say adios to audit fee pressure

what client goes out for an audit proposal when their auditor provides relevant advice and useful suggestions?  

by alan anderson, cpa
transforming audit for the future

your client likely engaged your firm for an audit because they need an audit. but what is it that they want? they don’t want a stack of paper delivered months after year-end. like anyone else, they focus on “what’s in it for me?” or wiifm.

more: use eight audit exit items to deepen client relationships | exceptional audit client service demands effective communication | deliver more audit value by getting out of the conference roomknow your three audit w’splanning lays the foundation of audit relevance | how do we drive relevance in audit? | before the audit: more than just planning | are you correctly identifying the relevance intersection? | lack of relevance drives audit commoditization | five crucial attributes for successful audit leadership | traditional audits don’t deserve premium billing
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they want relevant ideas that will help them improve their businesses. they want to learn from you about your experience with others in their industry or in a similar situation. they want a relationship with you to talk about their business in plain english. they want someone who can explain the accounting standards and how they impact how they report their results.

remember our definition of relevance:

to be relevant, the audit needs to zero in on the intersection of what you think is important, what your clients are interested in and what is useful information to stakeholders.

you deliver value beyond the audit report when you add relevance to your audits. you can’t get this competitive advantage just by using the same technology and canned approach as the firm down the street. by adding relevant insights, you will always come out ahead. the value you add can’t be measured by obsessing over realization rates.

fee pressure vanishes

why are people willing to spend more on a mercedes than a hyundai? both satisfy the basic need of getting you from one place to another. however, a mercedes delivers on the intangibles people want: prestige, comfort, luxury, dependability and a feeling of accomplishment.

every cpa firm i talk to complains that their clients are constantly pressuring them to lower their fees. when cpas acquiesce to those requests, they contribute to the audit’s commoditization. if your clients ask you to lower your fees, that’s likely because you’re only providing a hyundai level of service instead of a mercedes level. you likely didn’t deliver much more than a pile of paper with an audit report printed on it.

but when you make the audit relevant to the client, you instantly add value for the client. and guess what? the fee pressure vanishes when you provide more than just the table stakes of basic compliance. by providing mercedes-level services, you become the advisor they rely on to help them achieve their business and personal goals, the person they can reach out to when they need strategic advice. then, you become more valuable to them than any fee they pay for your services.

recently, my colleague, denise delahanty, told me how much the non-profit board that she sits on loves their auditor. this auditor took the time to explain how this organization stacks up against the competition. clients are not fee-sensitive when they clearly are receiving more value from their auditor than the fees they are paying. beyond regulatory requirements, what client goes out for an audit proposal when their auditor is providing relevant advice and useful suggestions?

the defining feature for the future will be that you’re not an auditor who understands distribution companies but that you really understand distribution and do audits. it’s not just that you’ve done a lot of audits of distribution companies, but you’ve also taken the time to understand what drives distribution companies. you know what the metrics and kpis that define success are. when you work with a client, and they’re not meeting a particular kpi, you ask them questions to determine the reason.

when you understand an industry, you can make suggestions that can greatly impact your clients’ bottom line.