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[Podcast] Business Process Outsourcing Best Practices with Steve Ronan of Citrin Cooperman

Posted by The AI in Accounting Podcast on Dec 16, 2020 7:30:00 AM
The AI in Accounting Podcast

This episode of the AI in Accounting Podcast features Steve Ronan, who started his career in management consulting and finance transformation for large Fortune 500 enterprises before switching to middle-market consulting. Now, he is a Principal and Leader of Business Process Outsourcing Practice at Citrin Cooperman, an accounting advisory firm based out of New York City known for its holistic, tech-forward approach to finance transformation.

Listen to the episode in full to learn why Steve thinks client service is so important to get right in the beginning. In his words:

[Podcast] Business Process Outsourcing Best Practices with Steve Ronan of Citrin Cooperman

“The first few clients that you acquire, you have to make sure that you go a little overboard in servicing them, and, as you do that … you need to build your toolset and your methodologies that are going to allow you to repeat that in some scalable way because at some point, you're going to need to build some volume … and you're not going to be able to manage all of those clients the same way. So, if you do that from the beginning … it's going to be a much easier path for you.”

Steve also gives some great advice on training clients to become more self-sufficient:

“We should be making [our clients] better at what they do. We should be making them able to hire more people, to train more people, to grow services and products in the marketplace that other people value. That's kind of important. Humans don't exist for economies; economies exist for humans.”

Steve also offers his perspective on the surprising similarities between finance technology and the fashion industry:

“There's that movie, The Devil Wears Prada. There's this great moment in the movie where they explain how the fashion industry works, and how a certain shade of green starts on the runways in Milan; everybody goes crazy for it, and two years later, it's in Target. That's the way I look at finance technology, too. You have to look at what the big guys are doing because they're going to be ahead of the smaller market on the investments that they're making.”

In this podcast episode, you’ll learn more about the importance of:

  • Deciding the kind of practice that you want to build and what you need to do well to be viable from the start;
  • Determining how you’re going to price your services, and how you’re going to compete with other firms; and
  • Building the staff and the tech stack that you need while maintaining a strategic, sophisticated, forward-thinking perspective on the finance industry.

Watch the Podcast Interview


Watch on YouTube: Client Accounting Services Best Practices with Steve Ronan of Citrin Cooperman


Listen to the Podcast Interview

Listen to Apple Podcasts: Client Accounting Services Best Practices with Steve Ronan of Citrin Cooperman


A lightly-edited transcript follows below:

Joshua Feinberg (00:03):

Hi, it's Joshua Feinberg from the AI in Accounting Podcast, and I'm being joined by a very special guest today. I have with me Steve Ronan from Citrin Cooperman. Steve is the principle and practice leader of the business process outsourcing group in the greater New York City area. Steve, thanks so much for joining me today.


Steve Ronan (00:23):

Absolutely, Joshua, thanks for having me.


Joshua Feinberg (00:26):

You're very welcome. The way I usually like to start these interviews is to understand what got you to where you are in your career. What were the kind of key steps along the way? Did you always want to go into accounting?



From Fortune 500 Management Consulting to Business Process Outsourcing

Steve Ronan (00:38):

So, yeah, I'm actually not an accountant by background. So, I grew up in management consulting for Fortune 500s, and I spent a number of years doing primarily finance transformation for large enterprises—which, as you know, comprise really a variety of disciplines, including your processes, your accounting capabilities, your technologies, and your operating structures models. So, one of the reasons that I made a change is I wanted to work with smaller companies. I was working with really big, generally public, complicated companies, and it's a lot of fun; you learn a lot when you're dealing with that level of complexity. 


But there's downsides to it, as well, and I really felt that the middle market was somewhere where I wanted to play more. So, I moved from large-enterprise consulting to middle-market consulting. It took a while to figure out how to adapt to, like, the level of rigor and discipline that a large enterprise needs when it's making big changes to how it runs itself into the middle market. But once I figured that out, we got a really good consulting product working in the middle market. CFOs were our most frequent buyers, and usually the point of entry was either a family, or an investor group that owned a private company, or the CFO of a private company. As a result of that, finance transformation became one of our really leading services, and we take a holistic, tech-forward approach to finance transformation. 


