Episode 84: How to Start a Forensic Accounting Practice with Robert Nordlander CPA, CFE
In this season of the Data Sleuth Podcast, join Leah Wietholter as she discusses the business of forensic accounting with successful professionals who have done just that! As part of this series, Workman Forensics and podcast guests are providing free resources and tools to accompany each episode to help you with your practice whether you’re just starting out or wanting to take it to the next level. Make sure to listen to the end of the episode to find out how to download! Lastly, during the last episode of the season, we are going to answer all of your questions - so if you have any questions about the business of forensic accounting, send them to Leah via YouTube, LinkedIn, or by emailing us at podcast@workmanforensics.com.
Today’s episode with Robert Nordlander CPA, CFE is all about how to start a business in the field of forensic accounting. In this episode, Robert and Leah discuss:
Start-up needs, costs, and considerations
Entity structures
Tax setup decisions
Licensing
Specialties/focus areas
Meeting potential clients
Robert Nordlander spent over 20 years as a special agent with IRS-Criminal Investigation. He investigated various tax crimes ranging from simple embezzlement to tax evasion using foreign trusts. He is an author, speaker, podcast host, and consultant to attorneys who need forensic accounting and criminal tax expertise. He has a CPA license, CFE certification, and MBA degree. He is the principal member of Nordlander CPA, PLLC, a boutique forensic accounting and tax resolution practice.
Website: http://www.nordlandercpa.com/
LinkedIn: http://linkedin.com/in/robert-nordlander
RESOURCES MENTIONED IN TODAY’S EPISODE
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Transcript
Leah Wietholter:
Hi, I'm Leah Wietholter, CEO and founder of Workman Forensics in Tulsa, Oklahoma. And this is The Data Sleuth Podcast. In this season of The Data Sleuth Podcast, I'm discussing the business of forensic accounting with successful professionals who have done just that, or they serve those who do. As part of this series, Workman Forensics and our guests are providing free resources and tools to accompany each episode's topic to help you with your practice, whether you're just starting out or wanting to take it to the next level.
Make sure to listen to the end to find out how to download each one of these. For the last episode of the year, Tracy Conan and I are going to team up to answer all of your questions. So, if you have any questions about the business of forensic accounting, or even forensic accounting in general, send them in via YouTube, LinkedIn, or by emailing us at podcast@workmanforensics.com. In today's episode with Robert Nordlander, we talk about how to start a business in the field of forensic accounting.
In this episode, Robert and I discuss startup needs, costs considerations, entity structures, tax setup decisions, licensing, specialties and focus areas, and even meeting potential clients. And I'm excited for you to listen. But first, a little bit about Robert. Robert was a special agent with the IRS Criminal Investigation Division. He investigated all kinds of tax violations, embezzlements, wire fraud, mail fraud, gambling, drug trafficking, bank fraud, money laundering, structuring, and bankruptcy fraud.
He has traced assets and income, leading to the seizure of millions of dollars in real estate, vehicles and anything else that someone committing a tax fraud would spend their money on. He has experienced finding hidden assets and testifying in federal courts. He was the lead financial investigator for cases that were seen on the Dr. Phil show, NBC, Rock Center, PBS, and in various publications. He is the owner and founder of Nordlander CPA. And we're very excited to have him on The Data Sleuth Podcast today.
Hi, Robert. Thank you so much for joining me on today's episode, the first episode of 2024. How are you today?
Robert Nordlander:
I'm doing wonderful, Leah. How are you?
Leah Wietholter:
Doing great. Hey, so I talked a little bit about this in the intro to this episode, but you were an IRS CID agent, criminal agent, right?
Robert Nordlander:
Yes, for almost 21 years.
Leah Wietholter:
Yeah. And then, after retiring, you started your own practice. And so, that's what I'd really like to talk about today is that transition and really what it took to open your practice. So, how long ago did you start your practice?
Robert Nordlander:
Well, I retired from IRS Criminal Investigations in March of 2021, and so I've been almost gone for three years now. So, I started-
Leah Wietholter:
That's awesome.
Robert Nordlander:
... really within a week after I left. You bowl around in your head, of course, before you actually jump out of the airplane without a parachute. But I started it just bare bones, knew hardly anybody, and that's how I started it.
Leah Wietholter:
That's awesome. So, why did you decide to do this?
Robert Nordlander:
Well, believe it or not, we don't use the word "forensic accounting" with IRS Criminal Investigations. I didn't even know it was a word until about two or three years before I even left. Okay? So, this is a whole new concept, and I knew what I did. I traced money. Where did the money come from? Where did the money go to? And literally, for 20 years, I chased the tax evaders and money launderers around the world. That's what I did.
