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Stay ahead with essential CPA resources

CalCPA Empowering Students

More than 300 aspiring CPAs were awarded CalCPA scholarships in 2024–25, with an average of $1,500 to support their education.

Student Scholarships

Turn Chaos Into Clarity

To solve and resolve crises while continuing to move forward takes a laundry list of actions, strategies and planning. We’ll boil it down to three essentials—and the role CPAs can play.

Crisis Management

Filling in the Blanks on Global Staffing: Part 3

In part 1 and part 2 of this series, we covered how to leverage global talent and unpacked some of the myths and realities international staffing. Now it's time to take some real action to fill the blanks in your organization chart and in your staffing plan.

Filling the Blanks: Part 3

ESG and the Future of Small Accounting Firms

Small accounting firms may believe ESG challenges are the domain of larger firms with larger clients. But in truth, these aspects represent opportunities—and risks—for every accounting practice.

Golden State wisdom straight from the experts

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Looking for an old article or a past issue from California CPA magazine? You're in the right spot!

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CPAs: Making Sense of What Comes Next campaign

 has, over the past five years, awarded $350,000 annually to students in California, 40 percent of whom attend(ed) community colleges. For the 2024–25 academic year, more than 335 students received CalCPA scholarships and were awarded an average of $1,500 each.

“These numbers reflect not just tangible gains for students—classes, books, exam fees—but support of the CPA profession, and the public trust and accountability it provides,” said CalCPA President and CEO Denise LeDuc Froemming.

California State University, Bakersfield students received the most scholarships for 2024, with the total amount to students at the university topping out at $21,500, and San Diego State University students right behind them with $18,500 in scholarships to accounting and accounting-adjacent majors. Other schools with large scholarship awards also included Cal State University Fullerton, Menlo College and Golden Gate University.

“Scholarships are a lifeline for me, representing the chance to pursue higher education despite the obstacles I’ve faced. As a first-generation college student from a Native American background, growing up in a financially strained environment in a tough neighborhood, scholarships are more than just financial aid—they’re a ticket to a better future,” said San Diego State University student Michael Bonillas from the 

CalCPA is focused on fueling the talent pipeline into the profession and transforming the career experience for accounting students and young professionals. The scholarship program is a commitment to that vision by helping them to excel in their academic and professional endeavors.

Established in 1903, CalCPA is the largest state CPA society in the country, representing and supporting certified public accountants and related professionals in California.

Change and challenges are daily reality in any business—from critical team members out sick to important vendors unable to deliver to long-term customers suddenly moving on. I imagine you can fill in the blanks with the unending situations we all confront in our ever-changing business lives.

Then, sometimes out of nowhere, comes the crisis that could stifle your growth, damage your brand or threaten your business’ well-being, if not its existence and your livelihood.

For decades, I have specialized in the world of crisis management it’s always surprising how many ways crisis can exist in a business, from not meeting strategic goals to being underfunded.

One of the sad aspects of a true crisis is that it is often characterized initially as just one of the many normal challenges we experience. However, it could be global, like the pandemic. It can be strategically industry-wide where new competition or tangential product development brings new benefits to older resources. It can be the loss of a group of valuable team members.  It can also be when the bank calls your loan.

Most people try to solve these crises themselves, even though it’s really beyond their skill base and experience. This often brings more chaos to the situation and elongates healing, with needed communication and teamwork getting put on hold. 

To solve and resolve crises while continuing to move forward takes a laundry list of actions, strategies and planning. We’ll boil it down to three “must do’s” that make everything else easier.

The first essential is, of course, people. But not just team members of the business; there are other stakeholders that need to be involved, including bankers; other lenders such as equipment financing; friends and family who lent money; key vendors; your CPA; your attorneys; wealth management advisers; and consultants. Who to involve at any given time depends on the level of crisis and needs

Input of funds—cash, revenue, receivables, loans, negotiated accounts payable that don’t normally bring dollars in, but slows down the need—helps buy time. I have heard many times that, if you need money and your banker or lender is supposedly being difficult, finding a new lender is your next step. Maybe down the road you do but that can and will take time—time that you may waste when you could have been reorganizing your business. Getting your proverbial ducks in a row prior to any crisis is key.

There are ways other stakeholders can help, too. Consider your vendors, who are in part dependent upon your business’s survival. They might be able help in all kinds of ways from funding to contract terms to new products. There may be other funding sources for specialized assets that might not be collateralized or assets that might have appreciated since last investigated.

For example, I raised substantial dollars on technical equipment that some customers were able and interested in additionally guaranteeing, which allowed other lenders to advance needed funds. Yes, it took some critical analysis and discussion to bring these assets forward. It was kind of a “who would have figured” scenario. It’s amazing how some assets go unnoticed until funds are needed.

