In order to understand accounting advisory services, it is important to note the three main categories from which accountants can provide assistance. Accounting services cover a broad spectrum so it can be a difficult profession to define. Nevertheless, these three sectors cover the foundation that all accountants use.
Most accounting firms will already have this covered, but compliance deals with the absolutely necessary services clients need like tax planning, financial reporting, and bookkeeping. Firms will typically charge by the hour for these services in order to ensure clients are compliant with tax laws. While compliance has represented the standard for most accounting firms, this area faces many threats brought on by recent developments in cloud computing. Those who depend too greatly on compliance find themselves experiencing diminishing revenue as their services have become obsolete due to automation.
This sector focuses on the overall health and performance of businesses. Though the Big Four accounting firms typically operate in this sector more than others, a few others partake in performance advisory as it remains important for businesses to be able to accurately gauge their potential profits. Growth profitability projections are vital for businesses and assistance within this sector is crucial for sustaining and growing your business. As performance typically serves as the first form of advisory accounting firms implement, it creates a great Segway for expansion into more advisory services firms can look to add in the future.
Advisory is the last frontier for accounting firms, which builds off of the performance sector. Advisory takes reports on a business’s performance in order to formulate other forms of advisory such as strategic planning and risk management. As the compliance side of accounting begins to take a greater turn toward automation, it is important for firms to adapt and provide other forms of service that can’t be replaced by technology. Advisory is key for accounting firms to mitigate the impact technological advancements have on their business, and it can actually bolster their revenue. Through implementing more advisory-type assistance for your clients, your firm can provide more services and become an even greater resource for your clients in all of their financial matters.
With this foundation for your accounting firm, your team will have tools at its disposal in order to execute a wide range of financial services for clients. Although these three sectors typically constitute what you will find at more traditional accounting firms, they also apply to sole practitioners who have elected to run their business on their own.
What Is A Sole Practitioner?
A sole practitioner will typically have a small to medium-sized client base where the owner operates with no professional staff. The responsibilities of a sole practitioner vary greatly as it is up to them in terms of what they would like to specialize in. Some specializations include tax services, management advisory, and bookkeeping.
Those who decide this is the occupation for them are typically either a Certified Public Accountant (CPA) or a public accountant (PA). Regardless of these categories, however, it is important to be qualified in order to be a successful sole practitioner. In order to be successful, it is highly recommended to have strong technical knowledge in various areas of financial management as well as being skilled at managing and marketing on your own.
Like any occupation, a sole practitioner faces advantages and disadvantages in their field, which also impacts their relationship with clients.
In terms of benefits for the owner, a sole practitioner dictates their own hours as they are their own boss. A sole practitioner forms a more personable connection with clients. Clients are provided with a trusted friend who guides them through more than just their finances and bookkeeping. Clients receive insights and advice regarding many consultation topics such as buying/selling a home, how to price products, as well as financial statement analysis.
As it is likely implied, a sole practice does possess disadvantages involving future business growth and the extent of services that can be offered. A sole practitioner is limited by their own knowledge and does not have a team to bounce ideas off of as they would if they were within a traditional accounting firm. Moreover, because sole practitioners must take on more work to replace not having a team, the job can be both physically and mentally draining.
How Technology Will Impact Accounting Advisory Services
Whether you are an accounting firm or sole practitioner, advisory can not only be a great service to your clients, but it can also help prevent your business from being replaced by technology. Threats from cloud computing and AI have put many accounting services in jeopardy as the man-power simply cannot compete with something that does the same thing at a faster rate.
That is why it is important for accounting firms to embrace the technological shift. Based on a data report from Accounting Today, firms that choose to implement technology will grow on average by 11% more than firms who elect not to use technology. This goes to show that technology is not necessarily a threat, but rather as a catalyst for your firm to make a change.
Compliance services are no longer an advantage for clients as these forms of assistance are becoming more automated; however, accounting firms can use this technology to their advantage by electing to complement compliance with advisory. The number of accounting firms investing in tech is already growing, and this growth will likely continue as businesses must use tech to compete at a faster and more efficient pace than their oppositions.
Firms can gradually introduce their advisory services by communicating to clients what exactly they are getting out of it. Although technology has automated the compliance side of accounting, there still is a need for people to analyze, break down, and convey this data to clients. This allows clients to understand their finances better than ever before while maintaining the trust with their advisor that had already been solidified.