So, you're always starting with aligning your finance department with how the business is going to grow, and what its operating strategy is going to be moving forward, and then from there, you basically decompose it into a number of capabilities that you need to build on the finance side, and that's where we started to build a perspective of, “If you were to be an outsourced accounting function for a client, what are the capabilities that are really going to add value to the way that the client runs their business? And how much leverage can you give to a business owner, or a group of owners, that are running companies in a way that not only replaces the cost, or management overhead of managing finance internally, but gives them capabilities that they can't otherwise find, or, in some cases, afford?” So, from there, that's how we evolved into having our specific outsourcing approach and going to market in a way that was very much aligned with this more innovative, tech-forward, finance-transformation work we were doing, and we've been building all of the capabilities that are needed to do that for a little while now: building the staff you need, building the tech stack you need, and still trying to keep that strategic, sophisticated, forward-looking perspective of finance, really with the way that we service all of our accounts.


Joshua Feinberg (03:49):

So, in the outsourced group that you head up today, are you primarily selling to CFOs? Or you're selling more to entrepreneurs and small business owners?



Hybrid Approach with Full-Stack Finance Outsourcing: From CFO to Bookkeeping

Steve Ronan (03:58):

Yeah, we have a hybrid approach. So, we do full-stack finance outsourcing, which is everything from the CFO down through the bookkeeping capabilities, and we also recognize that—especially when you're dealing with private companies—they really are all different. 


If you're looking at two $30M manufacturers that do roughly the same thing, they could run their business in two totally different ways, and we recognize that. So, the model that we have is flexible enough to adapt where we need to. So, some of our clients may have CFOs, or they may have a COO, or a family member, a CEO who's really financially literate, so they don't really need a full suite of CFO services, and for those clients, we're doing all the controllership; we're doing all of the transactional work, FP&A in some cases, and giving them as much leverage as they need to allow them to act in a CFO capacity but on a part-time basis. Sometimes, we are the accounting department under a CFO who's either an outside fractional CFO, or a full time CFO, and sometimes we're doing everything but that. 


So, it really depends; the model is sort of modular the way that we built it, and we try to focus on the areas that we're going to add value. We're not a bot-keeper, right? So, we're not competing for that sort of work. We're going to construct a service portfolio that meets the value needs of the client, not just replaces commodity activities.


Joshua Feinberg (05:34):

Yeah, it's really fascinating to me because there's been several inflection points in my own career over the past 20 years, where we've looked at—like in IT—what did Fortune 1000 IT know how to do that small businesses would want to be able to do without the budget of Fortune 1000 IT and without being able to do this in-house? It's constantly this feeling, like, that the big kids have it all figured out, the older siblings. When you're in high school, you look up to friends and family that are in college. When you're in middle school, and elementary school, you look up to high school kids and figure out a way to get it right-sized and be effective for millions of entrepreneurs.


The Devil Wears Prada and the Leading Practices of Mid-Market Finance

Steve Ronan (06:08):

Well, yeah, that's exactly the right point. It's an interesting line to toe because I think one of the first conversations that probably everybody in this industry has with their clients is around leading practices. They always say, "I want you to bring leading practices to me," and I understand what the essence of that statement means, and what they're looking for, but at the same time, I think the concept of leading practices gets elevated to a status that it can't possibly live up to in the middle market because you'd think that all the big guys have everything figured out. 


But in reality, they have as many issues as everybody else; they're just different structural issues, and the way I always like to frame it is there's that movie, The Devil Wears Prada. There's this great moment in the movie where they explain how the fashion industry works, and how a certain shade of green starts on the runways in Milan; everybody goes crazy for it, and two years later, it's in Target. 


That's the way I look at finance technology, too. You have to look at what the big guys are doing because they're going to be ahead of the smaller market on the investments that they're making. What's less transparent is which of those investments are going to work. There has been a lot of money that has chased things that were really hyped. They reached a very high point in the Gartner’s Hype Cycle, but in reality, it never really got executed. 


Blockchain is a good example of that, where I think everybody thought it was going to transform everything, and, as blockchain investments really progressed, everybody realized that there's a ton of value to this technology, but it's in these very specific areas, and it's not something that's proliferated the same way that AI is starting to do, or robotics has done. 


So, there's a filtering process that all of us need to look at when we're looking at what's considered “leading practice”, and what are people investing in, and then what's really going to have legs with middle-market companies and make a difference for them in the long run because it's a Venn diagram; some of it aligns, but not all of it.


The Strategy and Tactics for Growing an Outsourced Accounting Practice

Joshua Feinberg (08:16):

Yeah, that makes a lot of sense. One of the areas I wanted to ask you about today was to think about someone that's brand-new to starting up an outsourced accounting practice. What do you think is supercritical for them to get right from Day One? Maybe this is someone you went to school with, you're having coffee with, you met at a conference, and is, like, "Steve, can I pick your brains for a couple of minutes? What should I expect in getting this new practice off the ground?”


