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Practice Continuation for Small Firms
By Suzanne M. Holl, director of loss prevention services with CAMICO
Mutual Insurance CompanyNo one likes to think about it, but we are
all subject to illnesses and injuries, some of which can disable us for
several months, even years. What would happen if you were unable to work for
an extended period? Do you have any kind of contingency plan in place?
CPAs who have not yet taken the time to develop a plan may be:
- inviting future lawsuits against themselves or their estates; and
- leaving their spouses, families and heirs with the daunting task of
trying to figure out what to do in the event of a disability or death.
The first step is to get a plan in place, helping to facilitate the
continuation of the practice, making sure clients are taken care of, and
preserving the value of the practice.
CPAs interested in detailed guidance for developing practice continuation
plans can refer to the Management of an Accounting Practice (MAP) handbook (AICPA),
which includes an article on “Practice Continuation Agreements,” by John A.
Eads, CPA, or the Guide to Managing an Accounting Practice (PPC). The
following basic tips are excerpted from those and other sources on how to
get a plan started:
- Create a checklist of important resources and phone numbers, such as your
professional liability insurance carrier, state board of accountancy and the
state CPA societies. CPA societies can help put members in touch with MAP
committee members in their local areas to explore ways of keeping a practice
going in an emergency. Other important numbers may include your office
building manager, computer technical help, telephone service and other
utilities.
- Assemble a set of practice and operating documents. These documents can
be divided into sections, such as:
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- A profile of the proprietorship, including types of services offered,
names of key employees, location of accounting records, bank account
information and location of contracts and lease agreements'.
- A client list, including key contacts, services provided and
important deadlines. (This will need to be much more detailed if
you are interested in negotiating a buy/sell agreement as part
of a continuation or succession plan.)
- Procedures used to monitor work in progress. This will
enable others to determine the status of uncompleted work.
- A guide to using the firm’s computers.
- The location of work papers.
- A description of the filing system.
- Office procedures for handling the receipt and return of
client information.
- Billing schedules and collection policies.
- Procedures for identifying and paying accounts payable.
- The location of personnel files.
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- Decide on a continuation arrangement/ agreement.
There are three basic types:
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- A one-to-one agreement, which usually takes the form of a
buy/sell agreement written to cover the CPA’s disability or
death.
- A group agreement, in which several CPAs may act as
successors/partners to each other’s firms. CPA firm alliances or
associations generally serve this purpose, among other purposes.
- A state society plan, in which local societies or MAP
committees assist the member, spouse or heirs in finding a
successor/partner.
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- Identify, approach and partner with a suitable firm(s).
Network among sources of referrals. The best organization for
such networking is your state CPA society. Other sources include
bankers, attorneys and community groups.
Alliances among CPA firms are booming in some regions. Some are
formal associations, others casual, but one of the benefits is
that they provide for practice continuation in the event of
disability or death.
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- Implement the plan. Contact your attorney to draft
any agreements required by the plan. Discuss the plan with your
spouse, attorney and successor/partner. Communicate in writing
the instructions for all parties, and set up dates for annual
reviews of the plan.
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Reprinted with permission from CAMICO.© All rights are reserved.
About the Author
Suzanne M. Holl, CPA, is director of loss prevention services with CAMICO
Mutual Insurance Company (www.camico.com). With more than 18 years of
experience in accounting, Holl draws on her Big Four public accounting and
private industry background to provide CAMICO’s member-owners with
information on a wide variety of loss prevention and accounting issues.
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March/April 2007
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