As technology continues to deliver new efficiencies to the accounting profession, the nature of the work is changing.
Although the volume of compliance work is not going anywhere and increases, clients are less inclined to pay premium fees for legal compliance work yet more open to paying for value-added advice.
This means that the most successful firm model involves delivering tax and compliance work efficiently while keeping plenty of time and mental bandwidth in reserve to provide high-profit advisory services.
This article will explore how to increase advisory revenue, why firms sometimes get stuck when attempting to shift to a more excellent mix of advisory work, and overcome the common blockers to making this shift.
Why Offer Advisory Services?
If you’re reading this article, chances are you’re already interested in doing more advisory work, and you don’t need further convincing.
Nevertheless, it’s worthwhile reviewing the positive outcomes that advisory and consulting services can deliver to your clients, your staff and your firm:
1. It’s about helping your clients
The reality is that many business owners are struggling. They no longer just want to know their numbers. They want to know what their numbers mean.
Here’s a shocking statistic to illustrate: according to Xero Small Business Insights, just over 50% of Australian small businesses are cash flow positive. Nearly half are cash flow negative! (We expect these figures are typical of the North American market too).
This statistic alone highlights the need for services such as budgeting, cash flow forecasting and business development.
2. Clients will happily pay for value
While compliance work isn’t going anywhere, clients typically won’t pay a premium to merely complete their tax returns and lodge their taxes on time.
However, what clients will pay for is tangible value. For example:
- Structuring advice that saves tens of thousands of dollars in tax every year.
- Business acquisition advice that reduces risks and minimises future tax liabilities.
- Software setup that streamlines workflow and saves wage costs.
Offering services such as these to your clients is like “selling money at a discount”. What client wouldn’t pay 20c to get $1 worth of value?
3. Advisory work commands high fees and high hourly rates
Whereas the pricing of standardised compliance work is easily comparable between accounting firms, advisory services are about value, not price.
A brilliant structure that saves a client $50,000 per year in tax may well command fees of $20,000, even if it only takes you 5 hours to implement. (Even the best tax return preparation will never come close to this hourly rate!)
4. Advisory work is exciting and challenging
Accounting principals and staff members alike want to pursue interesting, challenging and meaningful work.
By doing more of this type of work, you’re more likely to enjoy a pleasant work-life balance and keep your staff engaged. You’ll also be able to afford to pay your team more because of the extra value they’re able to deliver.
Common Barriers To Doing More Advisory Work (And How To Solve Them)
There are a few common barriers to shifting to a more excellent mix of advisory work. You may find that some (or all) of them apply to you:
Reason #1: You’re too busy delivering essential compliance work to offer more advisory services.
The ideal model for most firms is to offer a mix of essential compliance services, plus additional high-fee advisory and consulting work.
But the reality is that many firms are so snowed under compliance work that they cannot deliver the added-value stuff. Their workload looks like this:
Before they can offer more brains work, they first have to re-balance their firm capacity.
One immediate fix is to add an offshore team to handle the lower-complexity work, freeing up space for your onshore people to do the top-end stuff, as depicted here:
Reason #2: You’re not spending enough face-time with clients
Another blocker to more advisory work (related to the previous issue) is that you’re not spending enough face-time with clients.
It’s all too easy to become stuck behind a computer rather than talking on the phone or meeting with clients in person.
Deep, value-based conversations can only take place in real-time. Email doesn’t cut it. So an important leading indicator of revenue is face time with clients.
Reason #3: Clients don’t perceive you as an “advisor.”
Still related to the first two issues: when you don’t spend enough face time with clients, they’re likely to underestimate your value as a trusted business advisor. They may not even be aware of what you can offer them.
Clients who aren’t aware of your value can’t buy. And they’re also unlikely to pick up the phone to seek your advice when they have an essential business decision to make.
The result is fewer revenue opportunities.
Reason #4: You already offer advisory work, but you haven’t been packaging or selling it optimally.
