Boomer’s Blueprint: Taking CAS to a higher level

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Accountants spend too much time in meetings discussing the definition, pricing, niche markets and service requirements associated with client accounting services. Now is the time for action and a change in mindset where the focus is on automation and adding value.

CAS ranges from payroll and after-the-fact data entry to full-blown outsourced CFO services, including advisory and consulting. It is one of the fastest-growing service areas and extremely profitable, if automated, niche-focused, staffed, and priced appropriately. Many firms are missing out on hundreds of thousands or even millions of dollars in revenue opportunities. Resistance to providing these types of services is generally based upon outdated thinking, lack of knowledge about the capabilities of today’s technology, outdated pricing strategies, and simply not taking the time to consider the value from a client’s perspective. Clients are willing to pay for multiple business services when properly packaged and priced on a subscription basis.

In this article, we will focus on 10 rules related to client accounting services, how to increase value, improve the client experience, and scale the services.

Thought-Provoking Question No. 1: Have you had a recent conversation with your best clients to discuss their dangers, opportunities and strengths?

First, let’s deal with expectations and scope. Most of the following statements are general and focused on practices that are growing or have a growth strategy. You should apply the rules based upon your desired practice. This often requires changes in firm leadership’s mindsets, toolsets and skill sets. Accounting software providers like Intuit and Sage have made it known that many firms have little knowledge of the accounting systems their clients are using. Firms are missing out on potential revenue from packaging transactional, compliance, advisory and consulting services, rather than delivering them in a silo approach.

Thought-Provoking Question No. 2:Do you have too many partners who are holding back your transformation and the ability to add value for your best clients?

Some firm leaders say they are too busy and don’t care about the economic potential. Yet the recent CARES Act proved there is a reason small-business owners turn to their CPA in a crisis. Please understand that this is an “and” proposition where firms can continue to perform traditional transactional and compliance work while increasing advisory and compliance revenues. By doing so, firms reduce the impact of commoditization on transactional and compliance fees.

Thought-Provoking Question No. 3: What are the differences between your firm’s requirements and your clients?

Traditional thinking about the accuracy/quality of work is paramount. Sure, accuracy and quality are important, but CPAs have access to more small-business data than bankers, insurance companies and even the government. Think bigger. Broaden your scope. Change your mindset to focus on higher-valued predictive and prescriptive data. This requires the convergence of data from multiple sources and data analytic tools, as well as the convergence of technologies such as artificial intelligence, machine learning and ultra-wide bandwidth.

Workflow and the client experience are also critical for the client to perceive and receive increased value. Hopefully, you are starting to realize this is a more complex and complete offering that will require a unique-ability team, rather than a rugged individualist, to deliver.

Thought-Provoking Question No. 4: What is the cost of a competent bookkeeper, including fringe benefits, continuing education and related technology?

In the past, most firms have added more technical skills, specifically bookkeeping, accounting and tax, to the entire process. In many cases, firms have simply focused on compliance services and passed on services related to the transactional (e.g., payroll, bill payment, billing and collections). Frankly, one of the reasons many small businesses don’t grow is because they don’t have access to professional services. They’ve tried to rely on internal clerical and automated systems that provide limited and often inaccurate information after the fact.

Thought-Provoking Question No. 5: Do you have too many clients who are holding back your transformation and the ability to add value for your best clients?

Here are the 10 rules with the objectives to make you think, challenge the rules, and improve mindsets, toolsets and skill sets. The purpose is to sustain firm success and make your firm future-ready.

1. Real-time versus after-the-fact mindset.With automation, access to increased bandwidth and machine learning, the mindset must change to real-time to increase value. Many older CPAs came up in a period where “float” and “reconciliation” were a necessity. Today, professionals are used to real-time data and understand that machines can code more accurately and consistently than humans.

CPAs have been primarily focused on the accuracy of the input and the basic financial statements. Entrepreneurs and savvy business operators demand dashboards and real-time data. They know the results of moving the right levers of operations and have already made the necessary changes (pricing, cost control and labor) before seeing the financial statements. This is a significant advantage for business owners who receive daily information on their mobile devices.

2. Managerial versus financial accounting.Many CPAs were trained and tested on financial reporting and tax compliance. While financial reporting is still important, managerial accounting is far more critical to small businesses (those with under $20 million in annual revenue).

Cash flow is critical to both survival and success. Dashboards can automatically provide accurate and timely information for those clients who are in real-time mode. Perhaps your firm needs to define target clients and filter out clients who do not conform to your supported systems, workflow and pricing models. This requires taking the time to vision, plan and develop relevant strategies. Improved internal processes, along with managerial accounting, can help your firm and your clients. Please remember, the majority of accounting firms are small businesses with the same issues as most of their clients.

3. Automate both input and output.To function in real-time mode, you must automate input and output. Most of the focus has been on automating the data entry and the accuracy of the data. Today there are workflow solutions, client onboarding applications, and the integration of apps in the cloud to enable and encourage real-time information. Do you and your staff still think after-the-fact, or are you thinking real-time? Do you have redundant steps and loops in your processes that can be “automated out” of the process to reduce cycle time and improve the client experience?

The most recent value-added addition has been in reporting beyond the monthly financial statements. Many accountants have used spreadsheets to capture important managerial data into compelling schedules and reports. This requires significant time for preparation, as well as formatting for publication. Standardizing and automating these reports can increase value while decreasing costs.

