Firms of the Future–Building Advisory Services
There is currently a general consensus that SMPs need to re-evaluate the services that they are providing, which may involve an eventual change to their current business model. Hence, it could be necessary for SMPs to shift their mindset and seriously consider building on their traditional compliance services with business advisory services focusing on foresight and other predictive analysis.
Interestingly, 45% of respondents to the 2016 Global SMP Survey seemed to support this direction by stating that they anticipated revenue to increase in 2017 for advisory and consulting services – the highest out of all four service lines. It was 44% for accounting, compilation, and other non-assurance/related services; 42% for tax and 38% for audit and assurance services.
IFAC’s literature review on The Role of SMPs in Providing Business Support to SMEs—New Evidence explored both the supply and demand for business support from SMEs and highlights the associated potential for future revenue growth from the provision of business advisory services. Research indicates that, irrespective of jurisdiction, accountants, and especially SMPs, continue to be the preferred advisors to SMEs. SMPs have an in-depth knowledge and understanding of their SME clients and are therefore well-positioned to provide a range of other services. They also have a unique advantage because of their interactions which are often long-term and centered on personal relationships that are based on trust and reliable communication.
83% of the 2016 SMP Survey respondents stated that they already provided some form of business advisory and consulting services. The most commonly offered services included:
- 48% provide Corporate Advisory (Financing, Mergers, Due Diligence, Valuations, Legal);
- 46% offer Management Accounting (Planning, Performance, Risk Management, and Internal Control);
- 30% advise on Human Resources Policies and Procedures/ Employment Regulations (Hiring and Firing, Employee Contracts, Sick Pay, Remuneration Structures); and
- 29% support Business Development (Strategy, Marketing, Benchmarking, Budgeting).
The IFAC SMP Committee has recently focused on how SMPs can build business advisory and consultancy services. During a recent SMPC meeting, representatives from around the world shared their own experiences with a view to better prepare firms that are ready to diversify into advisory and consulting service.
What services will small- and medium-sized entities (SMEs) require in the future?
Future oriented services such as budgeting, cash flow planning, determining market pricing on products and services offered by SMEs and a business ‘health-check’ are likely to be highly sought after. Furthermore, a firm that can house all compliance and advisory and consulting services in a single location, or hub, will be in demand as the SMEs will not have to move around to get the full range of services that they need. Hence, the attraction of services being provided through the cloud cannot be over-stated.
With SMEs operating on a more global basis than ever before and relying increasingly on computing power, SMPs that can operate across multiple languages and cultures and provide IT consulting and cyber-security services will be important business partners to their clients.
How can SMPs remain relevant to tomorrow’s SMEs?
The traditional SMP firm model may need to change. Specialization in a niche market offering could be a way forward. This could be a field where the firm has a high degree of industry and/ or technical understanding. It should be large enough to justify the expenditure on marketing and if necessary obtaining specialist knowledge. Focusing on developing specialisms may also open up new client opportunities as other firms may want specialist expertise.
Firms should consider how they approach collaboration, networking and alliances with other professionals and practices. SMPs may have a limited ability to provide a full range of services. It is therefore important to become part of a high-quality referral network, formal or otherwise informal. Some SMPs are already very active users of a trusted referral network. Successful firms have developed networks and cooperate with other accountants and other professionals such as lawyers, corporate financial advisers, chartered secretaries, qualified valuers etc.
Joining a network, association or alliance could also be explored. In the 2015 IFAC Global SMP Survey 28% were members of a network (11%), association (10%), or alliance (7%). An additional 24% indicated their practice was considering joining one. Key benefits indicated included broadening client service offerings, retaining clients expanding in size and/ or operations and strong networking opportunities. There is also a need to look at the value proposition as part of the transition into offering of advisory and consulting services.
As SMEs become more and more connected in the digital age, so too must firms evolve. Leveraging technology to manage costs and offer new services will need to be a priority. Investment in these areas has to be planned and executed. Automation should result in more time being available for data analysis, insights and proactive ‘real-time’ value-added services.
Trusted Business Advisor
SMPs need to remain relevant by understanding and listening to their clients’ needs, then utilizing their broad experience and expertise to help them accomplish their goals. The accountant’s role (as adviser, mentor, and coach) is to work as a ‘business partner’. This new role requires flexibility and an understanding of the context and cultural environment of the client. Practitioners will need to create an even more regular and ongoing communication with their clients and build the relationships.
Staff’s skill sets will need to be refreshed. Employees are expected to be more outward facing with strong communication skills and could require training on how to deliver valuable business insights. The traditional recruitment routes may no longer be efficient or viable as the skills required are rapidly changing. Hence, new ways to attract talent will be needed. A Gateway article ‘Searching for Stars: Youth & Talent Management’ explores this further.
How can the firms initiate change?
As part of the process to initiate change, SMPs must first evaluate their existing client’s profile. For example, are they expanding and, thus, need more support? Secondly, existing clients can be asked to rate their satisfaction on the firm’s past performance. This feedback enables the firm to know what areas they are doing well and what could be their inherent strength. In undertaking client profiling, coupled with internal insights, some past services that were delivered for free may eventually be billable as advisory in the future. The key here is to be confident that these services actually add value to the client.
SMPs need to focus on branding and communicating both to existing and new clients the full range of services that can be provided. One mechanism is to utilize the firms’ social media presence. This can help with promotion and the dissemination of information to clients, as well as attracting talent. A previous article Transforming Challenges into Opportunities: Competition also highlighted 7 tips to help practitioners lay the groundwork for a business advisory practice.
Yes, building advisory and consultancy services can be an amazing journey for staff, partners and clients. But, it is important for SMPs to take some time out to reflect on the firm’s strategy. Developing a strategic business plan with the necessary buy-in from staff and partners is paramount. It is critical to have a clear vision for the future and a roadmap for how to get there.
The Global Knowledge Gateway includes a number of articles and videos on these topics:
- What Makes a Successful Advisory Accounting Firms?
- Tomorrow’s Firm-Think Big, Think Advisory
- SMPs can Add Value with New Services
- The Future of Small Practices & Service Offerings
- Relevant Service Offerings – Practice of the Future
- New Services for Accounting Firms: It’s about Reliance, Not Compliance
- Excelling in the New Business Area
- 5 Steps to Being an Anticipatory Accountant
We welcome SMPs and Professional Accountancy Organizations (PAOs) to use and share these resources and we look forward to hearing your success story in the years to come.