Who's Really the BOSS?

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Rachel Dillon: Hi, I'm Rachel Dillon, and together with my husband, Marcus Dillon, we lead Who's Really the Boss podcast, where we highlight the joys and challenges of running a business with your spouse or family. Our mission is to strengthen families and businesses by helping listeners avoid the mistakes.We have made so they can lead. And live happily ever after.

Rachel Dillon: Welcome back to [00:00:30] Who's Really the Boss podcast.

Marcus Dillon: Hey, thanks for having me back.

Rachel Dillon: I'm excited today to talk through what really happened during tax season. We've had time, um, in between tax season actually happening and ending to kind of recover from what actually happened. So this is going to be our tax season recap episode. Um, but we're not going to share highlight reels only. We'll share the good, the bad and the ugly. Everything in [00:01:00] between. So excited to talk through that today.

Marcus Dillon: Yeah. And uh, you opened it up and said tax season. I would just say it's more of like a busy season because we have a lot of non tax projects during that time of year. So um, while it is the tax deadline season, I would just say that it's busy. Right. You know, it's a season. So, uh, we do a lot during that time of year. A lot of our friends focus on tax. And so they they know what we're talking [00:01:30] about. But, you know, it definitely is a busier time of year than the rest of the year.

Rachel Dillon: Yeah. And even before we start talking about that, because also what that means is we're kind of going to give a recap of what's happened now January through April of 2024. Uh, but during that time we have to update on Kinley, our oldest. So we haven't talked about Kinley for a while. So we have two daughters. Kinley is about to turn 19 and just finished her [00:02:00] first year in college, and Avery is 16 and finishing up her junior year. So we'll give an update on Avery on the next episode. But this week, uh, talking about Kinley and kind of how she ended up after her first year of college. So what are your thoughts to share on her first year?

Marcus Dillon: It was, um, it was a good year. She was closer than she was the prior semester. Obviously the prior semester she was in Switzerland. This time around, she was in Waco, [00:02:30] which is about three hours door to door from our home. So closer. Uh, the one thing I do not miss about her being home. She's been home for about a week now. Is like the tornado of stuff that comes along with her. Uh, she's very creative between baking and sewing and everything, so just kind of feel like a bomb went off in different rooms of the house. Maybe. I don't even know what. All rooms were impacted, but a lot of rooms were impacted. So it's good to have her home. [00:03:00] Uh, maybe we need to work on organization and cleanliness whenever you do come home from college.

Rachel Dillon: So and so I think. Yeah. Leading, um, or contributing into her tornado is actually the amount of time that she'll be home. And so she finished up, she had the best semester in Waco at Baylor and, uh, made a ton of friends, new connections. Uh, she was in a new small group and new church home and just a ton of new [00:03:30] opportunities. And so through that, she went ahead and planned out her entire summer to pretty much not be at home. So she had only a five day window that she's actually going to be here and had a I think it's 9 or 10 bags that she made, like sewing bags and she had for graduation cake orders. And so trying to get all of that completed within five days meant there's no cleanup time [00:04:00] in between. Like she starts a project and finishing a project, you know, the next morning. And so, um, so with that, I think it's comforting to hear at this, like simultaneously her mixer going and her sewing machine going in the other room with the TV turned up loud enough that she can hear it over all of her projects that are happening. So it's been pretty awesome having her here. And so you want to tell a little bit about where she'll be this summer.

Marcus Dillon: Yeah. So [00:04:30] she'll be going on a mission trip for two weeks, I believe, to Bogota, Colombia, uh, with her church. So she's raised money by making the bags and doing all that fun stuff. So, uh, if you follow her on social media, like, that's what she's doing. I know a lot of our friends and listeners do that. Uh, but then she's also, uh, working at a camp this summer that is, um, uh, handicapped individuals and will be there for 4 or 5 weeks, right?

Rachel Dillon: Yeah. She's she's supposed to be working for five weeks. [00:05:00] And so that doesn't take up her whole summer. But she had already planned to volunteer at that same camp before she got hired on, and then also now has a week of training. So that is really going to leave her two weeks home in June and a few days home in August before she goes back to school. So she has a full summer coming up. And if anybody is a brand new listener and doesn't know Kinley, you can follow her on Instagram at Kinley's Confections. And that's. Kaitlyn Lee. [00:05:30] So that's fun. You can keep up with kind of what she does in her businesses. I'll say businesses because I feel like she's, you know, starting a couple here now. So that's that's her update. So let's get into what Dylan business advisors. Um, we'll call it tax season just because that's a familiar term. Most people understand what that means. But really that time period from January through April and we're recapping 2024. [00:06:00]

Marcus Dillon: Yeah. So the 2023 returns that were done in the spring of 2024. Um, so we're quite a few changes compared to last year, and we'll get into those as far as team is concerned. And um, overall, how many returns we prepared or how much revenue was um, different things that we did in between last tax season to this tax season. We'll kind of bring us full circle. Um, also the team makeup that is in place today [00:06:30] and moving forward. And then what we learned in that process and what we're going to be looking for, um, and trying out testing or implementing before next tax season, because it'll be here before you know it. And I think some of us were recording, uh, this in May. It'll probably release in June. Some of us that have gone through tax seasons, as rough as they are, we can forget how rough they are pretty quick, and I document the pain while [00:07:00] it is real. That way you are motivated to make changes in your practice. That's what we've tried to do as best we can. And that's what this episode is about, what we've learned. So so you.

