First, a little about me?

Outsourcing: The Catalyst for Growth An Update for the Profession Presented by: Ray Barlow, Sr. Vice President XCM Solutions/Xpitax LLC Winning is Everything December 13 15, 2017 First, a little about me? Live in the 603 Started in the accounting industry in 2004 and spent 9 years at Thomson RIA 11 Years at CCH, a Wolters Kluwer business Spent 2 years at Intuit working with top 500 Accounting firms Ran North American Accountants business for Sage for 2 years 20+ years working with accounting professionals Joined XCM in April of 2017 Boston Red Sox fan However, and NY Giants Patriots football are fan! my team now Avid Fly Fisherman 1

AGENDA Overview What is Outsourcing? Trends in Outsourcing Business Models Strategies For Growth Productivity, Simply Enabled with Offices in Boston, Bangalore & Chennai XCM Has: Global Presence with 350+ Employees 600+ Customers 30,000+ Users 35% of the Top 100 CPA Firms Businesses > $50B in the Fortune 200 to SME Preferred partner of AICPA XCM Solutions: Focus on Tax, Accounting, Finance, Audit. & Operations Productivity Over 140,000 Tax Returns Processed Experienced CAS department with more than 10 years working with firms Largest Tax Return Was More Than 2,600 pages XCM s Productivity Platform: 2,000,000+ Processes Annually Browser & Device Agnostic Scalable Technology & Resources Customers Report ~10 30% Productivity Gains 2

What is Outsourcing? Outsourcing is a practice in which an individual or company performs tasks, provides services for another company Offshore outsourcing to obtain (goods or a service) from an outside or foreign supplier, especially in place of an internal source. "outsourcing components from other countries" Outsourcing for Accounting Firms Tax Return Preparation Client Accounting Services (CAS) Individual Corporate Journal Entries Accounts Payable / Receivable Partnership Not for Profit Invoice Creation Bank/Credit Card Reconciliation And More And More 3

POLLING QUESTION: What experiences have you had with offshore outsourcing of Tax and/or Accounting Services? A. Currently outsourcing tax/accounting work offshore B. Tried in the past, currently not outsourcing C. Never tried, but interested in learning more D. I m being told AI will eliminate the need for outsourcing E. I don t have a need for outsourcing Strategy for Tax Season Waypoint Solutions 4

Trends in Tax Outsourcing Tax Outsourcing is becoming more mainstream and part of a firm s processes focusing on: Client service Quality/turnaround Employees working to the top of their license Deliver work/life balance Tax Outsourcing growth continues! Key Factors Drive CAS Growth Technology is Rapidly Changing Cloud accounting technology has changed the CAS landscape! However, AI, Machine Learning, etc. loom as critical to the future of the profession. Profitable Revenue CAS is now considered one of the most profitable revenue for accounting firms. Outsourced Accounting Services Businesses are looking to outsource financial functions, to focus more on running the business. Advisory Services The ability to deliver higher level business advice requires 24/7 access to financials. 5

Small Business Owners Need Help Why Outsource? 6

Strategy for Work Compression Berdon, LLP POLLING QUESTION: Which of these issues is a top concern for your firm? A. Finding qualified staff B. Retaining qualified staff C. Seasonality/workload compression D. Bringing in new clients E. Managing work/life balance initiatives F. Keeping up with changes and complexity of tax laws 7

Summary Top Concerns of Accounting Firms Sole Practitioners 2 5 Professionals 6 10 Professionals 11 20 Professionals 21+ Professionals 1 Keeping up with changes and complexity of tax laws Finding Qualified Staff Finding Qualified Staff Finding Qualified Staff Finding Qualified Staff 2 Seasonality/ Workload Compression Seasonality/ Workload Compression Succession Planning Retaining Qualified Staff Retaining Qualified Staff 3 Finding Qualified Staff Succession Planning Retaining Qualified Staff Bringing in new clients Bringing in new clients 4 Bringing in new clients Retaining Qualified Staff Seasonality/ Workload Compression Succession Planning Managing work/life balance initiatives 5 Succession Planning Keeping up with changes and complexity of tax laws Keeping up with changes and complexity of tax laws Owner/ Partner accountability & unity Transitioning to a trusted client adviser Source: AICPA s 2017 PCPS Top Issues survey (Chart from Boomer Consulting) Recruiting & Retention Firms must address the shifting needs of their workforce. i.e. retirement of baby boomers Twice as many millennial couples working Recruiting & retaining top talent becomes more competitive Skillset Work/life balance Technology Millennials are different prefer not to do manual work of the past. Private sector (Finance & Accounting departments) feeling same challenge Baby Boomers 1946 1964 Generation X 1965 1980 Millennials 1981 2000 Traditionalists 1900 1945 8

Industry Trends The Rise of the Machines Think about tasks you perform, NOT the job you do! Rather than replacing jobs, technology changes the tasks and activities! Daniel Susskind The Future of the Professions 9

POLLING QUESTION: Where do you spend the majority of your time when completing tax returns? A. Data collection B. Data entry C. Missing documents; questions to client D. Review time E. Delivery Where are the bottlenecks? The Tax Return Process (lean six sigma study) Get Data in from client, Quick assessment Scan docs Tax Preparation (basic returns into pools) Tax Preparation (more complex returns) Review Clearing Review Comments Signer Review Assembly Days 1 2 Days <1 Day 1 2 Days 5 Days 3 Days 1 Day <2 Days 1 Day Humans should only do work that only humans can do. Peter Sheahan 10

