In this week’s episode Joe interviews Dawn Brolin, Certified Public Accountant and Managing Member of Powerful Accounting, LLC. Dawn has been featured on MSNBC’s Your Business and has spoken at Intuit Quickbooks Connect, as well as CPA Society Shows and Scaling New Heights. Dawn is an expert on fraud and forensic accounting and will be talking with Joe about best practices to protect and build your business.
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Joe: Thank you for tuning in for to this episode of the Scaling New Heights Podcast. During this episode, we will talk with Dawn Brolin. Dawn is a Certified Public Accountant and a managing member of Powerful Accounting LLC, was named to the Top 25 Most Powerful Women in Accounting in 2012 through 2015, one of the Top 40 Under 40 by CPA Technology Magazine 2009. Dawn is known for her hilarious presentation style.
Dawn has been featured on MSNBC “Your Business” and has spoken at Intuit’s QuickBooks Connect, CPA society shows, Scaling New Heights and many other events for accountants and small business owners throughout the US. She’s also an expert on fraud and forensic accountants, and also she understands what it takes to grow a practice from the ground up having been for many years a sole practitioner and now having a thriving CPA practice. Dawn, welcome to the podcast.
Dawn: Joe, thank you so much. I’m honored to be here.
Joe: Dawn, I’m going to jump right in to the first question because there is a lot to ask and you have a lot share. Let’s start with the session that you taught at Scaling New Heights on fraud and probably had a little touch of that forensic accounting that you’re so good at. I want to draw from some of the learning objectives of that breakout with this first question. How responsible are bookkeepers compared to CPAs or other certified professionals when it comes to ethics. Do the bookkeepers need to play a role here? Do they just say, “That’s the CPA’s job?”
Dawn: Well, it’s so interesting. Of course ethics for all of us are critical. Everyone in every walk of life has to have a standard of ethics that can be upheld to best serve the public. That’s what we’re really here for as consultants, bookkeepers, CPAs. But the bookkeepers are on the front line. The bookkeepers are the ones who we count on to be the most ethical people possible. Without their ethics and without their strategies around watching for unethical behavior - certainly, we don’t expect them to have unethical behavior, but we want them to also watch out for others who may be having it. Really their responsibility is just absolutely critical to the industry.
Joe: I agree with you completely. We’re all playing for the same team when it comes to maintaining that ethical standard for our client’s behavior, our professional standards. When it comes to the client and you’re making sure that they’re playing everything above board and they’re not doing anything that maybe even inadvertently is going to get them in trouble … They may be unknowing or it could be on the part of somebody who’s not the business owner and it needs to be detected.
What are some tips that you gave your folks in the breakout at Scaling back in May? You gave them some tips about internal controls and how to minimize the risk of fraud. Can you share a few of those?
Dawn: Yeah, absolutely. One of the key pieces that we talked about over and over and over again was even just the identification of a lack of internal control. We talked about being more aware. That was probably one of the biggest conversations we had during our sessions. The reason for that is, in a lot of cases, we’re dealing with small businesses who don’t have a large budget. So internal controls are typically - even if they're a sole proprietor, it may just be themselves - and internal control where they may be exposed themselves to a subcontractor situation and maybe they’ve given too much authority around someone who is outsourced.
We’re not even talking about a company with 30 or 40 employees. Typically, a size like that, they’ve had to implement some internal control, and we’ll talk a little bit about that in a minute. When you're talking about the smaller business, we as practitioners, the bookkeepers, a CPA, it doesn’t matter, consultants, people that are going in as outsourced CFOs, the internal control process is meant to minimize risk. I don’t think any of us expect that risk is eliminated entirely in any situation in life. Right?
In accounting, it’s the same thing. So we talked about being aware and being more aware, even though we are not necessarily charged with that. As an auditor for instance, it’s not our job to detect risk. It’s not necessarily our job to detect a lack of internal controls, though we do. With bookkeepers and consultants and CFOs, it’s so critical that we are aware and that we are assisting the business owners, regardless of our charge to do so, and watch for those internal controls and implement them.
That was one really big tip that I gave to them. I would say another one which is really critical was when you’re coming in and working with these small businesses, we know to not expect or overwhelm them with a million internal controls. Because we'll go in and say, “Oh my goodness, look at this, we’ve got 60 internal controls we need to implement. Hey, business owner, here’s a $50,000 engagement.” Now that’s scary. That would be scary for me. We want to make sure we’re taking it one step at a time. It’s really important for us to say, “Hey let’s control the situation. We know there’s a bunch of internal controls. We’re seeing so many high-level risk areas for this business owner. Let’s prioritize those risks and take them one at a time and implement an internal control.”
