CPA Firm Partnership Playbook

Turnkey Outsourcing Solutions Process Flow

Figure 1. Turnkey Outsourcing Solutions Process Flow: First Year

Figure 1. Turnkey Outsourcing Solutions Process Flow: Recurring
Step 1: Choose Partnership Format
- Standard turnkey outsourcing solution engagement assumes LIFOPro will manage all aspects of the LIFO calculation
- LIFOPro offers a variety of partnership formats to best suit each CPA firm’s desired goals and their client’s wants/needs
- Most common partnership formats include:
  - Direct partnership: CPA firm directly engages with LIFOPro (wholesale – retail model)
    - Designed for CPA firms seeking to generate or maximize revenues by building/enhancing a turnkey outsourcing solution LIFO service line
    - CPA firm engages with LIFOPro to obtain turnkey LIFO solution on behalf of their client at a wholesale or discounted fee
    - CPA firm resells LIFO solution to their client at a retail rate (typically between 2x – 4x the cost charged by LIFOPro to CPA firm)
    - Communication, document receivables/deliverables & billing occurs primarily or exclusively between CPA firm & LIFOPro
    - Typically involves a consulting agreement or formal statement of work
  - Indirect format: Client directly engages with LIFOPro, but provides free resources/support to CPA firm
    - Designed for CPA firms seeking to offer or enhance their ability to provide LIFO as a tax planning strategy without incurring costs to do so
    - Allows CPA firms to partner with a LIFO subject matter expert and resource who can also serve as their client’s 3rd party LIFO service provider
    - CPA firm typically provides an introduction or referral to LIFOPro, recurring involvement is based on the client & firms wants/needs
    - CPA firm & clients can place reliance on LIFOPro’s expertise to provide best practices feedback, training & support on all issues related to LIFO
    - LIFOPro engages directly with client regarding document receivables/deliverables & billing
  - Referral format: CPA firm is reimbursed for consulting services related to introducing client to LIFOPro
    - Designed for CPA firms who lack LIFO expertise/resources, but has clients with LIFO needs
    - Precludes CPA firm clients from seeking a LIFO solution from a competing firm, and ensures clients aren’t lost to competing firms who offer LIFO solutions
    - Can also be formatted where LIFOPro pays CPA firm a consulting fee to compensate firms for time spent on introductions/referrals
    - CPA firm typically provides an introduction or referral to LIFOPro, but has minimal amount of involvement on a recurring basis
    - LIFOPro allows flexibility in the design of the partnership format to include a hybrid of the above formats
    - Multiple partnership formats can be used within a single firm to best suit needs of each client or firm location
Step 2: Client Targeting & Outreach Overview
- LIFOPro offers complimentary resources to all prospective clients
- Most prospective clients receive a complimentary review or benefit analysis report & fee quote prior to becoming a client
- Those already on LIFO are provided reviews, which includes:
  - Confirm LIFO calculation accuracy (or identify errors when detected)
  - Confirm methods compliance (or identify compliance issues when detected)
  - Identify tax deferral maximization strategies or risk mitigation opportunities (best practices)
  - If applicable, recommendations are provided regarding implementing proposed changes
- Those not on LIFO are provided election benefit analysis, which includes:
  - Establish if LIFO has historically been a preferable method (via pro forma calculations)
  - Estimate the election year LIFO tax benefits, adoption timing & submethods recommendations
  - Appendix explaining how LIFO works, election requirements, rules and other essential information
- LIFOPro often meets with the CPA firm or prospective client after delivering the review/analysis report & fee quote to discuss findings, recommendations & engagement onboarding process
Step 2.1: Client Targeting & Outreach – Clients Using LIFO
- Identify firm clients that are already using the LIFO method
- The following outreach steps should be performed:
  - Client should be informed that your firm has partnered with a LIFO service provider that provides a turnkey outsourcing solution (or your firm has enhanced the LIFO service offerings to include a turnkey outsourcing solution)
  - Client should be informed that the LIFO service provider or your firm’s new service offerings makes LIFO as simple as possible
  - Client should be informed that they can obtain a complimentary best LIFO practices & calculation review & turnkey outsourcing solutions fee quote
- Outreach/analysis sequence is flexible to best suit the wants/needs of your firm/client
  - LIFOPro offers to host a complimentary discovery call with the client and/or CPA firm (presentation can be tailored to exclude any discussion regarding fees if CPA firm is engaging LIFOPro directly & using wholesale-retail model)
  - Some firms/clients may prefer to obtain the LIFO election benefit analysis prior to having discovery call or may opt out of having a discovery call altogether
  - Firms are welcome to host their own discovery calls with clients without LIFOPro present
  - LIFOPro’s discovery call presentation slide deck: LIFOPro’s Offering Presentation Slide Deck
- Outreach steps will likely depend on the CPA firm’s partnership format with LIFO
  - Firms directly engaging with LIFOPro (wholesale-retail model) may internally manage the outreach/analysis process to preclude the need for LIFOPro to communicate with their clients
  - Firms indirectly partnering with LIFOPro will likely connect their client with LIFOPro so the firm or LIFOPro can coordinate scheduling/hosting a discovery call and remain involved/aware regarding the progress of the LIFO analysis process
  - Other firms may prefer for LIFOPro to manage all aspects of the outreach/review process and will only need to provide an introduction or referral to their client/LIFOPro
Step 2.21: Client Targeting - Clients Not on LIFO
- Create a list of firm clients with inventory that are not already using the LIFO method
- Add primary business activity or industry description to above client list
- Take one of the following steps to identify the top LIFO tax savings opportunities
  - Option #1
    - Use LIFOPro’s complimentary resources to identify the best LIFO election candidates for the upcoming year end:
      
