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[Podcast] Outsourced Accounting Best Practices with Pam Chelden of SC&H Group

Posted by The AI in Accounting Podcast on Oct 14, 2020 7:30:00 AM
The AI in Accounting Podcast

Pam Chelden has more than 20 years of accounting experience and possesses insight across several industries, including but not limited to education technology, logistics, and manufacturing. Pam graduated from the University of North Carolina, where she earned a Bachelor of Science in Business Administration and went on to receive her master’s degree in Accounting. 

Originally from North Carolina, Pam’s first job was with KPMG, where she worked in auditing for nine years. She left her position as an Audit Senior Manager when she moved to the Baltimore area. Pam Chelden has amassed great experience and expertise in both the private and public accounting sectors.

[Podcast] Outsourced Accounting Best Practices with Pam Chelden of SC&H Group]

Pam Chelden joined SC&H Group in January as a Principal of Accounting, leading the Accounting Solutions practice in Baltimore. This practice provides outsourced CFO controller-and-bookkeeper-level services to small-and-mid-sized clients, preferably using cloud-based technologies. Pam strives to work hand-in-hand with her clients to support them in strategic planning, refinancing, budgeting, and cash flow. Pam’s goal is to ensure that the teams she leads have the right tools to meet and support the needs of the clients they serve. 

Listen to Pam Chelden’s career experience in both the public and private accounting industries, as well as her experience as a CFO for numerous companies. Pam offers a unique approach to outsourced accounting, as well as advice on how to get a balanced set of skills and understand how to use them in your own accounting work! 

In this podcast episode, you’ll learn how to: 

  • Mentor entrepreneurs on deferred revenue, and the difference between bookings, revenue, and cash flow;
  • Apply skills and expertise from both public and private accounting, and the importance of having experience in both sectors;  
  • Leverage your years of experience to help companies make affordable and good strategic financial decisions;
  • Provide the client with quality service with lower costs by implementing cloud technologies; 
  • Understand the levels of service that you can provide in outsourced accounting; and
  • Understand that the “winning ticket” is to become flexible in what you can offer your clients

Watch the Podcast Interview

Watch on YouTube: Outsourced Accounting Best Practices with Pam Chelden of SC&H Group

 

Listen to the Podcast Interview

Listen to Apple Podcasts: Outsourced Accounting Best Practices with Pam Chelden of SC&H Group

 

Highlights Include:

  • “Over the years, I had actually developed my own forecasting method in Excel that the investors seem to like when I put it together … balance-sheet income statement, and a cashflow statement.”
  • “The thing they [entrepreneurs] probably struggle with the most is the deferred revenue, and the difference between bookings and revenue.”
  • “I think it's really important to have somebody who has been in both public accounting, as well as private industry accounting. It is just really different. It's two different skillsets, and you can be really great at one but understanding both is, to me, kind of the ideal package here.”
  • “I feel like I have obviously an accounting base, and I'm a CPA. I understand the numbers, but to me, the differentiation that I can bring to my clients is just an understanding of how accounting affects business, and how to translate the numbers to actually help you make strategic decisions.”
  • “Accounting gives you a really good snapshot of the history … but what business owners want is, ‘Okay, how does this impact me going forward? How can I use that data to make decisions to drive changes in the future so that I can be more profitable, and I can drive more revenue, make better decisions?’”
  • “I think the fact that I'm able to kind of leverage my years of experience to be able to help small-to-mid-sized companies affordably make good financial strategic decisions, to me, is very rewarding.”
  • “I think that is the future of particularly outsourced accounting, and I think … cloud technologies are really enabling that process, and we're able to provide clients with quality-level financial services. That's usually cheaper than hiring that directly yourself.”
  • “I think you need to be flexible in what you can offer, and I think you have a spectrum of services. You have to be comfortable that you can deliver on all aspects of those services. But being able to be flexible is, I think, a winning ticket.”

 

A lightly-edited transcript follows below:

Joshua Feinberg: Hi, it's Joshua Feinberg from the AI in Accounting podcast, and I'm being joined by a very special guest today, Pam Chelden, who is Principal of Accounting Solutions at the SC&H Group up in Baltimore. Pam, thanks so much for joining me today.

Pam Chelden: Sure. Thanks for having me. It's good to be here.

 

Pam Chelden’s Journey to Principal, Accounting Solutions at SC&H Group

Joshua Feinberg: Likewise. The way I usually like to start out these conversations is to learn a little bit more about your professional background: what got you to where you are in your career journey today, and where your role fits in with your firm as a whole.