Joe: That’s really in all of our dealings with our clients. We can choke them by trying to go from mediocre to great or bad to great overnight. We have to realize that it’s a one-step-at-a-time process and it seems more invasive if we throw too much at them. It’s too costly and it’s too much to adopt and their people start pushing back. I like that idea of giving them one internal control at a time. I think maybe the core one to start with is that segregation of duties. I’m sure you’ve talked a lot about that in your breakout.
To me, that’s table stakes. One person should not … just in case there’s anybody listening to this who doesn’t know what segregation of duties is, if one person has check signing authority, they should not have bank rec authority. That way there are always two pairs of eyeballs on it. Then once that sort of table stakes game is in place, then you can start putting in other measures and layering those one at a time.
Dawn: Right. It’s interesting. We have a really great client that were working on right now as outsourced CFOs. We initially went in as really looking at the books (and the books were a mess) and doing a cleanup job. That’s what the engagement began as and that was back in around February of this year. Now, literally right now, we have transitioned from that portion into an outsourced CFO position, implementing internal controls. Of course, we’re utilizing as much technology as possible to segregate those duties through approval processes, through Bill.com and for payments and different things like that, TSheets, and various applications to permit those internal controls to ensure and minimize the risk that this client may have of so much money going out the door that is unnecessary or too much control in one person’s pocket. For instance, an employee staying late, always the last one out the door. That’s suspicious to me. There’s something wrong with that and the business owner thinks, “Oh she’s such a hard worker, she’s staying late. That’s wonderful.” I’m like, “No, that’s bad, get a camera on that desk immediately.” That’s where we come in.
Joe: That’s funny. It’s like putting on a healthy lens of skepticism, because I’m a naturally trusting person, too. And that would have been my gut reaction, “Oh, what a hard worker!” Maybe it was. Maybe that was the case, but the camera will prove out. And cameras can be actual mounted cameras, which I think you were saying, very literally, put a camera on that.
Dawn: Oh, I’m not kidding!
Joe: Yeah, exactly. But then there could be other forms of “cameras” like the technologies you mentioned. That’s a really good point, Dawn, that internal controls don’t just have to be about the segregation of the actual process that’s operated in the office. There’s now another form of segregation that’s available to us and it's through user roles and permissions and audit trails that show the activity of people as they use and automate this accounting process through technologies.
You mentioned TSheets for time. TSheets is going to not only just track the time, but it's going to be a lot harder to commit fraud with the timesheets because now with rules, with permissions and, I don’t know if TSheets has any form of audit tracking, but it’s much harder to cover.
Dawn: It does, absolutely.
Joe: It does?
Dawn: Yeah and you know what’s wonderful about that, Joe, I’m sorry to interrupt you. But one of the great things about it that I find to be so important is the fact that the tracking of the time but the submission of the time by the employee makes a statement that the employee agrees with that time and that’s an internal control.
Joe: It’s also required for DCAA.
Dawn: It is required. Exactly.
Joe: If you have the DCAA requirement, you meet it. If you don’t, then it’s arguable that if you’re required to maintain DCAA compliance or not, you should be DCAA compliant, because it’s a good standard whether it’s imposed on you by an outside company or imposed on your company by yourself. And you’re saying that’s just one example of how technology creates the audit trail, creates the approval processes, creates the log, creates the rules, creates the permission that tightens down the internal controls.
Dawn: Yeah. Joe, it’s really interesting because technology, we come to Scaling New Heights which has the best technology solutions possible at your show. We get so wrapped up around, “Oh, technology and subscriptions. And, oh, the cost associated and can they learn it.” I go from the angle of how can I solve and minimize the risk for my client with the next technology available or help them improve their practice which we’re going to get into it a little while. Those technologies, we have to think of them from that internal control procedure space and not always about automation or efficiency, which is true. But that internal control, if people can turn the switch and add on the internal control thought process, you have a home run for your client.
Joe: Right, and we do typically think this technology does efficiencies or accessibility or automation, but you just put a very important value layer on top of them.
Before we change gears, because you taught two breakout entire tracks, you taught two topics - fraud and also moving your practice from solopreneur to multi-practitioner.
Before we change gears here, I want to make sure everybody listening to the podcast knows that the first two episodes of this podcast series are an interview with Frank Abagnale, fraud expert, portrayed by Leonardo DiCaprio in the movie “Catch Me If You Can”. Frank, who’s a 70-year-old gentleman at this point I think is about his age, he now turned his entire life to the process of preventing fraud. He’s helping both consumers and businesses, anybody that interacts in any financial way and transacts business in any way to prevent fraud.
