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Although accountants are trusted advisors,
they find it difficult to ask their clients for more business.
Ironically, clients are desperate for help and have little or no
confidence in getting it from other sources. So, what are the barriers
stopping CPAs from dramatically increasing the average annual fee they
receive from their clients? It's a long list that includes the need to
be right, lack of confidence in giving advice outside the traditional
accounting/tax/audit areas, and no access to the required
competencies.
An
Example
When meeting with a client, a typical question is: “How's
business?” When the client replies, “It's tough. Imports from China are ruining my business,”
the average CPA replies, “There's
a lot of that going around.” The CPA then begins to talk
about the client’s tax returns and audit. But suppose the CPA
responds: “So what is your
competitive advantage? Let me show you how we can work it out and use
it to win in your market.” The simple steps they follow can
be used for any size client, on a restaurant napkin or in a board
room. The steps don't change. The more you apply them the more
confidence you gain. You reach a point knowing there is not one client
business issue you can’t deal with. The downside is that it
takes an average of five years to reach that point. Masterpieces take
time.
The client’s concern about international
competition is valid. Many U.S. manufacturing clients are feeling the
impact of China. Take the auto industry. China has been gathering the
technology since the early 80s. It has been able to gain international
quality accreditations such as ISO 9001, and the communist welfare
state work ethic has changed to one of capitalism-fueled hard work and
team culture. China will be hard to beat.
The well-trained, well-supported CPA works
with the client to develop a “sustainable competitive advantage” for
his business which might be achieved, for example, by implementing the
following strategy: “We will win by having the best response time in
our industry.” This introduces issues like:
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Understanding our customers’ needs. Most people don't make
the time to understand their customers’ (clients’) needs and
perceptions. China’s manufacturers will find it more difficult
than a local supplier. Being responsive to issues like product
development, alliances, referrals, and just being a fun person to do
business with can give an edge.
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Communication. This is a difficult issue for the Chinese
whose second language is English. Their sense of humor is not on a
par with ours, they don't watch the same TV shows, and they don’t
have the same political background or local knowledge. Accents can
add complexity to the communication process. Personal relationships
are harder to develop.
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Regular face-to-face contact. Just the cost of regular
meetings puts the Chinese supplier at a disadvantage and can work as
an advantage for the U.S. supplier.
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Capital investment. This is the same issue for both
countries. To get the response time right may require more or
different machines or people. These need to be funded.
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Shorter delivery time lines. Here is where the U.S. supplier
has an edge when a physical product is involved. It's less of an
issue for digital products. Shortening the time lines on the supply
chain is a key requirement for all suppliers.
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Matching China’s costs. It is not as difficult as it seems.
There is 20% waste in most organizations. Step one is to pull that
out. Think of it as a new law—we must match China’s costs. In most
circumstances there is a way to do it.
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Supply chain optimization. It’s a complex issue for the
Chinese. It is for the U.S. firms as well but easier to manage.
The CPA runs a series of strategy meetings
for the client to develop specific action plans for each of these
issues, pumping the outcomes into a business plan. He/she meets with
the client monthly for two hours to monitor progress. The compliance
accounting work just gets done along the way. This is the
client-focused CPA of today.
The good news is that the issues introduced
by the sustainable competitive advantage in the example above are just
as relevant for how CPA firms service their clients. The first step is
to apply these tools and processes internally and then offer them to
the A-class clients. Your clients need this support desperately. You
need to help them since they don't know where else to go. “Early-adopter” CPA firms around the world have found the answer. How
many U.S. CPA firms will follow?
How Are CPA Firms Learning?
Some firms have taken on the challenge head
on. Australia and the United Kingdom seem to have firms that moved
into “value added services” as many as ten years ago. The lessons of
the last decade are of value to all U.S. CPA firms. Take the UK's Horwath Clark Whitehill. It has trained a combination of office
managing partners and general partners in areas such as marketing,
sales, business planning, quality systems, and 360 reviews, and it
invests in ongoing coaching and training for these partners. Its
brochures promote these skills and it offers CDs to clients and staff
on every area, with online coaching and multimedia diagnostic programs
to support and add confidence across the firm.
The key success factor is the safety net of
experienced facilitators for e-mail, telephone, and in-field support.
This ensures that all client matters can be handled with confidence.
Some U.S.firms are taking the same medicine. One Midwest firm has
selected ten partners to receive the Horwath-type training and
coaching: two office managing partners, three specialist consultants
and five audit partners. Applying the resources internally is
essential—hence the managing partners’ involvement. Waste levels in
the typical CPA firm run as high as 30% of operating costs so
targeting this waste is a fast way to lift profit and improve service
levels and morale.
What about small firms? They have exactly
the same opportunity as the middle-tier firms. Clients of one- or
two-partner firms have the same needs. Their risk is that “compliance” work is being perceived by clients as a commodity. They assume that if
someone is a CPA he/she will do a good job. If a CPA then offers
business planning or support in marketing and sales as well as
handling the compliance work, he/she can win clients away from a CPA
without the value added services. The learning is not hard but it
takes a long time to gain the confidence, on average about five years.
The “early-adopter” firms are starting to
explore the options. The “laggards” will do nothing. The average firm
is unsure what to do in the face of the business improvement questions
from their clients, so for now they are doing nothing. They figure
that because they are busy they will always be busy—a dangerous
assumption in an ever-maturing marketplace.
Here are some organizations that can help
you develop your ability to provide value added business services:
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