It may be that you can offer advisory services, but you do not see the sales traction you desire. Many great thought leaders have also done a lot of work on “pitch” advisory services.
Two recommended resources are The Consulting Bible by Alan Weiss and Ron Baker’s Implementing Value Pricing: A Radical Business Model For Professional Firms.
Although these are brilliant resources, sometimes the problem isn’t a knowledge or skills gap. Returning to our first point: it’s the fact that you’re stuck behind your computer instead of out and talking with clients about their challenges, issues and opportunities.
New revenue ideas for accounting firms in 2019
Rising business costs, AI, complex data systems and other firms are offering competitive pricing… How are you going to protect, even better, increase your accounting firm’s revenue in 2019? Let us share our ideas…
As the cost of doing business rises and AI and increasingly complex data systems remove much of the manual work associated with filing taxes, accountants find their profits dwindling.
Many firms consider lower prices as a means of staying competitive, eroding their margins and creating strain on internal systems.
But it’s not all doom and gloom – depending on how you view the future.
As old tasks are automated, accountants are free to pursue other areas of practice.
Now’s the time to look at new revenue streams for your practice in 2021 and see how you can continue to remain competitive and offer a superior service.
The basics to increasing your business sales:
According to Floatapp, as a business trying to increase revenue, you would typically consider the following options:
- Increase the number of clients on your books.
- Increase the average transaction value per client.
- Increase the frequency of transactions for each average client.
But to attract these new clients or to grow revenue from each client, you’ll need to take a careful look at your offerings.
Mine your existing clients for opportunities
In every industry, the most significant sales potential is your existing client base. Your clients know and trust you, so why not take the time to see if they could utilise more of your services?
Spend an afternoon going through your client list. Decide on approaches to transition them to larger packages or additional services. You could also consider surveying your current clients about their needs or creating a referral campaign to encourage them to bring in more business.
You are offering time and cost-saving products to your clients—for instance, an audit shield package or an ACC review. Upselling additional packages will increase your revenue per clients.
Most small businesses don’t plan their growth, forecast their cash flow needs or even understand the reports their accountants send them. By providing advisory services that help your existing clients understand their financials better, you’re able to increase your revenue without letting go of your core business. These services utilise the business insights you obtain by managing a client’s accounts and enabling you to increase your revenue per client while building a solid relationship that will decrease churn.
- Offer a free business check-up. This is an opportunity to ask your clients a series of questions, then review their goals and cash flow. You provide conclusions based on the data and recommend additional services (such as business advice or coaching). It’s an excellent lead generation tool that can often lead to new business.
- Revamp your pricing. Stop pricing by the hour and using an ad-hoc method for additional services. Many firms now choose to bundle packages and get everyone on a monthly plan – this smooths out cash flow and introduces value-based pricing.
- Prune out the deadwood. Focus on marketing and delivering your services to the clients you want – the ones willing to pay more for your expertise (The Fundbox blog has an excellent article on sourcing value clients). Get rid of the ones that aren’t a good fit for your firm and that cause more trouble than they’re worth.
- Free up your time. To increase revenue with value-add services like the kind we’ve described here, you will need to free up time, so your team can deliver.
One of the most innovative ways to do this is to outsource your compliance work to Connect.
With over 800 fully trained accountants ready to take on your work, we’ll help reduce your margins for compliance and free up your in-house team for the more specialised (and interesting) advisory work.
Cutting costs where possible to increase revenue
Operating a lean business will enable you to collect a more significant share of the revenue for every dollar of profit. Look at ways your firm may be able to reduce costs. You could consider:
- Outsourcing compliance. As discussed above, outsourcing through Connect can be an excellent way to keep more of the money you make while enabling your accountants to focus on more exciting work. One of Connect’s client’s states that, “using Connect, we have replaced a $160,000 wage cost with a $100,000 compliance cost, and we’ve increased our production significantly.”
