Offer, refer or outsource?

What do accountants do all day? Prepare tax returns and annual accounts, the public would probably say if asked. That offering may well be enough for many small fi rms, but to increase revenues (and hopefully profits) some offer additional services, including tax planning, advice on business lending and finance, technology consultancy (cloud software, automating manual businesses processes), business coaching and strategy. Some may even act as a virtual finance department for larger clients.

Providing more varied services can keep work interesting and avoid the risk of becoming too reliant on one service for most of your income. But with limited resources, skills, staff and time, how do you know what to provide yourself or outsource?

As ever, when making strategic plans about your practice, start by asking who your ideal clients are, whey they want and who is the right person to provide that service, says Heather Townsend, founder of Accountants Millionaires’ Club, which coaches accountants.

Carl Reader, chairman of d&t accountants and a small business expert, advises putting services into three categories: core services most firms provide, such as accounts preparation and tax returns; other common services (for example, bookkeeping, VAT production and payroll), which are sometimes contracted out to specialist firms; and advisory services (for example, tax planning and management accounts production and post-production advice).

Next, work out who will provide the services – whether through your own staff, with a business partner, a franchise through an outsourcing company, or a joint venture (a formal business relationship with an external provider).

Finally, decide the price you’ll charge for the services. If it’s a new service, working out how much time it will take and its value can be tricky.

Firms can check pricing databases to see what other firms are charging for similar services. You can also charge a ‘success-basis’ fee. For example, your firm may only charge a business client for advice on business funding if the funding application is successful.

Bookkeeping

Bookkeeping is traditionally done by a third-party but can be brought in-house or to a “tied” outsource specialist but still done under your firm’s name.

But don’t dismiss bookkeeping. Doing it yourself can be a good way to really get under the bonnet of your clients’ business and build rapport with them. Your bookkeepers will talk to your clients more often, maybe once a week, and may discover opportunities to sell them new types of advisory service, which have a higher profit margin − if your bookkeepers remember to pass on the leads. Cloud accounting software can give accounting firms and their clients a near-instant view of finances, including cash flow.

Bookkeeping is “the basis of a decent conversation about non-compliance tasks,” says Townsend. “The reason why a lot of accountants are struggling is because they don’t have the dialogue with clients. If you have the mechanism in-house to have a regular dialogue with clients you’re moving forward.”

Financial services

Advice on financial services typically isn’t seen as a core service or competence for small accounting firms. Many refer financial advice work to independent financial advisers or wealth managers. However, some accounting firms are starting to offer their own financial advice − particularly for things such as inheritance tax planning, where there is overlap with tax. Some also advise on will planning.

Technology

Accountants often recommend software (especially cloud accounting software) to clients and help them implement it. Some will have partnerships with their technology suppliers and recommend customers use them. This can mean referral fees and have the additional advantage of building goodwill with a client by taking the hassle out of picking software. Although large accounting firms often provide technology consultancy services, this may be too much of a stretch for small accounting firms, unless they already have staff with these skills.

Business coaching

An increasing number of small accounting firms are providing business coaching to their clients, experts say. This can be done by partnering with a business coach who coaches your clients, in return for paying a fee to your firm per client.

“The [accounting firm’s] client doesn’t need to go elsewhere and [the accounting firm can become] more of that holistic business adviser,” says Townsend. “That’s where the marketplace is moving. Business owners don’t really value their set of year-end accounts.”

Banking and lending

Smaller practices are helping their clients get access to loans and grants. Demand for this advice has grown sharply in the past year because of the economic impact of the coronavirus pandemic.

Lending platforms such Capitalise often work with accountants and can pay them a commission if the firm refers them a business client and their loan application is successful.

Accounting firms use this partnership model when providing finance advice, especially when trying to find good loan terms for a client that has an urgent gap in finance, says Townsend.

Accountants use a similar referral arrangement when arranging invoice finance for their clients, she adds. Recruitment companies – which typically get paid in two lumps (after a candidate starts at a client and after completing six months or so in the job) – often use invoice finance to smooth their cash flow. The invoice finance company pays a company’s invoice in advance, minus a fee.

Hands on, or hands off?

There are many ways that accounting firms can provide services to their clients. The right option will depend on the service, it’s value and the skills and experience of your staff.

Experts recommend an open mind about how your firm delivers its services and being prepared to switch between in-house and outsourced services if things don’t go as planned.

“We still haven’t found the ideal model yet after trying every option,” says Reader. “You might start with outsourcing [but] have a concrete plan as to what point you’ll convert this to either a joint venture with the outsourcer of perhaps employing somebody full time to do it.”

Nick Huber is a freelance journalist