      2024 Top LIFO Election Candidate List & Client Identification Tool
      
      2024 Top LIFO Election Candidates Guide
  - Option #2
    - Send list to LIFOPro with primary business activity or industry for each client (can provide ID# in lieu of client name)
    - LIFOPro will return a prioritized list of the clients who are top LIFO election candidates that includes key metrics & amounts required to estimate election year tax benefits
- Proceed with client outreach for clients who are top LIFO election candidates or provide introduction to LIFOPro for purposes of client obtaining complimentary LIFO election benefit analysis
Step 2.22: Client Outreach - Clients Not on LIFO
- The following outreach steps should be performed for clients who are Top LIFO Election Candidates:
  - Client should be informed that meaningful tax savings could be obtained from electing LIFO (may be useful to include their estimated taxable income reduction or tax savings from LIFO calculated using LIFOPro’s Top LIFO Candidate List)
  - Clients should also be advised they can obtain a complimentary LIFO election benefit analysis
  - Client can optionally be advised they can attend a complimentary discovery call to learn more about LIFO and the opportunity
- Outreach/analysis sequence is flexible to best suit your firm/client
  - LIFOPro offers to host a complimentary discovery call with the client and/or CPA firm (presentation can be tailored to exclude any discussion regarding fees if CPA firm is engaging LIFOPro directly & using wholesale-retail model)
  - Some firms/clients may prefer to obtain the LIFO election benefit analysis prior to having discovery call or may opt out of having a discovery call altogether
  - Firms are welcome to host their own discovery calls with clients without LIFOPro present
  - LIFOPro’s discovery call presentation slide deck: How LIFO Works & LIFOPro’s Offerings
- Outreach steps will likely depend on the CPA firm’s partnership format with LIFO
  - Firms directly engaging with LIFOPro (wholesale-retail model) may internally manage the outreach/analysis process to preclude the need for LIFOPro to communicate with their clients
  - Firms indirectly partnering with LIFOPro will likely connect their client with LIFOPro so the firm or LIFOPro can coordinate scheduling/hosting a discovery call and remain involved/aware regarding the progress of the LIFO analysis process
  - Other firms may prefer for LIFOPro to manage all aspects of the outreach/analysis process and will only need to provide an introduction or referral to their client/LIFOPro
Step 3.1: LIFO Reviews – Clients Using LIFO
- LIFOPro will prepare a report summarizing our findings on the following areas:
  - LIFO calculation accuracy
    - Client’s historical documentation through the last period closed will be imported into LIFOPro’s software to confirm it is free of errors
    - Any errors found are documented, and a comparison of the as corrected vs. as presented LIFO reserves are provided
  - LIFO methods review
    - The LIFO methods elected by the client are reviewed, and LIFOPro confirms that the methods used comply with regulations
    - Any compliance issues are documented, and a comparison of the as corrected vs. as presented LIFO reserves are provided
  - Best LIFO practices feedback
    - LIFOPro review’s the client’s present methods and uses our knowledgebase to determine if there alternatives that the client could be using to provide a more beneficial/simplified approach could be used. Examples include:
      
