H&R Block and Liberty Tax have been expanding from traditional tax preparation services into other areas such as bookkeeping as they reach out to service small business clients year-round, giving traditional accountants some extra competition.

On Tuesday, Liberty announced a bookkeeping service built around the cloud-based accounting software Kashoo. The new bookkeeping service, dubbed Liberty Accounting, is intended to help Liberty Tax’s 4,400 franchisees expand beyond tax season and provide additional services besides tax prep and filing.

The number one tax prep chain, H&R Block, recently announced plans of its own to attract CPAs and other accountants into selling their practices to Block or becoming franchisees (see H&R Block Reaches out to Attract Accounting Firms). In conjunction with that effort, Block also said it would start offering bookkeeping and payroll services to small businesses through cloud technology.

Competing tax chains such as Jackson Hewitt and TaxSlayer are still sticking to their core tax prep services, but if they see significant growth from Block and Liberty, they could be induced to change their minds.

This isn’t entirely a new trend. Individual franchisees for Block have already offered services such as bookkeeping and payroll in the past. Another franchiser known as BookKeeping Express offers bookkeeping services to small businesses through its franchisees. Block made a major move into the accounting field in 1999 with RSM McGladrey, operating what it called an alternative practice structure in conjunction with the CPA firm McGladrey & Pullen before selling the business back to McGladrey in 2011.

Block has tried other financial businesses in the past, such as the ill-fated Option One subprime mortgage business that it was forced to sell at a heavy loss in 2007. In this case, Block does not appear to be making such a heavy bet and is mainly out to attract small CPA firms whose owners are looking to retire or planning for an eventual exit.

If the idea catches on, small accounting practices could find themselves competing against Block, Liberty and perhaps other chains for their small business clients and will need to diversify further by adding extra services to avoid being lumped in with the franchises.

Do you think H&R Block and Liberty Tax will provide serious competition to traditional accountants in the small business market?