Rachel Dillon: Brought up a great point. So I think it would be perfect to start even before April. So let's go back to as 2023 was ending and we were preparing for what would come in 2024. What are some of the changes that we learned or, [00:07:30] um, kind of fell into near the end? We'll say like Q4 of 2023, what were some changes that took place that would definitely impact our tax season?

Marcus Dillon: Yeah, I think the main one, we're in the people business. Right. So it's team, uh, changes in the team makeup. So, uh, if we look back in Q4, our tax director, he exited the practice and went and started his own own firm, which is great. We supported that decision, and it made a lot of sense [00:08:00] for him and his family. So, uh, but on our side, we have one less, uh, leader tax director roles important and most firms. And, um, so that was a change going back all the way to tax season of 2023. Uh, with the 22 returns we actually had, um, we were one more client controller at that time. Uh, we did some restructuring in March of 2023 and um, had [00:08:30] like were did not have the need for one CSM position and one client controller position. So, um, we had two less team members FTEs coming into this tax season compared to last and one less tax director as far as that makeup is concerned.

Rachel Dillon: And we've talked about that before with, um, some of our client transitions that we've initiated on our part and certain things that we've done within our business that [00:09:00] it's it's never our goal to downsize necessarily. Our team. Um, for some of these, the performance did not match the expectations of the firm. And once those two positions were removed, we realized after we realigned based on that need that we didn't have a need for those positions. So it wasn't where we all of a sudden just didn't need two people. It was more that there were some performance issues [00:09:30] and expectations that weren't aligning. And then once we realigned really verticals of clients and teams, um, our teams of three and our pods, then we realized we didn't need to go out and hire for those positions again. But all of that said, for this, um, tax season in 2024, we were three. Less positions than what we previously had in years prior.

Marcus Dillon: Yeah. So and that's [00:10:00] just on the production side, you know, we had two less admin team members or, you know, sales and business development team members as well. So five total headcount down from last year and then three production, uh, people down from last year. And then the other changes that we um, saw this year over last we, we exited clients. Um, so some of those annual client relationships that no longer fit the model of DBA, [00:10:30] um, we exited those, we monetized that client block. It was about 35 family relationships. And when we say family relationships, that's like a 1040 additional business returns or additional trust returns. Um, it could be a makeup. It's more than just one tax return or one person's tax return. Uh, most of the time, especially when we got to that. So those 35 families made up about 75,000 of annual recurring revenue. None of those clients were on a monthly recurring revenue model. [00:11:00] And so, uh, we we exited them just because, as we'll talk about here in a bit, who works on those 35 annual relationships was challenging in years past. And we knew going into this year we were going to maybe have a capacity issue with three less full time equivalents in production.

Rachel Dillon: Yeah. And so I believe you can definitely hear more details on what we do [00:11:30] once we identify clients that are no longer best served within DBA. I think there's an M&A transaction podcast previously recorded out there that you can listen to that kind of talks through, uh, how we determine that and then what we do with those clients after after they're identified. Um, we had with our director of tax exiting, we really wanted to make sure that our team felt supported [00:12:00] in that area of tax. Um, just meaning that they had someone that they could go to for very technical questions or maybe questions that they were not familiar with or just confident in making on their own. And we didn't want that to be limited to just, um, you, Marcus, because one that will cause a capacity issue immediately if there's only one person who can answer questions for them. Um, and then two also, because again, you [00:12:30] don't spend majority of your time doing tax, researching tax or or learning new tax laws. Um, and so wanted to make sure that there was somebody who was an expert at that so that our team would have comfort knowing they have a resource available to them.

Marcus Dillon: Yeah. And so, uh, um, the director of tax in the past, all of 20, 23, uh, his production hours were around 700 hours of production. And so we knew that, [00:13:00] uh, if worse comes to worse, we had to replace 700 billable hours, right? Production hours. And then there's probably going to be additional admin time. Um, he did a really good job setting up systems and processes while he was a part of DBA and, uh, equipping other members of the team to where he wasn't needed. He essentially worked himself out of a job as what he would say. And but we still had that 700 production hour, um, capacity that could be an issue. So what we identified [00:13:30] is we identified somebody in the market, uh, and kind of tapped her to be a tax director of counsel. If you will be available to our team for some of those, uh, technical trainings, technical advice, technical review that is needed, uh, with a tax director no longer being in-house. And so she was just starting her practice kind of going solo, so reached out to her, kind of firmed up what a reasonable hourly rate was. And then, um, [00:14:00] kind of blocked out some time on her schedule for our team to be available. So that looked like she would be in the Tuesday hole team meeting, the Tuesday tax team meeting, which is right after that's an hour of team meeting time and then available on Tuesday for review and for questions, and then a half day on Thursday for review and questions.

