Are American CPA Firms Truly Providing Value Added Services?

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:

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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:

Focus3  www.focus3.biz

Mentor Plus  www.mentorplus.com

Mindshop  www.mindshop.com

Principa  www.principa.net

RAN.ONE  www.ranone.com