Steve Ronan (08:41):

Yeah, so, I would probably look at it in two dimensions. The first dimension would be strategically. What kind of practice do you want to build? And then the second dimension is tactically. 


What do you need to do well to be viable from the start? From a strategic perspective, I think this is a marketplace where there are a lot of players, and a lot of people who have slightly different views on how they want to service clients, and how they want to operate service delivery broadly. 


On that side, I think it's really important to figure out where you're going to play, how you're going to price yourself and make sure that you know how you're going to compete with the other firms that have decided to do that because I think people hear “outsourced bookkeeping”, or “outsourced accounting”, and they may not necessarily realize how many flavors of that there are, and when you get into competitive situations, it's not just going to be a pricing play all the time. 


Sometimes, it will be, but sometimes, there's going to be certain soft attributes of your buyer that you're going to want to figure out how to meet more than others. Maybe it's an industry attribute, maybe something that’s related to industry, or a certain aspect of accounting or finance in an industry. Maybe it's a part of the trust pyramid, in terms of where a CFO plays; maybe it's the technology stack; maybe it's a certain pricing model, or a certain delivery model. There's a lot of ways to structure yourselves, and it's all going to play into, “How do I structure, so I can compete in the marketplace against the other people who are trying to play with the same clients?”, and then, “Can I price that in a way that I can make it profitable for myself over the long term and scale it?” 


On the tactical side, we all know it's all about client service. So, the first few clients that you acquire, you have to make sure that you go a little overboard in servicing them, and, as you do that, as you service them, you need to build your toolset, and your methodologies that are going to allow you to repeat that in some sort of scalable way because at some point, you're going to need to build some volume here, and you're not going to be able to manage all of those clients the same way. So, if you do that from the beginning and avoid having to reinvent your service delivery at $5M-$10M and $20M, it's going to be a much easier path for you.


Joshua Feinberg (11:07):

Sure, that sounds like a really good plan. So, thinking about the other extreme: someone that's been running a practice like this for five or 10 years, and it just doesn't seem to be clicking. Maybe there's a lot of clients that are churning; maybe there's a lot of staff turnover; maybe they're feeling a sense of burnout. What advice would you give them to help them reset and get the practice back on track?


Using Surveys and Technology to Keep a Healthy BPO Accounting and Finance Practice

Steve Ronan (11:36):

You know, every situation is going to be a little different. I think keeping close to your clients is really important. I was with another services firm yesterday; we're kicking off a big project with them, and they actually had this terrific approach of soliciting client feedback, where they're doing Stage Gate reviews with clients.


They were doing regular digital surveys with their clients to figure out what they're doing well, and then whenever they're underperforming in an area, it allows them to be really responsive in finding out the specifics about why that perceived performance issue is there and gives them a chance to fix it. Building some of those into the operations of the practice, I think, is a good thing. 


If all the feedback is good, and you're still having issues growing or still losing clients, then that in and of itself is an interesting diagnosis for whatever the root-cause problem under there would be. I think the other thing is that building for scale is obviously very important, and talent acquisition is very important. 


So, having a real strategy for the types of skillsets that you need, and the types of people you need, how they're going to grow inside of your firm, is important, and then making sure that you have enough people with the necessary technology skills and client management skills will be critical, as well. The other thing is if you've been in a practice for 10 years, you do reach these inflection points, where you need to think about what technology you're using to service clients. 


In the last five years, there's been just an enormous number of advancements in virtually every functional area that we touch as an outsourced accounting practice, and so if you've been working off a legacy platform for a really long time and haven't rethought how technology should drive service delivery, now would be a good time to re-examine that, and that's not just a pitch for you guys, Joshua—although, I know that's a good message for you guys—but it's really true. A lot of the tech that we're implementing now wasn't even available to implement five years ago.

Joshua Feinberg (13:43):

Yeah, it's interesting. I remember standing at QuickBooks Connect a year ago, and we actually did get a fair amount of people that said, "We're on Desktop. We can't move to QBO." It'd be really interesting to go back to those same people now and see if they found the motivation in the last six or seven months.


Steve Ronan (13:58):

Yeah, yeah, absolutely.



Understanding What Drives Change in How Accounting and Finance Infrastructure is Delivered

Joshua Feinberg (14:02):

Another area that I'm curious about is when you bring on new clients, what you observe about what they're not doing right before they get to you. What do you see as a big mistake or two—regardless of whether they're coming from another CPA firm, an outsourced bookkeeping firm, or even just running internally?