Pam Chelden: Okay. Sure. Sure. So, I'm actually originally from North Carolina; I started my career in Charlotte, North Carolina with KPMG. So, I started in audit. I spent nine years with them. I left as an Audit Senior Manager, and I moved to the Baltimore area and took a position with a... I'll call it a “startup wireless-services company”. I've spent the last 20 years as a CFO in a couple of different industries: One is the logistics transportation space, and most recently in the ed-tech space. So, I have a good background of, you know, public accounting, as well as private industry. And I joined SC&H in January to head up the practice of accounting solutions, which is providing outsourced CFO controller-and-bookkeeper-level services to small-to-mid-sized clients, preferably using cloud-based technologies.

Joshua Feinberg: Excellent. I saw pretty recently in the last month or two, you had done a webinar on cashflow tips, or managing cashflow through a crisis, how to stretch your dollar, things like burn rate, runway forecasting. How did the planning for that all come about?

Pam Chelden: So, we actually were requested; we do a lot of work. Johns Hopkins has an incubator program for startup businesses, and we've gotten a couple of clients out of that. It's a really neat group of businesses that need support. And so, they asked us to put on a cashflow webinar. So, it was primarily directed to that group. So, it's directed to non-accountants, and it was directed to people that, you know, are running their business, and certainly, during this economic time, trying to manage your cash flow. It was actually something that came very easily and naturally to me because I had just spent three years with an ed-tech company, where I managed cash every day; cash was a little bit tight. So, I learned a lot in those three years, as well as, you know, with the transportation company. That was something that was always top-of-mind, is just your cashflow and understanding the sources, and the uses of that. And so, over the years, I had actually developed my own forecasting method in Excel that the investors seemed to like when I put it together, and, you know, accountants do balance sheet income statement, and a cashflow statement, but to me, the cashflow statement is something that is really hard to understand in, I think, layman's terms. So, I put together my own cashflow schedule that basically showed, “Okay, here's the deposits coming in from customers, and here's your cash going out the door. Like, get rid of all the accounting, like, prepaids, and deferred. Like, what's your cash doing?” And to me, cash is king. And so, focusing on that and understanding your trends, if you understand kind of your monthly or weekly trends, it's a lot easier to try to project out those trends on a go-forward basis. And then, you know, for a lot of companies, cash is tight, and you have to manage to that and understand when you're going to have certain expenses hit, and making sure that you're collecting from customers or do you need to raise funds or get an additional line of credit to cover those costs?

Joshua Feinberg: Do you find, when you're working with entrepreneurs at an incubator, you keep answering the age-old thing of explaining the difference between the profit and loss, and what shows up on the cashflow statement? Or do you find over time that becomes less of an issue?

Pam Chelden: I don't. Probably the biggest thing I have to explain—because I think entrepreneurs, they get cash. Naturally,; they're all really smart, so they get cash; they get balance sheet income statement. The thing they probably struggle with the most is the deferred revenue, and the difference between bookings and revenue. So, that's usually an area that we spend some time talking about. The good thing with deferred revenue is, usually you've collected the cash up front, but you've got a service that you've got to deliver over time. So, just understanding the difference between cash versus revenue, and what's showing up on your financial statements, is an important differentiator to understand.

Joshua Feinberg: Like timing, and the idea of accruals.

Pam Chelden: Yes. Yeah. So, just, you know, accruals, and so, I think deferred revenue, and, you know, there's lots of guidance out there in the accounting world on when you have to recognize revenue, and how you recognize it. So, you know, just making sure that you follow the rules properly. But at the end of the day, it's just like, “What's the cashflow impact?” Right? That's what matters when you're a startup business.

 

Advice for Those Building a New Outsourced Accounting Practice

Joshua Feinberg: So, it sounds like you're extremely hands-on with the advice that you give to small business owners. When you put on your hat of running a practice that's providing outsourced accounting solutions, in your years of working as a CFO in private industry, what would you say is your biggest tip for someone that's just launching an outsourced practice to think about? What's the biggest piece of advice that's super important to focus on?