He details a lot of additional fraud prevention techniques that go all the way down to the type of copier that you use. If you used the wrong kind of copier, it could create not necessarily a fraud issue but it could create a situation where sensitive information gets into the wrong hands. I encourage you to listen to those two episodes.
Let’s change gears for a second, Dawn, and let’s get to this track that you taught at Scaling New Heights, which you approached me on and said, “I've gone on this journey. I know what it takes to make this journey and I want to teach other accounting professionals how to do this. It’s called ‘Solopreneur to Employer’.” I’ve known you now for 15 years, and for much of that 15 years, you were by yourself. You had one employee, one contractor and now you’ve got this thriving CPA practice and I’m sure that journey was adventurous. Let’s start with the internal controls. Are you eating your own dog food on that, do you have internal controls in place?
Dawn: Of course we do, and we work on them every day which is interesting. There is no end to internal controls, but yes we have over the last four years gone from … It was really four years ago when I started the hard-core journey to go from just myself to having a team and I don’t ever say employees. I don’t ever say staff. I say I’ve got a team because every team member … it doesn’t work without one of them. One of them falls off, we’re a disaster. Right? That’s not totally true.
But the internal control process for us had been very eye-opening for me as the CEO of the company and understanding in order for me to be able to actually be a CEO and not just a technician - which I still love, I still love to touch, I still want to be in there, I want to be in the dog all day long - but I also have to run a company. The transition from just being a technician to also being a CEO, I have to have these internal controls in place so that my company can run if I’m not there.
I love to use a great example. I think you’ll appreciate this. We moved from making my … I had two staff at the time, making them go into QuickBooks and book their time. They hated me. I don’t blame them; they hated me because my internal control function was - enter your time into QuickBooks so that I can track your time and pay you properly and bill my clients and make sure that’s all right.
They would do that and they did an external Excel spreadsheet because they didn’t want to log in and out of my QuickBooks file all the time. I put them through the ringer until I said, “Oh, internal control, TSheets. Enter your time into TSheets, you have to submit it to me.” Now, I have real compliance driven … That was an internal control I implemented and it took away a lot of the pain at the same time, because I can do payroll in literally 10 minutes. I make them submit their time. That was an internal control we implemented. , but that’s one of them. Through these internal controls that I’ve implemented,
I had a little bit of an accident in January and I was in bed laid up for a week. Now, I know Joe, if you know me, and you’ve known me for 15 years, you know how well that went over. That’s like putting a cat in a little tiny box in a cage and expecting me to survive for a week. It was tough, but because I have specific internal controls, onboarding techniques for clients. So, a new client would call in - what are the steps it takes to onboard a new client, what is my control over the on boarding process. We’ve been working through that so my team was able to onboard a client without me having to be directly involved.
Those internal controls are critical for you as a practitioner. As a person who’s going to hire my first person, “Okay, what is your employee - okay, for them, they may say employee - what’s your team onboarding process?” You have to teach them your internal controls, what’s that going to look like. “Here, here you go. There’s your computer, get to work.” It doesn’t work like that. If you have these systems of internal controls in place, they read about them, they learn about them and your company is going to run more efficiently and at a lower risk level because you’ve implemented them. I know that was kind of a long answer.
Joe: What you’re really saying is you’re doing the comprehensive picture here. A lot of people start with technology in order to get workflow efficiency and standardization of process so the machine will run without the direct intervention of the owner. We learned in the last part of the first part of our conversation that that also has internal controls layer that’s really cool. It has an aspect a lot of people don’t think about. Then, since you have internal controls on the brain and you have fraud prevention on the brain, you’re a forensic accountant, you’re launching from employee number one to make sure that you’re safe and secure and protected and then in the process of that you get workflow and automation.
It’s kind of funny coming or going, the technology and the workflow does both. A lot of people think technology solves it all, it doesn’t. Process by itself doesn’t, process plus technology is that double-edged sword that’s going to get you all of the goodies we’ve just been talking about.
I’ll tell you it’s usually not process and it’s usually not systems and it’s usually not technology that stops someone from being a sole practitioner and taking the leap into becoming an employer. It is the fear of hiring.
Joe: I will tell you Dawn, the biggest mistakes I have ever made, they're in 2 categories. But the biggest mistakes I have ever made are hiring the wrong people and hiring the wrong clients.
If you take all the other collective mistakes I’ve made as a business owner, you combine them altogether, they don’t equal one of the mistakes with hiring the wrong person or hiring the wrong client. Those are doozies. Everybody is so afraid of hiring the wrong person that they just never hire, but I understand you know how to hire the right people. What are your secrets.