I knew how to trace money. I knew how to articulate it. I knew how to create a crafted narrative. I knew how to do reports. I know how to testify, interview people. I had that skillset. But how does that translate into private sector? Because when I was a special agent, I didn't see people with my same skillset in the room at the defense table. So, the defense is on the side of the table.
I was on the prosecution side of the table, and so I was the expert in the room. And I appreciated them trusting me, what I had to say. But don't rely upon everything the government says. Of course, we are government employees. Everybody's prone to mistakes. So, I decided to open up a forensic accounting practice, didn't even know what it was, and say, "I'm just open for business."
And the only sphere of influence that I had at the time were criminal defense attorneys because those are the ones that would hire me or potentially could hire me, prosecutors that could hire me. They had their own agents. I'm leaving them. And I knew I could trace money, but I just did not know exactly how much they paid. The question is, who's doing it, who's writing out the checks and who's actually doing the training to learn how to do this type of thing?
And so, when I started my practice, I really had no idea. So, at the very beginning, well, who do you talk to? Well, the only people I talked to were criminal defense attorneys. So, I wrote maybe about 15 letters to people that I knew, that I worked with, that I respected. There's one or two defense attorneys I've... you can have them. But I sent letters to them and said, "I am open for business and this is what I'm going to do."
And within a week or two, I got my first phone call and said, "Can you help me do it? It was a pretty big case." And I was told by a bankruptcy lawyer that was a witness of mine in a bankruptcy fraud case that once you're out there and known and know what you're doing, getting business is not that complicated. And I was like, "Yeah, yeah, yeah, yeah, we'll see." And sure enough, once you start getting out there, attorneys talk to each other.
And that was one ways I marketed was just direct mail to attorneys, but I only did that once or twice. The ones that knew me, I think three out of 12 or 15 I sent out, were hiring me within three months. And that's kind of how I started it. And then, I started some other marketing techniques that we could talk about if you want to, but that's just kind of how I just did it.
A computer, an internet connection, Zoom communication, and Microsoft, email and Excel. That's how I started it.
Leah Wietholter:
Yeah. So, I'm curious, did you write a business plan?
Robert Nordlander:
Are you kidding me? No. Business plans, in my opinion, are a waste of time. If you know who your client is, or potentially could be, I just say, "Where are they?" Who are the influencers? Where do they meet? What problems do they have? And let's go out there and go talk to them and let them know, "Here's what you need to know. And if you want to hire me, you can hire me." And that's kind of how I started. That's all. I didn't have a business plan.
Leah Wietholter:
So, I think a leg up that you definitely had was all of your experience with IRS and working those cases and knowing those people. And conversely, when I started my business, I had been a tax preparer and I was not doing business development. I had several years of experience of working cases. I was then the certified fraud examiner or senior certified fraud examiner is what they called me.
So, we'd been working some forensic accounting cases, but I didn't know anyone. So, when I decided to start my business, and it really wasn't even a thing in Tulsa when I did, and so whenever I started my business, I was going off of maybe four years, four and a half years of experience working for the bureau and then in public accounting. But I had not networked.
Quite honestly, I really thought I was terrible at talking to people, so I had not even honed that skill at all. And I just remember this partner at the firm I worked for, he said, "Good luck." And he gave me the name of an attorney that his kids went... their kids went to school together and, I don't know, played soccer together or something, and said, "Talk to him." And so, that was the first person I reached out to.
And then, I was really dependent on people saying, "Oh, well, you should meet so-and-so and you should meet so-and-so." So, just kind of two different... you'd had experience meeting these criminal defense attorneys. I had worked several cases at the bureau, but when you're working under a forensic accountant, it's not like I'm having contact.
I wasn't even working under an agent, so I didn't even have contact with the attorneys there. But yeah, I didn't write a business plan. It was kind of survival for me, so I get that.
Robert Nordlander:
No, I would agree with you 100%. How I started, I had a couple of things that worked and didn't work, of course. One that worked extremely well for me is I created an email and said, "Okay, where do my potential clients meet? Will they meet at the local bar association?" They're attorneys, right? They meet at local bar associations. They're a part of the bankruptcy... every lawyer has their own little niche, bankruptcy bar, divorce bar, trust in the state bar, all that type of stuff.
And so, I sent out emails to all the local associations and says, "Hey, I'm a former special agent at the IRS. I have expertise in forensic accounting and trace of money. Here are the following four topics that I can talk about," and I gave titles, cryptocurrency, how it's going to ruin your firm or whatever, something catchy like that. I didn't have a single one of these already prepared. I just knew I could talk about it.