Steve Ronan (14:25):

Yeah. It's hard to talk about when they're switching from another CPA firm. That doesn't happen as often, and, I think when it does, it's usually just a mistake, and I think all of our practices make mistakes that you lose clients over sometimes; it happens. Hopefully, it's not a symptom of a deeper problem; I think, usually, it's just one-off, a campaign error. 


But when they're coming from internal finance teams to switch to external finance teams, most often, it's because they grew or evolved past the capabilities of what they could reasonably hire for internally. 


So, a smaller business that's been running with a single full-charge bookkeeper that suddenly needs services that are much more aligned with controllership, or they're taking on bank debt that comes with covenant compliance and reporting that they've never had to deal with before. They're dealing with multicurrency cash, multicurrency transactions, more cash accounts, investor reporting; usually, something has gotten more complicated than what a typical full-charge bookkeeper could handle. So, that's usually what it is; it's evolution. 


I think judging mistakes of the past is always very difficult because it's usually just somebody who had a different set of information, and assumptions they knew at a given point in time. I think we have to recognize that companies change, management teams evolve in their perspectives, and the nature of the marketplace demands either different focus areas or different skillsets, and that's usually what we look at when we're coming on, and then addressing whatever sort of legacy operational debt they might have.


Joshua Feinberg (16:12):

You're saying a big trigger event is something that's happening externally to the business—usually, a good thing, but they may not be able to deal with the recruiting, hiring, staffing up, that function, let alone a small team to react fast enough.


Steve Ronan (16:25):

Yeah. Not only that; talent has gotten very expensive. So, if you're a smaller company that needs a sophisticated CFO who's going to help them with gross-margin analysis, costing; you've got bank covenants that you've got to deal with, and you're going to do a capital raise; that's an extremely expensive person, and it's hard to find those people; it's hard to hire them, and it's hard to retain them. So, in those situations, you might be better off going with an outsourced option—maybe even a hybrid outsourced option—where you can get the sorts of skills that you need, without everything I just mentioned.


Joshua Feinberg (17:04):

So, they're taking on, basically, like a timeshare, like a quarter or a third of that person's capacity and share.


Steve Ronan (17:12):

Oh, yeah.


Joshua Feinberg (17:12):

Yeah, yeah.


Steve Ronan (17:13):

There's great fractional CFOs out in the marketplace. I mean, we're the accounting department for a number of fractional CFOs, or interim CFOs. Sometimes, we play that role ourselves, depending on the client.


Joshua Feinberg (17:25):

So, these are all good problems to have, as long as the company leadership recognizes that they're going to need a much more sophisticated level of finance and accounting help.


Steve Ronan (17:34):

Yeah, the only time it's a bad problem is when it goes unaddressed for a long time, and people get frustrated with it. The board suddenly gets fed up with the reporting that they're getting, or something like that, but it's usually not, like, the person in accounting's fault; it's usually because haven't addressed the infrastructure of accounting adequately.



Where Outsourced Accounting is Headed Next: The Contrarian Viewpoint

Joshua Feinberg (17:53):

Gotcha. The final area I want to talk with you about today is your thoughts on where the business of outsourced accounting is heading. What's going on right now that we're going to look back 12, 18, 24 months from now and say, like, “That was the key event that made the biggest difference in where client accounting services, outsourced accounting services are headed?”


Steve Ronan (18:11):

So, I'm going to offer myself as the contrarian view on your podcast for this, if you don't mind.


Joshua Feinberg (18:17):

Go ahead.


Steve Ronan (18:20):

Partially, because it's fun. But partially, I actually do think there's going to be a swing back. So, I think a lot of the focus in this space over the past several years has been, “How do we make appliance accounting a real thing?” Like, I go buy a refrigerator, and I expect it to work for the next 10 years. I'm going to go buy an accounting service, and I expect it to just run my accounting, and I don't think that is a realistic way to look at accounting. 


I think it commoditizes accounting in a way that I don't think is practical, and I also think it's almost damaging philosophically when you're thinking about growing business, driving profitability, driving good results for clients and employees. 


So, a lot of the effort and thought leadership that's been put into mechanizing accounting as much as possible will reach its limit at some point, and things will swing back to more of a team-focused approach, with automation standing in for some functions. 


But I don't think that we are going to get to a place where accounting is suddenly completely automated, and you're getting great numbers every month without really anybody touching them, which is I think what a lot of people have been seeing as the panacea. Not only do I think it's not going to happen; I actually don't think it would be helpful if it did happen. I think management teams need the types of analysis, need the types of variability, to adjust to new products, and new services, and changing markets, and new pricing models, and everything that comes with that, in a way that just that level of role automation will not allow. 


