H&R Block turns attention to small biz accounting services

James Dornbrook for Kansas City Business Journal writes: H&R Block formed a strategic partnership with accounting consultants BMRG Advisory Services and announced its intent to acquire or add franchisees in the small business accounting area.

The new strategic partnership involves Connecticut-based BMRG founder and CEO Jennifer Katrulya helping Kansas City-based H&R Block (NYSE: HRB) in its efforts to offer small business bookkeeping, payroll, tax and other similar services. It’s in the wheelhouse for BMRG, which consults with accounting firms to help them assemble the education, resources, tools and services to create modern accounting practices using best-in-breed technology. Once her clients graduate from the program, firms that meet certain criteria can consider selling themselves to H&R Block or becoming a franchisee of H&R Block.

“Jennifer is already helping these firms develop top-notch client accounting services practices that align with the type of practice we are creating at H&R Block,”Jeremy Smith, director of Block Small Business, said in a release. “Now we’re layering on the ability for many of these firms to consider an opportunity to sell to H&R Block if they’re ready to exit or to possibly become an H&R Block franchise, which we can then help them grow in a meaningful way.”

In essence, Smith said, the program offers a succession plan in a box, and there is nothing like it in the industry.

Working in H&R Block’s favor is that cloud-based technology is taking roots in the industry, making it easier for small business bookkeepers to offer affordable services nationwide. Also, according to theAmerican Institute of CPAs, a vast majority of CPAs are expected to hit the retirement age during the next seven or eight years, and succession planning is their top concern.

H&R Block is not new to the accounting industry. The company has always offered some kind of small business services. In a way, the recent announcement is a return to the company’s roots. Founder Henry Bloch ran a small business accounting, bookkeeping, payroll and tax service before coming up with the idea of adding individual tax services and forming H&R Block. It’s also fitting because many of the firm’s individual tax franchisees already do small business bookkeeping and similar services in the offseason.

H&R Block was in accounting on a large scale, acquiring RSM McGladrey in 1999, but the partnership wasn’t always smooth. The partnership spent most of 2009 in court, arguing about the administrative services agreement with auditing arm McGladrey Pullen and the noncompete clauses of the contracts. The firms eventually reconciled, but it all ended with H&R Block selling RSM McGladrey at the end of 2011.

The latest approach by H&R Block to enter the accounting business is a bit different. RSM McGladrey focused on middle-market firms and competed with some of the nation's largest accounting firms. The intent with the latest move into accounting is to stay focused on accounting firms serving small, privately held businesses. H&R Block also is allowing accounting firms to become independently run franchisees instead of joining a large subsidiary directly owned by H&R Block.