Pam Chelden: Yeah, I think it's really important to have somebody who has been in both public accounting, as well as private industry accounting. It is just really different. It's two different skillsets, and you can be really great at one but understanding both is, to me, kind of the ideal package here. You know, audit teaches you how to, you know, prove out balance sheet items and make sure that they're accurate, and you got documentation to support it, which is very important. But actually, the process of closing the monthly books on a regular basis, doing account reconciliations for every account, analyzing the P and L, understanding the trends, understanding your expenses, your income, and how that all relates so that you can actually translate that to your management team, so that they understand it on a business perspective; it's just a unique skillset that is not really learned at a detailed level in public accounting. So, you know, I just think you need to have that; you need to have both.

Joshua Feinberg: So, if somebody were to, right out of school, join a team like yours in accounting solutions, after a couple of years, their best bet, if they really want to eventually progress to leadership, is to work in private industry for a couple of years, and then potentially circle back, so they'd have that breadth of experience.

Pam Chelden: I think so; I think it helps. You know, I think I'm finding that it resonates when I'm talking with prospects about our services that I've actually sat in the CFO chair; I've made these decisions, and I'm building a team out that consists of controllers that have been controllers and sat in that chair, and I think it's resonating with our clients and our prospects.

Joshua Feinberg: Yeah. It sounds like it's really hard to get that empathy without having walked in those shoes.

Pam Chelden: It is, it is. You know, accounting, there's such a wide spectrum with accounting, right? It comes in all shapes and colors and sizes. You know, when I was studying accounting in school, it really wasn't what I thought I would do as my career. I've always liked math and stuff, and I always thought accountants were the folks that wore the green eye shade and sat in a broom closet and added up a bunch of numbers, and I was actually really pleasantly surprised when I got into the business of accounting and into business, that it was much more about people and relationships and understanding business than it was about accounting and the numbers. But I feel like I have, you know, obviously an accounting base, and I'm a CPA, that I understand the numbers. But to me, the differentiation that I can bring to my clients is just an understanding of how accounting affects business, and how to translate the numbers to actually help you make strategic decisions. You know, accounting gives you a really good snapshot of the history, and the historical, but what business owners want is, “Okay, how does this impact me going forward? How can I use that data to make decisions to drive changes in the future so that I can be more profitable, and I can drive more revenue, make better decisions?”

Joshua Feinberg: That seems to be the Holy Grail; where a lot of leaders in outsourced accounting and client accounting services are trying to head to is trying to improve their processes, improve their workflow, so they can free up the time, free up the budget—a combination of the two—to really move into true advisory services.

Pam Chelden: Yes. Yeah, and I think that's, you know, you've got a difference between… I was just thinking about this earlier today, you know, that processing accounts payable is a commodity; it's a routine process; just about anybody can do it. But actually, providing advice on maybe a transaction—maybe it's a legal transaction—but have you thought about the financial implications of this? You know, have you looked at your healthcare plan, and are you working with a good creative broker that can help you design a competitive benefit plan that allows you to attract quality talent in the marketplace but also is affordable for your company? And I think, you know, if you've been through that, you can provide that advice, and that's something different than just debits and credits. So, I think there's a difference between commodity, you know, services that you can provide on an outsource basis versus strategic financial advice that you can provide.

 

What to Expect as Your Outsourced Accounting Practice Grows 

Joshua Feinberg: What advice would you offer to someone who has been providing outsourced CFO services, outsourced accounting solutions for several years? What are the bumps in the road that someone is unlikely to experience if they find themselves in the position of running an outsourced accounting team, and they're three years out of college?

Pam Chelden: So, a couple of thoughts here. I think, you know, it's a really interesting position to be in because I get exposure to a lot of different industries and companies, whereas when I was in private accounting, private industry, I worked for one company, one business, one model. Right? So, this allows me to get exposure to multiple businesses, and multiple companies, and I find that really fascinating. So, that's one thing, and then I think the fact that I'm able to kind of leverage my years of experience to be able to help small-to-mid-sized companies affordably make good financial strategic decisions, to me, is very rewarding. So, I think, you know, I would encourage anybody with similar backgrounds to mine to get into this field because I think it's very exciting, and it is rewarding.

Joshua Feinberg: What I've heard a lot of, also—and speaking with people in similar roles here—I've noticed you do some workshops and certifications around Sage Intacct. I've actually heard this with a lot of Sage Intacct experts, as well, where they started working in private industry, and they got introduced to the platform by, like, an integrator or consultant, and they loved it so much that they ended up going to work with the firm, and now all they do all day—instead of, like, Sage Intacct being one of 20 things they're responsible for—is they help 20 different firms with their Intacct implementations, and so, it must be such a different routine.