So, I didn't spend all this time and money trying to create something that they may not want. Every single one of them want a cryptocurrency. They could care less about tracing money. "Let's talk about cryptocurrency." "Okay, we'll talk about cryptocurrency." So, I would give 30-minute, an hour speech about cryptocurrency at various associations for free. And that's just kind of how I started doing that.
And then, I took my expertise and I wrote a book called Criminal Tax Secrets: What Every Defense Attorney Should Know. After we met actually at the ACFE, I went ahead and finished it all up. And so, I created this book because I just want to pull back the curtain about what if I was a defense attorney, how can I bring value to this situation? And so, I try to think about what did I want them to know?
And so, what I ended up doing was writing a book so they can see behind the scenes. And I'm telling you, from a royalty standpoint, books don't make any money, unless you're a trashy romance novel prep person, unless you get a gazillion people buying your books. No one buys criminal textbooks. Okay. It's only one out there. The market's very, very small.
But because I wrote the book, you become an authority in the space. In using that authority in the space, I'll give that book out for free because if I get one client out of it, it pays for it a hundred X. And the book is one thing that I did do and just started marketing myself of "Here's a book. I'm an expert in this area and I'm expert in this area."
And then, once you write one or two books, you get a thousand books that end up beating in your head about what you could write. But that was one thing that I tried. Direct mail doesn't work in this type of business, in my opinion. So, anyways, the point being is that direct mail didn't work, the Google Ads, this is the personal relationship.
And so, in order to be a good forensic accountant, you're going to have to go out there and meet these people and show them that you know what you're talking about. Not in an arrogant way, but in a 'let me share what I know' way in a presentation typically, or maybe write an article or two, that type of thing. Another thing that helped, and I know we're competitors in some way in all this, was starting a podcast.
I am a huge believer in podcasts because for me to pick up the phone and say, "Hey, Leah, I just want to talk to you about forensic accounting," I probably won't get past your secretary or your assistant.
Leah Wietholter:
You won't.
Robert Nordlander:
Yeah, I probably wouldn't. But if I say, "Leah, I got a podcast and I love what you can bring to the table regarding," you build them up a little bit. "I love the expertise that you have. My audience would love to hear about this. Do you have 30 minutes or an hour we can talk about? I'll even give you the questions. And oh, by the way, I'll even let you edit it. I'll give you a copy before I even send it off and publish it."
People go, "Yeah, sure." I would say nine out of 10 people I contacted say yes. And so, from there, behind the scenes, you build up a rapport, you talk to them, you give them a good product, they're happy with your podcast episode. And I got quite a few clients just because of that. And not only that, but they told other lawyers that they were on the podcast. They were like, "Oh, fantastic, you're on a podcast."
And so, then, they sit there, either want to be on the podcast, which is kind of interesting. Or number two is that you build your sphere of influence to where now you are the expert. I wasn't smarter because I had a podcast. I just asked questions. That's all I did. But once again, it's all about the marketing and just knowing people and that personal touch. You picked up the phone and some of my friends are accountants, good luck and all that.
You're going to have to meet and greet. So, writing a book, podcasting, and then also doing presentations. Those three things are frankly what makes me busy today. And I'm more busy than I was three years ago, for sure.
Leah Wietholter:
Yeah, that's awesome. Yeah, and I would agree, even just podcasts are looking for guests. So, if somebody doesn't have the time or expertise or maybe starting a podcast sounds overwhelming, just try to get on podcast. So, for this episode, I want to, and you're a CPA, and so I wanted to make sure that we talk about just some of those things that you need to have that aren't, maybe they're not as interesting as the strategies or marketing ideas, but just some of the basic things that you need to have in order to start any business.
But for the purpose of our discussion of forensic accounting business, so what types of startup needs did you have and what did you have to do? The whole LLC, setting up a corporation, operating agreement? What are some of those decisions that you had to make?
Robert Nordlander:
Well, first of all, because I have a CPA license, I had to go through the CPA board to make sure that whatever entity I had passed the smell test for them. So, they kind of gave me a general idea of what they would like and what they didn't like. So, I ended up starting an LLC. It's called a PLLC, Professional Limited Liability Corporation.
So, I had to go get an EIN from the... make sure I get all this information beforehand, but call the state and say, "Listen, I want to start this. What do I need to have?" They kind of told me my options. I went with a LLC, Professional Limited Liability Corporation. Go to the IRS, get that number. Go to the Secretary of State, get the name all registered like you're supposed to. Open up your first bank account with that information.