      Using the IPIC method for companies presently using an internal index
      
      Expanding LIFO election scope to include additional inventories presently valued using a non-LIFO method
      
      Using an alternative approach that would maximize tax deferral from LIFO, minimize administrative burden or eliminate/reduce IRS audit risk
    - Includes pro forma LIFO calculations for any proposed alternatives & comparisons of the proposed vs. present methods
  - Recommendations & action items
- Documentation requirements – All LIFO calculation documents for the most recent two periods closed
- LIFOPro will deliver the following within one week of receipt of the required documents:
  - Best LIFO Practices & Review Report
  - LIFOPro report package for the most recent period closed (using client’s actual historical documentation)
  - LIFOPro’s turnkey outsourcing solutions fee quote
- If desired, LIFOPro will host or attend a call to discuss report findings, recommendations & next steps
Step 3.2: LIFO Benefit Analysis – Clients Not on LIFO
- Clients who are 2024 Top LIFO Election Candidates & interested in exploring a LIFO adoption should obtain a complimentary LIFO Election Benefit Analysis
- LIFOPro will deliver the client’s analysis report & fee quote to the firm and/or client within 1 week or receipt of required documents
- Analysis & fee quote documentation requirements
  - Non-dealerships
    - Current period & prior year end’s item detail or stock status report containing the following fields:
      
      Item number (UPC/SKU) and description
      
      Stages of production and/or hierarchies (if applicable; hierarchy examples include categories/class/type/line etc.)
      
      Quantity on hand or weight
      
      Current period item/unit cost
    - Completed benefit analysis questionnaire (enclosed in benefit analysis document request list)
    - Download our Non-dealer document request list here : LIFO Election Benefit Analysis Document Request List
  - Dealerships: Download, complete & return the applicable questionnaire to LIFOPro
    - Auto dealer LIFO Election Benefit Analysis Questionnaire
    - Machinery & equipment dealer LIFO Election Benefit Analysis Questionnaire (ag/farm & construction machinery)
    - Other dealerships (RV, powersports etc.): Contact LIFOPro for document requirements OR IF AVAILABLE, provide the same documentation listed above for non-dealerships
- Benefit Analysis Report Overview
  - Comprehensive case study delivered as PDF report to assist CPA firm & client with the LIFO due diligence process
  - Series of historical calculations made to forecast company-specific long-term LIFO tax benefits
  - LIFOPro’s proprietary inflation scoring system used to model company-specific expected risks vs. rewards of LIFO
  - Election year LIFO tax benefit & estimated amounts included for booking a LIFO journal entry (if applicable, journal entry using benefit analysis amounts should be made so financial reports can be issued on a LIFO basis & LIFO conformity rule compliance is met)
  - Includes LIFOPro’s findings & recommendations regarding whether a LIFO election should be made/deferred, and the most beneficial submethods to use if a LIFO election recommendation is made
  - Also includes a comprehensive Appendix containing LIFO election essentials, accounting for LIFO & FAQs
- Fee Quote Overview
  - Provided at the same time the client’s benefit analysis report is delivered
  - Includes services to be provided, deliverables timing, document requirements & detailed fee quote breakdown
  - Provides separate breakdowns for the election year vs. recurring fee amounts
  - Provides separate breakdowns for the various LIFO submethod alternatives (if applicable; i.e., internal vs. external indexes)
  - Also provides separate line items for optional services
Step 4.1: Onboarding Overview
- LIFOPro offers to schedule & host a meeting or call with the firm and/or client to discuss the benefit analysis/review report results, fee quote and implementation/onboarding steps following the delivery of the client’s report and fee quote
- LIFOPro will collaborate as needed with client and/or CPA firm to provide additional best practices feedback, training & additional resources prior to entering into a formal engagement
- Firms directly engaging LIFOPro may choose to discuss results & fees with client directly and are not required to share benefit analysis/review reports and fee quotes with clients
- Firms with an indirect relationship with LIFOPro often elect to introduce the client to LIFOPro to facilitate direct communication between the client & LIFOPro
Step 4.2: Onboarding & Engagement, Deliverables & Reporting/Implementation
- Onboarding: LIFOPro will deliver the following items within 3 business days of request to proceed with an engagement:
  - Engagement letter (fillable PDF form)
  - Year end calculation document request (Excel file)
    - Includes separate first year & recurring annual calculation document request lists
    - Year end document request will typically include the following items (dependent on type of business and whether year end or interim documents were provided):
      
