Moving into higher-value services, such as advisory and virtual CFO doesn’t happen overnight. It takes work, intention, and a sound business model. The problem is that most firm owners simply don’t know where to start.
The first step is getting into a modern mindset—one that moves your firm out of all-transactional-work-all-the-time mode (e.g., write-up, tax) and gets you thinking about higher-value advisory services. This is not to say that transactional work will ever go away completely. Rather, it’s about creating a balanced business model that is made up of transaction-based, outsourced, and advisory/CFO services to ensure a strong overall revenue stream throughout the year.
The next step is making that first move up the modern accounting and bookkeeping spectrum (more about this later). For some firms, this can mean jumping headfirst into advisory and virtual CFO services. For others, it means starting out slowly, like offering outsourced accounts payable services.
There’s a lot to think through as you build your modern accounting practice. Let’s explore what small business clients really want from their accounting and bookkeeping professionals, what firms can do to make the transition into higher-value services, and how to create balance in your business model.
Understand what business clients want: Fact vs. fiction
Bookkeeping and accounting services are in high demand—and will continue to be as the number of small businesses continues to tick up. So first and foremost, firms must decipher fact from fiction in terms of what clients want and the firm’s capability to deliver.
Fact 1: Small businesses want an accounting partner to offer holistic advice. Clients are looking for an advocate—a dedicated expert to provide data-driven insights that support informed business decisions year-round.
Dismiss the fictional notion that bookkeeping is a boring profession with no future in the profession or that AI bookkeeping bots are taking over this lucrative revenue stream.
Clients are looking for a business partner that can offer them holistic advice about their business and be someone that they can lean on for complex tasks (think PPP loans and other complex work).
Fact 2: Accounting and bookkeeping professionals are tech-savvy and solutions-focused. This requires you to stay current with new technologies and evolve your modern technology ecosystem over time to support streamlined, automated operations and service delivery. Know that this is indeed in your wheelhouse.
Dismiss the mindset that firms lack the ability to serve clients within a high-tech ecosystem.
Fact 3: Bookkeeping is a launch pad to higher-value advisory services. It provides the data required to offer clients deeper financial analysis and focused forecasting.
Dismiss the perspective that bookkeeping is just data entry.
Understand your place on the modern accounting spectrum
The modern accounting spectrum is vast—ranging from basic transactional services (think write-up) to collaborative, advisory and virtual CFO offerings. You must first understand the spectrum before you can ascend it.
Transactional
Many firms made their start at the base of the spectrum, offering compliance-based, technician-style services. And while transactional work still has its place, if that’s all you’re offering, it significantly narrows your ability to provide the deeper level of data analysis small business desire.
This type of work is generally restricted to general ledger, cash reconciliation, and financial statements. This is really accounting from the rearview mirror.
Business process outsourcing
This is the next level on the spectrum, following transactional work. This includes such outsourced services as AP/bill payment, AR/collection, and cash management and reconciliation. This takes firms one step closer to supporting clients with data-driven insights and is often the stepping stone into higher-value advisory work.
Virtual controllership
The next step up on the spectrum, virtual controllership, typically includes financial statements, comparative reporting, and budgeting work. This moves firms even closer to client data and positions them well for making the move into full-scale virtual CFO and advisory work.
Advisory/Virtual CFO
The highest level of the spectrum represents collaborative advisory/virtual CFO services. This is where many firms aspire to be. It’s where they’re able to serve as their clients’ year-round partner, helping them with big-vision financial strategy, financial modeling, and market analysis. During the pandemic, businesses were privy to the fact that they could turn to their accounting professionals for deeper levels of advice and support, and now they are demanding this level of service moving forward.
Advisory represents the modern state of the accounting and bookkeeping profession—with many firms having already entered the advisory market. In fact, of firms in 2021 that were already offering advisory services, 85% are expecting significant growth in 2022. And 69% of those firms plan to add more staff due to rapid growth (BILL, State of Bookkeeping Survey, 2021).
The big questions for firms are: Where are you on the spectrum? And if you’re not where you want to be, what do you need to do to move forward?
Start with AP for a smooth transition to advisory
For firms that are already handling the bookkeeping work for clients, it’s a much easier move into advisory services. With control of the data, you can advise clients on everything from AP and AR processes to cash flow forecasting, financial strategy, and buying decisions. If you just take the AP process as an example, most clients are doing a lot of work manually. You’re in a position to show them how technology can automate and streamline the process for great time and cost savings.
The standard AP process for most business looks something like this:
- Enter: Bills come in from all over the place and are manually entered in a non-uniform manner.
- Approval: This step is typically non-existent, or routing approvals is a manual and time-draining process.
- Payment: Payments are often entered into online banking and then re-entered into the accounting system. Double work!
- Reconciliation: The standard process is manual where clients reconcile their accounting system and bank accounts separately.
Firms often have to reverse engineer the data because it comes in messy or the client simply doesn’t understand how it all works. This is an opportunity to talk to clients about outsourcing this function.
The inefficiency of the AP process represents a huge opportunity for firms. In fact, it’s a $510B opportunity.
70% of businesses make B2B payments via check and spend on average $22 per transaction. By helping clients automate this process, you not only save the money and time, but also open the door to offering full-scale advisory services down the road.
By simply offering outsourced AP services, firms can quickly increase revenue 2-3 times over. It’s also an easy entry into higher-value advisory offerings.
Create balance in service offerings
When you create a balanced services model, you ensure ‘money in’ from multiple channels. For example, let’s look at the 75/20/5 model, where 75% of clients are write-ups at $300/month, 20% outsourcing at $1,500/month, and 5% advisory at $6,000/month. This provides a safeguard for firms when they lose clients in one service area or the other—while also supporting a multi-stream revenue model.
The above model represents over $82,000 in revenue per month!
Ask your clients for their business
With client data at your fingertips, you know better than anyone what services your clients need. Take the time to conduct an inventory of clients and then tag those who fall into each of the main categories: transactional, outsourcing, and advisory.
You should also take the time to vet clients by asking them pointed questions on their business needs. What are their short-term growth plans? What are their long-term revenue goals? Do they have plans for expansion into other verticals? You get the gist.
From these questions, you can determine which clients have the most potential to move up the spectrum to outsourcing, controllership, or advisory/CFO services. It’s up to you to make the case for why clients need your services. And the more questions you ask them, the more informed you’ll be. It’s up to you to also explain the value of your services. Have you shown them that it costs them $22 to pay a bill? Have you explained how much you can save them?
You’ll never know if a client wants your service if you don’t take the time to ask the right questions or simply ask if they are interested.
Final words…
In today’s small business landscape, there is a tremendous opportunity for firms to expand their advisory clientele. Small business owners require a year-round partner to help with everything from compliance work and outsourced AP to higher-value financial forecasting, modeling, and advisory services.
The pandemic blew the door wide open on just how much accounting professionals can do for their clients—having helped businesses navigate economic relief programs, business model pivoting, and in general, helping them keep their doors open.
This is the level of service today’s clients want. Make sure that your firm is sitting at the highest level of modern accounting and bookkeeping spectrum to cash in on the opportunity!
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