the clients buy more services and are “stickier.”
by hitendra patil
client accounting services: the definitive success guide
client accounting services (cas) is the new revenue segment you cannot afford to miss.
if you are an accounting firm owner/partner, you do not want to miss the emerging, growing, and profitable opportunities in client accounting services.
more: do you value your cas value? | the mindset you need for client accounting services
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before we get to why, to ensure that we are on the same page, let us agree on a description of what cas is.
how is cas different than what i am doing now?
in a brief survey that i conducted, one of the most common questions i received from accountants (from firms of nearly all sizes) was, “how is cas different than what i am doing now?”
this question may have been lingering in your mind too. and it is an important question that you can’t just brush aside if you are indeed to lay the solid foundation of your cas practice. to know what cas is, you need to know what it is not.
if you recall from the previous chapter, before the emergence of new technology – especially the internet, which gave birth to accounting software in the cloud – business owners used desktop accounting software as business software. accountants did not have an easy way to access that software installed at clients’ offices. as a result, you mostly did after-the-fact, write-up work, i.e., after your clients made their business decisions and entered into business transactions. you, as an accountant, had little say in how business owners decided, even if you could have guided them to make better business decisions.
it all changed over the last few years. now, with collaborative, real-time, online sharing of the same accounting software, you as an accountant can work with business owners not just after they make business decisions, but more so, while and even before they make those business decisions and undertake business transactions.
cas: what is it not
in the past, you mostly worked in and on the past.
it was mostly recordkeeping for compliance purposes and some advice to the business owners, for example, answering a typical question, “how did i do in the last month/quarter/year?”
you could rarely guide your clients’ business decisions in real time. you invariably fixed the errors in client books (because clients were not professional accountants to record transactions correctly). you prepared financial statements mostly from bank statements, credit card statements, check stubs, and some information from clients.
you infrequently received any questions from clients about the financial statements you delivered. clients mostly wanted accountants’ help to get their books “tax-ready.” “accounting” mainly was compliant recordkeeping.
clients used, if at all, the accounting information to “learn some lessons (mostly from their business mistakes),” not so much to make better business choices and decisions. accountants were, generally, not a must-have part of clients’ business decision making.
such accounting services are not cas. at best, they could form a small part of cas.
cas: what it is
now, cas means you will work more in the present and for the future. part of the client accounting work can still be after the fact. that work does not disappear. it minimizes.
cas makes accountants become part of the clients’ business processes. it is like their in-house accounting department. the critical difference is you, the accountant, are a few (or a few hundred, even a few thousand) miles away from the location of the business. the vital difference, though, is now the client has the benefit of professional accounting, because of you.
cas means clients follow your expert accounting processes. you lead “client accounting.”
types of services offered under cas
caution:
after reading this section, you may feel:
- you are already offering cas or
- you may not have the resources to provide cas or
- your clients and prospects may not need/want cas or
- your clients and prospects can’t/won’t pay for cas
please do not make your judgments yet.
there is a lot more than meets the eye when we try to refine and define cas into brief segments. the three categories mentioned below are just like the dashboard of your car. behind the dashboard that you see, there is a whole engine, the parts of which work seamlessly – at your command – to take you where you want to be. you drive your car, so will you drive your cas. the difference, though, is you spend money on your car, but cas makes you money – a significant amount of money if you drive it right.
cas can, and will, take you and your practice to where your potential deserves you to be.
more importantly, what cas can do for your practice and for where you end up when you retire can be as stark a difference as that between night and day.
the types of services offered under cas can vary; let us agree that there are three main categories of cas offering.
- after-the-fact financial statement preparation: also called “write-up,” in which the client has already written their checks, issued invoices, and taken cash receipts. a member of the accounting firm’s staff enters the data into a general ledger to produce a financial statement.
- business transactions processing: in this type of work, the accounting firm issues invoices for a client, processes accounts payable and cuts checks (or processes electronic payments), processes payroll, pays employees, pays payroll taxes, computes and files sales tax, sends invoices, and manages/tracks receivables, and more.
- outsourced cfo and controller services: this work entails a higher-level cpa/accountant (often a partner) meeting with the client’s management regularly to review financial performance and provide input to strategies to improve business. it includes regular, frequent interactions with the client to support financial and business decision-making, in near real time with after-the-fact, but certainly not just or only after the fact.
we are looking at client accounting services, and because it is all about “accounting,” for understanding cas, we will touch upon but not explore much in detail the tax, audit, and technology services that many accounting firms offer. however, tax planning/strategy may invariably become part of your cas offering, as you will ensure that via your accounting processes.
what is the impact of what cas is?
it is critically important to consider what cas is in close conjunction with what the impact of cas is. let me share some key factors here.
- average number of services offered by cas and non-cas firms: in perhaps the largest cas survey in the accounting profession that i conducted in collaboration with cpatrendlines, it was revealed that cas firms offer nearly double the number of services compared to firms of similar size that do not offer cas. this corroborates well with the other key finding from the survey that firm size does not matter for offering cas. these findings are also consistent with some other industry surveys that indicated cas firms earn average annual revenue of about $8,000 per cas client and $4,200 per non-cas client. i know of firms that earn between $14,000 to $60,000 in annual revenue per cas client.
- cas firms have comparatively more efficient processes and technology: the survey results revealed that irrespective of the firm size, cas firms offer double the number of services compared to non-cas firms. this is true for each of the firm size categories that participated in the survey. it clearly indicates that cas firms have more efficient processes and technologies compared to non-cas firms of the same firm size.
- cas firms have more intimate knowledge of clients’ business: cas firms generally provide more services than just after-the-fact services to their clients. it means clients interact more often with their cas accountants as they are making their business decisions. it gives cas firms more intimate knowledge of clients’ businesses. this deeper knowledge gives cas firms more opportunities to offer advisory and consulting services to their clients.
- 84% of cas firms agree that cas brings more opportunities: not just advisory opportunities, cas firms get more opportunities to upsell and cross-sell more services to their clients. no wonder 84 percent of cas firms agree that cas brings more opportunities to their firms. for example, cas firms are more equipped to offer tax strategy advisory services that clients can implement all through the year, rather than non-cas firms advising tax strategies only for future implementation. it means cas firms can deliver benefits here and now rather than just a future possibility promise.
- cas clients are more “sticky”: as cas clients buy more services from the same accounting firms, clients do not get exposed to multiple firms. as long as clients are reasonably happy with the firm’s services, there is not enough opportunity for clients to compare the service quality of competing firms. cas clients are reported to be more “sticky” and loyal to their accounting firms.