Dawn: It’s really interesting. It took me a while, maybe I’m slow. It took me a while to figure out the secret sauce and I’m going to tell you what that is and it’s pretty simple. What it is, is that we’ve heard it so many times that we’re stale to it. Our brains don’t take it in and soak it in like a sponge, but the number one thing you have to do is define your core values. That sounds so corny and sounds so cliché but without you knowing for yourself what your core values for your company are, you cannot hire one person because you have to define those in order to be able to weave through who you are hiring.
Now, we’ve all made bad hires. I made a bad hire this year. They were in and out in 30 days. That happens because you don’t have a process. Well, guess what, our hiring process was established; that was actually February 1 of 2016. We established that process because I said I would never do that again. Now, I feel there’s a little bit of luck in the draw. For me, I’ve been blessed by the people, my team, I wouldn’t trade them. If I had to do it all over again, I would pick the same people.
Thankfully, they fit into my core values, but the core values are critical and of course, loyalty is important. Respect is important. You really have to believe in those things. So, establishing a core value and hiring to those core values are critical.
Understanding, there’s another piece of the secret sauce, understanding what you need when you’re hiring. Do I need another A-type person? Do I need another Dawn Brolin type personality? No, I’ll kill them. What I’m looking for when I’m hiring, I’m deciding maybe I do. Do I need a person in New Haven who’s a Dawn Brolin, so I don’t have to go there? Do I know I’ve got a Dawn Brolin …
Joe: Explain to people what you mean by that. You’re talking personality types. You said an A person, which you call a type A. How do you determine a person’s personality?
Dawn: There are tests out there like the DISC test. There’s various ways …
Joe: The DISC one is one I love, and there are various DISC assessment tests you can take online and that will determine personality type. What I really like about it, Dawn - and you know this because you do it with your folks - is it differentiates between the natural and the adaptive styles. Because when people are in certain work environments, they may behave or take on a personality over time to adapt to their environment. Naturally, natively, they act differently and if you can give them a culture where they are free to be themselves, then you’re going to get a more authentic person and they’re going to start acting more to their natural style.
Usually there’s not a big sway between natural and adaptive, but if you see a big sway, you’ve got an area of unpredictability there that you just shouldn’t hire again. That’s just one example folks. DISC, run that test and do it all in your current employees now, maybe you have them in the wrong role.
Dawn: Exactly. Oh my goodness, Joe, I love that you say that. We did that. We did the DISC test, all of us, we took the assessment. What’s critical about that if you hire and you say okay I'm looking for this type of person and they score out to look like that’s the person and it turns out that they are not. It doesn’t mean you’re like, “Okay, you’re gone. I don’t need you.” What you do is to say, “Oh hey you’re a truck driver type personality.” You know what that means? A truck driver personality stays in one lane. They can do one thing at a time. They drive.
If you have that type of person and we all … My goodness, our firm has gotten it down. I know exactly what I can give to each one of my team members and who can handle what, what they’re best at, can they multi - no, not multitask, because nobody can do that - but can they work on 15 to 20 clients during a week or can they only work on three. If they can only work on three, make sure you give them three that are a higher level client where they’re working for 10 or 12 hours that week on the client.
We realized that through those assessment, I’ve gotten better as a leader to understand them, not what I want them to be, but who they are and we’re putting them and giving them opportunity for success, because they are in the right position. That’s critical. You have to shift, maybe you have to shift.
Joe: Maybe you do. Jim Collins does a really good job detailing this out in his book Good to Great. There are aspects of that book about hiring and role and servant leadership, but he uses the bus analogy. He says it’s not just that you get the right people on the bus. Obviously you have to do that too and get the wrong people off the bus, but you can get them in the right seats on the bus. That’s the whole idea of the roles and you cannot -and this is what I would encourage everybody listening to do - you cannot go from solopreneur to multi-practitioner and hire people and have a team unless you have developed an org chart and the org chart has to be based on the role that the person will perform then you hire to the role.
You never hire a person and create a role. This thing I love about what Jim says, Jim Collins says - if you have the wrong person on your bus and you don’t get them off the bus, you are doing them an injustice. We'll keep them on the bus because we’re afraid of that momentary negative experience, but he says that momentary negative experience passes and then they’ll find the right bus once you free them up to do it.
