Understanding the trend toward client accounting advisory services (CAS)
Once upon a time, the accountant would show up at your door with briefcase in hand to diagnose your company’s financial health and prescribe a regular course for compliance with the law. The accountant was a general practitioner, someone whose range of expertise was broad enough to identify and address many kinds of issues. But this model of the sole practitioner has been disappearing over the past several years as the increasing complexity of society has forced us to seek the help of highly specialized experts.
Today, companies are being affected by rapid technological, regulatory and marketplace transformation. Therefore, accountants must offer a full suite of client accounting advisory services (CAS) as their expertise is inextricably tied to a wide range of business functions. According to a recent survey in Accounting Today, CAS are on the rise for small- and medium-sized accounting firms. Between 2017 and 2018, the percentage of firms offering or planning to offer such services rose from 42 to 45% for small firms and 41 to 48% for mid-sized firms. This trend should continue
to increase as CPA Practice Advisor noted that future accounting clients, largely comprised of millennials, will seek a greater array of services from accounting firms that go beyond traditional compliance roles, with many focusing around technology-based services.
It’s all about trust.
Accountants are regarded as highly trusted professionals and confidants. Therefore, many businesses, especially small- and medium-sized enterprises (SMEs), look to them for big-picture guidance. Accountants must be able to diagnose their clients’ needs in more than one context. While financial activities are at the core of any business’s viability, a more enlightened set of possibilities emerge when the accountant assesses financial information along with other questions:
Technological aptitude and appetite
Customer preferences and changes in the marketplace
Understanding stakeholder concerns and values
Awareness of all categories of risk
Whether alternative organizational need to be considered
Like an old-time general practitioner, the accountant should be able to engage in an open-ended dialogue with clients that is a mixture of brainstorming and detective work. Moreover, accounting firms benefit from possessing industry-specific knowledge, depending upon the types of work in which most of their key clients are engaged.
Providing clients with a holistic business perspective
Beyond traditional compliance, tax, bookkeeping and audit services, accounting firms are offering a range of CAS that comprise nearly all dimensions of business. These include financial management; risk management; mergers and acquisition; information technology, software implementation, and workflow automation; succession planning; sustainable practices; and general business planning. The accountant is often in the ideal position to examine their clients from a holistic business perspective. They understand how resources are being used, where they are being wasted, and where the greatest cost efficiencies can occur.
Planning for human resources
According to Strategic Finance Magazine, studies have shown that replacing an employee can cost an average of up to 200% of the base salary of the previous employee in
that same position. Accounting and human resources should no longer be viewed as separate silos. The cost of hiring, salaries, benefits, termination and various compliance costs must be carefully assessed along with the contributions that employees make to their respective companies. A variety
of human capital factors such as experience, education, creativity and other skills should be seen as critical revenue- producing or profit-contributing assets. Accountants help businesses develop their overall business strategies with these factors in mind.
Assisting clients with leveraging new technologies
From blockchain to AI and data analytics, new technologies are affecting the services the accounting profession provides on several levels. First, there is blockchain technology, which is revolutionizing the way companies facilitate transactions, recordkeeping and the automation of numerous accounting practices. The accountant could play a more prominent role in transitioning businesses toward blockchain-based systems. Second, there is the vast potential being unlocked through data analytics.
Thanks to the emergence of powerful databases and data-collection tools, accountants are helping their clients assess organizational performance and measure a variety of additional factors affecting their businesses. Finally, accountants are helping clients run their businesses more efficiently through the adoption of cloud-based IT, mobile software solutions, cybersecurity systems and real-time dashboards.
Providing clients with guidance on risk management
Every organization today faces risks. From crime to climate change, business owners often don’t understand disasters. Putting systems in place to prevent theft, lawsuits, financial waste and even loss of customer bases from negative publicity is a critical aspect of any organization’s survival. Accountants are ideally situated to help their clients understand and prioritize the costs to mitigate these risks.
As globalization presents opportunities for businesses across many industries, many businesses lack an understanding of the regulatory environments in other countries working with multiple currencies, banking requirements and international transactions. Compliance with IFRS and other international professional standards is often critical for doing business across borders.