Tuesday, June 21, 2022
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What exactly is ‘advisory’ in client advisory services?

I was at AICPA Engage 2022 conference in early June when Dan Hood, the editor-in-chief of Accounting Today, stopped by to have a quick chat. Of course, me being the author of the first and only book on client accounting services, the conversation quickly turned onto CAS 2.0, and specifically about the “advisory” services opportunity that everybody at Engage22 seemed to be talking about. 

First and foremost, why is advisory a mystery? Or is it not? The need for clarity is embedded in the different lenses through which the profession can view advisory services opportunities. 

The accountants’ “what:” The first lens is the “what” lens. What do accountants do in advisory? Which services do they offer under the advisory umbrella? The more widely communicated definitions of advisory services give lists of some of the services firms provide under their advisory packages. For example:

  • Financial dashboards;
  • Ratio analysis and industry benchmarking;
  • Cash flow forecasting;
  • Budgeting and tracking budget versus actuals;
  • Business process consultation;
  • Technology recommendations and implementation;
  • Business analysis and reviews;
  • Outsourced/virtual CFO services;
  • Management reporting;
  • Tax planning; and,
  • Wealth management. 

Take a closer look at this list. Most of it is about defining the “what” you can do (and probably “how”) if you want to offer advisory services. It does not tell you what your clients should do with the advice hidden under these service segments. 

Now, let us explore the strategic part of the advisory landscape. 

The clients’ “what”: Any advice is not just meant to be given; it needs to be understood by the recipient and implemented to take the recipient to a better/enhanced situation.

Therefore, the question is, what should your clients do with your advice? 

Let me give you a couple of examples here.

One of my ex-clients, the owner of a firm specializing in the restaurant accounting niche, would identify how pork skin price changes with weather patterns. If prices were likely to go higher, he’d recommend restaurant owners buy and stock more pork skin. That would save the restaurants a significant amount of money. The key to such actionable advice was the underlying data and, of course, the professional understanding of that data to work out valuable advice. 

Another accountant figured out that the profitability of a client’s business was somewhat lower than the similar types and sizes of businesses she served. A deeper dive into inventory valuation revealed that the inventory quantities used were not producing the intended number of final products this client was selling. The accountant started asking searching questions to the employees of that business, and within two weeks, a couple of employees quit without giving any notice. The inventory theft stopped. The profitability returned to normal benchmarks in about three months. Did the accountant give just some advice? Or was the advice delivered as an action that produced an outcome? 

So, what exactly is CAS?

Client advisory services being such a comprehensive, expansive array of services accountants can deliver to their clients, the actions and hence the impact arising from the “advisory” can be experienced by clients in a multitude of ways. Therefore, irrespective of which niches/industries you focus on or your chosen advisory services segments, you’d find the following guidelines helpful:

When it comes to advisory in CAS, remember the two words: “actions” and “impact.”

For your clients to experience positive impacts, the insights from the accounting information that you turn into advice must be “actionable.” Therefore, you will often need to guide and coach your clients on how to take those actions you recommend. 

The advice you deliver needs to be that they should: 

  • Do something (that is currently not being done by the client);
  • Not do something (that they are currently doing that is damaging the business); and/or,
  • Continue to do something (which is also valuable advice when you see the client has implemented your advice and is therefore benefiting from those actions arising from your advice). 

Why provide advisory services?

The business and the regulatory world get more complex by the day. At the same time, technology constantly progresses to help do even more than ever. Information is more and more available at the fingertips. Automation eliminates more manual tasks. 

Clients and prospects are aware of the possibilities. The need to “do,” i.e., to process accounting-related work, is still there, but clients value the outcomes and impacts more than having you just “doing” the work at your firm. You can optimize your work time, costs and efforts, and hence your profitability. For example, one of my company’s clients, a payroll-focused firm, has just two full-time staff members processing live payroll for 700 companies each month. 

Finally, most importantly, your clients are not professionally trained and experienced in accounting. You are. 

Operating your advisory services

Your firm’s processes, technology, knowledge and experience will help you uncover and deliver the advice. Financial reports are just the starting points of your advisory. The focus on everything you provide to clients should be on actions that the clients should take and the impacts thereof.

As you go along, prepare and keep a list of “actions” you advise your clients to take. This repository of actions will become your advisory training material for your team. 

Your firm should view advisory as an internal resource (like a small accounting firm within the business!) at your clients’ businesses, as if you are their board member accountable for financial and business intelligence. 

To provide relevant advisory services, you’d always need to know and understand the objectives the business owners have in their minds and then connect the dots between those aspirations and the advice you give. 

You’ll need to know the business, the operational trends in the business, and the industry in which the company operates. Then you provide advice such as when and how much inventory to buy, what the pricing of finished goods should be, which technology solutions can help clients avoid internal process delays/replication of information, if and how to obtain growth financing, and so on.

You’ll need to develop metrics by which you will measure the before-and-after impact of your advice, e.g., a comparison of the difference between pre- and post-advisory in growth rate, profitability, cost per unit of products/services/goods that the client sells, etc. The same measurements should then be used to compare successive periods like quarterly impact, etc. 

Keep an internal scorecard to identify and articulate the impact of your advisory services clearly. For example, imagine the power of stating something like, “Our advice helps clients make $1.21 for every dollar their competitors make.”



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