And that's just kind of how I rolled with it. And then, I went to Fiverr, if you've ever heard of that, F-I-V-E-R-R, got my little logo for like 50 bucks, got a little letterhead, little things like that. The small things like that, you have to have. Get your website. It's very important to get your website out there. Websites, at least in my opinion, don't get you clients. You'll lose clients by not having website because here's what's happening.
When an attorney refers you to somebody else versus, "Hey, talk to Robert, talk to Leah." What's the first thing you do? You go Google them. You find out who they are. You go to their website. If you have a crappy website, it looks bad on you. You're not going to get the client, but you definitely will lose it by having a bad website. So, just get a decent basic website about what you do and who you are and how to contact you.
Those were the first beginnings of my business. I didn't become an S corp until the second year. But the first year that I was in business, I did not know if I would even make money. And so, I made enough money where I'm like, "Screw this. I didn't want to sit there and deal with all my self-employment taxes. Let's just become an S corp." So, I become an S corp. And then, that's kind of how I started it.
Leah Wietholter:
Okay. I want to just pause here real quick so we can take an ad break. And we'll be right back because I want to talk more about setting up that tax structure.
Speaker 3:
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To order the Case of the Cash Flow Fiasco or the Case of the Man Cave for your students, visit workmanforensics.com/tig-educators or check out the link in the show notes.
Leah Wietholter:
Welcome back to my interview with Robert. So, Robert, before the break, you were talking about how you chose to start filing as an S corp. And so, we're talking about tax returns. That's an 1120-S. What were you filing before and then why did you make this change to an S corp?
Robert Nordlander:
A sole member only person LLC automatically goes on a personal tax return as a sole proprietorship. So, you have to pay the self-employment tax. It's just the way the tax law works. Because it's a 15.3% extra tax bill, I decided to become an S corp. And when you become an S corp, you have to pay yourself a reasonable salary. So, you had to figure out what's a reasonable salary, the number of hours that I do work, what type of work that I do, as well as I do.
Leah, when you start your business, you are the administrative assistant, you are the marketer, you are the social media coordinator, you're the trash-taker-outer type of thing. You are the chauffeur, you're everything. So, you have to figure out reasonable compensation. I used the RCReports to get a general idea of what I was worth in the marketplace based upon the hours and the type of work I was doing. But you have to give yourself a W-2 that's reasonable.
You can't just give yourself a W-2 for $10,000 if you're doing $100,000 worth of work. So, I became an S corp because of that reason, because it does save me taxes in the long run. Usually, as a tax professional, when you get up to $40,000, $50,000 a year type of net income, it starts to pay to become an S corp versus just a sole member LLC. And because I was making more money, that's the reason why I did it.
Leah Wietholter:
Yeah. So, just going back to my tax prep days because I'm also an S corp, but essentially that 15% you were talking about, you're going to pay that on your entire net income if it's flowing through to your Schedule C without the S corp. But then, through the S corp, you pay yourself payroll and it's just limited to that payroll, not your entire net income, right?
Robert Nordlander:
Right. And once you start making over the Social Security amount, which is what, $140,000, $150,000, if you start making a net profit over that, the self-employment tax doesn't apply anyways. So, there's a calculation that you can do. It's not for everyone, but if you do start making a substantial amount of money, when I say substantial, between $50,000, $40,000, $60,000, it probably does start paying to actually be an S corp.
Leah Wietholter:
And if you don't know how to prepare this return yourself, you're going to have some tax return prep fees where maybe you wouldn't just filing a Schedule C.
Robert Nordlander:
Exactly. Some of the tax savings that you get will be eaten up by a tax preparer, hiring them to do the fee. But at the end of the day, you still net out better tax-wise with an S corp.
Leah Wietholter:
Yeah, I would agree. I would agree. Well, great. You're in North Carolina, right?
Robert Nordlander:
I am.
Leah Wietholter:
That's where you practice. So, what are the requirements to start a forensic accounting practice? How do you have to be licensed? What are the rules in your state? Do you have to be a CPA? Do you have to be a PI? What are those rules?
Robert Nordlander:
Well, to call yourself a forensic accountant, all you got to do is call yourself a forensic accountant, sort of like being a return preparer. All you got to do is raise your hand and say, "I want to be one," and that's it. Now, anybody can call themselves a forensic accountant. The question comes down to is who's going to hire you and why? That becomes the issue.