4. Leverage AI, machine learning and ultra-wide bandwidth. The convergence of technology, as well as packaging and pricing multiple services, increases perceived value by the client. Please remember, value in the market is not determined by the provider, but rather by the consumer. Therefore, your business model should probably change along with parts of your technology stack and labor pool. These are all cloud applications, and most were designed to integrate and share data. This is also an area where you may need to source or upskill your talent pool, but there are thousands of add-on productivity applications, much like with your mobile devices.

Upskilling is not difficult for those who have been trained or are willing to take the time to learn. However, the technology stack and skills are focused differently than the data analytics on the audit and compliance side. While many of the skills are similar and transferrable, the objectives are different. A respected software vendor recently reminded me that most auditors tell you what happened, analysts tell you why it happened, predictive analysts tell you what will happen, and prescriptive analysts tell you how to make it happen. The value increases as you move up the value chain.

5. Manage the processes, don’t focus on doing the work.Processes, starting with client onboarding, are critical and must be structured and consistently adhered to to ensure a positive client experience and the agreed-upon value. Firms are learning that digital workflow and document management systems are critical. Often, they learn they need to utilize different systems for CAS than they use for compliance work. There is a continuous volume of documents, and security and privacy must be adhered to. The importance of document management has grown with an increasingly virtual workforce. Due dates and a regular schedule of events must be maintained to ensure compliance. This should all be done digitally if a firm desires to scale and control processes.

A “Lean” process improvement project is generally advisable. A Lean project normally requires people from outside of the process to change/improve it. The tendency for people who are currently part of the process is to defend the existing process, rather than improve it. Don’t let personal preferences get in the way of automating and adding value. The recent pandemic has proven that firms can work virtually. Now their processes must be improved to allow for both a physical and virtual workforce.

6. Most small-business clients value historical financial statements at a lower level than their CPAs.Independence is an important standard of the CPA profession. You and your firm are not required to be independent to perform non-attest services such as financial statement preparation, tax preparation or consulting services if they are the only services your firm provides to a client.

With clarity on independence, firms should consider the economics and client perception of value. The economics of providing attest services has been debated in many firms, but there are options for firms to do both services. It is just more complicated with attest clients and additional services.

This is not a debate, but rather an economic perspective of the marketplace and what we are learning from firms and their small-business clients. There are many positives in providing a subscription service, including transactional, compliance, advisory and consulting. The economics of a college education, continuing professional education and client-perceived value are all important considerations.

Just remember: The client’s highest value perception generally comes from the business knowledge you share, and not from the technical requirements of compliance work. Clients value your ability to help them transform in a digital and rapidly changing world. Thus, it makes sense to package and price multiple services from a firm and clients’ perspectives. The solutions to your own internal challenges have value for many small-business clients. Technical CPAs prefer solving the problem over communicating with the client. Professional marketing and sales can solve this dilemma.

7. Predictive and prescriptive analytics are differentiators.Data comes from many sources. Financial data is important, but not all-inclusive. Human resources and market analysis provide a wealth of information for predictive and prescriptive analytics. Many of the key performance indicators firms have been focused on are lagging rather than leading indicators. We are in a period of transformation to data-driven decision-making. The spreadsheet continues to play a role in small businesses, but affordable analytics tools are available in the form of apps or platforms that professionals can leverage. We are in a plug-and-play cloud-based environment, so your decision today may not meet your needs in the future. Still, you need to get started to provide the services businesses need and want. The train has already left the station.

8. Project management and the client experience are as important as technical skills.Project management may be the most important skill missing in the majority of firms. As firms move toward advisory and consulting services, the number and complexity of projects increases. Using CPAs who have not been trained in project management generally does not make economic sense.

Professional project management reduces cycle times and improves the client experience. Project management will differentiate you from the competition and allow technically trained CPAs to gain both capacity and capabilities. An additional benefit is the use of project management skills on compliance-related services where the aggregation of data and delivery of financial statements is often less than optimal, expensive, and increases cycle time. Automation, standard processes and project management skills can add value and greatly improve the client experience.

9. Graphics are more important to non-accountants than spreadsheets. Accountants have fallen in love with spreadsheets. In fact, some have spreadsheet disease. Today’s suite of applications can develop into a financial system that provides accurate and real-time decision-
making information. The good news is that accountants who love spreadsheets can move up the value chain into data analytics with a tool like Microsoft Power BI. I recommend starting with five dials:

  • Cash and accounts receivable;
  • Sales with comparative numbers;
  • Pipeline;
  • Monthly run rate; and,
  • Client churn and profitability.

The good news is that most general ledger applications provide this basic information, and many provide much more. Remember, the larger the business, the more complex these metrics become, and the importance is determined by a more diverse user group.

10. CAS services are a team sport.The skills required to deliver the services that small businesses want and need have expanded greatly, and the transformation has been accelerated by both new technology and the recent pandemic. Small-business ownership and leadership have acknowledged their trust and respect for CPAs, who have been on the financial front lines. Small businesses seek collaboration with their advisors. You should choose to source or affiliate with other providers for some of the required skills. The skills and resources necessary to deliver CAS include: accounting; banking; client experience — service and support; communications; data analytics; HR and talent development; insurance and risk management; legal; marketing; project management; process improvement; sales; and technology.

Accounting professionals have a great opportunity to quarterback the small-business teams in their firms. Some, however, may choose to be a contributing team member rather than the leader. There will be new opportunities for those who decide to upskill. Now is a great time to assess your capabilities, capacity and required skills for the future. I encourage you to seek external assistance in building your vision and roadmap. It will save time and resources, and help build consensus within your firm.

Think — plan — grow!

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