How small and midsize accounting firms can make their advisory services permanent and sustainable

In the recently published 2022 Tax Professionals Report from the Thomson Reuters Institute, the leaders of hundreds of small and midsize accounting firms from several countries were surveyed — and 95% of respondents said their clients want more business advisory services.

Even so, only one-half of these firms have taken steps to add advisory service offerings to their practices — often because doing so feels daunting, disruptive, and risky.

Will Hill, a Senior Product Manager at Thomson Reuters, said that as little as a decade ago, many firms weren’t all that familiar with business advisory services, and were trying to figure out what they were and why they were beneficial for the firm and its clients. Later, as the concept took root in the profession, firms’ focus shifted to practical, tactical execution. Today, many of those firms are struggling to ingrain advisory services into their operations and growth strategies.

“These days, we’re having more conversations about how to structure and scale advisory services throughout the firm,” Hill says, adding that many firms have wisely eased into advisory services with small steps and provide business guidance in small but highly relevant ways to a handful of clients with specific needs. These firms didn’t disrupt their own business model in the process, and they didn’t change everything at once.

Over time, these firms learned what works, demonstrated the value to the firm and its business clients, and gained confidence in their ability to deliver more than bookkeeping and tax returns. But advisory or consulting services often are not central to their offerings, identity, culture, operations, growth strategy, or client engagements. They are delivered piecemeal as opportunities arise — or not at all during those times team members are swamped with compliance work.

So, how do firms lock in the progress they’ve made and solidify their advisory offerings? By recognizing that it’s time to go all-in and be systematic about it.

Start at the start

“Start by making advisory services part of your engagement with every new client that comes on board,” Hill advises. Firms should package their business guidance with their traditional services such as accounting and tax return preparation, and focus the guidance on the client’s business goals, using financial data to inform recommendations and decisions. Firms should also develop a detailed plan for morphing their marketing, business development, operational processes, staff training, and client on-boarding to support this shift.

Once the new model is in place for new clients, introduce it to existing clients. Inform your full client roster about the availability of business advisory services, then work with them individually and focus on their specific needs. Firms should also work methodically to make personal contacts with all clients in a set time period; and they shouldn’t require clients to make a change or do anything differently. Firms need to just explain to clients the benefits and options these new services can bring.

Traditional tax & accounting services remain critical in this model. They ensure the client is compliant with the law and operationally sound, and they also make sure the business’s financial planning takes place on a solid ground. These bread-and-butter services are foundational as the accounting firm transitions to an advisory role, but they are no longer the central product. Providing business guidance now takes center stage, because it delivers tangible value going forward — value that’s built on a solid understanding of past results and current conditions.

Evolve with the client’s life cycle

Construct your services — both advisory and traditional compliance work — to meet the needs of business clients as they move through each stage of their lifecycle. “When the client’s business is ready for growth, they’re going to need a certain set of advisory services,” Hill explains. “If it’s experiencing decline, they’ll need another. If they’re planning to sell the business, they’ll need a different type of support.”

It’s also important for firms to remain flexible. “Basic compliance work — what we often refer to as maintenance — might grow or shrink at different stages, but it’s a constant throughout the lifecycle,” he adds. “Whether clients are adding more entities or taking them away, hiring or firing staff, or whatever it may be, the maintenance continues. Meanwhile, the client’s business lifecycle and operating environment dictate what advisory services will be needed next.”

Change the nature of the client relationship

Firms should seek to reinforce their new operating model by making and maintaining concrete changes that instill day-to-day work with an advisory mindset. This will reinforce for everyone — staff and clients — that the nature of the relationship has changed permanently.

This process might include twice-yearly consulting meetings to review business performance, chart progress against goals, evaluate operating changes and challenges, and examine future needs. Firms need to do this even with clients that haven’t signed on for advisory services in order to potentially change the nature of the engagement.

And firms also need to include their pricing methods in this evolving relationship. For example, firms could move to fixed monthly rates for a package that includes accounting and tax services, a quarterly financial review, and the twice-a-year consulting meetings. Remember, you can move to higher fixed rates as the client takes on more advisory services.

“The relationship has a different scope now,” Hill says. “It requires a mental adjustment for both parties to ask, “Hey, what are we here for? We’re not here just to do a tax form. We’re here to help the client reach their goals.’”