works is that you fill in a profile on-line for insynq and they dial into your pc to load the communications software, this is actually pretty easy. They upload your QuickBooks data file or other accounting software.

We are using QuickBooks for this discussion but many programs work on an asp after the data is uploaded and the exe file is moved you are ready to start. They charge me $79.00 a month for the hosting, now I can log on to insynq from anywhere using my browser.

One fee gets me access from any spot on the planet with Internet connection, so I can work from my home in San Diego or my ranch in Wyoming or from a clients office or even a hotel when I travel. What I see when I log on is the exact same desktop for my computer from anywhere the ASP allows me to link to my staff as well as my clients. In our office all of my staff log on to the ASP also then we can share data files, and work from anywhere after doing this for a few months last year, everyone decided they did not need to come to the office any longer to work. I agreed and we went virtual in February of this year.

It was going virtual that pointed out that we could also do bookkeeping for clients from any where now that you have the back ground of the ASP. Lets talk details on how we offer services to the clients

First of all, what are the reasons clients will hire you to outsource bookkeeping? The promise of this on line conference was how to add $8000.00 a month to your practice in 90 days, here it is:

Your clients cannot hire good bookkeepers. Bookkeepers that know accounting software are not easily hired today. As a matter of fact, that is how we got started in the first place, mine quit and it was the 3rd one in three years we set out to lay a program together for doing outsourcing for our own publishing company. The project went so well that in December of 1999 we started telling our bridge21 customers to offer it also.
This worked out also, and we now have 600 firms using the systems I'm about to describe.

First the sale is made to business that cannot hire a good staff bookkeeper or are tired of doing the work themselves. The number of mistakes the average client or in-house bookkeeper makes, causes a lot of bad management decisions. When we approach a client, they must have a problem with bookkeeping or they will not work with you. As I describe the service if I get someone who does not like the numbers they are getting, or who cannot hire a bookkeeper then we have a prospect. On average, we bill the client what they are paying the bookkeeper now or are offering to a new hire. Some of our accounts actually use the help wanted ads to contact potential clients. I personally like doing QuickBooks seminars to bring in potential clients. To get to $8000 a month you will need to offer this to 3 or 4 clients maximum.

Our experience has been that every accountant we work with has three or four clients who are having a lot of trouble getting bookkeepers. A simple letter sent to your client base six times a year telling them about the on line bookkeeping that you can offer is generally enough to get a few clients started. When I talk to the client I promise to take the bookkeeping job out of their hair. Most biz owners know that they do not add value to their practice with bookkeeping so they are happy to get rid of the task.
Now once we have a client who agrees to let us do the on line bookkeeping we must answer 3 problems:

First how do we collect source documents for accts payable?

Second how do we collect info for payroll?

Third what do we do to track sales?

Our best clients have been non-profits, contractors, lawyers and biz service companies, the reason for that is the low number of sales transactions that most of them have.

Now lets cover the first one in detail: Collecting source documents for invoices, we started by sending a clerk on site to do data entry, which was a nightmare. We moved to using a fax in service. The client opens all invoices and signs off on them with payment instructions written on the invoice. We then had the client fax all the invoices to us each night. The faxes went to Nikko ne, this is a service that I pay $25.00 a month for that converts the invoices to an image file and e-mails them to my data entry staff. This image is then brought up on the screen; we use 2 monitors for our data entry so we can put QuickBooks on one screen and the image on the other.

This allows us to reduce the time it takes for accounts payable. The number your looking for on productivity is 31 hours of work per month for each full time bookkeeper you replace. This allows you to have a realized billing of 67 per hour that number works because we pay data entry $12 to $14 hr for 24 hours of data entry per month, and we then pay a bookkeeper $20 an hour plus, to review the data entry.

One data entry (DTA) can do the work of seven clients, then one bookkeeper can review the work of 4 DTA over the month at 7 hrs per client per month, this productivity allows us to generate the realized rate of 67 an hour.
The increase in productivity gives us an average profit margin of 50% after about 3 months with the client. The first 3 months are hell because of all the details that need to be worked out, after a short time we learned that we could change the ship to bill to address and do even better. We started having invoices go directly to our DTA, they would set the invoice for payment and the client approves them at the moment they pay the bills. We use on line bill paying because you can pay 40 invoices in 40 seconds, this cuts time also.

The important thing to remember on pricing is that you are replacing an employee so you can get the $2,000 to $3,000 a month they are paying the bookkeeper, but you do not need to take 160 hours a month if you use this ASP technology and a few other tips. By putting the records on an ASP we can cut the time it takes to communicate with the client. This allows us to get the data and the bookkeeping into the records at any time in real time.

John Green: The current issue of CPA Software News states that CPA firms are not good candidates for ASP because they run too many apps. How do you respond?

KC Truby: John, good to hear from you. The number of apps in most situations is a factor of old habits that can die-hard. But in this situation we're talking about clients linking to our office not the CPA office.

John Green: Exactly how many paying customers do you have on the ASP model?

KC Truby: John, we have 600 at some level and at the last count over 200 on the ASP model not bad eh? And you said this would not work. The reason it works is the communication on source documents we cannot pick up the paper, everything has to be paperless, after we changed the capture of source documents to our address.