Marcus Dillon: And we just paid her really, uh, a reasonable hourly rate for the time that she did spend working with DBA. She was in our [00:14:30] team's, um, environment. She was in our tax program environment and still is to this day. And we learned a lot in that experiment. We wanted to give her a little bit of comfort with starting your own firm. Hey, you can you can count on us to kind of keep you busy to a certain extent as you go out and build your own practice. And we saw her as a as a peer that we wanted to support, and maybe it allowed her to not make some [00:15:00] bad decisions on new clients or clients that would only fit while she's getting started. So I think that was a good match for, uh, 2024. And hopefully we build upon that as we've kind of learned some things on, on both sides. So the other team addition, well, there's two team additions, uh, the other team additions.

Rachel Dillon: Let's go back to our, um, director tax director of counsel, because the one thing we didn't want to do, we didn't have a need to hire another director of tax [00:15:30] full time because we didn't have the amount of tax work to support a person who only did that. Um, we weren't sure that we we weren't sure what even part time meant for a person like that. So we went kind of the contracting and fractional part set up some like loose boundaries of estimates of we think about this much time each month, um, is what we're looking at. And let's try it for a year and see how [00:16:00] it works. And, you know, at any time during that point we can discuss and talk and, you know, make sure that it's working on both sides. But one other thing that we tasked, um, that position with was trainings for our team. So we have team members that don't necessarily have a tax background but want to be in a controller role, which is one of our roles in our. Teams of three model, and so wanted to make sure that there was also someone who was giving updates and [00:16:30] training available to train our team members, whether that was like whole group, everybody who needs tax training or individual specific training. So that was one other area that we thought this this could potentially work out to help if there was ever, um, not very much work for tax. So maybe during some off months, but also to keep the calendar or the space open that that person would be available for training. [00:17:00] So those are just some ideas and thoughts in case anyone else wanted to explore an opportunity like that of things that that person could do, um, if they were looking for someone kind of in that same capacity.

Marcus Dillon: Yeah. And I think it was a role that we identified and kind of built and, um, now sharing that role with other people, they shake their head as like, that's awesome. How can I get her number? Uh, because it's needed. Uh, it kind of gives external perspective, almost like a peer review, if you will, [00:17:30] but not like peer review in the sense of, like, audited financials and all that stuff, but truly like having, um, an external party that you can go to. And we also have kind of that relationship with a larger firm, a top 20 firm. Um, it's harder to get those partners at that firm to give you a little bit of focus as a small firm, so they're not as available as you would hope. But we needed to support our team and give them assurance that if they had something technical come up with a client, that they had a person [00:18:00] that they could go to in addition to me. And that's also a great option, uh, for people that may be on the other side of firm ownership if they retire and they want to kind of be this tax director of counsel for other firms, I think that there is a need for that in the market. Um, and you can ask a pretty good rate, um, especially during tax season. You know, I think that's something if you were just a retired partner or retired technical tax person, [00:18:30] you could definitely call your shot, work as much as you wanted to, and just be available to other teams and maybe not manage clients, maybe not manage other teams.

Rachel Dillon: Yeah, absolutely. Well, I think that's great. So let's talk about our other position that we added. Um, prior to 2024 starting.

Marcus Dillon: Yeah. So a lot of what our tax director did was administrative work. So making sure that um, returns were filed, extensions were filed. Um, kind of giving updates on [00:19:00] tax things throughout that season, that administrative work. What we've always identified is that administrative work was not necessarily the best fit for someone that is worth more in the open market. Um, so how do you remove that admin work and delegate it to others? Um, we just after it became clear that this person was no longer going to be in house, we really had to start answering those questions of who is the best person to evaluate [00:19:30] progress of the team. Keep really a good pulse on projects, know when things are coming in, when things are going out, and uh, really just manage the whole tax season. So that role best fits in my mind with a operations person. And so we brought on a director of operations Amy is that person. So that's part of what she does, uh, during tax season is she makes sure that the overall like efficiency of the team and effectiveness of the team on both the accounting and then tax as a part of that [00:20:00] CAS service offering is going as best as it can. And so we. Elevated our tax admin a little bit to to handle some of those, um, tasks that were handled directly by a tax director. And, you know, it's just the economies of scale with, um, different price points and who's the best skill set to do this.

Marcus Dillon: And so our tax admin d stepped up in multiple ways this year. Um, and did that. And she was she [00:20:30] was already a part of the team. Um her time did actually did actually it did not increase this year. It actually went down a little bit because of that client block exit, because she would also do some prep on those annual clients. So we were able to shift some admin responsibility over to her to kind of backfill her available time. So as you have changes in your in your firm, you're really going and looking for existing capacity on the current team. And so we [00:21:00] did that with the uh, the final addition we made this year was an outsourced, uh, team member who sits in the Philippines. And so, uh, she does not touch the tax process, but she is also available to support the operations team. So she is useful. Um, she is very smart, capable, and works full time, um, with the different price points and things like that that are available with having somebody, [00:21:30] uh, on the other side of the world, it just made sense, um, to kind of shift some tasks over her way. And she, she does them with a smile and she does them most of the time very well. So I think that's something else we learned during those shifts and team members.