Of course, additional funds can come from family, friends and associates—just be aware that this needs to be analyzed with a lot of understanding and compassion as you don’t want to hurt them financially because of their desire to help. Reduced salaries, often for owner managers, are not unknown; some are paid back, and others are glad to have a job. All these need to be reviewed to make sure they make sense, especially with legal oversight.

During a crisis, new revenue often languishes as the focus is on managing the crisis and not as much on sales and revenue. This might be instinct, but it’s important to intentionally help team members find the time continue meeting with customers, advancing on open sales and creating new sales and programs that historically brought new business.  

Enhanced conversation brings a whole new life to any situation. Verbal interaction has probably eroded because management has become uncomfortable with discussing what has been happening—or not happening. That’s not to say normal communication, pre-crisis, was a glowing example of what people were needing, but it was probably better than what is happening in the middle of a crisis.

There is much to say and not to say during these times, but in general, more meaningful and authentic dialogue is needed about the reality of the situation. This may sound contradictory, but whatever is said about the situation or situations in play needs to be uplifting, not downtrodden.

This means being able to give the bad news as well as what is going to be done together to move from chaos to new success.

Starting with management, I suggest that an agreement be put together as to how things will be acted upon. For years, I have used a one-page agreement (that each member signs) developed jointly with the business team. It outlines what behaviors are acceptable and what are not. It’s worked out together and there is usually a standard list of each, but it is important for the group to craft their own.

One imperative that needs to be there: “Blame must stop at the door.” There is no good reason to get on the blame bandwagon. Accountability and finding out what happened must be forefront. When everything, ultimately, settles down, most people are surprised what really happened—there is no reason to presume anything going in. 

Other agreements, like the one that management has can be put in place in other departments. The goal is to have an organization that is working from the same page so more can be accomplished. How this process is distributed will be determined by the size of the organization and the level of crisis.

Keeping the process and the communication flowing is essential. Telling the truth once is one thing, telling the truth all the time is another and staying on mark is essential. To do so, there needs to be a running meeting, starting daily of key people from the business’ most important areas of what has happened, what needs to happen and how can others help?  

It needs to be in the 20- to 30-minute range -- so that people can get on to what’s needed done. Move forward, the meeting usually comes down to once or twice a week as new programs stabilize.

Communication is the most difficult and arguably the more important of the three essentials we are discussing. Poor communication, misunderstanding, poor data, people not being on the same page as well as poor decision making have probably added more to the crisis than one could imagine. Focusing on better distribution of information, ideas, feelings and actions must stay strong or the business might slip back and find itself in even more crisis than before.

While there are many other actions, strategies and ideas that will be needed to bring a business out of a crisis, having these three concepts in place is a good start.  Without this tripod model, stability and effectiveness of what needs to be done is at risk of not being successful within the crisis or in the future. Build a good foundation with the strength of your people, the ability to garner the needed funds now and in the future, and communicate as a team by reinforcing everyone being on the same page.

It is also a time where the CPA world can add additional value by helping clients better understand what is going on and help them make the most effective decisions possible. CPAs know a great deal about clients and their ways; this is an appropriate time to reflect, analyze, cross-correct and move forward. It is a time to reach out, touch-base and add a personal touch to someone who might really need it.

 of this series, we covered how to leverage global talent and unpacked some of the myths and realities international staffing.

Now it's time to take some real action to fill the blanks in your organization chart and in your staffing plan. So instead of making this an epic poem, allow me to lean into my CPA-ness and make a straightforward bullet list of actionable steps—roughly in the order in which you should tackle them.

These steps don't always happen in a fixed order, but the key takeaway is that there are so many critical steps needed before taking the plunge. Don't jump in blind. Remember, "Ready, Fire, Aim" is a guaranteed miss.

As a CPA, what can you do from your side of the ledger to assist your business clients in avoiding wage and hour pitfalls with their workers? Employment law, and wage and hour issues specifically, are not your area of expertise, but there are several things that you can safely do that would assist your clients in recognizing the issues so an employment law specialist or HR professional can rectify those deficiencies before they blow up. This is especially true if you provide payroll services. Let’s discuss a few.

 Your client likely has both salaried (exempt) and hourly (non-exempt) employees. Only non-exempt employees are eligible for mandated overtime. Misclassification cases arise when the company has paid someone as a salaried employee, but the employee should have been classified as hourly non-exempt and eligible for overtime. This has a cascading damages effect concerning meal and rest break violations and associated penalties. If your client has an overabundance of salaried people, or you are working with an A/P, A/R or payroll person whom you know to be on salary, those are red flags for misclassification. Also, note that federal law and state law differ substantially on this subject, and the more rigid state law takes precedence (as it typically does in 95 percent of wage and hour issues). 