What if? Workflow 50% Awaiting client documents Points created Client response to points Waiting time for review Clear review notes 7.5 Days Interpretation 40% Client data, quick assessment Review prior year return Research Initial Review Final Review 6 Days Data Input 10% Scan, populate, OCR, etc. Tax return data entry only. Annotated pdf for review 1.5 Days Strategy to Reduce Review Time Windham Brannon 11

POLLING QUESTION: What is the primary objection you hear when considering outsourcing? A. Employee Concerns B. Client Perception (7216 Consent) C. Loss of Jobs / Patriotism D. Quality E. Loss of Control F. Lack of Understanding the Process G. Security Objections to Outsourcing Employee Concerns Client Perception (7216 Consent) Loss of Jobs / Patriotism Quality Loss of Control Lack of Understanding the Process Security 12

Process & Security Accountants from across the U.S. collect, scan and then upload their tax documents. These documents are then stored on servers based in the United States. At no time do they leave U.S territory. Outsourced personnel in India finish the return. You are then notified when the return is ready for review. Benefits of Outsourcing Capacity restraints Standardize & automate the process Opportunity for growth Improve client service increase turnaround time Improve work/life balance Scalability Focus on value added services Increased profitability * From 2017 Xpitax Survey 13

So, how does it work? Tax OS Process Client provides source documents/tax info to CPA firm Information is scanned, PDF created and stored in DMS Firm uploads needed documents and files through XCM. (Tax File, Source Docs, PY Return) Within 24 48 hours the return is complete 14

POLLING QUESTION: What tax software application does your firm use? A. GoSystem Tax RS B. ProSystem fxtax/cch Axcess Tax C. Ultra Tax CS D. Lacerte E. Other 7216 What Is It And Why Is It So Important Consent is required when disclosing of tax information to a preparer that is located outside of the U.S. Needed for 1040 family only! Client tool kit to support firm efforts 15

The Facts Typical firms outsource 10 40% of tax returns Some very small firms outsource everything! Firms maintain control of review and delivery process! Experienced outsource professionals have a deep understanding of U.S. Tax Law Strategy for Growth 16

What to Outsource? Data Intensive Tasks Individual returns Corporate Returns, Partnership and Fiduciary Returns Bookkeeping Services Write Up Services Accounts Payable/Receivable Financial Analysis Reports Workpaper & Financial Statement Conversions and Rollovers What to Retain? High Value, High Touch Client Service New Business Consulting Strategic Forecasting & Budgeting Business Valuations Tax Planning Corporate Financing Business Succession Estate Planning Wealth Management/Financial Advising 17

Determine the Right Model Seasonal Support Offshore Staff Augmentation Build Operate Transfer Build Operate Manage Strategy Decisions Seasonal Support! Who will be the Outsource Coordinator? How will receipt of Consent form be tracked? Expected number of Returns by month? What types of returns? Who will contact client with questions? Who will determine which returns are actually sent to OS partner? 18

Building Your Strategy Evaluate Outsourcing Opportunity Tax: 1040, corporate Bookkeeping, write up, AP/AR Financial statements Business analysis reporting Determine the Right Model Staffing and Training Considerations What will we do differently? Strategy for Growth Strategy for Growth Friedman, LLP Friedman LLP 19

The Future of Outsourcing Future of Outsourcing: Summing Up Outsourcing trends are constantly changing New technology driving growth in outsourcing industry Focus on providing top quality services and exceptional customer experience Outsourcing of both core and non core functions to enable growth Future ready firms will rely on outsourcing to provide value added services and optimizing staff. Outsourcing continues to be the catalyst that drives growth! Bold Prediction firms will move more towards outsourcing and hire staff that are better suited to working with clients. 20

Thank You!! Monthly Close Checklist Example # CHECKLIST ITEM DESCRIPTION Ray Barlow Sr. Vice President XCM Solutions Ray.Barlow@xcmsolutions.com 781.664.9688 @rfbarlow ASSOCIATED STATUS RESPONSIBLE ROLE 1 Confirm all source documents required are present Source Document Collection Staff 2 Check opening balances against prior period Annual closings MUST check Retained Earnings Preparation Preparer 3 Prepare Reconciliations banks, credit cards, loan accounts Preparation Preparer 4 Inform client of any items within reconciliations 45 days or older not cleared Preparation Preparer 5 Confirm trial balance amounts against any underlying schedules (i.e Accounts Receivable, Accounts Payable) Preparation Preparer 6 Review trial balance for any suspense or uncategorized accounts Preparation Preparer 7 Review fixed assets and repairs & maintenance for additions or items that might be capitalized Preparation Preparer 8 Review all Prepaid & accrual accounts Preparation Preparer 9 Scan trial balance for any accounts with improper balances (Example a credit balance in AR or debit balance in AP) Preparation Preparer 10 Confirm all entries/transactions posted (Example all checks posted, Sales Journal, Cash Receipts Journal etc) Preparation Preparer 11 Confirm intercompany balances, if applicable Preparation Preparer 12 Confirm Interest & Principal segregated on loan accounts, if applicable Preparation Preparer 13 Review Income statement for inconsistencies (Examples recurring amount like rent either not posted or different amount or large variance in normal expenditures) Preparation Preparer 14 Prepare any underlying schedule, if applicable (example Fixed Assets, Depreciation, AR, AP) Preparation Preparer 15 Prepare Reports, if applicable Preparation Preparer Questions? 21