Very few firms cite advisory services as their biggest revenue earner today. Why does this gap exist and how can firms use the two ‘A’s to close it?
Accounting technology has come on leaps and bounds in a matter of years. Calculators and manually updated spreadsheets are on their way out — and cloud-based, automation-heavy tools are in with artificial intelligence and machine learning on the near horizon. Why spend hours manually compiling working papers when a tool can do it in an instant?
Some initially saw this giant technological leap forward as a threat to their profession. Most, however, quickly realised that technology is opening the door to a better future — accountants aren’t going extinct, they are just evolving.
Professionals no longer have to spend their days making sure the right numbers are in the right place. With this process now entirely automated, they can instead turn their attention to what the numbers actually mean and suggest: where their clients are performing well, where they’re performing poorly, what the future holds in store, and how they can maximise their chances of success.
This is liberating, high-value work. Accountants can put their expertise to good use and transition into becoming trusted business advisors.
Firms of the future will use technology to deliver powerful advisory services. They’ll use their technology to reach beyond automation to support real-time activation and predictive intelligence, and be well-placed to help clients grow their business the right way. In fact, according to our latest report, ‘Technology Trends in Accounting 2021’, 55% of firms expect advisory services to be their biggest revenue earner in just five years’ time.
That’s interesting and ambitious but is it possible? Despite this clarity of purpose in the profession only 14% say that advisory services are already their biggest revenue earner. Let’s dig into why this gap exists — and most importantly, how firms can use the two ‘A’s to close this gap: access and automation.
It’s all about access to data
Accountants might be geniuses, but they’re not genies. It’s impossible to provide advisory services unless firms know everything about their clients’ performance. They need access to crucial financial data – the historic and real-time. This data is the foundation on which insights are built and show what’s really going on behind closed doors.
54% of respondents of our recent survey stated that they have “access to data and insights that enable me to deliver advisory services for my clients”. But there’s a significant difference between being able to provide generic advisory services and really diving deep into how a client is managing their business — and spotting what needs to change. This also means that 46% don’t have the data they need of course.
Compiling an annual set of accounts or working papers will certainly reveal the broad brushstrokes. But accountants can only demonstrate their true value by diving into the detail. That’s why they need access to all financial data — for instance, data hidden in other systems. Yet only 35% of respondents can access financial data in other systems that their clients use for business management.
Imagine your firm sees that a client’s wage bill is far higher than other industry competitors with a similar headcount. On the face of it, it’d be easy to tell them that they need to reduce their headcount. This could well be right, but it might also be too simplistic a piece of advice.
You decide to check out their salary and bonus structure. Suddenly it hits you: their loyalty program, where they increase employees’ salaries by X% for every Y years they stay at the company, isn’t working. They’re retaining employees but the ones who have been there for years actually become less productive over time.
So yes, this particular company might need to reduce their headcount or cost base — but if they do then they should make sure to focus on longstanding employees who have actually been underperforming. Or perhaps they can keep the same headcount but scrap the loyalty bonus. Not only will this reduce their expenditure, but it also safeguards employees from becoming complacent, safe in the knowledge that time served — rather than value provided — will be the key to their next pay increase.
These are the types of next-level insights that accountants can offer their clients, so long as they have access to all financial data.
Automation has its own role to play in advisory
Much of the discussion around compliance versus advisory work has lumped accountants in two separate buckets. It has also constrained the benefit of automation. In one bucket, there’s compliance (and the traditional focus for automation): data-heavy and repetitive tasks that need to be completed without errors. And in the other bucket, advisors: experienced accountants whose expertise and insight can be put to good use when advising clients.
Only, there’s a significant crossover benefit from automation. This is a simplistic view.
It’s true that automation makes compliance work fast, easy, consistent and accurate. That means you can manage more clients and faster. But it also means that the time typically consumed by this activity can be reinvested in client advisory. Not just by the most senior and experienced members of the firm but potentially by all that work with clients.
Accountants can’t focus on everything at once. If they’re busy dealing with one client, they’re not going to notice if another client suddenly makes a bold (and perhaps unwise) financial decision. Accountants are well-placed to provide key financial advice — but this doesn’t mean they can stay on top of everything at all times.
Advisory services are still by and large manual, ad hoc processes. Accountants have to be on the ball at all times in the hope of noticing key insights. If they catch them, they can then provide their clients with the advice and guidance they need. But not all insights will be noticed — meaning not all clients will receive the crucial advice that they require.
This is where automated notifications come in. What if you could automatically be notified any time a client suddenly ends up in the red, makes a large-scale investment, reaches a key development threshold or their cash flow suddenly dries up?
If you could, you’d be able to provide all your clients with the maximum value possible. They’d know that you’re there at all times, monitoring their finances and ready to offer up counsel when needed. Unfortunately, a mere 25% of respondents can create automated alerts or reports from their clients’ data — this is just a 3% increase from last year’s survey.
There’s little point in recognising the value of automation for compliance and manual reporting tasks but then ignoring its potential when it comes to high-value advisory work. Clients are increasingly looking for firms that use technology to glimpse into the future and provide proactive business intelligence. By setting up something as obvious as automated alerts, you’re ensuring that no key insights will go unmissed.
The clock is ticking
If you’re like 55% of firms, you predict — and likely hope — that advisory services will be your main revenue driver in five years’ time. But predictions and hope matter for little unless you take action.
You can’t be that indispensable financial advisor if you lack access to real-time data across your client portfolio. It’s not enough to simply use the data that they hand over at the end of each financial year-end. You need to be able to see the ins and outs of their organisation at all times. Whenever money is spent or received, you need to know about it.
Once you’ve gained suitable access, you then need to move to step 2: automation. Use automated alerts to make sure that no key insights go unnoticed. Stay in the know at all times and provide critical advice as soon as it’s needed.
If you do, you’ll be well on your way to becoming an advisory-led firm and all your work on compliance will only strengthen the quality of your advice.
To find out more about the biggest changes to have affected the accounting industry in the last 12 months, download ‘Technology Trends in Accounting 2021’ today.