 

Navigating the Future of Outsourced Accounting with Sage Intacct and Other Cloud Technologies

Pam Chelden: It is, I mean, and I'm the beneficiary of when I joined the firm, they were already a Sage partner, and they were using that as their platform, and so, they had vetted it, and I'm really impressed with it because it is a true cloud-based ERP system, and they have a console view that is perfect for small-to-mid-sized clients; it's Sage Intacct's way of trying to compete with QuickBooks. So, a lot of companies use QuickBooks startups, but Sage Intacct is more of an ERP system. QuickBooks is good for really small businesses, not accountants trying to use it to generate financial statements. Once you grow beyond that, I think Sage Intacct is a perfect platform for that, and again, I'm not a Sage Intacct sales rep, but we use it, and I find it really easy to navigate. You know, when my whole team had to go remote on March 15th, when the whole world shut down, and things shut down—at least, in Maryland, they did—you know, it was seamless for my team because all of our technologies are cloud-based technologies, and that's not where I was before. So, before I joined SC&H, you know, my controller would come into my room with a stack of checks, and, you know, hard-copy invoices and say, "Here's the check run. Can you review this and, you know, sign the checks?" And that was my process, and I thought it was actually fine, and it wasn't until I joined SC&H that they already had this all set up, that kind of the light bulb went off, and I was like, "Wow! We use Bill.com to pay all of our vendors!” And our vendors just email the invoices right in; there's artificial intelligence that reads the vendor, and the dollar amount gets coded. We review it; there's an automated workflow process between us and our clients; it gets automatically synched into Sage Intacct; we pay our vendors, and it's all in the cloud, which I think is phenomenal. So, you know, my whole team, we used to come into the office; we liked working together. We would see each other, you know, in the hallway. But now, we're remote. We've been remote since March, and I'm not sure we'll ever go back, and I think, you know, luckily, we were set up with all cloud-based technologies that made that really seamless, and I do think that's the future. That was probably your next question, Josh. But I think that is the future of particularly outsourced accounting, you know, and I think cloud technologies are really enabling that process, and we're able to provide clients with quality-level financial services. That's usually cheaper than hiring that directly yourself.

Joshua Feinberg: Yeah. I imagine there's a lot of education that goes into getting them to understand the difference between the level of services you're providing versus a very entry-level bookkeeper. Like, night and day, and a lot of times, I guess it may be that they have to first experience what happens with compliance and cash-flow issues and making payroll and being able to produce the kind of statements that make banks and investors comfortable.

Pam Chelden: Yep. Yep. Usually, they come in with a request, right? Like, “We've got investors, and they're telling us these QuickBooks reports just aren't going to do it anymore.” Or they've got a lender on the hook, and the lender wants, you know, regular, routine, kind of gap-based financial statements, and so, they're usually kind of growing out of their element to deliver on that.

How to Avoid Common Pitfalls When Building an Outsourced Accounting Practice Within a CPA Firm

Joshua Feinberg: What do you see as the biggest mistake that accounting firms can make with outsourced accounting, outsourced bookkeeping, client accounting services? Have you been in your role long enough where you've taken over some work that's come over from other firms and cringing at how things were done? Have there been any situations like that?

Pam Chelden: Yeah. I mean, I think having a team that has nothing but public accounting in their background is probably a mistake. So, I think, again—and we talked about that as one of the first questions—is having that dual experience, I think, is really critical. I think, also, you know, it's not a one-size-fits-all solution for clients. I think you need to be flexible in what you can offer, and I think you have a spectrum of services. You have to be comfortable that you can deliver on all aspects of those services. But being able to be flexible is, I think, a winning ticket.

Joshua Feinberg: I know you mentioned you work with a lot of startups. Has that flexibility led you to a place where you've developed any vertical markets, any industries that your firm is choosing to specialize in your practices?

Pam Chelden: It has. Yeah. It's led us to a lot of, like, medical device and biotech companies, which is really fascinating, and then also a fair number of nonprofits. Sage Intacct is really set up really well to handle that; it allows for multiple dimensions of reporting and capturing. So, I mean, pretty much any kind of service industry; we are rather industry-agnostic, with the exception of probably, like, full-process manufacturing. It's just not something… I don't currently have any clients today that fit that bill, and I don't have the experience for that. So, that's not something right now that's in our future to pursue.