Rachel Dillon: Yeah for sure. And I think with Amy's hire, Amy's position and the director of operations being identified as really what was needed within DBA, [00:22:00] what Amy has really taken on pretty much everything. I think she doesn't do any bookkeeping or payroll, but maybe she does every single other thing besides that in the firm. But really what she did was she came in and took a lot of things that you and I were doing or should have been doing, and weren't giving enough attention or focus to, and really started helping, uh, put processes in place and helping to delegate and elevate our team. So like identifying [00:22:30] and elevating our team members to help her. So not that she has to take on every single role and do every single thing all herself. Um, but that's why the, um, director of operations that we identify, that's why Amy specifically is really amazing, is that she can come in and see, okay, these are the things that need to be done and these are the like this is the appropriate person to ask. And then she can set up what that process looks like so that they can be successful with that new responsibility. Um, [00:23:00] obviously that is helping a ton with team development and leadership within the team, not just at one level or by a couple of people, but really within all the team members.

Rachel Dillon: So that's really been a great addition. Uh, April, who is our outsource team member? She is, uh, Amy is helping to, uh, manage her responsibilities right now, but that means that Amy can identify when there is a CSM who needs additional help, or there is a [00:23:30] piece of a project that needs something that's more along the lines of administrative. She can tap April, um, and get her started and going, and then April can complete that. So all of those team members that we added and positions that we added have so far been amazing, um, and helped contribute to the success of the 2024 tax season. So as people are tracking with us, we haven't even gotten into the actual tax season. [00:24:00] Still talking about the things that happened before. And so one other thing changed and that was related to technology before we even began tax season, which kind of made 2024 look different from prior years. So that one piece of technology that we implemented internally in DBA was canopy.

Marcus Dillon: Yeah. So, uh, and Amy is, is really the champion on most software, um, transitions. And it was no different. We implemented canopy right after she started in Q4 [00:24:30] and uh, we rolled that out internally first. So for this tax season, for the remainder of Q4 and then Q1, going into Q2, the way that we used canopy, it replaced, uh Thomson Reuters on Vo, which is how we, uh, track projects, track time, all that fun stuff. And we we still do track time, really, just to build out like budgets and look for out of scope on different projects. We do not bill by the time a bill by the hour to. And [00:25:00] that's not why we track time. So but it's a metric that we continue to value. And we have a lot of part time individuals as well. So we're going to have to capture their hours anyway. So it just it works for us. But canopy was that new home for a lot of, uh. Practice workflow, different items that we were tracking in tax season previously that was done in envo. Um, whenever we started with canopy, we made the call [00:25:30] to just roll that out internally first.

Marcus Dillon: And so we wanted our team to test it, experiment with it, get to learn it better before we ever invited clients into it. And so that happened through, um, April or May of 2024. So about six months fully on canopy internally. What we did build out, um, and tested and monitored during tax season was, um, tax status updates being sent to [00:26:00] the clients through canopy, and it's essentially the Domino's Pizza tracker. And as their project would move from scan received to in preparation to review and then to client, you know, message being sent out, every status changed, initiated a message out to the client via canopy. And that was all automated and everything that we set up there. So, um, we had clients reach out, uh, early tax season asking if [00:26:30] canopy was doing the tax return or if we were doing the tax return. So we probably could have done a little bit. Uh, and that was only one person. Um, so it doesn't really matter.

Rachel Dillon: Prior to them receiving their first status update, we did let them know. And so that was really our first like introduction. Or if you want to call it like a drip campaign to kind of make them aware, bring awareness that we are introducing a new, uh, software. It's mostly on our side, [00:27:00] but they would they will be using it in the future. And so we kind of introduced it that you will be getting, you know, updates. It will come from canopy. And so this is to better serve you and to provide better communication so that you just have more transparency into your process throughout the season.

Marcus Dillon: Yeah.

Marcus Dillon: So that we planted that seed because we want the clients to start becoming aware of that software, because there's going to be something introduced later, later this month, [00:27:30] actually, um, to kind of transition clients to full adoption of canopy. And for the most part, that went well. We also we continue to use on v OTB, which is built into Envio, and that's Envio trial balance, um, to move data from QuickBooks online into ultra tax. And that's a Thompson product. Um, that's something that works half the time. Um, it doesn't work. Well, um, maybe if you've had a better experience with that product you're doing [00:28:00] or using it better than we are. But, um, our frustration on that Thompson side is just, um, different. You just shake your head. I won't go into it too much, but, um, on the OTB is something that we continue to use because it was a once a year purchase that we that we did early, maybe Q3 of 2023. So we had purchased so many licenses. It's an annual subscription. So we just continue to use it. And one less thing to change during [00:28:30] tax season. So we were we knew we were pushing through a pretty big, uh, software change with canopy, uh, being practice management side. So we just wanted to limit the other changes that we were making with the team.

