The first steps toward advisory

September 1, 2023 9:00 AM

Everyone is telling accounting firms to shift their focus from compliance work to advisory work — but very few people are offering concrete ideas on how to do that.

Below are eight deliberate steps you can take to start preparing your firm, your staff and your clients for the move toward a more advisory-centric future.

(See our special report on "The Future of Advisory Services.")

Figure out what you want to do

Many of the experts say that firms should begin with a little introspection.

"Part of what we have to do to get into advisory is get really clear on what it is we want to deliver as a firm, and get rid of the stuff that we don't want to do," said Geni Whitehouse, a winery advisor at a small CPA firm in the Napa Valley who also advises CPA firms as the founder of The Impactful Advisor. "And that's really hard for many firms to do. They're motivated by fear of losing the revenue."

Identifying what types of clients you want to work with, and what kinds of services you want to offer them, are great first steps — particularly if you can back them up with a careful, data-based look at who your most profitable clients are, and which of your current roster of services generate the most interest.

Ask questions

On the client-facing front, Whitehouse recommends starting by getting to know them on a deeper level.

"It starts with that initial prospecting meeting, where we ask them different questions," she explained. "'What are you trying to achieve as a business?' And in my case, 'Why are you in this particular hard-to-do-business? Why would you want to be a winery? What's the attraction?' And that sets the stage for everything else we do after that and then, 'What's working, what's not working? And what, ideally, do you want to see across these areas of your business — finance, customers, operations, people and your end in mind? What are those outcomes that you're trying to get to?'"

Understanding their goals and aspirations is critical to knowing where you can help them — as opposed to simply trying sell them services they may not need.

Checklisting your services

Robyn Mackenzie/Getty Images/iStockphoto

Assuming you've identified a particular type of client you want to serve, Darren Root suggests creating a checklist of the types of services they'll need. For instance, he said that he had brainstormed an ideal checklist for the optometry industry with a group of accounting firm leaders, and they had identified 35 separate services that would cover the needs of an optometry practice.

"I think the first step that firms miss out on is defining what it means to holistically serve a customer and then doing the work," said Root, who has run his own practice for decades, and is also the chief strategist at Rootworks. "It's kind of back in the days when we used to do audit checklists: We knew what an audit was. We knew what we were supposed to be doing. So let's create a checklist of all the things; that way we make sure that we do them. It feels like with advisory services, it's the same thing: There's a checklist of all the stuff we should be doing for an optometry practice."

(This doesn't mean, of course, that you need to offer all 35 — but have the checklist gives you a place to start, and an idea of where you might want to add or partner with outside expertise.)

Check your client data

Once you've checklisted the ideal set of services for your ideal client base, Root recommends checking what information you have on those clients.

"Step two is making sure that we have the data on those clients to know whether we're doing those things for them or not. A client may already have a retirement plan — all right, check that one off, right? But how do we know that?" he asked. "And so we have somebody in the firm who is collecting this data."

Much of this information is available in different applications, he noted, and firms should look there first: "We're starting to see in applications what I would call it a frictionless collection of that data. So how can we collect that without calling every client and asking them 35 questions? Can we do that in a more frictionless way? Some of this data comes from QuickBooks, some of it comes from payroll applications. Can we start collecting that?"

Check your information flows

Thumbnail for Video: The Promise of Big Data

Intelligent use of data and technology are important parts of a modern advisory practice, and accountants need to make sure they're getting the client data they need to offer valuable advice, according to Carl Peterson, vice president of small firm interests at the AICPA.

"I think they need to really look at their technology and their tech stack to support that on-demand information that the clients expect them to provide," he said. "They're providing a lot of that information on advisory, but they can even take it another level higher."

"If you can provide greater proactive services with the on-demand information and have dashboards and information on that client's business or on where they are in their life, that advisory piece is going to be ultimately viewed as more like CAS services, right?"

Check your tech

pololia - Fotolia

Just as you want to make sure your data flows are giving you what you want, you want to double-check your technology overall to make sure it will give you the collaboration and automation capabilities you need.

"Advisory practitioners typically inherit legacy technology solutions from other service lines, such as audit," explained Jin Chang, the founder and CEO of FieldGuide, which develops engagement software for advisory and audit firms, "but they are seeking to bring the engagement life cycle into the cloud, because advisory services require significant cloud collaboration and automation capabilities, which are not available with on premise or point solutions."

Start working on your image

DOC RABE Media - Fotolia

The AICPA's Peterson also stressed the importance of how firms brand themselves.

"They really do need to sit back and change their model of branding, the model of awareness, and how they hold themselves out," he said. "When I go to their website, or if I happen to follow them on any social media, who are they, and what is that brand? They could be a tax advisor, they could be a business advisor, they could be any kind of advisory — that needs to become first and foremost, I think, out in front of the public and their client base, so that clients then also start selling the same concept: 'Oh, my business advisor is my CPA.'

Accountants talk about being trusted business advisors, but that doesn't often carry through to clients, he warned: "They're not known to be that. They're not branded that way, and I think that's where the small firms need to really to change to get out of the stereotype perception that you're a tax prep firm, and becoming, 'I'm a business advisor, I'm a tax advisor.'"

Change your mind(set)

As a final crucial first step, Peterson says firms need to start thinking differently about themselves and the services they're offering. Most accountants are already giving some level of advice to clients, but they tend to view their compliance work as their primary offering.

"I think they're all doing advisory work as well, but they still have this mindset that the tax preparation is why my clients are coming to me," he said. "But in the end, that's just a byproduct of the advisory stuff that you're doing for them already."

Recognizing that, and being comfortable that the advisory work is where a firm's primary value lies, will require a major change in thinking for many firms, but it will be critical to their success.