Because of the nature of the business that we do, we are in court, we testify, and you got to get past the judge who's the gatekeeper of who can testify and who can't. So, attorneys want to make sure that when they hire you that you have the ability to testify and get past the gatekeeper, the judge, to make you "an expert." Well, with that comes credentials. And a CPA credential helps tremendously.
It could probably get you over the bar easily. Your experience helps. Even getting a certified fraud examiner is also important as well. I was not a believer of the certified fraud examiner when it first came out. Just me. I did this job all the time, who needs a CFE? But an attorney friend of mine who's in bankruptcy court said, "Get the CFE." I was like, "Why? It's kind of beneath me."
And he goes, "Well, the reason being is because it looks good, because the courts are now accepting that as being anti-fraud professional, and you can trace the money." He said, "CPAs, it ranges from tax preparation to controllers to auditors. It could be just about anything. It's too broad. But if you have a CFE, kind of narrows your niche a little bit, and it always helps."
So, it's like a thousand dollars, something like that, take the test and be a member. So, I said, "Yeah, sure." And he was right. It adds a little extra feather in the cap. And so, I got my certified fraud examiner, a credential and got the CPA license. And that's what I use as my basis to be "an expert," including my experience. And when I do my CV or resume, however you want to call it, all the presentations that I give, I put in there.
All the books that I've written, I put in there. All the times I testified, I put in there. All the experience I had in the last 20 years as an IRS agent, I put in there and never had a problem, and consider an expert in what I'm doing because of that.
Leah Wietholter:
Yeah, I agree. I think that the CPA license really just helps skate by just the... I mean, obviously, you still have to do great work. Your work can be challenged and all of those things, but it definitely helps with just getting past that hurdle of being an expert. In the state of Oklahoma, to investigate fraud, you actually have to be a licensed private investigator, a CPA, or an attorney.
And so, what I've seen is that somebody could be a PI, work the case, but then maybe they're not going to testify as the expert. They're more of a fact witness. So, there's a couple different ways there. But yeah, if you're going to testify as an expert... I testified as an expert for 11 years, actually longer than that, maybe about 11 years, without my CPA license. And I would have to have this battle-
Robert Nordlander:
Well, you also had those great initials. You also had those great initials called FBI, which puts you in a league all by itself, whether it's warranted or not.
Leah Wietholter:
It's true.
Robert Nordlander:
It is true. Yeah.
Leah Wietholter:
But a couple years ago, judges in Tulsa County started getting really particular. That's not why I sat for the CPA exam, but once I had the CPA exam, now I don't have to battle it out in depositions about why I'm an expert and all that stuff. So, if you're trying to decide... if a listener's trying to decide, "Should I do the CPA, should I not," and you really want to do this work and you want to testify, just go ahead, bite the bullet and do it.
Robert Nordlander:
You know what, you will cause yourself less headaches by having a CPA. And the good news is this, and Leah, you probably know this, people don't even know what CPAs do. They just think you're smart in all finance and all tax areas. It's not true. But the assumption is, "Oh, he's a CPA, he must be an expert in everything." Not really.
Leah Wietholter:
Here's what I tell people, it just makes people feel better.
Robert Nordlander:
It just does. It just makes people feel better.
Leah Wietholter:
It just makes people feel better.
Robert Nordlander:
Exactly. Exactly.
Leah Wietholter:
Yeah. Okay, so you've kind of answered this already, but I'll just ask you more specifically. So, forensic accounting is a niche in itself, but I'm sure you've experienced this too. Once you get into this niche, oh, my goodness, there's still all these other things that you could actually specialize in further. You mentioned criminal tax, but what are some of those areas that you are focusing on and specializing in?
Robert Nordlander:
Well, one of the first things that I was looking into is what are people buying, the attorneys? Do I need to go into the valuation things because it's forensic accounting and valuation of businesses? Is it worth the cost to get their credential, to get their revenue? Do I want to do divorces? Do I want to do trust? Do I want to do bankruptcy? There's so many different areas out there, criminal tax or just criminal in general, white-collar crimes.
So, when I was kind of meandering my way, trying to figure out my space in this niche, I decided to go just with the forensic accounting, and I do a little bit of divorce work. That's not my niche. I do quite a bit of bankruptcy, and it's not because I thoroughly just wanted to do bankruptcy, but once I got into it, to me, it was more fun. There are some drawbacks with it because you don't get paid up front.
With criminal defense work, you get paid up front. In bankruptcy, you get paid later, if there's money available, but you get priority. But the point is, is that once I got into the bankruptcy space, there's such a need for it that I was like the only game in town almost. So, once you do one work for one good attorney, it's a small click. And in bankruptcy, it's professional. No one's yelling, screaming. You can't handle the truth type stuff.