The state requires salaried employees to spend more than 50 percent of their time performing higher-level management or senior administrative duties to remain in the exempt category. Federal law doesn’t use a bright line percentage. Think Starbucks store managers. They hire, fire, manage, budget and troubleshoot with customers and generally are indeed managers. But because they spend upwards of 80 percent of their time working on the floor with their team, they cannot be exempt salaried employees (Starbucks found that out the hard way, settling a class action 15 years ago). 

If you are overseeing payroll and observe that certain exempt employees are paid a salary that is less than twice California's minimum wage ($68,640 for 2025), that’s a violation of the “salary” test under California law. You can’t include commissions or other forms of compensation in that number.

 If you have an opportunity to review client paystubs (and perhaps timesheets during payroll), be on the lookout for how the client’s employees track their time. If you notice that meal breaks are not recorded, tell your client to look into the issue. Meals not noted on timesheets, are shorter than 30 minutes or routinely commence after completing five hours of work, are violations. “Auto-deducting” for meals should never occur. If timekeeping is done electronically, urge your clients to implement daily end-of-shift electronic attestations for hourly employees to acknowledge compliant (or not) meals and rest breaks before they finish clocking out for the day.

 You may have no way of tracking rest breaks, but you may know about the nature of your client’s business and if rest breaks are likely required. Ask whether employees are receiving compliant, paid 10-minute rest breaks, generally twice during an eight-hour shift, for example. 

 Rounding time, though technically still legal, is an absolute no-no these days, especially if it is handled electronically. Courts take the position that if you can track to the minute, there’s no need to round. Also, when we perform a statistical analysis of whether rounding favors employees or the employer over time, it’s often 80 percent or more in favor of the company. 

 If your client has business expenses related to employee travel or expense reimbursement for the use of personal phones or other personal equipment, you will be able to see that in the tax work that you do or in the payroll process. Alert clients that they need to reimburse employees for the use of personal equipment, such as using a personal phone to record time on an app. The usage may be minimal, but it still requires reimbursement. 

If you have clients in construction or vehicle repair, for example, employees are likely using their personal equipment, such as tool belts, hammers and screwdrivers. If employees are required to provide such personal equipment, the employer must pay them twice the minimum wage ($33/hour for 2025). Otherwise, employees must be reimbursed for the use of that personal equipment. Many employers in these industries have no idea about this law, even though It has been in effect for decades.

 Every pay period, employers must provide their workers with the amount of sick time (or PTO) they have available. The amount is typically shown on the pay stub. If it is not there, the employer likely is not providing that information as required. It is also good to know whether workers accrue sick time, or it is “front-loaded.” 

 If your client has 1099 workers beyond obviously legitimate vendors (like you and me), you might give them a heads-up about California’s “ABC test” for engaging independent contractors. State law has tightened up tremendously on who can be an independent contractor. That test is difficult to meet, despite its simplicity: who controls the means of production; is the worker performing work that is outside the regular scope of the company’s business (often the biggest hurdle); and does the worker have an identifiable business of their own? That could be a tough standard in many situations. Inquire about the services performed by those 1099 workers to see if they likely violate the test for independent contractor status. 

 If clients provide bonuses to their hourly people, which will show on pay stubs that you may see during your work, those bonuses likely need to be added into the regular rate of pay for determining the overtime rate, sick time rate and meal/rest break premiums. This will depend on whether the bonuses are “discretionary” or “non-discretionary.” Non-discretionary bonuses are performance-based, but clients are often unclear about what that means in less obvious situations like payment for not using sick time, recruiting bonuses and longevity bonuses. Note that the overtime calculation differs depending on whether the non-discretionary bonus is static or fluctuates.

 If your client has a commission structure, all such commission agreements must be in writing and signed by both the employee and the client. Those agreements often have vague language about the basis for the commission payment, and what happens if someone departs (regardless of reason) while the commission is “in the pipeline” (sometimes known as “tail commissions”). The client may also have “independent reps” who don’t qualify for that non-employee 1099 designation. There is also a major distinction in compensation between “inside salespeople” versus “outside salespeople” as far as overtime requirements. The definition of outside sales is exacting, and if the employee is performing inside sales, they may well be owed overtime, including on their commissions beyond their base draw, salary or hourly pay.

CPAs, accountants and bookkeepers are not insurers of their clients’ businesses, but they can certainly help protect clients from wage and hour pitfalls. You don’t have to be an expert on the merits of these issues, but alerting the client is a safe way for you to provide value-added service. It will also certainly reinforce your relationship with them for the future as their trusted adviser.

Alert Your Business Clients To HR Pitfalls

As a CPA, what can you do from your side of the ledger to assist business clients in avoiding wage and hour pitfalls with their workers? Employment law may not be your area of expertise, but there are several things that you can safely do to assist your clients.