- I was working remotely. Renting office space and outfitting your team can be one of the most significant overheads in your business. Many accounting firms are moving to a remote-working model, where the teamwork from home or a chosen location and connect via conference calls or in co-working spaces when required. This gives staff flexibility and work-life balance, as well as lowering overheads.
- They are revamping sales processes. Many firms waste too much time and money on the sales process. Take a look at your sales funnel and leads and see where you could make changes to decrease the amount of time until a deal, improve onboarding, and decrease churn.
Making changes to your accounting practice can be scary, but it’s the only way you’ll be able to grow revenue in 2019. Instead of being afraid of machine learning and AI in your business, embrace them and demonstrate the value humans bring to the business table. Build a firm’s vision for the next 5-10 years and make that vision a reality. Whether your practice needs
Four strategies to help your accounting clients grow their business
Playing a pivotal role in their clients’ professional lives allows accounting firms to move away from simply crunching numbers and transition to a business advisory role.
Growing every client’s business is the ultimate goal for modern accounting practitioners and their firms. Here are four ways to help you do it.
Accountants are the first port of call when a business wants to pivot, grow, downsize or sell, reinforcing the profession’s collective value as a constant source of advice and support.
It’s an exciting prospect for accountants. Playing such a pivotal role in their clients’ professional lives allows firms to move away from simply crunching numbers and transition to a business advisory role.
This change has in part been driven by the gradual rise in cloud-based accounting platforms, which have allowed the broader industry to focus on a more collaborative relationship with clients. However, the increasing focus on helping clients grow their businesses has undeniably added pressure on accounting firms.
Clients expect accountants to be proactive about their needs, promptly reply to enquiries and often cry out for more value-adding services. As such, accountants are required to wear many hats.
According to new research, the broader accounting sector in Australia has experienced modest revenue growth on the back of improved technology and value-adding services.
The sector achieved revenues of A$20 billion per year and annual growth of 1.5 per cent between 2013 and 2018, IBISWorld research found. The development is mainly due to favourable business confidence and increasing demand for industry-specific advisory services, such as audit, the study notes.
Clients have also looked to accounting firms for advice on cutting costs and becoming more efficient in an increasingly competitive business environment.
Meanwhile, the industry has value-added further by incorporating new technology, such as data analytics and, of course, cloud-based accounting. Several Australian accounting firms have been implementing digital tools and processes to help clients forecast what the future might bring, which can help them bolster profits.
An example is predictive accounting, which allows accountants to better engage with clients by using their database, software and analytical tools to unlock new opportunities for a client’s business.
Wolters Kluwer started offering predictive accounting a couple of years ago. The introduction of the technology into the firm meant it could help accountants accelerate lead generation and exponentially improve efficiency.
Here are some other ways accounting firms are helping clients accelerate business growth.
1. Become an adviser
Clients no longer want their accountant just to crunch numbers. They’re seeking someone they can trust to move into an advisory role and help drive growth in their business.
“Historically, accountants have worked with their clients by looking in the rear-view mirror at what occurred within their business over the previous reporting period, but that’s all changed now,” says Wolters Kluwer regional director Daniel Wyner.
Advising clients gives accountants new opportunities to entice clients through the front door, he adds.
“When you go to your accountant, unfortunately, it can sometimes be like going to a dentist, but it shouldn’t be that painful. You don’t necessarily have to get clients to step outside their comfort zone in a bid to grow their business.”
Sharing technical knowledge with clients doesn’t need to always be in the context of a transactional relationship. Instead, also look for ways to educate, inspire and motivate them within their businesses, Wyner says.
Nonetheless, he notes: “Accountants have been fed a healthy diet of major tax overhauls over the last two decades. For example, when the GST came in, accountants had so much extra work presented to them.”
He says the federal budget presents an enormous opportunity for accountants to run events to better educate clients on how regulatory change can impact ways to grow their business.
Explaining areas such as changes to self-managed super funds (SMSFs) and co-contributions is a great way to share your expertise.