There's a federal judge involved, so it's pretty serious. Typically, there's money involved to deal with that. And then, when you're in bankruptcy court, there's probably five or six attorneys at any given time in bankruptcy court. So, once you do a good job, you're really doing a pretty good job for all six. And then, you get hired by somebody else who's also in that courtroom who never knew you, but saw your work and were referred, and it just grows from there.
So, most of my work now comes from bankruptcy, believe it or not, just because people like me in that area. I am getting more criminal work and it's probably because COVID has kind of gone out and then criminal investigations have started and now more stuff is coming through the pipeline. I do get more of that these days. But I don't do hardly any divorce work. I don't look for it. I don't reject it.
But then, again, it's one of those things where I do it, but it's not as much fun as the criminal side of things and bankruptcy side of things.
Leah Wietholter:
Yeah. So, you mentioned how you get paid on these different cases. How did you decide how to charge your clients? So, kind of answer those questions about do you do fixed fee or by the hour. How did you decide on your hourly rates? How do you structure that? How do you take retainers and apply retainers? Kind of covered the gamut of that course.
Robert Nordlander:
Great question because I had the same problem. What does my engagement letter look like? What do I need to put in there? Who should I charge? How much stern should I be if someone says, "Oh, that's too much of a rate or that's too high," that type of stuff? Great question. What I ended up doing is like, I'm not in the accounts receivable business, so anytime I do work, I'm going to get prepaid.
And I just kind of got a general idea. I went to the bankruptcy court actually, and the rates are a public record. So, I went to the bankruptcy court to figure out what they were paying, and it's like, oh, they're paying someone $250, $300 an hour. Sounds good to me. I'm now $250, $300 an hour. That's how I ended up doing it. So, I just started $250 an hour, and that was three years ago. There was a demand for it, so I went to $300.
Demand for it, went to $350. So now, I'm at $350 an hour, no overhead, working out of my house. I don't have any employees, just myself and some of those people that I may hire on a case by case basis. But that's how I... now, I'm $350 an hour. Now, the courts, I do $300 an hour because I'm starting to bump up to that range to where it's not a problem. I don't want to be that issue like, "Oh, we don't know, we're not."
Three hundred an hour, that's fine. Three hundred, $350, so what? But for all my cases, now, it's $350 an hour and I get paid up front. Typically, how I sell this, Leah, is I will say, "Listen..." they come with a problem. I'll say, "Listen, I'll give you 10 hours' worth of work. And I want $3,500 up front," and they'll give me $3,500 up front. I do 10 hours. "Do you want to renew and do more, or not?" I do it in phases.
That's the bulk of my work. There are times or two where someone says, "I really don't know if I need to hire you, but I need you to talk to my client." "Okay, it's a thousand bucks." And they said fine. So, it's $1,000. Maybe would travel an hour, go talk to their client, come back. To me, it's a flat fee, no big deal, but it still comes out to be at $350 an hour anyways.
I wasn't going to nickel and dime over travel costs and all of the garbage for a one-hour conversation. So, for the most part, to answer your question, it's an hourly rate based upon a retainer.
Leah Wietholter:
Yeah. I like that idea and I think that's a really good way. I wish I had known that whenever I was first starting out. Now, I kind of do it a little differently. But starting out, trying to figure out, am I going to get paid, because there's nothing worse, in my opinion, than staying up all night to make a deadline for a client and then they don't pay you. And I've only not collected-
Robert Nordlander:
Oh, no, no, no, no, you need that business-
Leah Wietholter:
I've only not collected three times. And so, that's why I wanted to make sure we talked about this today because, and we're talking three bills out of thousands of bills. So, that's pretty good. I have a pretty high collection rate. But what I started doing was kind of looking at how many hours do I think I'm going to bill for this client in a month.
And then, I actually take that as a deposit, kind of like you take a deposit on a rental house or something if you have a rental. So, I take that deposit and I put it in a trust account, and then I bill them monthly. So, we bill the fifth of every month and we will send them a bill. And if they don't pay within 15, 20 days, we stop work. If they don't pay in 30 days, then we apply that retainer and we're done with their case, but they have to keep paying that bill.
So, that bill may be a couple thousand dollars. It may be-
Robert Nordlander:
You have a security deposit. That's what you have. You have a security deposit going on.
Leah Wietholter:
Yeah, we do. It's called an evergreen.
Robert Nordlander:
Okay, that's interesting.