Dawn, it’s amazing how every single time I’ve had to either because of elimination of role or because of non-cultural fit or because of a performance problem, every time I’ve had to say to a team member that we’ve come to the end of our journey, it’s amazing how they always land in some incredible place, maybe not as fast as they wanted or I want, because I like to keep up with them. I like to make sure they’re okay. I’ll follow them on LinkedIn. I’ll breathe a sigh of relief when they get to a happy place. It’s amazing how they always find this perfect place for themselves and they're better off as a result of me releasing them, freeing them up.
Dawn: Right. One of the things - I love your point. Culture too, so your culture on a bus if you’re keeping that person on the bus. Other people are getting miserable. It’s kind of like okay some people are cold and some are hot and put the air conditioning on and take it back off again. You’ve got the person on the bus, so I have found when we have had to let people go, sometimes the bus actually goes faster, a little bit less weight on the bus and the bus is going faster and it has excelled the practice rather than stagnated the practice for a little bit until we had this removal or whatever. It was definitely better for the other person. You never want anyone to be unhappy. That’s one of the biggest things. We want everyone to be happy.
It’s okay if we as a CEO are unhappy. That’s okay, because that’s our job. We really want the team to thrive and be happy. As a matter of fact, we just went on a team building excursion on Monday. We chartered a boat, went across the Sag Harbor, a day on the boat just to recharge our batteries. We had a blast, the memories, the fun. We saw each other as real people and you’ve got to do those kind of things. We have remote staff. Tracy came up from DC and we have Sharon who is moving to North Carolina. She’s still on the team. Wendy works from home most of the time. Four others are in the office. We get to talk, but we don’t see each other, so we’re like, “Charter a boat, let’s go! We’re going to have some fun.” You've got to develop that culture depending upon how that hiring is going to go.
I would say one more thing Joe. I’ll talk to you for seven hours, but I will say, which is great because I’ll do it! One other thing that’s really important. I think this is one of the other pieces of the secret sauce is when you are hiring, especially if you’re hiring in a technician role, that you establish your minimum, I’ll call it minimum system requirements just like a computer. You have to have this minimum standard of where you believe they need to at least start at.
Now I’m going to use, for example, a certified bookkeeper. Not everybody on my team has an accounting degree, but I require that they become certified bookkeepers because I believe in certifications. That’s just me, not everybody believes in that. I do. I have the freedom to do that. So I say, “You have to be a certified bookkeeper.”
If you don’t come on as a certified bookkeeper, you have to submit an education plan. We have to have a plan for that, which is a critical piece if you’re hiring technicians - have an education plan that you set the expectation so that there’s no hard feelings. I’ve done it the wrong way. It sucks. I want you to get an education plan for minimum system requirements for those people. How long is it going to take till they're certified in the software? How long is it going to take until they are part of whatever it is that you set for systems for that technology person? But, from an education perspective, set the minimum requirements before you hire them and make sure they know before they take the job.
Joe: All right, so let me just kind of put a bow on this thing, because you’re right. This topic you taught for hundreds and hundreds of minutes. That’s an educator who’s always going to talk in terms of minutes, because it’s a 50-minute credit hour, but I think you talked for 200 or 400 minutes on this topic. We can’t possibly cover all of it here but just to kind of summarize what Dawn has said here folks, she said if you want to take the plunge and go into a hiring model - and I do encourage you to do that or at least to explore it, because it’s a way of expanding your ability to fulfill your vision as a practice, it’s a way for you to service more small businesses, and it’s a way for you to stabilize your economic position even though it’s a little bit more economic risk especially at the outset.
What Dawn is saying is start with sort of the container if you will, get the processes in place, get the procedures in place, get the technology in place that the person will use once they’re on board so that you don’t have friction from day one and you have internal controls from day one then focus on hiring the right person. Dawn recommended that we use a DISC assessment for that. I couldn’t agree more. Then hire the person to the role, not just their personality type, but then Dawn just finished out with their qualifications, so that by personality and qualification they fit the role and they can thrive and you set them up for success.
Then we talked about when somebody doesn’t fit the role, you have to have the courage to fire. You have to have the courage to fire any unhealthy relationship in your practice. We talked about firing a team member, but that would also come down to firing the client, because clients and team, they all create that single culture and at the end of the day, they’re all on the same bus.
Dawn, we’ve covered a tremendous amount here today from how to help our clients to prevent fraud and risk of loss due to embezzlement. Then we talked about how we can leverage our resources better through a multi-practitioner practice. It has been great having you here. Thank you so much for being on the podcast.
Dawn: Joe, as always, it’s my pleasure and my honor to participate in anything you’re doing. So thank you so much for having me.
Joe: Well, it’s been great having you here and to everybody tuned in, we want to thank you for tuning into today’s podcast in our conversation with Dawn Brolin.
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