Ever since automation and artificial intelligence (AI) began helping us take care of various parts of our roles, the wisdom of a shift from a compliance focus to an advisory one in the world of accounting has been up for debate.
Some have asserted the only way forward for accounting businesses is to offer more strategic advice. The future, some say, is beyond compliance and in a dynamic and more lucrative field of business advisory.
Those resistant to the move believe accountants will always hold great value in their specific areas of specialisation. This is particularly true, they say, in the current environment in which the market is struggling to find enough accountants to cope with the current workload.
The reality is somewhere in the middle.
“Accountants are ideally placed to take on that virtual CFO role for SMEs, offering bookkeeping and payroll services, insight into cash flow forecasting, budgeting, what-if analysis, strategic structuring, tax planning and KPI tracking,” says Jamie Johns FIPA FFA, CEO and founder of Sky Accountants and CEO and co-founder of Wize Mentoring.
However, it’s when inexperienced accountants swerve into the CEO’s lane that accidents can happen, Johns says.
“Stick to your knitting,” he says. “Stay in your lane. An accountant’s role is more that of a CFO than a CEO. Our role is not that of the CEO, which involves numerous responsibilities. For that, we should refer our clients to other experts or make sure we are adequately trained and qualified to be their business coach. The first criterion is to make sure your own firm is in order.”
Are you already advising for free?
Duncan Walker FFA FIPA, IFA Scotland Regional Ambassador, has developed an online programme – available for subscription in Australia and the UK – designed to help boost accounting practice revenue through strategic advisory work.
It’s called Six Steps to SuXcess, and it takes accountants and their clients through a six-step journey to reveal where changes need to be made.
Those steps are:
- Where are you now and where do you want to be?
- Product, processes and people
- Sales and marketing
- Finance
- Technology
- Setting strategy
At the end of this process, Walker says, the accountant and their client will have a clear picture of the next steps required to move the business in the direction it needs to go. This may involve the accountant managing those next steps, or it may involve them recommending the client on to other specialists.
Either way, Walker says, it will put an end to the likely current process in which accountants provide free advice as an almost automatic expectation of their clients.
Accountants should not stop doing compliance work, Walker says, but to retain current clients and attract new ones, they should be clear about their advisory offering, as well.
“Ask any accountant dealing with SMEs and they’ll tell you that they get phoned, emailed, texted etc., with various questions 24/7,” he says. “A typical client thinks they’re your only client, and that you should answer their questions because they pay you. The questions can range from employment law to how they get finance from the bank.
“Most accountants in small practice give all that advice for free, because that’s what they have always done. But going forward, you have to distinguish between preparing accounts and doing returns – the compliance side – and the advisory services. If you formalise this, you can monetise it going forward, without any nasty surprises for clients.”
The case against advisory
We’ve long heard the arguments for an advisory focus, but not everybody is convinced. Business transaction advisor Kev Ryan, from accounting firm transaction advisory KevRyan, says, “If I was buying a firm and had to choose between one with strong advisory revenue and one with a pure compliance base, I’d take the compliance firm every time.”
Why? It’s all about predictability and saleability, he says.
“Advisory work can be risky in various ways. It’s also harder to quantify, and often depends on the relationship with one individual,” he says. “It’s harder to scale, harder to value and easier to lose.”
Also, Ryan wonders if many accounting firms are properly and fully qualified to offer and deliver advisory services. If you’re running a small accounting business, he says, you are clearly very good at certain things, but are you a business growth expert?
Advisory also opens up accounting businesses to new levels of legal and reputational risk, Johns says, particularly in areas like payroll and forecasting.
“If you are offering bookkeeping or payroll services be careful,” Johns says. “There is risk around getting wages wrong, not paying people the right rate, etc. There are cases where accountants have been sued because they got this wrong. So these engagements need to manage this risk.”
There is also greater risk of disappointing and losing the client, Ryan says. If the client has just spent $10,000 on advisory services and the intended growth was not achieved, for example, possibly because the client did not follow the strategy, the blame will sometimes fall back on the advisor.
A cultural/mindset risk also arises when shifting from a compliance to an advisory focus.
“The shift to CFO advisory needs to be strategically planned,” Johns says. “Firstly, a firm owner needs to have their traditional compliance business ticking along nicely, because unless it has enough capacity or has problems, adding additional services will only leverage existing problems.”
“At Wize Mentoring, we coach and mentor firm owners to get off the tools and get back their time, so that they can be confident in adding additional advisory services successfully.”
“A typical client thinks they’re your only client, and that you should answer their questions because they pay you. […] Most accountants in small practice give all that advice for free, because that’s what they have always done.”
Duncan Walker FFA FIPA, IFA Scotland Regional Ambassador
Training and technology
For those who are keen on making the move to advisory, there is some preparation involved.
Johns identifies five essentials:
1) Get your own firm in order: Firm owners need to free up their time and walk their talk. “You shouldn’t be advising your clients what to do, unless you’re doing it yourself,” Johns says. This might mean tracking all your numbers or holding monthly board meetings, etc.
2) Team design and capacity planning: It’s vital to conduct a capacity planning exercise to find out who needs to be brought on board and when.
3) Develop a sales playbook: Make sure you know how to sell the advisory services by developing packages, such as ‘bronze’, ‘silver’ and ‘gold’. This way you can scope the jobs correctly and make sure they are profitable.
4) Technology: Specific tools will be necessary, cloud based accounting will be essential and tools like Xero Accounting, Dext and the WizeHub Business intelligence dashboard are critical.
5) Training: Key staff will need to be trained and developed over the longer term. Hiring correctly and knowing how to retain staff will be a top priority.
“Finally, at Wize Mentoring we are launching Wize Advisory Certification,” Johns says. “We are teaching traditional public accountants how to be business coaches using a proven blueprint and formula for those firm owners who are ready to take this step. This certification is available worldwide.”
More information on Six Steps to SuXcess in collaboration with IFA Scotland Regional Ambassador Duncan Walker here.