Leah Wietholter:
So, if you're talking to an attorney and trying to set that up in your engagement letter, it's called an evergreen arrangement. So, that's how we handle that, and that has really helped. And then, as far as your rates, I would say I've been looking at this lately with some different people and I think $250 is that perfect point to start if you have experience.
If you don't have experience, you're going to start lower. But if you have experience working cases, maybe you haven't done it in the private sector, I really think that $225, $250 is perfect, especially if you have a CPA license. I think if you don't, you probably need to start out a little lower, maybe $175, $200. But I was in Oklahoma, that was kind of the rate range for starting out.
I'm in Utah now, and I've talked to people here and it's about the same. California, I've talked to people in California. So, that kind of seems to be the rate. It's my understanding-
Robert Nordlander:
It's funny-
Leah Wietholter:
... that New York is where it gets out of control-
Robert Nordlander:
I was going to say that in-
Leah Wietholter:
... where they're in the 600s.
Robert Nordlander:
Yeah, I'm just saying, listen, Leah, I had a conversation with someone that says, "Did you know that your billing rate is lower than my paralegal?" No, because they're out of D.C. Really? It's kind of embarrassing. I don't know if I want to go higher on my rate just because someone's hired me out of D.C. or New York. But yeah, there's some economic arbitrage when they start calling, "North Carolina? Oh, you're doing for $350? Oh, you're a deal."
Yeah, but I'm not going to sit there and say, "Where are you from?" We'll figure out your rate from where you're from is, to me, a border line on unethical practices. But yeah, I would agree with you 100%. And the good news-
Leah Wietholter:
That's an administrative headache for me.
Robert Nordlander:
It really is. And the good news is this, Leah, when you're dealing with attorneys, they're getting retainers anyways. They know very well not to do work without having money in a trust fund. So, they fully understand when you say, "Pay me up front retainer." It's not a "What? You're doing what?" There's never that question. It's like, "Oh, yeah, sure. No big deal."
Leah Wietholter:
Yeah, that's a great point.
Robert Nordlander:
Which is great. Yeah, so you're dealing with people who are used to working with retainers to begin with. And I've never had... I've only had one slight pushback where somebody want to do some business with me and I said, "Yeah, okay, I'll do a little bit lower rate just to get in the door because I want to do business with you." But it was not drastic.
But the good news is, Leah, that once you start getting up to $250, $300, $400, $400 to $450 is no big deal. Going from $150 to $200 may be a bigger deal, but going from $400 to $450 is not that big of a deal. So, once you start getting up in that ranges, when you start doing the inflation adjustment and start going up a little bit here and there, it's not a shock to people. They're willing to pay for it.
Leah Wietholter:
Yeah. And one thing that I want to make sure on these rates, I have a rate sheet. In addition to providing my CV, I'll also get asked for a rate sheet. So, we just have a nice... it's got our brand on it and it has our rate sheet, our credentials, and then I have a team. So, it lists everybody that's going to be touching the project.
So, anyway, that's something else that somebody might want to do whenever they're first getting started. Have that CV or resume and then also prepare rate sheet. That's one of the main things I get asked.
Robert Nordlander:
I put that in engagement letter. I put that in my engagement letter. "I am X dollars, I'm $350 an hour for the engagement. I'm $500 an hour if you want me to be on the witness stand. And if I have a financial analyst, it's $175 an hour." So, I just put that right in the engagement letter.
Leah Wietholter:
That's a good point. I do charge more to testify. I used to not do that. And then, people would drag me into depositions and it was just the most awful eight hours because we could have just talked about this and settled this without questioning my integrity and my professionalism. So, without this personal attack on a case that I have no dog in this fight, so I bumped my rate up and that has actually made it where I get asked to... that reduces the depositions that I have to give now because so much of our work is based on facts.
So, in my opinion, there's no reason to just go and start duking it out. Now, when it's more based on opinion, when you get more in that valuation stage, I understand. But when it's fact-based, come on, you know these checks. You know your client wrote these checks. Why are you going to come in here and just question if I know what I'm doing? Yeah. So, I saw that being really helpful.
Robert Nordlander:
Another thing too about forensic accounting is the ability, and we've had this conversation beforehand, Leah, is getting the bank documents and bank data into some type of spreadsheet format. That is always a bottleneck. And for forensic accountants, just realize everybody's had the same problem.
It's just because your clients have messy records, don't have all the records, have PDF, and they'll write on the original bank statements and upload it to you, going, "Here it is." And it's scanned properly and you got to reconcile things, and it's just a constant bottleneck. So, those out there who think they want to be forensic counsel, or just realize it's just part of the headaches of better forensic accountant is dealing with that type of stuff.