Rachel Dillon: Yeah, absolutely. So, uh, if we're tracking in the right direction, I think we have identified or explained most of the changes that happened that would contribute to what our tax season would look like. So let's get into the real, um, let's get into the actual numbers. So let's get [00:29:00] into the real data and talk through how many tax returns we actually prepared and filed by the April 15th deadline.

Marcus Dillon: Yeah.

Marcus Dillon: Before we do that, let's back up, because Amy's actually sending me that as we speak because I had to ask our tax director or our, uh, director of operations for that, uh, because I don't have it. Um, so she's going to send that to me in a bit. Um, whenever we looked at 35 less family relationships, that was actually [00:29:30] about 60 to 70 less returns in the program. So, um, that already came off the top. Whenever we look at 500 active client tax returns in ultra tax, automatically you go down to let's say for 40, right? Um, within that for 40, there's a lot of clients that we serve in a team structure, but they are tax heavy, um, [00:30:00] clients. So that means that they get a lot of k-1s. They are really past tax season. They are into extension season, if you will, and they're never going to be ready. Even if we wanted to, um, to prepare those prior to March 15th or April 15th.

Rachel Dillon: And I think something worth noting, and this is just been a practice that we've done ever since I've worked in the firm, which was only two years after it started. So since [00:30:30] 2011 is not filing extensions because of our team or our timeline or us getting behind. So if we file an extension for a client, it has always been because of either the client choice, the client not receiving information in time, or potentially the client not sharing or signing in time for us to do it. But as far as us, we set an internal deadline of we [00:31:00] have to have documents by a certain date, or we don't guarantee that the return will be, uh, prepared and filed by the specific April 15th deadline that we will happily file an extension on their behalf. But even with that, a lot of times we will if we have the ability to, we will go ahead and prepare and file even returns that come in after that, because we've just set up expectations and dates internally of when we want things to be done, [00:31:30] when we want to start calculating extensions, um, that are prior to even April 13th.

Rachel Dillon: So prior to like usually a week ahead of time, which gives a little bit of time. And I know originally that was something big for you because, um, just being able to prepare that return invoice, that return, and then wait to collect payment way back in the early days. And so pretty much it was like, I know they got it [00:32:00] to us only three days ago, but I can knock it out, and then I could invoice it and then I can get paid for that return. So I'm not going to hold it just to hold it like I'm going to do it and turn it around if I can. So that's something else. I think a lot of times when we say, you know, however many we prepared and then however many. We extended. Those are not typically decisions. They have not been made by our team because we got behind or could not handle the amount of work that came in during that time, even when we had [00:32:30] 2000 returns that we were filing.

Marcus Dillon: Yeah.

Marcus Dillon: So, um, the other thing that was kind of different this year is Texas franchise tax. So, um, majority of our clients have a Texas return attached to their business. Texas franchise tax was updated. The forms were delayed. Ultra tax kind of delayed. When they release those it was a mess. And so we had to make sure do a lot of reconciliation after March April, going into the May 15th Texas [00:33:00] deadline that those returns were done. So that was that was there's always going to be a curve ball every tax season. Hopefully that was it for this one. Um, we may find out if there was another one where we missed something. But uh, the other point that we always want to make is we filed all business extensions and all like trust return extensions for the most part in the first week of February, um, we went ahead and filed those extensions so we don't really have a march deadline and everybody's just kind of working towards [00:33:30] that April deadline. And really, the estimated tax payments or payments that are due with the majority of the returns. So with our, um, you know, with our cast clients, we want those returns done really in February, um, kind of waiting on the IRS window to open, if you will. Um, so we can just push submit and roll on to the current year. Planning is is an ideal world. So, um, but yeah, like [00:34:00] we go ahead and extend those. We don't we do not do that with the individuals because usually there's a payment that is going to be owed. And, you know, people don't even realize that there is a separate business tax return extension a lot of times. So.

Marcus Dillon: Yeah.

Rachel Dillon: And so as we're talking about just extensions and things, we'll, we'll skip over and then come back. But this year, uh, and it was almost this last year I think. But there may have been 1 or 2 people affected. [00:34:30] Um, but no overtime and no weekends. And so I think last year, our only overtime really was probably our director of tax, maybe because there were some administrative responsibilities during that time that were taken on. And so really that I think that's something huge to highlight and celebrate is that we are going on, you know, a few years now of there's no. Over time. It's not that it was ever required. Um, but it was needed [00:35:00] because we have a two week turnaround from the time we receive information until we want to have it sent out to the client for review. And so really, just staying true to those deadlines and expectations that we set for ourselves, it did in the, you know, years ago, require people to work a lot of overtime, even though we didn't say, like, this is your minimum amount of hours that you have to work. We never had to set that because just the work dictated that we were all [00:35:30] working all the time. So, um, I think we every year we need to celebrate when there are no overtime and no weekends worked, and even for the most part, stayed to our half day Fridays throughout the whole entire season.

Marcus Dillon: So yeah.