Accounting firms don’t need an overly sophisticated emailing solution to implement these offers, Wyner says. Instead, you just need an ability to read and understand your client base and reach out to them and invite them in so you can help them. Being proactive in this respect doesn’t need to consume additional resources within the firm.
Wyner has the digital tools to generate a report highlighting clients who are, for example, income earners within a certain tax bracket. He can print out messages with each client’s email address and create an offer specifically tailored to their individual needs.
“Digital tools can help accountants proactively touch base with a core group of clients and look for specific opportunities to help grow their business,” he says.
2. Run workshops
Getting the structures in place within your practice to run workshops and seminars enables you to become your own “keynote speaker”. This also is an excellent value-add for clients.
Melbourne-based Brent Szalay FCPA, managing director of business, tax and wealth advisory service SEIVA, has positioned the firm as a strategic partner to its clients.
“We invite clients to attend workshops, which gets them out of their environment to analyse why they’re running their business and get back to their core goals,” Szalay says.
The workshops guide business owners through a series of crystal ball-gazing questions to look at where they would like to be in five or ten years.
Szalay is the first to admit the workshops aren’t rocket science, yet says this is often a new process for clients stuck on the day-to-day treadmill of running their business.
“We want to get clients thinking about the future, utilising SWOT [strengths, weaknesses, opportunities, and threats] analysis and working with key stakeholders in the business to think about the strengths and opportunities that lie within the business that we can help them with,” he says.
The one- or two-day workshops include analysing whether the client can facilitate growth.
“We get our clients thinking about what they would do if they had 30 new enquiries tomorrow, to see if they could handle that level of opportunity,” Szalay explains.
“Sometimes businesses think they’re ready for growth, but the truth is they don’t have the processes in place to facilitate it.”
The workshops frequently uncover business owners wearing too many hats in their operations. “As a result, we often look for ways to free up capacity and delegate so they can focus on growing their business, rather than running it.”
The hardest part is always implementation, so Szalay meets monthly or quarterly with clients to follow up and keep them on track.
“As an accountant, you’ve got to be curious and listen to help build the wealth of your clients,” he maintains.
3. Help clients spot market trends
Assisting clients to identify market trends is another great way to help grow their business. This could, for example, include looking at broader economic and consumer trends within their specific industry sector.
A range of research reports and market analysis tools are available to accountants that can help them spot key trends for clients.
Which one you use will depend on whether you intend to uncover information about geographically similar services, look at new pricing structures, or help them identify a potential new market niche.
Co-owner and director of Hobart-based firm 4 Business & Community, Joss Fenton CPA, has helped various clients identify how to transition to a more ethical and sustainable business model.
Fenton describes himself as a “registered tax agent and business nerd” offering sustainable business and accounting solutions. His advice can include clients tracking where products come from and looking at staffing and labour elements to ensure they’re running a sustainable and impactful business.
Professional Development: Your sustainable firm. Whether you’re a sole practitioner or a partner in amore prominentr firm, the principles and learnings from this course should help you formulate manageable strategies to develop your sustainable and growing firm.
4. Get technical
As mentioned, adopting technology and digital tools can increase your ability to evolve and grow a client’s business.
Offering to build data-driven business reports that give accurate insights into the most profitable areas of any business can go a long way, says Fortuna Advisory Group founder and managing director Dinesh Aggarwal FCPA.
“We can build very analytical reports that give our clients insights into deeper issues that could drive growth, which is highly valued,” he says.
“There are plenty of business intelligence data, and forecasting and analytical tools on the market that can enable an accounting firm to become more technology-oriented and, in turn, help grow clients’ businesses,” he says.
Take the time to consider the type of business advice you want to specialise in before deciding on which tools or apps would best complement your services, Aggarwal advises.
“There are lots of digital resources out there to help you transition toward a more technical firm and step into an adviser role. It’s an exciting time for accounting firms,” he says.