For years, environmental, social and governance (ESG) considerations were seen as exclusive to large corporations with published comprehensive sustainability reports and dedicated teams. The rise of transparency and accountability demands from key stakeholders, including investors, regulators, customers and consumers have propelled ESG practices into mainstream organizational operations. 

Accordingly, small accounting firms may believe ESG challenges are the domain of larger firms with larger clients. But in truth, these aspects represent opportunities—and risks—for every accounting practice, regardless of size.

The role of accountants as trusted advisors exists because we deliver essential insights about our clients’ financial health, risk management and long-term strategic planning. With the rise of ESG, this role is expanding. 

Small firms that neglect ESG considerations risk losing their clients to competitors who integrate ESG into their operations and offerings. 

ESG is not just about ideology, it’s about financial risk. Issues like supply chain disruptions, climate-related impacts and shifting consumer expectations all have material financial consequences. Businesses that proactively engage with ESG will be better-positioned to navigate evolving market expectations and risk landscapes, ensuring long-term stability in a growing sustainability-conscious economy. 

While the current federal administration may be reluctant to champion ESG, many states continue to push forward with ESG-related policies, and Europe remains steadfast in its regulatory commitments. 

In this environment, smaller firms can gain substantial advantages when they incorporate ESG principles into their operations. The demonstration of ESG strategy is critical in retaining clients and attracting new ones. Clients will need accountants who understand ESG regulations and practice those values themselves. 

Many clients expect their service providers to show commitments to social and environmental sustainability and adopting ESG principles allows firms to stand out in competitive markets by strengthening client relationships.

Numerous firms already showcase their ESG values by participating in community activities while maintaining ethical labor standards and practicing responsible resource management. The key is to be intentional and communicate these efforts.

ESG also enhances firm reputation. A firm that pursues ESG initiatives actively demonstrates its commitment to long-term resilience and forward-thinking to clients and potential employees. In the accounting field, where talent shortage is an ongoing issue, this benefit is extremely important. Increasingly, younger accountants are looking for value-aligned employment opportunities.

Implementing ESG principles with a focus on governance and ethics functions can also help mitigate regulatory risks. The financial reporting environment continues to transform as jurisdictions increasingly mandate ESG-related disclosures. Firms that understand and integrate ESG principles now will be compliance-ready and avoid last-minute adjustments when regulations make these practices mandatory. 

For smaller firms looking to start their ESG journey, the approach does not need to be overwhelming. A few examples to incorporate sustainability and governance practices into daily operations include enacting energy-efficient office practices by reducing paper use and adopting cloud-based systems. Firms can also lean into ethical vendor selection, collaborating with suppliers who focus on fair labor practices and sustainable sourcing methods. 

Transparency is key. Take a page from the larger corporations' playbook by sharing your ESG values through digital platforms and marketing communications. A firm can set itself apart through a concise declaration of its ethical obligations and community involvement. Accountants who demonstrate their ESG commitment publicly attract purpose-driven clients as they seek partnerships with organizations that share their values.

Organizations across many industries will rely on expert advice to apply best practices as ESG reporting standardization progresses. Accounting firms can take advantage of this development to grow their service offerings, generate new revenue streams and position themselves as leaders in an emerging area of financial expertise. The AICPA has many ESG certificate courses for practitioners to grow their knowledge. 

Sole practitioners who are concerned about their place in the wider ESG framework can improve their positioning through deliberate choices like sustainable business practices and mission-driven client work. Even taking small steps like removing single-use plastics from home offices or choosing banks that prioritize sustainability are a move in the right direction. 

Sole practitioners can use networking to connect with ESG initiatives. Participating in sustainability-focused industry groups, engaging in ESG discussions at professional conferences, and collaborating with other ESG-focused professionals generates substantial insights and opportunities. Sole practitioners who educate themselves in this area can become known as ESG experts and gain access to clients who require that expertise but lack funds to hire large firms.

Sole practitioners can integrate ESG criteria into their process of selecting clients. Aligning professional values with business operations becomes possible when collaborating with organizations that emphasize sustainability and ethical leadership while maintaining ESG alignment. Providing ESG advisory services, even at a basic level, can serve as a competitive advantage in today's marketplace.

The accounting field is at a significant crossroad as ESG has evolved from “something trendy” into an essential business strategy. As global awareness increases the material business impact of ESG initiatives, more people understand ESG risk is financial risk. Accounting firms that integrate ESG principles now will protect their future viability while helping their clients navigate the changing business environment. ESG serves as a strategic business tool that helps build trust while enhancing long-term sustainability and driving value creation.

Accounting professionals who lead firms or manage their own small practices or solo operations have a distinct opportunity to guide how business approaches ESG implementation. Taking proactive steps now can strengthen your own businesses and help shape a more sustainable and ethical future for the profession.