Growing an advisory practice can be challenging for accounting firms. But staying relevant in a world of change and disruption is especially difficult right now, due to the economic uncertainty created by the pandemic.
Patrick Stern, Josh Lance (Head of Accounting at Practice Ignition), and Andi Ancheta (VP of Customer Success at Karbon) have seen how these challenges have affected their clients—but also how progressive firms are strategizing to overcome them. These insights are collected in three different surveys run by Spotlight Reporting, Karbon, and Practice Ignition respectively, highlighting advisory trends in 2022 that will help you move the needle in your firm.
Here are five of the biggest areas of insight for North America:
1. More firms are offering advisory than ever before—and most are looking to offer more
In Spotlight Reporting’s Global Advisory Trends Report 2021/2022, 91% of respondents feel that there is a surge in demand for cloud advisory services.
To meet this demand, Canadian firms are beginning to use technology to deliver and scale these services. They’re leveraging tools like Spotlight Reporting, Karbon, and Practice Ignition to streamline processes, which in turn supports better work-life balance.
“If we can automate some of the manual work which the accountants do like bookkeeping, tax prep, it will open up more time for them to actually advise the clients,” says Josh.
In contrast, the US is still mainly focussed on recruitment: the availability, attraction, and retention of good talent in order to provide advisory for their clients. However, it’s important to remember that while good talent is important, it’s not the only way to grow an advisory practice.
2. Cash flow forecasting is a great opportunity for advisory growth
The pandemic, as well as the natural evolution of the industry, are driving the growth of cash flow forecasting.
“In both Canada and the US, Cash flow forecasting exploded last year, not just with the firms we work with, but with businesses as well,” says Patrick in the recent advisory trends of the 2022 webinar. “We’ve never seen so many businesses utilize our cash flow forecasting tool. There’s a definite need for it, and accountants are noticing.”
Firms that don’t jump on the cash flow bandwagon risk being left behind. After all, as Spotlight Reporting CEO Richard Francis often says, every business deserves a cash flow forecast.
3. In the age of COVID, uncommon advisory services are meeting customer needs
The data gathered by Spotlight reporting shows that due to recent changes in global economic conditions, many firms believe they could be providing more value-add services that are critical for their clients.
As an accounting firm, it’s important to understand the opportunity areas where clients perceive value. Financial reporting, advisory, tax prep, bookkeeping, financial closures, and statements are some common services that clients ask for help with—but there is scope to provide them with so much more.
If we dive specifically into the North American market, the majority of the respondents from the Global Advisory Trend Report felt that they should be looking at these uncommon services as well, rather than just at the services that were currently thriving. Pre-covid, clients didn’t see much value in services like cash flow analysis, benefits administration, lean processes, and payroll, for example. However, these services have recently come to the forefront, with more clients requesting them than ever.
Two things that firms can do to meet this need:
- Diversify their services—consider the advisory offerings that used to be nice-to-haves, but are now essential
- Lean into industry specialization—if your client base consists of one or two different industries, your clients are going to benefit from specific trends and insights.
“Diversification is essentially going to be a critical component for survival as advisory services mature, and clients expect this,” says Patrick. “At the same time, specialization is what’s going to be bringing more value to your clients. They are going to expect you to have insights into their industry.”
4. Advisory has substantially expanded value-based pricing
Karbon’s data shows that in the past year, non-advisory firms have shifted back to a fixed-fee pricing structure, while the number of advisory firms that price by value has increased by 13%.
Value-based pricing means firms can focus on the services that are important to clients, reiterating and improving their offerings based on client needs. This is a far more scalable approach than charging by time; by focussing on value-added, potential revenue is not limited by the number of hours employees have in a day.
Because of this, advisory firms with a value-based pricing structure stand to gain more revenue per employee. This is an important KPI for accounting firms that are often limited in employee resources and capacity.
“With firms that offer value-priced advisory, the revenue per employee really grows over time,” says Andi Ancheta, VP of Customer Success at Karbon. “This is going to be a very interesting metric to track going forward.”
Staying relevant in a world of change and disruption is challenging. To learn more in detail about the advisory trends of 2022 on how accounting firms are moving the needle, watch this webinar recording.
5. There’s real ROI when accounting & advisory are bundled
Choosing the best business model strategy is always challenging for any business, but the biggest challenge for accounting firms is how they can bundle their traditional service packages with strategic advisory services.
Survey results by CPA.com prove that advisory services when added to payroll and tax services, increased monthly revenue per client by 48.6%.
In short: Advisory services are becoming more and more popular in North America.
“Advisory is a top service for deployment for many accounting firms,” says Patrick. “For the next 12 months in order to retain this trend, hiring and retaining staff remains a priority in both Canada and the US.”
Thanks to surveys conducted tracking the changes in the North American accounting industry, it’s now obvious that there’s been an acceleration in the diversification of services beyond tax and compliance. More and more firms are now utilizing cloud-based accounting tools to meet their clients’ needs as they arise. In addition, advisory firms that focus on adding real value for their clients (and price accordingly) are generating more revenue per client than ever before.
As the pandemic continues, businesses will continue leaning on their accountants for guidance, support, and reassurance. By focussing on high-value advisory services, firms can mitigate (and have been mitigating!) the economic fallout—and be part of the change that is shaking up the industry as we know it.
Some helpful links:
- Watch the webinar recording here.
- Download a copy of our Global Advisory Trends report.
- Patrick talked about our Transform! eBook—you can download it here.