Whether it’s an area you’re considering moving into, or have already rolled out extensively, it pays to understand what ‘advisory’ really entails.
It can be a broad, sometimes ambiguous term. From business planning to budgeting, a whole range of services fit under the umbrella of business advice. But at the heart of all advice-centred work is helping businesses perform better, rather than just remaining compliant.
Not just that, offering business support has enormous commercial potential for your practice – to secure new revenue streams, increase billable hours, reach new customers and retain existing ones.
Defining the value of advisory
Differentiating between the different types of business advice isn’t straightforward, and the lines can be somewhat blurred. But, on the whole, the differences lie in the varying degrees of time and consultative input required and the complexity of clients’ issues. More substantial engagements will obviously involve more resource than others.
AccountingWEB splits advisory services into the following basic categories, which are a useful place to start:
- Number interpretation: Sitting down with your client to discuss their management accounts, dashboard and KPIs at the most basic level, to provide proactive advice.
- Number analysis: Creating cashflow forecasts, budgets, actual vs budget variance reports and financial models, like a finance controller, to help clients grow.
- Number improvement: Working on the strategy, business model and tactics of the whole business and not just in the finance department, like a business coach.
Business advice can range from the routine and rudimentary to something far more strategic. This broad spectrum means it can be approached in different ways, depending on the client, the problem and the advisor. After all, all three come in very different shapes and sizes.
So thinking about where compliance stops and advice begins is useful, as well as what feels more strategic. This list, presented by Xero at a recent conference, does just that:
- Sales tax returns
- Annual returns
- Year-end tax returns
- Outsourced bookkeeping
- Other tax compliance
- Cashflow forecasting
- Business planning
- App advisory
- Company returns
- Management accounts
- Monthly reporting
- Software implementation
- Startup mentoring
- Virtual CFO
- Succession planning
- Performance benchmarking
- Capital raising
- HR advisory
- International affairs
Considering your firm’s long-term future
So, is a move towards providing more business support and value-add client conversations the right thing for your firm? It’s clear there’s no shortage of opportunities, regardless of your firm’s size. But, as with any investment, it’s important to consider how sustainable a shift into advisory might be, especially if you’re just starting out.
According to a study by Wolters Kluwer, compliance services currently contribute 0-3 per cent to accounting firms’ revenue growth, while advisory services are predicted to amount to up to 40 per cent over the next few years.
Add to that advisory’s close association with cloud accounting software, and there’s a strong case that a move into more advice-driven activity is safe long-term bet. Technology has already become a central part of the accountant/client relationship, with 64 per cent of small business owners using accounting software.
As a result, the process of recommending, implementing and supporting the use of cloud accounting applications has become a branch of advice in itself.
What are the commercial benefits?
Ultimately, a greater emphasis on business support also translates into increased fees, according to Xero, which found that firms that provide advice earn ‘considerably more revenue per client than firms that offer only compliance’. In particular, the study revealed that ‘practices that provide specialised services are generating the highest annual revenue per client’ at £4,980.
To specialise, it pays to know your strongest areas of expertise and develop the skills to unearth your clients’ specific challenges. Sitting down with your client to properly understand their business is a great way to demonstrate a consultative approach, drill down into their objectives and pinpoint the issues shaping their finances.
In fact, the simple act of reviewing your client’s business with them opens the door to a whole range of advisory opportunities – helping to reinforce your position as a trusted advisor and increase the potential for upselling your services.
Helping clients thrive
Cashflow is an area ripe for the kind of specialist attention that small business owners need. Their business is their baby, something which they want to protect at all costs. But cashflow issues are a problem small business struggle to resolve independently, owing to an enormous knowledge gap, with only 26 per cent of SMEs having a qualified person in charge of finances.
By stepping in to offer advice, you can help your clients thrive – and that’s not all. When your clients can ascribe business success to their accountant, it goes to reinforce your existing relationship, creating the conditions for additional services and a more durable partnership.
Most of all, it can help the firm to grow alongside your clients, boost your practice revenue and ensure your firm remains relevant in the long-term.