[IMGCAP(1)]CPA firms, like many other businesses throughout the country, are feeling the sting of the recession.

Despite the increased analytical value CPAs can bring when times are tough, the reality is that clients shrink their expense budgets and become more fee sensitive. In response, many firms find themselves considering layoffs, buying work to keep people busy, slashing expenses, and exploring alternative pricing strategies. The mood of the client-firm relationship is somber at best and panicked at worst.

In light of these realities, it is of crucial importance for accounting firms to frame the value of their “softer” assets. By softer assets, I mean a number of intangible but highly valuable characteristics embodied by most CPAs and their firms. The purpose of this article is to describe three of those assets and the opportunities associated with each.

Initiative by the Most Trusted Advisor

The Asset: Surveys by payroll firms, insurance companies, and others continue to confirm that accountants are a closely held business’s most trusted advisor. My own work over the years confirms this; more than bankers, brokers, insurance agents, and attorneys, accountants are seen by a business owner as crucial to business, and even family, decisions. And it’s easy to see why. Business owners and wealthy individuals see their accountant at least every year for tax planning and tax return delivery, and possibly financial statement preparation.

With “A” clients, contact might even be monthly, weekly or in some cases daily. A relationship built on regular communication flows from the ongoing interaction.

The conversation with good clients usually goes way beyond compliance-oriented issues and upcoming financial decisions; a great amount of time is often spent discussing or listening to issues about the client’s industry, employees, vendors, adult children, or parents.

Sometimes the conversation focuses on the overall business climate, other times they talk about succession or estate planning strategies. All of this conversation, coupled with a strong sense of the CPA’s confidentiality and independence, leads to a level of trust that is virtually unrivaled by other professionals.

The Opportunity: Unfortunately, many accountants have a history of being primarily reactive. Much of a CPA’s bread-and-butter business comprises tax returns and financial statements, which are in fact backward-looking documents. One might even argue that a core competency of an accountant is responding to someone else’s demands (such as the bank, regulatory agencies or legislation) and reporting what happened in the numbers to the IRS, figuring out how to minimize tax liability, or documenting the stability of the business for third parties.

However, this trusted advisor position gives the accountant a wonderful opportunity to go beyond “reaction” and initiate discussions on other areas at least as critical, and probably more important, to the business owner’s future. The right questions, delivered with an eye toward understanding the client’s needs, can play right into the additional services a firm has to offer.

Asking a client about the legacy she wants to leave can lead to estate planning. Asking a client about his retirement goals can lead to wealth management services. Asking clients about their demand forecasts and working capital needs can lead to outsourced CFO services. Asking clients about their management team can lead to executive recruiting.

Asking clients about their workplace practices or employee handbook can lead to HR consulting or training. Asking clients about their succession plan can lead to family business consulting. The point is, using the trusted advisor position to be proactive and ask clients about their future plans in specific areas can lead to a wealth of new opportunities to enhance the business relationship with the client.

Lessons from the Long View

The Asset: Many clients in most CPA firms have been clients for generations. This gives the firm a chance to view the client’s people, issues, changes, successes and failures over a very long time period.

For example, if you look at several growth spurts in the client’s revenue over many years, there may be commonalities in how the client’s management system takes advantage of unique opportunities during those times. What does the client do, time and time again, to succeed? When you look at management transitions between generations in the client’s business, what makes those transitions successful? When the client loses money, are there certain market trends or particular behavioral or decision-making processes that contribute to the loss? How do the client’s values — not just their wealth — transition from one generation to the next? The firm’s asset might be best thought of as a rich repository of observations about client businesses and families that go beyond the numbers.

The Opportunity: With such an historical and observation-rich client perspective, the CPA can contribute to the intellectual assets of the firm to enhance the firm’s value in the marketplace. By combining the observations of clients made by every partner and manager and thinking of them as intellectual property, client “best practices” begin to emerge.

Which practices lead to better management? What strategies lead to more successful transitions? What kind of cultures lead to less employee turnover? What are your clients’ most common responses to market downturns? What behaviors most often lead to business failures?

As themes begin to emerge, you have the opportunity to communicate your “findings” — your intellectual capital — to your clients, your prospects and the public, ultimately enhancing the image and depth of your firm. Communicating to an audience that you not only know technical issues and solutions (a basic expectation of a CPA), but that you are cognizant of the best business and family management practices, only adds to your reputation as a knowledgeable business advisor. Clients will ask for advice on a broader range of topics, offering an opportunity to better understand their needs and in turn provide more services.

The Storyteller

The Asset: Accountants are generally seen as quantitative people. They help gather and organize data; they crunch and make sense of the numbers; they churn out the historical trends and ratios. They do this at different levels for every client, year in and year out. So if you consider a regional accounting firm, they have literally hundreds of thousands of tax returns and financial statements, most of which have been created or utilized primarily for reporting purposes. And those tax returns and financial statements have specific categories or line items that offer a perspective, a narrative, on a business at a particular point in time. And while confidentiality is an ethical imperative for a CPA firm related to how they use and safeguard that data, the fact remains that the aggregate data can tell interesting stories about industry players and indicate certain trends about peer groups of clients.

The Opportunity: Telling “the story” behind the data can create a significant perception of technical depth for a CPA firm. In my last role as Practice Leader for Agribusiness at Kennedy and Coe, LLC, a group that audits the cattle-feeding industry, I compiled data and ratios from audits and used the results to educate owners and key employees on trends, key ratios and areas for departmental improvement. When lenders saw the expertise we drew from the lessons of aggregated data, they not only referred more business (sometimes even requiring a prospective client to use our firm), but also asked for training for their loan officers on key financial and management indicators, which was a new service opportunity. When our economists looked at the data, they saw more management lessons and crafted a low-tech newsletter that generated significant new business opportunities.

When you look at the number of similar businesses you work with, even if they are not a statistically significant portion of a given industry, opportunities exist to offer comparative observations based on an understanding of the data, without violating confidentiality. In fact, many businesses appreciate knowing where they stand relative to others in their industry, and would permit the aggregation of their data in return for knowing how they are doing.

In my experience, good CPAs often provide this comparative perspective informally. If they back it up with the data, new opportunities arise with similar clients, with prospects, with industry associations, and with the vendors associated with that industry, because the data has been converted into a useful narrative that gives a broader group of people a sense of what is happening within their business and around their industry. It shows that you know the business inside and out, which is valuable all the time and especially in an economic downturn.

Lance Woodbury spent 14 years working as a non-accountant in consulting and leadership positions in a regional CPA firm (six years as a partner), and interacting with a number of firms across the country.


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