Gulf Coast FCU: An Urgent Need for Credit Union-Centric Accountants

Introduction

In this case study, we’ll discuss the journey of a full-service accounting relationship, including:

• The catalyst for outsourcing
• Unexpected benefits
• The importance of communication
• Letting go of fear and trusting professionals
• Succession planning

Before LeNoir entertained the idea of outsourcing his accounting function, he had a traditional setup consisting of an in-house, non-CPA accountant, capable of handling the day-to-day routine and monthly reporting as well as a group who managed individual pieces of the accounting function (like general ledger, accounts payable, income statement, and profitability.) After Gulf Coast lost their primary accountant to another company in late 2019, they hired a replacement, who was unfortunately not nearly as capable. This all-too-common situation created a huge disruption in the credit union’s function and created a frustrating knowledge gap, and it became evident to LeNoir that he needed a different solution this time around. He started looking immediately.

A Single Source Solution

LeNoir went to his league first for suggestions, The League of Southeastern Credit Unions, headquartered in Tallahassee, Florida. He had worked for them for seven years and knew they were a great resource for tough situations and questions. Fed up with the run-around, Gulf Coast desired an alternative to hiring that would make their accounting function more economical, improve centralization of the team, and improve accountability.  LeNoir explains: “When I asked the League, they said, ‘Well, we do know of some outsourced accounting firms.’ I called a dozen different ones and told them what I needed: a full-service accounting firm that can take care of everything from soup to nuts. I always got the same response: ‘Well, send us the reports you want us to prepare, and we’ll see what we can do for you.’”

LeNoir was “wholly unsatisfied” with the lack of a robust, turnkey solution. It seemed his only option was an ad-hoc combination of separate bookkeeping services and CPA services. “Our credit union needed a single source for our accounting function, one that understood credit union specific accounting, and one that was not going to rely on our own personnel to augment what those accounting firms did.” LeNoir was relieved after meeting with Diane Parham, CFO of Aux and head of the CUSO’s outsourced accounting services, learning that her team could offer a full, credit union-centric solution, one that works as an extension of his own team. “There was no other singular solution company that offers anything like that,” says LeNoir.

Small Credit Union Staffing Woes

Gulf Coast’s challenges with hiring and retaining staff was not due to lack of trying, that’s for certain.  They too were victim to the massive staffing challenges that existed pre-pandemic and are even worse now. After their accountant left, LeNoir said “we cast our hooks far and wide to try and land someone. We advertised, went through a recruiter, looked online… and we found very capable bookkeepers competent at the mechanics of accounting. However, they didn’t have gravitas that an accountant brings in, and the hands-on experience of credit union accounting, which is often unexpectedly complex.” And when it comes to training a new accountant, the amount of time and expertise it takes, especially in a skilled field like credit union accounting, is deeply burdensome to a smaller credit union like Gulf Coast. They don’t have the luxury of cross-training and a team who is capable of training a replacement. Once the accountant leaves, the knowledge goes right with them.

What’s worse, small credit union staff poaching is a real problem. “We end up as a training ground for people to work at other financial institutions that are able to compensate them better than we can,” laments LeNoir. One can see how appealing outsourced services become after years of running in staffing circles. LeNoir was sold by the cost-benefit alone: for the cost of just FTE accountant, the credit union could have an entire team, from clerks to CFOs!

The Power of the Credit Union Mission

LeNoir, like many of our clients, is a credit union-lifer. He entered the industry in 1981 and never looked back. He lives the credit union mission, and it was important that he find an accounting partner that felt that same way he did – but was losing hope. “That’s what’s missing when you call an outside accounting firm: they don’t know what we do,” sighs LeNoir. “They don’t understand our mission, our philosophy. We’re just a small micro bank. And I say, ‘No, you need to spend some time with us. You need to feel the emotionality that’s involved with our members when they walk in and say, ‘I feel so good to be here. I trust everybody here. Everybody always works to help me here.’”

LeNoir’s impassioned words might strike a nerve with our readers. Aux has heard countless times the frustration our compliance and accounting clients have with vendors who treat them as banks. We feel that our focus on the credit union philosophy is what makes us so unique. “There’s an old axiom that says the one thing your competition can’t take away from you is the relationship you have with your member. People walk in the door of a small credit union and say, ‘I’d like to speak to the manager,’ and oftentimes the CEO will walk out and sit down with them in a chair and say, ‘Mr. Jackson, what can I do for you?’ You’re my boss.”’

