Technology is Driving Future Services for CPA Firms

Clients and potential clients of your firm need compliance work, but if you think that will impress them or earn their loyalty, think again!

What they really want is a plethora of services from their trusted advisor. But how do firms get to that level when they are bogged down in compliance and staffing? With automated technology!

Market-shifting technological strides combined with workplace changes that have occurred as a result of COVID-19 have made cloud migration and adoption of technology the cornerstone of any future-ready CPA firm. This evolution has forced the field to consider new models of doing business and pressed the question of what business should look like. Hint: it is all about being advisory.

Solving for Capacity to Grow Advisory

While many firms know they need to be more advisory in nature, they struggle to do so. Most CPA firms have the experience, client-based financial insight, and industry knowledge that it takes to deliver both niche advisory insight and broad-strokes tax advice. Sometimes they struggle because there is a lack of understanding around what being advisory means. More often, it is because they do not have the time in their already full days to sit back and think about the bigger picture for their clients. Capacity is the major handicap.

Capacity is constricted by the number of workable hours in a day. It is the biggest limiting factor impacting a firm’s ability to grow revenue. A typical accountant has, on average, 2,000 productive hours per year available. If she spends 50 percent of her time on bookkeeping, she only has 1,000 hours available for advisory and higher-level services in addition to all administrative, training, marketing, and business development responsibilities. Therefore, in order to grow revenue, a firm has to hire additional staff to expand the number of clients they can support. A shortage of available talent and the sheer cost and time of training make hiring a poor option for revenue growth.

The answer to this dilemma is automation stemming from artificial intelligence (AI), more specifically machine learning (ML), in the form of a bot. When pre-accounting tasks, like transaction identification, are automated, accountants can get back 50 to 70 percent of the time they spend on bookkeeping functions. This newfound time can be used to seize the full business potential of their organization.

A Renewed Suite of Services

There are likely a number of advisory services that your firm can offer today including estate planning, tax planning, budgeting, cash flow analysis, business valuation, and wealth management to name a few. It was always your firm’s intention to cross sell these services to existing clients to ensure you are helping them with the issues that matter most to them…and to keep your competitors out. Gained capacity means more time to actually provide these services.

In addition to growing advisory services, firms can get more data with which they can advise existing clients. As a result of using ML, firms have access to pools of data and dashboards where accountants can glean tremendous insights to help clients and to pursue others like them. You now have the ability to build new advisory services stemming from the additional data you have at your fingertips.

Kiss the Billable Hour Good-Bye

As a firm increases reliance on ML-supported technology, it also needs to rethink billing processes. The billable hour really does not apply when you have a bot doing your pre-accounting. How can you bill for bot’s time? You can’t.

Many firms get caught up in the fact that their costs when utilizing bots are significantly lower than before, which is why cost-plus pricing no longer works as a blueprint. Rather, firms need to bill the advisory piece of accounting separately and distinctly from the automated or data-entry based labor. When pricing engagements, firms need to create a core offering with a fixed rate and then a custom offering for advisory services.

Better Identify Your Targets

Shifts in practice management as a result of increased technology are not limited to services and billing. Firms will also have an additional layer of accountability and efficiency as a result of real-time dashboards and workflows. This layer of information demonstrates which areas of a firm are better performing than others. This kind of detail can help a firm proactively determine who their client base should be based on firm strengths. The days of “whoever walks through the door is the ideal client” are long gone. Firms have the power to decide who they best service and focus on that niche audience.

Added services layered on top of compliance and automatable tasks give firms the option to expand their demographic through expansive advisory services. Bot-enabled technology primes a firm for a future of growth because bots are infinitely replicable, no added headcount necessary. That is what allows CPAs to be the trusted advisors their clients are looking for.