Smith's Accounting and Tax Service: Can Amanda Turn Her New Business Around Before It Is Too Late?
Section I: Please summarize the control function and describe how it fits into the planning, organizing, and leading functions. In addition, include a discussion of the importance of accurate and timely information and the link between planning and controlling.
Amanda Smith worked for one of the big accounting firms for six years. She earned an accounting degree and passed the CPA exam on her first attempt. She has strong technical skills and was given management responsibilities for audits and tax services for two or three years.
Amanda always wanted to open up her own business. She wanted to work in her own community and have the flexibility provided by owning her own business. Of course, she hoped to make a nice living at it, too.
So, in the fall of 2008, Amanda opened up Smith's Accounting and Tax Service with one employee, Lisa. Lisa was an acquaintance of Amanda's from her neighborhood. Amanda knew Lisa was looking for a job and had worked with her on several community events. Amanda and Lisa got along well, so Amanda hired her.
Lisa was what they used to call a Gal Friday. She did everything. She did the bookkeeping and secretarial work, answered the phone, set appointments, placed advertisements, made sure the office was clean and presentable, and did a host of other things that kept the business moving in the right direction. Amanda frequently praised Lisa and rewarded her with small gifts and tokens of appreciation. She promised Lisa that, as the business grew, so would Lisa's position in the firm. Lisa felt like she was on the ground floor of something big.
Amanda developed a mission and a strategy for her business. She wanted to be the accounting office of choice for small business owners who needed accounting services, and the tax service of choice for small businesses and individuals in her community. In her advertisements, she targeted small businesses and individuals, offering in-office services in addition to willingness to complete tasks at individuals' homes. Her motto was "Have laptop, will travel." She focused on pleasing the client and making her services convenient.
About mid-December, Amanda starting getting calls for tax services. It seemed the local H&R Block and Jackson Hewitt offices were moving their services to a town about 10 miles away. They were consolidating their locations, and many of their clients didn't want to travel the extra miles. What a great opportunity for Amanda!
Amanda advertised in the local paper for accountants with CPA credentials and experience in tax preparation for small businesses and individuals. She let Lisa do the interviewing because she was overwhelmed with clients and was frequently out of the office. Lisa gave Amanda her best recommendations. Amanda went with Lisa's recommendations and hired three accountants on about the first of January.
The four accountants (Amanda and the three new hires) and Lisa met every Monday morning for a staff meeting during which they all laid out their work for the week. This gave Lisa an opportunity to know where everyone would be and for Amanda to see how business was going. Amanda and Lisa held down the office, and Amanda covered one of the areas while the other three accountants either worked in the home office or in their assigned areas each day. You can guess that Amanda had her hands full. She was glad she had hired three experienced accountants so that she didn't have to do much checking. She didn't have time to check other people's work unless she gave up sleeping!
Amanda's small business had grown from two people to five very quickly. But Lisa was working out well, and the other three employees were CPAs with experience, so Amanda knew they would know what was expected and how to complete the work. She relied on the mission and the motto she had developed and given to them to help guide them in their day-to-day activities. She didn't want to be the kind of supervisor who was constantly looking over people's shoulders. She had hired professionals in the hopes that she would not have to use her valuable time to constantly guide and manage other people's work.
Toward the end of March, Amanda started to overhear phone conversations between Lisa and various clients that concerned her. She could hear Lisa repeatedly indicating that she would check on the status of clients' tax returns and get back to them. Granted, it was hectic, but Amanda worried that neither she nor Lisa knew the status of the clients' returns and that they could not quickly answer the clients' questions. But Amanda was so busy trying to meet her own client deadlines that she didn't have time to worry about the other three accountants. She would just have to let Lisa take care of it.
April 15, Tax Day, was a Monday, and at the regular staff meeting, the issue of filing extensions came up. Specifically, one accountant asked if Lisa could file the online extensions for more than 50 organizations and individual clients. This seemed like a large number of extensions for such a small accounting firm. Amanda asked each accountant how many returns he or she had filed so far. The numbers ranged from 100 to 175. Two of the three accountants made major requests for extensions. The third accountant only needed three extensions and could easily file them himself. Amanda had already filed the five extensions she would need and had completed about 165 returns herself.
Amanda knew that something wasn't right, and she vowed to review what had gone wrong and to fix it for next year.
After tax season was over, Amanda focused on developing other small business clients. After all, she had three accountants whom she needed to keep busy and pay all year long. Of course, she hoped that the accountants knew that part of their job was to bring in new clients. This was how all accounting firms worked, and her accountants certainly had experience and knew the lay of the land.
In June, Amanda began to get questions from clients who were receiving requests for additional information or additional payments from the IRS and the state treasury. It seems there were some errors in the tax returns filed by her firm. While Amanda believed that each of her accountants should be solving his or her own problems, she was worried about the reputation of the firm. So, she decided that she would work with the other three accountants to figure out the problems, solve them, and find some pattern to the problems so that they could be avoided in the future.
For most of the summer, Amanda dealt with solving tax problems rather than cultivating new clients. The other accountants brought in a few new clients, but not enough to generate the revenue necessary to keep all the staff. Amanda was forced to lay off one of the accountants, and it appeared that she might have to lay off another before the next tax season. In fact, Amanda was worried about the firm's ability to make it at all. What if the clients with the tax problems didn't come back? Would the firm be able to complete enough returns to keep everyone busy? Would they have the same problems as last year?
How did Amanda lose control of her dream? She thought that she had done a good job of establishing the mission and setting the motto. She had hired people with the right credentials. She had organized for efficiency. She had tried to lead by example, and she had not been a micromanager.
Amanda is wondering what she did wrong, and what she should do next to keep her business and her dream alive.