“I didn’t feel like I was doing anything of value in my job back then,” says Parham. “And the truth is, the further you get away from that relationship with the members, the harder it is to remember how crucial what you’re doing is for those folks. But when I first came to Aux in 2018, Gulf Coast FCU was one of the first clients I spoke with. It was like chicken soup for the soul to just hear about people who cared about their members, and that I could actually help you help them!”

And thus, a partnership linked in mutual appreciation and respect for the credit union principles was formed.

It’s Like a Marriage

We often equate our outsourced accounting services to a marriage. “I’ve got to turn everything over and say, ‘Look, I have no secrets.’ Then I need to trust Aux to have a peek and say, ‘We’re familiar with your situation, and we can deal with that.” There is no such thing as overcommunication when it comes to the accounting relationship. It takes time to learn the intricacies, workflows, and personality of a brand-new credit union client, just like a significant other. LeNoir gently refers to the process as “manicuring the relationship.” “It’s just the nature of a professional relationship. It’s the same with a physician or attorney,” says LeNoir matter-of-factly.

CFO Parham agrees: “One of the hardest things for me to learn, being a third-party CFO, is learning your credit union. It takes a long time to learn how the credit union operates and what’s in the best interest of your members, not what we think is in the best interest. Every credit union has a different risk profile.” The unique services they provide place Aux in a fascinating position. With over 30 clients, ranging from $10M to $1.1B in assets, what other organization has intimate experience of so many credit unions’ full accounting function? And no two credit union clients are alike.

Mistakes do happen, just like in a marriage. “We’re going to mess up,” admits Parham. “We employ humans and humans are going to make mistakes. As long as we can come back and say we messed up – and here’s how we are going to fix it, that’s alright. At the end of the day, all you want from the people you’re working with is that they’re accountable. And we try really hard.” LeNoir pipes in, “But Aux is really good in admitting that they have made a mistake and committing themselves to correcting it.” Now, doesn’t that sound like something you’d like to hear from your spouse!

Outsourcing doesn’t Mean Losing Control

While the burdens of staffing costs, training, documentation, and workflow disruption weigh heavy on the shoulders of credit unions, one would wonder why there would be any hesitancy in choosing to outsource. What seems like an obvious solution has many layers of psychology to it. LeNoir explained where the hesitancy to outsource accounting stems from: “There’s a need to feel that credit union decision makers are still retaining control. They are highly protective of their operation, and most credit union managers feel that they own the credit union. Because we’re accountable for everything that takes place, relinquishing some modicum of control over something as crucial as financials makes executives nervous.”  It’s easy to see that these fears boil down to trust. “How difficult is it to establish and maintain a high-quality trust relationship with anyone? Who do you currently trust? Your attorney firm, your League reps, your core processor? What will it take for you to be willing to trust a firm with your accounting processes?”

The benefits of outsourcing to Aux certainly outweigh the fears for Gulf Coast.

Succession Planning

After 40 years of credit union service, LeNoir plans to retire in 2022. And as a looming wave of smaller credit union CEO retirements grow nearer, what role does Aux’s accounting services play in LeNoir’s succession planning? To hear another customer story about a small credit union C-level retirement turned upside-down, check out Siskiyou FCU’s story here.

LeNoir outlines his plan. “In any organization – especially small credit unions – there are partners and there are critical business partners, those who are fundamentally necessary for us to carry on business: our core processor, our telecom company, the League and Trade Association, CUNA, and our accounting firm. Let’s say that Gulf Coast FCU chooses to go another direction and does a little comparison shopping to see if we can find a better outsourced accounting solution. And we need to ask ourselves: How happy are we? Has Aux provided a beneficial service? One that is cost-conscious?

When I transition my successor, I’m going to insist to the Board that we continue our relationship with Aux because without them, we would not have reached $51M in assets. We would not enjoy the profitability that we are currently enjoying. I’ve been able to manage the finances of this credit union and keep the regulators, auditors and my Board happy.

Given the options that are out there, I don’t think my successor is going to be able to discover or develop an option that is more cost effective, responsive, accurate, interactive, and more dependable than Aux’s,” concludes LeNoir. Aux hopes that they can help other credit unions transition when their executives retire as well, taking some of the stress off their board and management team.