The 8 biggest mistakes accountants make
Successfully avoiding mistakes is a key to practice growth, particularly those mistakes that can hinder client retention and new client acquisition – universal concerns of the accounting profession.
Here are eight of the biggest mistakes most accountants make in practice management and how to avoid them. (View this article as a slideshow.)
1. Not differentiating (branding) themselves. Most consumers of accounting and tax services cannot differentiate one accounting firm from another. These consumers think all or most accountants are the same. Why? Because most accountants can’t or won’t articulate how they are different from their competition. Accounting Web sites look remarkably similar. If accountants can’t brand themselves, how can they expect the average consumer of accounting and tax services to? Those “unbranded” accountants are often selected by prospects based on the universal differentiator – price. This leads to practice commoditization, which is not a strategy for long-term success.
The best differentiator is to become a “consigliere.” Firms need to understand that their mission is to partner in their client’s success, show that they care about their client, and lead a collaborative, multidisciplinary team of advisors to solve or prevent client problems.
2. Not understanding client, business, or industry. Among Fortune 1000 companies, the primary reason for terminating an accounting firm is the firm’s lack of understanding of the client, the business, and the industry. This is not exclusive to larger companies. Accountants do not invest the time to understand a client’s business because they don’t feel they can be paid for this effort and don’t see the value. Clients will vehemently disagree. Accountants should use non-billable time to understand the client, the business and the industry. The client will appreciate the effort and reward them with additional work.
3. Not being proactive. It is the nature of the profession to collect and summarize historical data. This natural tendency creates reactive behavior – waiting for the client to initiate a conversation about a particular issue. The problem with reactive behavior is that the client may not raise the issue or may be unaware of other concerns he should be aware of.
A proactive approach is a hallmark of a trusted advisor. The real value of a CPA is not in “compliance deliverables” but in determining what a client wants, learning where the client wants to go, and getting the client to the goal line. Firms cannot do this reactively by waiting for the client to initiate the conversation. That is the accountant’s responsibility. A proactive accountant is one who has learned the art of effective communication.
4. Not billing what they’re worth. This comes from a basic misunderstanding of why clients leave accounting firms – over fees. Clients rarely leave over fees, but when they do, it’s because they don’t see the value of the service provided.
Billing is an attitude. A firm’s fees express its conviction of what its services are worth to the client. If all the firm is doing is preparing a tax return with no tax planning and submitting monthly/quarterly financials with no recommendations, they can be sure the client is looking elsewhere. On the other hand, if they are adding the value the client expects and do this with every communication, the subject of fees comes off the table. Firms need to demonstrate to the client that their objective is to be a partner in the client’s success. That approach earns them the right to premium-price their services. It makes no business sense to price services to compete with others who don’t offer the same value.
5. Only offering compliance services. This epitomizes the frustration that many clients have with their accounting firm. From an anonymous CPA in Tom Stanley’s Networking with the Affluent and Their Advisors, “Most of our competitors provide little else than traditional accounting services. Most clients appreciate more than core services. They genuinely appreciate accountants who take to heart the real problems that clients and their industries face.”
Compounding this mistake is the fact that technology is disrupting traditional compliance services, eliminating barriers to entry and creating opportunities for tech-savvy operators to offer compliance services for pennies on the dollar. Offering business advisory services is where the profession is headed long-term.
6. Not profiling their “ideal client.” Many accountants are content to take any business that “walks in the door” with the ability to pay. This means anyone from the individual who needs professional assistance to file a tax return, to the small-business owner who needs competent accounting services and corporate income tax filing. No business can be all things to all people. Firms should let their professional staff and referral partners understand the type of clients they can and want to service effectively and profitably.
7. Not building a referral network. Many accountants feel uncomfortable attending networking events. While they often claim they are too busy servicing (too many) clients, the real reason is that it takes them out of their comfort zone, they don’t see the value, and it has not been successful for them in the past.
This is a “What’s in it for me?” decision consistent with a firm-centric approach to doing business. Yes, while networking can result in revenue enhancement, the better mindset is how it will help a firm’s clients. Accountants need to network with other professionals to develop beneficial relationships to introduce to their client base. This provides value outside of their core competency. Clients will appreciate the extra level of caring, which will increase the likelihood of additional referrals -- not to mention referrals from those the firm has referred to its clients.
8. Not understanding what a trusted advisor looks like. A trusted advisor is the pinnacle of the client/advisor relationship. A trust-based relationship must be earned over time and is not a knee-jerk reaction to the question, “Who is your most trusted advisor?” According to David Maister, Charles Green, and Robert Galford, the co-authors of The Trusted Advisor, a trusted advisor must show the client a degree of caring far beyond a vendor or subject matter expert relationship, and must always put the client’s interest ahead of their own.
How do you earn this trust? Trust accumulates over time based upon the accountant’s mission to partner in the success of the client. A good way to measure the success of an accounting firm to measure and monitor the cumulative success of its business clients. Has the firm helped them grow the business, become more profitable and add new jobs? That is a great way to attract new clients.