A study conducted by Small Business Australia found that more than a third of businesses are faced with the odds of imminent closure. On top of that, a report by Accountants Daily noted that a staggering 72.5% of small to medium businesses said they were facing cash flow problems.
Not to mention the challenges associated with financing, labour, and many other issues that companies have to deal with.
Bottom line is: it’s not business as usual.
Where your accounting firm made the cut by relying on traditional accounting services, finding alternative ways is imperative now more than ever.
This is where advisory comes in.
The statistics mentioned above highlight how important accounting firms are to step in with much-needed business know-how. So let’s talk about how advisory is the key to unlocking your firm’s profitability.
What Constitutes Advisory Services?
Before we get down to it, it’s essential to clarify, with precision, what the term advisory services refers to.
In short, advisory services cover all other activities of your firm that don’t fall under the main compliance and tax-related concerns. This can include any value-added service you offer to your clients.
The most basic advisory services deal with the more traditional aspects of advisory like:
- Wealth Management
- Business valuations
- Financial Planning
- Outsourcing regular accounting services
- Tax strategy
Advisory services can also branch out to include unconventional roles such as:
- Technology management
- Human resources
- Cybersecurity risk guidance
- Risk management
Basically, the chief advisory services can be grouped into four main categories.
Process advisory. Here the role of the accountant is to help your client establish processes and systems that work and bring returns efficiently.
Financial advisory. In this role, the advisor endeavours to improve an organisation’s financial health, for example, by assessing ways of clipping expenses or finding ways to grow revenue.
Compliance advisory. With compliance, the advisor focuses on preventing compliance and regulatory issues before they arise.
Technological advisory. Using the right technologies can help boost a company’s performance. That’s why advisors focus on assisting companies in finding the right tools for automation. Plus, advisors can also help companies to customise their tech solutions.
Why Advisory Can Breathe Life to Your Bottom Line
1. Customers need value addition
As mentioned previously, businesses are facing tough odds. The struggles that enterprises deal with often makes compliance services feel like an extra torturous burden for business people. Rather than just compliance-related work, businesses need help and direction to put their businesses on the right path.
Businesses need help with strategies for business development, tracking expenses, boosting revenue, software tools, among many other problems. Clients are usually more willing and ready to pay good money for services that visibly impact their profitability— more than they would be willing to pay for obligatory work.
In simple terms, if you give businesses what they need, they are more inclined to reward you handsomely.
2. Reduces reliance on seasonal business
The bulk of the work in your traditional accountant’s role deals with regulations tied to the tax reporting season. This can cause seasonal spikes and dips in profitability.
With advisory work, you expand the scope of your offering to eliminate seasonal capacity challenges. Clients are always in search of ways to add value and improve their businesses.
3. Creates a well-rounded team
CPAs traditionally have a hindsight perspective. This, unfortunately, limits the creativity and forward-thinking that clients are looking for to drive their businesses forward.
By taking up the advisory side of the company, your team becomes well trained in critical thinking. This will help establish your position as a thought and industry leader, drawing more customers to you.
Once your team is made up of well rounded, critical thinkers, you can deliver a broader range of services that can help struggling clients turn the corner. You will also be better placed to elevate your stronger performing clients. This will help deepen relationships with your customers, the result: a wider pool of loyal clients.
Apart from pooling clients, your team is more likely to be more stimulated and engaged than with a traditional accounting role. Engagement typically goes hand in hand with loyalty, reducing employee turnover and associated costs significantly.
4. You can charge a higher, value-based fee
Raising prices is almost impossible for standard compliance work. Fees range within a similar band across all firms. Plus, you don’t have much leverage to push up your prices beyond other firms.
With advisory, however, you can set your rates based on value, not standard price. For instance, if you help your clients implement smoother processes that save client A $100,000 and client B $50 000 per annum, you have the leeway to levy proportional rates. This means client A can pay twice as much for roughly the same service.
So the more value you bring to your clients, the more you can charge. The value-based system of advisory work eliminates the fee sensitivity associated with accounting firms.
According to accountant’s resources site CPA.com, accounting firms can boost their profitability by 50% through advisory services.
Using Software to Step Up Your Advisory Services
Despite the high rewards that advisory services promise, you may not do justice to your clients without the right tools, especially when you have several clients. A half baked effort is often the surest way to drive customers over to your competitors.
That’s why using software tools can help you to augment your processes, shape up and cultivate the right relationships.
Through software tools, firms have been shown to save about 4 hours per client, reducing overall staff hours. Some firms have also reported earning more than $100,000 in revenue plus sealing advisory contracts running into millions within a month or two of implementing a customer-centric advisory software system.
Ready to expand your services and dive into the world of advisory? Consider using a top-class software system like AVA.
With AVA, you can view all your clients on one dashboard, simplifying your decision making. Plus, you get access to live financial information and KPIs to keep your finger on the pulse of your clients’ business.
Get in touch to learn more and open the door to skyrocketing your firm’s profitability through advisory.
There is no denying the fact that accounting is one of the most essential services of any business, regardless of its size. A lot of businesses are forced to spend a lot of money on…
- Jul 19