Traditional accounting firms are not immune to the wave of digital disruption that is permeating the wider professional services space. As more SMEs make use of cloud-based accounting services such as MYOB and Xero, accounting firms must start to align with new, more strategic revenue models.
With clients increasingly moving to DIY solutions for their day-to-day accounting needs, firms face a challenge as much of their transactional, albeit lower-value type of work, is drying up. However, the flipside of this development is a significant opportunity for accounting firms who are willing to reevaluate their business models.
Technology advancements mean that financial data, like other types of information, is now available in real-time, not just once or twice a year. So instead of providing a 6-monthly or annual service, firms can now deliver higher levels of value by taking on more of a strategic role with their clients, in some cases moving to a partnership or advisory type of arrangement.
A cornerstone of this new way of working is transitioning to a monthly, retainer type model, or “Accounting as a Service” (AaaS) – very similar to the way much of the IT industry operates. While “billable hours” will still play a role, there will be a greater focus on agreed deliverables with the risk more equally shared between accounting service provider and client.
- The advantage to accounting firms is a less lumpy, more predictable revenue stream, as well as the opportunity to develop an expanded suite of services as you consolidate your role as a trusted advisor; for example, joining the board or advisory council of your client organisation. Or you might be involved in more advanced commercial modelling or business case building as your clients grow, expand or consider new business lines or strategies.
- From a client’s perspective, they will benefit from greater budgeting certainty, access to subject matter experts on an ongoing basis, and develop relationships with specialists who know their business on a much deeper level.
A new business model presents some exciting options for many firms, however the reality is that not all your clients will be ready, or will want to go on this journey with you. Some will prefer to stay with things as they are while, for others, it may not be the right time. Some clients may need help with exploring the new ways to access your services, while others will be already moving with you.
It’s probably useful to apply the 80/20 rule to the change, with say 20% of your most valuable clients being ready to make the shift today, a number that is set to grow as the new model becomes more mainstream. Of course, your ‘most valuable’ clients may not necessarily be those who spend the most on your services today, but could be those you identify as having the right strategy and mindset for growth – the ones, like you, who are focusing on the future.
A number of your clients may already have other advisors who they retain on a regular basis or may be considering moving down this path – with IT service providers or legal advisors for example.
So how do you make the shift?
Transitioning to a new service model requires a fundamental change in thinking as a business, and an understanding that implementing this change will not happen overnight. As you move away from focusing on transactional work, the way that you resource and structure your business may also need to change – especially as you evolve and grow your service offering.
In addition, as your partners and lead consultants will have more face-to-face client time, they will need to be supported by the right processes and systems to make their work as streamlined as possible. This may require a different skillset in the back-office and/or a restructure of your current support processes.
To get started:
- Take time to scope and define your new market offer and your unique positioning but don’t expect it to get it 100% right the first time. To refer again to a common way of working in the IT industry, think “agile” and make a series of iterations along the way, rather than trying to get it perfectly right upfront.
- Then start having conversations with those of your clients who will be ready for the change, and create a plan to canvas and educate the rest of your client base. Early adopters of your new model are often great case studies that can be used when speaking with these clients.
There’s no stopping change
It’s only a matter of time before this wave of change will sweep through the accounting industry. You may have noticed some of your competitors advancing along this path or maybe some clients have already spoken to you about it. In fact, some of the Big 4 accounting firms are recognising the opportunity in the mid-market and are potentially moving toward targeting your customers – so you can’t afford to stand still.
As the conversation shifts away from low-value services, price also becomes less of an issue. The traditional cost barrier of using a Big 4 is becoming less important because it’s now about providing and generating value on an ongoing basis.
Make sure that you remain a part of the conversation.
Learning from a shared experience
Correct Solutions is both a provider and consumer of managed services similar to the ones described here. We provide IT on a retainer, ‘as a service model’ to SME organisations (including a number of accounting firms) and retain business advisors on a similar model – including legal and accounting consultants, among others.
We believe in sharing knowledge and experience with the businesses we work with – if you would like to speak to us about our experience on both sides of the equation, please get in touch.