Marcus Dillon: Most most of our team is only, you know, they're they're full time at 36 hours a week. Um, so yeah, it was another celebration which we took full advantage of that as well. Like we weren't working on [00:36:00] client work necessarily. Um, we, we work, but not on client work. We're doing other stuff in the background. Um, and then the other piece was we pushed, um, to really wrap up things before the April 15th deadline. So we made sure that everything was done really April 10th, um, with a really final internal date of April 12th. So, uh, we did not want [00:36:30] to work that weekend. Uh, we did not want things to come down to the last minute. Clients try to make you come down to the last minute, and we just don't let that happen. So, uh, you know, April 12th through the 15th, you're just making sure if there's any rejects on extensions or acceptances, um, you know, payments that are made for the 2023 return and 2024 Q1. Just that those are done in plenty of time where there's not an issue. So, um, when we look at, [00:37:00] um, you know, other numbers that we look at are obviously revenue. Um, so we had about $75,000 less of client tax work that was invoiced out annually. Um, so overall there there's really not much during that time of year, um, that is invoiced out separately because we do include tax for the most part in our CAS engagements.

Marcus Dillon: We do have some large client families, but like I said, those are typically done later in the year and wouldn't [00:37:30] be done prior to the deadlines. So our tax revenue year to date is down about 23%, but our CAS revenue is up about 10%. And so that's really offsetting um, tax revenue with CAS revenue. And we did price increases this year even though we exited clients, we did uh, 5% or above across the board on tax, which is kind of low. We had been at ten previously [00:38:00] and heard from a few clients, important clients that man, that 10% is really starting to sting. So we kind of knocked it down to five for the most part and made sure that we had, you know, a lot of backup and what we were doing. I mean, inflation is what it is. So, um, so we did price increases on the tax side. And then on the CAS side, we did, you know, price increases as well. So I think those are the pieces that we can probably talk about and dedicate a whole podcast episode to just price increases and [00:38:30] what we push for, what the results were, all that fun stuff. So yeah.

Rachel Dillon: I'm looking forward to that in a future episode. And the reason we're leaving it for a future episode. We actually introduced or sent out those price increases to clients in February, letting them know that that would take effect April 1st, and that to remember that kind of our cancellation policy is a 30 day termination notice or, um, to let us know within 30 days [00:39:00] that they're canceling and so wanted to make sure there was plenty of time for them to receive that, evaluate that pricing if they wanted to continue to be a client, and then that they would have time to say, no, we're not going to continue any longer, um, and then and not be penalized for that. And so here we are nearing the end of May, and just wanted to make sure that if there are any other clients, you know, after a couple of months of paying that new price, [00:39:30] if they're still finding the value aligns with the price they're paying and have it raise their hand to terminate services. So giving that a little bit of room to breathe and to really shake out before we share what actually happened, kind of how we went about determining the price increase, how we send it out, and then what the results of that were as far as from a revenue standpoint and from a client retention. To no loss standpoint.

Marcus Dillon: Yeah.

Marcus Dillon: Um, so I've got the numbers. Uh. They're not. Thank you. Amy. [00:40:00] Yeah. Thank you. Amy. Uh, so 2023, we did before April 15th, we filed, uh, 224 tax returns across all different types of returns through 2024. We did 165. So not a not a lot compared to other firms like relatively speaking. You know, our client base, uh, we serve about 110, 115 families currently, uh, with their needs and. 12 to 15 of those families. [00:40:30] Um, always file because of their complexity after tax season. So it's more of an ongoing tax advisory service, you know, that we provide to them fully. So but yeah, uh, a lot less than we did last year. If you were just looking percentage wise, I don't I can do 24 one 6559 divided by 24 is about 26% less right than we did last year.

Marcus Dillon: So yeah.

Rachel Dillon: Um, and then as far as [00:41:00] kind of what that looked like. And so we have talked about this before that we started out as a traditional tax firm. We were tax heavy. I mean, at one time we had over 2000 tax projects. Not all of those were filed by April 15th, but a lot of those were filed by April 15th. And so really back in that time, about 20% of our revenue came from what we would call CAS at that time. And about 80% was tax. We have completely [00:41:30] reversed that where we are now, where only about 20% of our revenue comes from tax and 80% comes from our recurring monthly CAS services.

Marcus Dillon: Yeah.

Marcus Dillon: So I would say 10% previously was uh, Ana. So audit review compilation, 10% was like bookkeeping, CAS, um, payroll maybe. And then the 80% was tax. Um, back then. Um, so I think the year was 2017, it's kind of easy [00:42:00] to remember, um, the we passed the million dollars in revenue mark, uh, in April, uh, with all the April 15th filings and everything like that. 80% of that was made up through tax. Right. And just this past April, we again passed the million dollar revenue mark. And most of it is recurring CAS. And as you can see, only, um, 165 returns filed. So, um, I, you know, that [00:42:30] kind of puts us on track. We're we'll probably touch 3 million this year if everything goes right. We haven't, you know, pushed by any means to kind of get crazy on boardings in or anything like that because we didn't know what tax season was going to look like without, uh, a tax director or some of the capacity gaps that we thought we had. But now that we're through tax season, it gives us a lot more assurance, um, what the future looks like.