So, I think outsourced accounting is going to be probably a growing area for a long period of time, and I think the people that figure out how to integrate the automation and operational necessities with really good human capital and innovative human thinking are going to be the ones who probably win in the end.


Joshua Feinberg (20:23):

It's really fascinating because if you think about what discipline would be the driver of wanting to productize professional services, somewhere along the line, probably finance chimed in and said, “This would be really great if we could standardize practices and build a model that helps it be more scalable, kind of like a network appliance, when they're taking servers that used to take a lot of space and put them into a form factor, taking client server applications and putting them in the cloud and SaaS model.” So, yeah, it's really interesting to think that we may be hitting the limits in the near future of what is possible, and a lot of companies are going to realize that it's just not that practical, and maybe that's the whole point of a lot of this is using the technology to streamline the commoditized work to free up the time for advisory work, and then, in theory, a lot of that self-corrects.


Steve Ronan (21:14):

Yeah, that's right. I mean, philosophically, what is the purpose of a person being in a professional services role? What value are we adding to our marketplaces, to our communities, to society? It should be value, where we have an amplifying effect on the benefits that other people are adding. So, for our clients, we should be making them better at what they do. We should be making them able to hire more people, to train more people, to grow services and products in the marketplace that other people value. That's kind of important. 


Humans don't exist for economies; economies exist for humans, and when we start to interact with our clients at a level where we're talking about, “Why is this business meaningful for you as an owner, or meaningful for you as an executive?”, or, “What makes your employees want to work here?” It's not mechanics that come out of that, right? It's something that's more aspirational. So, people don't want to be running their business to just build the perfect factory and be able to walk away. 


I think some people want to think that, but they're enticed by the creativity that building great products and services take by developing new ways to approach and do things, and then what the businesses are doing is making it economically viable to do that. So, when we're working with our clients on a more human basis and helping them unleash that intangible aspect of what they do, that's a partnership that's really important, and finance needs to look at itself as somebody who's going to enable that margin that allows them to do that and help drive that forward. 


So, I think we have to keep that human aspect at the forefront of what we do, while making sure that what we do is really good and really efficient, and the economics are properly aligned with how we're trying to help our clients.


Joshua Feinberg (23:24):

Yeah, it's definitely, in the course of interviewing a couple dozen people, you were the first person who's said, "There's going to be a practical limit," and it totally makes sense, and it's probably just a matter of whether it's a year, two years, three years out. At some point, there's going to be a certain amount of questioning as to whether this is really delivering the value that people thought it would, right?


Steve Ronan (23:48):

Or to what mix, right? What balance do we need to strike between automating a lot of stuff and still making sure that we have people in these important seats, managing everything in a way that's adding the value that we should?


Joshua Feinberg (24:07):

It's the insight that is worth way more than just the bookkeeping, and the compliance, and the coding.


Steve Ronan (24:14):

No, that's exactly right. Yeah, it's a higher plane of insight. It's not just coming up with a better scenario model—although, it is coming up with a better scenario model—it's also really getting engaged in what the strategies of our client's businesses are, and what they're personally trying to do with them.


Joshua Feinberg (24:27):

This is all great. Steve, what's the best way for someone to learn more about the work that you do for Citrin Cooperman? Are you active on LinkedIn? Is there a good place to go on the web to check you out?


Steve Ronan (24:37):

We're very active on LinkedIn. At, you can check out our business process outsourcing services, where we've got a number of videos, webinars; we do regular webinars series. We also do a lot through our strategy and business transformation practice that is very closely aligned with our outsourcing services. 


So, a lot of our finance content might be coming through that practice, as well. But definitely encourage people to sign up for a mailing list on our website. We definitely encourage people to go out and download our papers, watch our videos, and then listen; we love conversations. We love engaging—even if it doesn't end in a client relationship—just engaging in dialogue with people who are in the marketplace and want to learn more is something that not only I love to do, but my entire team loves to do. So, email; we're always up for a conversation and to tell you about what we're seeing in the marketplace.


Joshua Feinberg (25:34):

Excellent, thanks so much, Steve, really appreciate you taking the time to talk with me today and to bring our viewers up to speed, our listeners up to speed on how you see the outsourced accounting model working.


Steve Ronan (25:44):

I appreciate it, Joshua. Thanks very much.


Joshua Feinberg (25:45):

Thank you.


Steve Ronan (25:46):

Take care.

What's your favorite Client Accounting Services tip? And what did you find most valuable from Steve Ronan's podcast interview? Let us know in the Comments section below.


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