We then called the vendors and asked for faxed invoices instead of paper almost all agreed to electronic billing. This cut our labor cost even more and led to a paperless accounting system, all images are stored on the ASP now; the few invoices that come in as paper are scanned at the bookkeeping desk. This keeps the rest of the paper out of our system, if a source document has to be reviewed because the owner does not remember the invoice.

Nannette Rochelle: Does your system with ASP then assume that the client has access to and is active in some parts of the accounting program?

KC Truby: Yes, we encourage the client to log onto the software at least once a day and review. In some situations (like order entry) the client uses the software a lot.

One last thing on source documents for accts payable, what about filing? The funny thing is that most source documents don't need to be looked at so we file them by date, and if its paper we put them in a bankers box for this month. If we ever need to look at them, we go to the folder for this date and just page down, if we need to look at an invoice that came in on paper, we go to the bankers box and search from top to bottom. It seems to work, few invoices ever need to be looked at when we do pay bills if I have a question about one, I write the bookkeeper an e-mail and ask. She sends back info about it, and that generally works. If I ever need to see it she sends me the scanned or faxed image and I can read it. I usually ask for one or two a month, but it's almost always something I ordered and had forgotten about.

KC Truby: Now, lets cover payroll. I recommend that the client keep the payroll service if they are using ADP or etc., this is a low value added task unless you are really into payroll. Some of our accounts will use the QB payroll and have them send checks. QB payroll does open a few questions about paying for tax tables so I leave it to the individual accounts. What we use the Internet for is to capture time cards; this is a simple log on process that lets us have a central point that captures time on the job. Then we can do the payroll for the client, in some cases we use a voice mail on the company phone.

The employee calls in that they are at work, and this voice mail from a caller ID verified phone (the company phone) is converted to an e-mail and sent to our DTA. The DTA does the data entry for hours worked. All outsourcing has variations in each client. That is why ADP has not gone into this business to many variables.

The last part of doing the source documents is sales. This is the toughest. At B21 we use our web site as a POS and run all orders through it. This allows us to have one order entry that can be accessed from anywhere. This will not work for many clients, but I'm telling you about it so you can see how many ways this can work. Our bookkeeper gets an e-mail at the end of the day listing all sales and the amount that went into the bank from our web based POS she makes a journal entry and we get individual sales info from the reporting system on our web software.

Other firms like a contractor I sold last month in San Diego, have a lock box. All checks go to that lock box and since we put the client on line banking it shows up when they get a deposit. I can just key the info into sales after that other biz like a restaurant will still have to make deposits themselves. We tell them to fax the deposit slip to us so we can make the journal entries. If a restaurant wants the cash register slips too, so we can do the sales tax reports, the rest of capturing data is a case-by-case situation; we cover a lot of this on our web site at Capturing source documents must be done as fast as possible.

KC Truby: While my fingers rest, feel free to ask questions.

Tim: Do you destroy the original documents after they are stored electronically?

KC Truby: Tim, we store them in a bankers box by month. If the client ever wants to look at them, they can.

Tim: How long do you keep paper originals?

KC Truby: We keep them for two years. On January 1, 2000 we will erase all 1998 files.

Beatrice Graeber: Do you charge clients a flat monthly fee or by the hour?

KC Truby: We do not charge by the hour. It does not allow you to take advantage of the ASP technology and the profit potential.

Session Moderator: Here's a questions that appeared earlier - I don't think it got covered yet: Is the accountant restricted to journal entries when adjusting the company books such as in QB when using the accountant's copy?

KC Truby: Except those that are required.

John Green: The AICPA states that the number one issue for Accounting firms in 2001 is staffing - if clients cannot hire qualified help, how can CPA firms find the people to perform the work (bookkeepers in NY make up to $70,000)? I tell the client that they can keep the overhead allocation cost, but to let me have the payroll

KC Truby: I prefer to charge the same price as they are paying a bookkeeper now. The fact that your clients cannot hire a bookkeeper is your opportunity not your obstacle.

Tim: With all the major software venders entering into the online accounting market, do you feel that the field may become saturated?

KC Truby: Many of our accounts use the ASP model to hire outside of the major market; geography no longer is meaningful on saturation. In California their are 400,000 qualified businesses to buy outsourcing.

KC Truby: If I sold 1/10th of 1% I would be billing a hundred million a year. The market is not the technology the market is the replacement of an incompetent bookkeeper. This is a real profit center. Whenever clients have a problem, you have an opportunity the majority of this type of work is done by staff. This frees you up to do the top end consulting and to manage a biz, not be a number cruncher. Splitting the workload between DTA and a bookkeeper that is very qualified. The DTA makes 12 to 14 an hour but they do 75% of the work this efficiency allows you to create profit, clients love this. So far I am only aware of 2 firms dropping off outsourcing once they start.

KC Truby: Our average accountant now adds one client a month at $2,000 monthly fee average, the net after the first three months of chaos is 50% average.

Nannette Rochelle: Are you able to work simultaneously? Or do you have to close your access for someone else to enter/review the data and then get back into the data file again?

KC Truby: If you have a 2 user QuickBooks license you can both work on the software at the same time, same goes for other multi user software. I use a single user as B21 because I'm only in the books about 15 minutes a day as the owner.

Workshop sponsored by: Mostad & Christensen

Mostad & Christensen

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