Rachel Dillon: I feel like we shared some of the dreamy things, like only 165 [00:43:00] tax returns prepared and filed. And that was not with like having to extend and people being angry about it. Right. Like those were the ones that were here ready and needed to be filed. And we also shared like no overtime, no weekends, only 36 hours or less per week. Um, those were the dreamy things. Let's talk about some of the things that we don't necessarily want to highlight. And certainly we don't want to highlight these with the client, but we are a monthly recurring services [00:43:30] firm. That means their responsibilities and deliverables that need to go out every single month. So for us, that's financial statements with commentary that we send to clients every single month, with an internal deadline and an outward facing promise that those will come by the 15th of the following month. And so what did that look like for us? Because those same team members that work on that monthly client work [00:44:00] also prepared tax returns. Our controllers are responsible for the tax. Um, but they also review those financial statements and record commentary and send it out. So talk a little bit about, you know, kind of the thing that we don't necessarily advertise out to the world, um, what that looks like during tax season.

Marcus Dillon: Yeah. So, um, we, we really started making a push for that 15th internal deadline to go out to clients. So they had timely, relevant financial data to make decisions in their business. And we, you know, [00:44:30] there were times this year so far that we haven't hit that. Um, and it's because we didn't have the right process in place. We maybe weren't as educated, um, internally as we thought we were on some things. And, um, some of those deadlines were missed. And, and I think if you step back and look at the different levels, just even the CSM and the client controller level, and when they are busy and, um, it's hard to make that timeline, um, the December financials [00:45:00] have so many, so many adjustments potentially that may go into them that those December financials are always like an asterisk. So we'd like to have at least drafts sent out during January. During the month of January, you also have 1099 W-9 kind of different things floating around project wise in the month of January. So that also causes a little bit of a capacity issue at the CSM level. Um, so most of that evens out for. Of the CSM because the CSM does not touch the tax [00:45:30] program, you know, the income tax program, uh, at all. So most of that flushes out by mid-February, I would say. So Csms are kind of back to a better cycle. But then mid-February, right around Valentine's Day is when it always hits is like when tax stuff starts showing up. So, uh, the March financial issuance and the April financial issuance, you know, we just try to give a lot of grace this, you know, time around. Um, but I think even now we're, [00:46:00] we're recording this on May 16th. And I will say like it, it has gotten a lot better both at the CSM and comptroller level with these April financials that just went out. So, um, I think overall, majority of the client financials went out before May 15th.

Rachel Dillon: Yeah. A lot of times where we get hung up is, um, questions back to the client getting answered and where our controllers may not be doing, reviewing or preparation of tax. They [00:46:30] may be, um, in more communication than normal or, you know, in more communication with their CSM to work out some of those details and get those financial statements out sooner. Um, and then also just a little bit of time that it takes to record the commentary. We definitely let them set priority depending on time of year and what client it is specifically. Um, and kind of make those adjustments as needed. Obviously, payrolls and sales tax are taken [00:47:00] care of by our client service manager. So those that is never missed the things when we say kind of a missed deadline that's internally set, that's an expectation and a level of service that we want to provide. And so obviously anything that's compliance related can get a bit of priority over that if absolutely necessary.

Marcus Dillon: So yeah. And then the other thing that, you know, didn't go as well, we had some team members that just didn't have a tax background, that they didn't feel comfortable like in [00:47:30] certain parts of their role, mainly the client controller or even like client CFO if they don't have that technical tax background. And so that was a knowledge gap that existed. And just the worst timing that it kind of hits during tax season, you know, busy season. So, uh, what we did there, uh, we learned that, you know, the leader that was in place, um, was just kind of picking things up and getting like he would tell people to get it to a certain point and then he would finish it up, wrap it up, and push it out to [00:48:00] the client. And, um, that's great and all whenever you're always going to be in that chair. But when you're no longer in that chair, that team member is not, you know, fully educated. So, um, that's just something, you know, we learned and now want to make sure that all of our leaders can fully, you know, teach and delegate everything that they possibly can in case they aren't in that chair for whatever reason. And what we how we solve that was probably early March. We saw that as a knowledge gap. And [00:48:30] the best way to, um, give her some assurances that controller was her to actually watch me review a tax return. And so we would spend an hour every week, um, she would bring anything to that meeting that she wanted to. And any return she wanted me to review to that meeting and her, the CFO, anybody else that wanted to join, um, essentially watched me share my computer [00:49:00] screen and walk through how I would review that turn return, and I would comment throughout, um, and by doing it that way, I think we also recorded most of those for like internal purposes.