      Year end inventory report from accounting system (aka item detail, stock status or inventory valuation report)
      
      Year end balance sheet or summarized trial balance schedule listing year end balances of all inventory-related subledger accounts
    - Sample templates or previously provided documents included in reference to requested items to assist firm/client in preparing the requested items
  - New Client Questionnaire – Sheet included in document request Excel file. One-time onboarding form used to confirm delivery timing, contact information & IRS forms preparation
- Engagement Performance
  - Performance of the engagement typically begins after the year end has been closed, after the required documents to complete the calculation are available & as soon as the firm or client delivers the required documents to LIFOPro
  - Some firms/clients will send preliminary or unaudited documents to LIFOPro to expedite LIFO report delivery & facilitate quick closes. When this occurs, LIFOPro will revise and deliver updated or final LIFO reports at no additional cost if changes exist between the preliminary/unaudited and final/audited information provided to us.
- Deliverables: LIFOPro guarantees to deliver the following by or before firm/client’s required report delivery date):
  - LIFO report package (PDF and/or Excel reports) – Contains all information required for financial reporting, audit/review & tax purposes (including all LIFO-related amounts required to book journal entries & prepare year end financial reports and tax returns)
  - IRS forms package – If applicable; for companies making accounting method changes or first-time LIFO elections
- Reporting/Implementation: Client can complete all remaining LIFO-related tasks upon receiving the deliverables listed above, including:
  - Client records LIFO journal entry using amounts provided in LIFO report package
  - Client prepares year end financial report using amounts provided in LIFO report package
  - Client/CPA firm prepares LIFO-related entries on tax return using amounts provided in LIFO report package (and attaches IRS forms package to tax return if accounting method changes are being made)
Best LIFO Practices & Review Report Excerpts
LIFO Election Benefit Analysis Report Excerpts
LIFOPro Report Excerpts
LIFOPro Fee Quote Excerpts
Resources

LIFOPro’s Offerings Overview (1-page summary)

2024 Top LIFO Election Candidates Guide

2024 Top LIFO Election Candidate List & Client Identification Tool

2024 LIFO Opportunities & Strategies Guide

Sample LIFO Election Benefit Analysis Report

Sample Best LIFO Practices & Methods Review Report

Sample LIFOPro Report Package

Contact Bob Richardson for business development questions and requests

Bob Richardson, CPA

robert@lifopro.com

Direct dial: 531-466-4275

Cell: 402-850-4807

CPA Firm Partnership Playbook

2024 Top LIFO Election Candidates Guide

Sec. 473 Relief Estimate Request Form

Auto Dealer IPIC LIFO Case Study

2024 LIFO Opportunities & Strategies Guide

How LIFO Works: A Beginner’s Guide to LIFO

How to Identify Clients that are Good LIFO Election Candidates

How to Easily Implement LIFO

Complimentary Interim LIFO Estimate Request Form

Best LIFO Practices & Review

Auto Dealer LIFO Case Study

LIFO Election Benefit Analysis

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Addition of Services Table 9 Codes

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PPI Category Updates

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Consumer/Producer Price Index Inflation History

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IPIC LIFO Advantages

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FAQ’s

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LIFO Glossary

Accounting and financial professionals who work with LIFO need to understand the jargon associated with LIFO. Below are a number of LIFO-related terms.

What Makes a Good LIFO Candidate?

Get answers to who should use the LIFO method, how much LIFO may benefit your company or client & good LIFO candidates by industry & principal business activity along with historical inflation data.

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CPA Firm Partnership Playbook