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The Boomer Bulletin - 2013
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Add Another Zero to Your Fee

Posted By Gary Boomer, Wednesday, August 14, 2013

Most firms would like to add another zero to the annual fees their top 100 clients pay by adding additional advisory services to their client’s agreement.   To some, this sounds impossible. I encourage you not to resist what is transpiring in the global business world.  According to a study by KPMG LLP and HfS Research, a leading analyst authority on global business operations strategies, the finance and accounting business process outsourcing services will surpass $25 billion globally in 2013 and grow at a compounded rate of 8% annually through 2017.

Outsourced accounting services (OAS), business process outsourcing (BPO) and management advisory services (MAS) are all terms firms have utilized to increase services.  The trend in business is to "mesh” or "source” in order to:

  • Pay for what you need, when you need it
  • Experience fixed-fee pricing
  • Access broad-based resources from a bench of talent
  • Experience convenience and collaboration through a web-based platform

Joseph Schumpeter, a Harvard Economist, coined the term "creative destruction” referring to how technology and market conditions commoditize industries.  Accounting services are not exempt.  All industries go through various stages starting with emerging, growth, status and depleting phases.  Twenty-five years ago most firms did some sort of write-up work that included services ranging from general ledger, payroll and accounts payable.  They may have utilized a more sophisticated name such as Financial Reporting.  These services became commoditized due to the personal computer and software like QuickBooks in smaller businesses.  Another cycle has occurred in our industry due to technology, scarcity of talent and the desire by business owners to "mesh” or "source” these services due to the economics.  In-house systems are expensive to maintain and staff often are underutilized.

The Internet or Cloud, as the industry refers to the new technology, offers a collaborative platform that is much cheaper, better, faster and easier.  Even Intuit, an industry leader in small business software, has been challenged.  Their desktop software, QuickBooks, runs in the Cloud (hosted) via emulation and their QB Online version is not as feature rich as their desktop software.  Some might say Intuit did not invest early enough in new technology.  While you cannot contest their market share, accounting firms should select a platform that will enable them to offer collaborative services at multiple levels in order to benefit from this growing trend.  The levels of services are:

  • Level 1 – Transactional Services (bookkeeping, tax returns & financial reporting)
  • Level 2 – CFO Services (financing, budgeting, cash flow & data analytics)
  • Level 3 – Planning Services (strategic, succession, technology, & talent development)

Most firms have done a limited amount of these services in the past, but it has not been as profitable in most situations due to issues such as, inadequate bookkeeping skills at the client’s office, version control (multiple version of the software), licensing and hosting requirements, lack of integration of applications, file transfers and the timing of year-end corrections and adjustments for tax reporting.

Creative destruction typically allows industry transformers (new players) to enter the market and accounting is no exception.  One challenge is for firms to stay informed and utilize platforms that meet the needs of their clients.  The leading platforms we see firms using today are AccountantsWorld,, Intuit, Intacct, Net Suite, Sage and Xero.  This is a global market and development will continue at a rapid pace.  CPA’s should not discount the importance of the ecosystems surrounding these leading platforms.  You may also be surprised to learn that reporting tools, dashboards, work papers, workflows, project management and CRM are all available in the Cloud.   Development in the ecosystem is at an all-time high.  Why?  Because there is less friction in the Cloud and developers are able to develop applications that will integrate accurately and easily reducing the number of databases most firms have struggled with in the past.  The pressure is on for software developers to open their proprietary databases.  Many of these platforms are coming from outside the United States…a global economy.   

If you want to learn more, blogs are a good way to communicate with peers.  Another way is through a community like The Producer Circle TM, which is a community of business and IT savvy thought leaders focused on providing improved client accounting service and achieving firm growth and profitability by leveraging technology and the Cloud.  You can learn more at

Firms who are providing these services through a variety of Cloud-based platforms are reporting some interesting findings:

  1. Clients are increasing services in all three levels (Level 1 – Transactional, Level 2 – CFO and Level 3 – Planning) and readily accepting value creation agreements with payment terms that improve or eliminate firm issues with accounts receivable and work in process. Most firms are assured payment by ACH on the first of each month or work stops.
  2. The client’s books are accurate and timely which reduces the time required during the traditional busy season for tax return preparation and other reporting.  With accurate financial information, it is much easier and faster to deliver CFO and planning services.  A CPA’s involvement in the production processes is generally more efficient than trying to correct errors at a later date.  This is a basic principle of Six Sigma – drive out errors early and at the lowest possible cost.
  3. Bill payment and payroll can be directly integrated into the general ledger allowing firms to provide these services, source the service, or allow clients to utilize the available tools in an integrated accounting environment.
  4. Client referrals are increasing in various industry niches such as medical, not-for-profit, churches, real estate, property management, hospitality and service industries.  Interestingly, most firms admit they "fall into a niche” rather than plan for a niche or market segment.
  5. Clients appreciate the reduced investment in technology infrastructure, the security of a system hosted in the Cloud with offsite backups and access to a professional bench of resources.
  6. The ability to integrate affordable systems like CRM, Project Management, Workflow and Inventory/Point of Sale brings tools to small business that only larger businesses could afford.
  7. Firms experience an increase in profit margins over their old processes and systems.  Once a solid team is developed, the revenue per full-time equivalent increases rapidly and above that of traditional accounting services.
  8. Firms are able to attract and employee remote workers who only need a browser and Internet connection.  This type of arrangement works best with experienced personnel.
  9. The more services a client utilize, the longer the life cycle and greater the value of a client.
  10. The business model is more like the "Blue Man Group” than "Siegfried and Roy”. Standardization of your people and processes rather than creating a service that is all about one or two partners.

The challenges for firms range from leadership to how to package and price these services.  The old hours times dollar model does not work.  Firms also must change their value proposition and marketing message focused on a collaborative team approach where clients have access to as many resources as they need and when they need them.  These services are best delivered by teams that include:

  • Entrepreneurial leadership
  • Client representatives (marketing and sales)
  • Business analysts (processes, technology & accounting)
  • Bookkeeping
  • Tax
  • Project management and administration

The easiest way to take advantage of these emerging trends, avoid commoditization and make the necessary changes in your firm is to focus on your best clients.  That is where the extra zero comes into play.  Look at last year’s fees for your top 100 clients.  Add one zero to their annual fees and then brainstorm about the services your firm could offer to provide 10 times the value.   Your biggest challenge is taking the time to think about the opportunities and the required changes in marketing, staffing and profitability.  Your peers who are transforming their firms to this model are experiencing growth, increased profitability and the ability to attract and retain quality people.  As Kurt Gödel’s law states; to understand a system, you must get outside of the system.  This may simply require outside coaching and assistance for many multiple partner firms due to the change from independence to advocacy.  Don’t be afraid to "mesh” resources for your own firm!  Firms will continue to do both types of services, but the growth is coming from advisory services in most firms.   Gaining and maintaining confidence in the new service line is critical.  It requires change.

Okay, so you can’t add another zero. You can only multiple current revenues by 2, 3 or 4 times.  Most will view that as a successful start.  Regular client meetings will uncover many new opportunities.  Also, don’t forget about filtering the clients who don’t meet your new criteria.  They will only take time and resources that distracts you from serving your top clients.

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