Marcus Dillon: Obviously they're sensitive data there, but just a training tool internally. Um, what I liked about doing that, obviously it it stunk that she didn't have that education or the opportunity to do that at another time of year with somebody else, but we were actually getting the work done as we went, like whenever [00:49:30] we finished that time together. That return was reviewed and ready for her to go record client commentary and send it to the client for signature. So it wasn't a matter of like, I have to stop everything and train somebody. We actually trained on the active engagement. And so I think that's something as you find knowledge gaps in your team, um, what are ways that you can do that and just share screens and make the most of your time together? Some of that hour, every week [00:50:00] was spent just talking through like, theory and a lot of the client by client decisions that have to be made and, you know, not the where it's not black and white on what we do for some versus what we may do for all. And you also have to talk through like a collective risk tolerance of the firm, um, on certain, you know, judgment decisions when it comes to tax. So a lot of that was helpful for her. I think she gave great feedback that that just. Gave [00:50:30] her so much more education for her role by.

Marcus Dillon: I think we spent like a total of like 6 or 7 weeks doing that. So, you know, less than ten hours of that training going through like active client engagements. So that was not something that we had planned for. And throughout tax season. I also asked, like myself, a lot like, what is my role? Like what what where do I need to step up? Because we no longer have a tax director. We have this tax director of counsel who is available. But what [00:51:00] is where is her time best spent versus my time best spent. So I, I did work more production wise this season than I did in the past. Obviously in the past we had a tax director in place. Um, my total production hours this time around were 186 production hours, which still not a lot relative. But last year, my total production hours the whole year of 2023 were less than 300. So, you know, going into, um, third [00:51:30] of the year, I'm on track to do more than that. And I had prepared for that mentally. And, you know, different capacity things that I had done with my client base to make sure that I had availability to give to the team in that respect. So, um, you know, the 186 hours probably will put me on track to do more like 400 to 500 production hours this year, given my ongoing kind of CFO production responsibilities and things like that. But overall, you know, 4 to 500 production hours a year is not bad for a partner, [00:52:00] a solo partner in a $3 million CPA firm.

Rachel Dillon: Yeah. And I think just the specific example where you were actually sitting down and training with some of our team for an hour each week during what for some people is a very busy time of year. Um, but when you look at it really, like you said, it was less than ten hours and the investment in that team member and actually it was really two team members. But the investment with those team members, not only did it [00:52:30] just continue to solidify relationships, but also now both of them are more equipped to not only complete their own work, but to train within their pod or to train within the team. And because they're coming from a non tax background, gaining that tax knowledge, how much better is that for them to train others who their backgrounds are similar um that aren't coming from a tax, they're going to really be able to understand what where they struggled versus [00:53:00] somebody who's been doing tax for so long. Um, they just they just don't even know, like I'm not sure what you won't get. What you do know what you don't know, what will be hard to grasp or you know what's easy. And then we can quickly move on. And so just that investment all around to not only build confidence, but like actual education and then the ability to multiply that out to others. So I think that was a great investment for sure.

Marcus Dillon: Yeah.

Marcus Dillon: And you know kind of closing it out, [00:53:30] you know, we kind of talked about the good the bad and what what did we learn or where are we going. And so we mentioned, uh, our tax director of counsel, um, kind of so we touched base with her after tax season and just said, hey, appreciate you being available as much as you were. And she actually approached us and say, y'all didn't use me like you thought. Um, am I really needed? And so we are. We kind of identified that it does make sense to have her in place, but more [00:54:00] of a just in time need not necessarily blocking out set days per week for review, because we didn't want the turnaround time to expand so much with her availability. Um, we, you know, clients saw that that return was pushed to review, so they're looking for it. Um, so we we just took it on ourselves and either I would review that or, um, some, some engagements were good enough to just push out to the client directly. And I may have put eyes on it, but most of them were great. [00:54:30] And then so going forward, she'll still be in place more as like a technical lead. Um, whenever the team is needed. Kind of continue to provide support, education, current tax updates, all that fun stuff.

Marcus Dillon: And I think that's going to be a great balance. Um, the other change is we mentioned on the job, we are currently testing and evaluating other ways to get data into ultra tax. We are good with ultra tax, um, for the time being, and even though it stinks to have to have a hosted [00:55:00] solution for a virtual team for ultra tax, we are not, um, looking to change tax software at this time or this year. So we'll stay on ultra tax at least one more year. But how do we get data into ultra tax? And so both on the individual and the business side on the OTB did that a little bit. Um, it did not work perfectly. So we'll be testing tally for some different options there. And then finally we mentioned canopy. So canopy the rollout to clients uh, will [00:55:30] happen. It's already been teed up. Clients got their first email um, this week about Lisio was our previous kind of client secure communication portal, if you will. Uh, lisio will be fully phased out, and we'll be just using canopy more. Um, and that just goes back to that app fatigue and using fewer programs. Better than more programs for just specific needs.

Rachel Dillon: Yeah, [00:56:00] well, this has been a great conversation. Um, thanks to you and to Amy for pulling our real taxes and data and sharing what our tax season really looked like within our Cass firm that is made up of mostly monthly recurring revenue. So it's been a great conversation. I'll see you on the next.

Marcus Dillon: All right. Thanks so much.

Rachel Dillon: Thanks for hanging with us to the end of another episode. Leave us a review with your thoughts, comments, and feedback on Apple Podcasts or Spotify. Be [00:56:30] sure to subscribe to our podcast so you don't miss any future episodes. Join us again next week for another great conversation.