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AccountingToday, November 3, 2003 - News article                                            

     By Roger Russell

Tax season staff crunch approaches

Firms get creative in dealing with annual manpower shortages

  An improving economy and the demand for fulltime accountants in other areas has made it more necessary than ever for firms to find creative ways to cope with the increased work flow during tax season.

  “It’s good news for us, and bad for people looking to hire,” said Neil Lebovits, President of Ajilon, a Saddle Brook, N.J.-based provider of managed services, consulting and specialty staffing. “The outlook has been flat until this last quarter, but now client sentiment is very bullish. We strongly urge firms to get fully staffed by the midpoint of the fourth quarter. It’s not just the build-up towards tax season that people hire for in November and December. That period coincides with corporate America closing out budgets.”

  “So putting the two together in terms of busy seasons coinciding, it will very likely be the busiest hiring season in finance across the board in several years. It’s going to create a challenge for people who aren’t proactive about hiring,” Lebovits added.

  Pete McTague, a group leader at Casey Accounting and Finance Resources, in Chicago, agreed. “The whole year has been better than expected. For us, the majority of our work involves corporate accounting and finance, some of which is tax. With companies getting ready for the year-end close, now through March is our heaviest time.”

  “Over the Last year, a lot of Companies have cut staff quite a bit – though the volume of work has not gone away,” he continued. “As the economy improves, companies are petty conservative about hiring people back, so they use temp-to-hire as a cautious way of bringing the staff back up.”

  “For example,” he said, “say a corporate accounting department had 20 People, but over the last two years it cut back to 10. A lot of mid-tier managers need help but they don’t have ‘head-count’ approval. They can work around this by bringing in temporary employees to help out at peak times, knowing they may get head-count approval down the road. Now they already have someone who has auditioned for the job by the time they get approval.”

  Charles McCabe, president of Richmond, Va.-based Peoples Income Tax Inc., has 20 locations to staff. “There’s not an abundance of qualified tax preparers out there who are available for three to four months,” he said. “And the ones who are there may be available for the wrong reasons – you wonder why they’re leaving their old firm.”

  “We’ve found the best way to recruit and train is to operate a tax school,” he said. “It gives us a chance to look over students and see who is good and who is interested.”

  John Hewitt, chief executive of Liberty Tax Service, concurred. We’re doing what H&R Block invented - you pay us to learn how to work for us. We replicate that with our schools. In addition to the students who want to work at a location, we’ll get a number who want to work because they’re thinking of acquiring a Liberty franchise in the future.”

  Liberty is also testing an entrepreneurial program in 10 markets. “We’re financing recent college graduates, with full financing to acquire a franchise. The tax season lends itself to this, because it’s easy to know if someone will succeed. You know in the first month and a half, because we do 50 percent of our work in the first six or sevens weeks.”

  Matawan, N.J.-based CPA Salim Omar has also found the tax course to be the best way to attract seasonal employees. “Last year, we had a two-day tax course that we offered to the community. This year, we’ll have two - one in December and one in January. It attracts bookkeeper types, and gives you a chance to evaluate them, and them to evaluate you. Last year, we hired 12 seasonal staff to help during tax season.”

  McCabe has developed his own tax courses, which he licenses to independent firms. “We make them available to firms not competing in our own market,” he said. “It forces us to be more disciplined, and gives us a source of income during the off season.”

  For a growing number of firms, outsourcing tax returns is the way to deal with staff shortages. There are now a handful of firms specializing in tax return outsourcing, and the cost efficiencies are moving down. While the original users were larger firms, industry observers now estimate 1,000 returns as the break-even point for using outsourcing services.

  “Tax return outsourcing will be a very hot area,” said Allen Koltin earlier this year. Koltin, president of Chicago-based PDI Global, believes that the practice of outsourcing is slated for heavy growth. “Firms have struggled just to be competitive on the low- to medium-end 1040 returns. This in an opportunity to get the best and the brightest accountants at wage scales so less than here.”

  Mihir Sandesara, chief executive of Ahmedabad, India-based eSoftCircle Pvt. Ltd., noted that his firm, in fact, focuses on small and midsize firms. “The small and medium–sized firm segment operates with a limited budget and capital. With outsourcing, they can convert an annual staffing cost into a limited seasonal cost, and it enables them to grow by offering high-end, bigger-revenue items to their clients.’’

  For Hewitt, outsourcing is not an option. “So many of our customers want to know on the spot how they’re doing - that’s what sets Block and us apart,” he said. “We do the bottom 85 percent, and 50 percent of them want a refund as soon as possible, so it’s not the right course for us.

  Although Ajilon is getting into outsourcing, said Lebovits, he doesn’t recommend it for everyone. “It may be commonplace in five to 10 years, but if you don’t do your homework, it could be dangerous,” he said.