Leveraging regulatory churn
Accounting is often described as recession-proof. Tax and accounts need to be filed and paid each year. During a recession, struggling businesses will need help to wind down. When the economy is growing, businesses need advice on how to expand, on strategy and technology.
In the UK, the top end of the accounting market is set to reformed, after the Financial Reporting Council recently announcing plans for the Big Four firms to split their audit practices from the rest of their business by 2024. That may create gaps in the market for smaller firms to expand their advisory services. But how can they do so while some types of compliance work, such as the ongoing Making Tax Digital in the UK, plus Brexit, are likely to absorb more of their time? We asked experts for their advice.
Use technology to automate administrative tasks, and practice management software to make your firm more efficient
Cloud-based online software can let you scan receipts and reduce data entry, saving time and reducing errors, says Della Hudson, a business consultant who previously owned an accounting firm. It can also help accountants give their customers timelier business advice because they can log on to accounts at the same time as their customer. Hudson says that it’s worth paying for practice management software, rather than using Excel, to run a fi rm.
“It’s cheaper than a PA and doesn’t go on holiday,” she says, adding that the practice management software she has used enabled her business to do the book-keeping in a quarter of the time it took previously. And that meant more clients and more fee income.
It pays to specialise
Tax is a big subject, and you can’t be an expert in everything, says Elaine Clark, managing director of CheapAccounting.co.uk, which provides online accounting services. “What are you going to specialise in? Learn once and sell multiple times.” For small accounting firms, useful specialisms may include types of tax – for example, capital gains tax, understanding special purpose vehicles for buy-to-let properties or a focus on the tax rules of certain industries, such as for child-minding, Clark adds.
Find the right client for advisory services
Can they afford it? Crucially, are they interested? “You need the clients who value advisory work,” says Keith Underwood, managing director UK at Foulger Underwood, which advises professional services firms on mergers and acquisitions and strategy.
“[It’s] no good having clients who have no need for [advisory services]. It doesn’t matter how much you try to convince them.” The better you know your client and its needs, the easier it’ll be to spot if they could benefit from consulting. Understand their ‘pinch points’ − such as cashflow, or helping their son or daughter start in business – then gain their confidence, says Underwood.
The next step is explaining what services you can offer. Then you can say how, for example, your data analysis and management accounts offering can help your clients make better decisions and grow. The Covid-19 pandemic is upending business models, which may create opportunities for advisory work. Some business, such as restaurants, are having to change their business model by switching to takeaway and delivery services. They may need advice on strategy and finance.
Plan your workload and develop a pipeline
At certain times of the year, such as January, you know that your business will be extremely busy with tax returns. So, tempting as it may be, don’t book lots of advisory work for that or other busy times of the year. “You don’t want to upset your bread and butter customers,” says Elaine Clark. “It would be foolhardy to lose them.”
Knowing when your business is likely to have spare capacity can help you plan new business. If you want new business in May and June, then you’ll need to start marketing and pitching for business earlier. Even when busy, it’s important to take time for business development, says Clark.
Publish blogs and other content to help clients and raise your firm’s profile
During Covid-19, small businesses are particularly hungry for business advice in plain language.
Della Hudson published some free newsletters giving business advice and ran a weekly webinar earlier this year when the Covid crisis was acute. Accountants can help businesses think clearly during a crisis and explain abstract concepts in a language that they can understand.
“Clients don’t just need to know [what] financial support is available,” says Elaine Clark. “They are told to ‘pivot their business’, but no one tells them what that means.”
Use your experience to provide advisory services: don’t start from scratch …
Sometimes clients may want to bounce ideas off someone. Accountants see loads of different businesses and can use this experience when advising clients. “If [accountants] see something that works in one industry it could be applied to others. In other words, don’t reinvent the wheel,” says Clark.
… But don’t neglect compliance work
Advisory work may typically be more profitable than tax and accounting compliance work, but it may be a one-off and take a long time to agree. Compliance work is recurring. Customer referrals can be a source of new business. Accountants are often reticent in asking customers to suggest other potential clients, says Clark. “Be a bit more canny with how you sell yourself,” she says.
“If you can’t sell yourself in compliance you certainly won’t be able to sell yourself in advisory work as you have to prove your expertise whereas accounts [and] tax returns are almost a given for an accounting practice.”
Nick Huber is a freelance journalist