Joshua Feinberg: I find it amazing when I talk to people in similar roles in different firms in all parts of the country, that exception came up a week or two ago, as well, is that's the one red flag with a certain kind of industry that they feel like, if he didn't have a specialist on his team who came from a hardcore manufacturing background, that they'd be really reluctant to take it on.

Pam Chelden: Yeah. There's some unique accounting needs in that space. So, it would be better to have somebody who has experience in industry doing that. It's around raw materials, work-in-process, capturing; it's cost accounting.

Joshua Feinberg: Got it. You see the emergence of a lot of client accounting services and outsourced accounting teams, too, putting out thought-leadership content, similar kind of to the webinars you're doing, and E-books, and videos on social. But a lot of times, they're very specific to vertical markets. But I guess they're looking for high-growth areas, as well, and, as the world becomes more digital, and geographic location becomes less vital, I could see that becoming a big trend, too.

Pam Chelden: Yeah. We have a client actually that's based in the Czech Republic. So, yeah, geography is not a concern. Thank you, technology!

Joshua Feinberg: Cloud definitely makes it possible. What's interesting, too, is I come from the IT services background, and for 10, 15, 20 years, managed service providers have been trying to get their clients to think about hurricanes, earthquakes, fires, floods, sabotage, and it just didn't click, and then I guess this is kind of the mother of all contingencies to plan for, and if you still needed to come into the office to have a check passed around from person to person, envelopes passed around, or running something that's still on the desktop, as opposed to in the cloud, yeah, this is definitely… there was that cartoon going around back in April or May—not that they should've made light of it—but, like, what was responsible most for digital transformation in your company: your CEO, your CIO, or COVID-19? And I guess the implication was that if the CEO couldn't get everyone to make the changes, and the CIO couldn't make the changes to take digital transformation seriously, that having, all of a sudden, everyone, all accounting firms, are remote accounting firms now, to a certain degree, for the foreseeable future.

Pam Chelden: Yeah. Yeah. I think that's actually a good thing that's coming out of COVID, you know, is that it's really forced Zoom calls and video conferencing and video chatting, and then just cloud-based. If your company was not cloud-enabled before now, then you either had to quickly pivot to that, or, you know, you're going to be left behind.

Joshua Feinberg: Fortunate for the firms that had been proactive enough to be there before March because I'm sure it was a lot less stressful to already have those changes in place, and then you're dealing with a tax season that got pushed back multiple months, and all of this in industries that were especially hard-hit. Everyone I've talked to has been forced to get an MBA and PPP in CARES the last few months.

Pam Chelden: Yes. We spent a lot of time on that. Most of our clients that applied for it received it. So, that was nice. But yeah, we definitely developed a specialty in the PPP, and now we're working on the loan-forgiveness side of it. So, never a dull moment.

Joshua Feinberg: Trusted advisor all around. Pam, what's the best way for someone to learn more about the work that you do at SC&H or reach out to you if they have any questions?

Pam Chelden: Yeah, sure. So, feel free to visit our website: SCHGroup.com. We've got an accounting solutions page that talks a little bit more about what we do. Or feel free to either email or call me, and I'll be happy to talk with you a little further about our services.

Joshua Feinberg: Are you active on LinkedIn, too?

Pam Chelden: Yes. Yes. You can find me on LinkedIn.

Joshua Feinberg: Excellent. Well, Pam, I really appreciate you coming on the podcast today to talk about your career experience and starting out in public accounting, and a lot a great experience in nonprofits and ed-tech as a CFO, and how that's really framed your whole approach to being able to take outsourced accounting up to a whole different level, and it's great advice to you for someone that's thinking about what their career might look like five, 10, 15 years down the road to get that balanced experience of working with lots of different clients and understanding the context of delivering that within a public accounting firm.

Pam Chelden: Yeah. Well, thank you for inviting me, and I enjoyed having a conversation with you today.

Joshua Feinberg: Likewise. Thanks so much for your participation. I really appreciate it.

Pam Chelden: Thanks.



What's your favorite outsourced accounting tip? And what did you find most valuable from Pam Chelden's podcast interview? Let us know in the Comments section below.

 

Learn even more about outsourced accounting when you download the free report: The State of Client Accounting Services and Outsourced Accounting.

 

Download your free copy of The State of Client Accounting Services and Outsourced Accounting.

 

Topics: Podcast, Client Accounting Services Best Practices

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