Leah Wietholter:
That's a great point because I used to, in the early days, I'm starting on year 14 here, but in the early days, I would really stress about, "Oh, my gosh, I have to digitize all this data and so forth." But I don't think you can do your job without doing it. Obviously, I wrote a whole book about it. You have to have the data in order to work these investigations.
And so, it's just part of the cost of this engagement. And it's unfortunate that it seems so simple, but it's the basis and the foundation of our work. And so, we have to do it. We have to do it right, we have to do it completely, and it's part of the cost of this type of service.
Robert Nordlander:
It really is. And software is out there. You can get the bare basic Toyota Camry or you can go to the Rolls Royce like anything else. There's a cost of doing business, and some clients can pay for it, some clients can't. It just depends on the type of client. But for the most part, I just pay a small license fee and just upload it and just spend some hours reconciling it, make sure it is the right payee and classifications and that type of thing.
It's got to be done. It's just part of doing business.
Leah Wietholter:
Okay. So, as part of this series this year, I have asked our guests and also myself to provide different resources for people who are wanting to get into the business of forensic accounting or maybe take their business to the next level. So, can you tell us a little bit about the download that you're going to make available to our listeners?
Robert Nordlander:
One of the big sticking points is what should my engagement letter look like? What should it say and not say? What terms should I put in there? So, I craft an engagement letter. It's like four pages long. How do I recommend... you get your own attorney to look at it. But some of the sticking points is my hourly rate, what I bill for, what I'm not billing for, what the scope of services should look like, whether or not this is a Kovel letter with some type of attorney-client privilege into it.
What happens if there's a dispute? What happens if I have to travel? And what happens if you pay me $5,000, I did $5,000 worth of work and I got to do more, but you don't want to pay? Do I put the pen down? And the answer is I can go above the $5,000 if I want to. It's at my discretion. But if I feel like I'm not going to get paid, I can put the pen down and don't do any more work, and it lays it all out.
So, there's about four pages of this stuff. It's based upon my experience. Some people say, "Do you bill by the hour?" I do, but technically, I bill by the 10th of the hour, every six minutes. But it's in there. I don't bill for photocopying. But if you want me to photocopy a gazillion pages, we're going to talk. But it's all in there. And I'll make that available as a template that someone can use and look at. But by all means, have their own attorney look at it.
Leah Wietholter:
Yes, for sure. That would be great. I know that was one of the first things that I had to have put together for my business. And so, I think that would be really helpful for our listeners. So, all right, last thing, Robert, if our listeners would like to get in touch with you, what's the best way for them to do so or connect with you?
Robert Nordlander:
Well, I have a few things. Number one, I have a podcast called the Fraud Fighter Podcast that they can listen to if they want to do that, of course. And we talk about forensic accounting. And there's also my website, nordlandercpa.com. If they want to get in touch with me, they can. I have a couple books out there, one's on unpaid payroll taxes, which talks about small businesses and how they get themselves in trouble and how they get out of it.
There's a book on criminal tax if you're interested in criminal tax type of activities. They're all on Amazon. I also have some continued education courses out there. If you just Google Nordlander, CPA Crossings is one of them. And there's like 12 courses that I have that I go over money laundering and forensic accounting and tax and how to solve different problems, that type of thing. So, I'm out there.
Leah Wietholter:
That's great.
Robert Nordlander:
Feel free to do so.
Leah Wietholter:
Yeah, you stay busy. You stay busy, that's for sure.
Robert Nordlander:
I enjoy the continuing education side of things. I really do enjoy it. It's more passive income, but once you create the content, it's good. But the good news is that once you create the content, you put it on your CV. You become an expert in the judge's eyes because you now are creating good content and people can listen to it. Just add another feather to the cap, just like your credentials.
Leah Wietholter:
Yeah. Yeah, totally agree. All right, we'll make sure to link to those things in the show notes as well as to the landing page where people can download that sample engagement letter. Thank you, Robert, so much for joining me today, and I look forward to talking to you again soon.
Robert Nordlander:
Well, thank you very much, Leah. It's always a pleasure talking to you.
Leah Wietholter:
Thank you for listening to this episode of The Data Sleuth Podcast. The resources discussed in today's episode are available @datasleuthpodcast.com. Also available in the show notes. If you have any questions you would like answered in the Q&A episode of this season, make sure to send them to podcast@workmanforensics.com or the Workman Forensics YouTube page or the Workman Forensics LinkedIn page.
The Data Sleuth Podcast is a production of Workman Forensics. Thank you for listening.