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‘Advisory as a replacement’ can dramatically scale your accounting practice

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The rapid changes in the accounting profession demand that firms must also evolve. Bookkeeping, tax and compliance work are being commoditized at such a rate that it is unsustainable for practice owners to make real money, much less scale their practice if they retain this same business model. 

One  solution that practice owners are turning to is the “advisory as a replacement strategy.” It’s a business model where you, in essence, replace your existing services (e.g., tax, bookkeeping, accounting)with a focus solely on advisory services.

In two previous articles about the three most popular business models based on advisory services, we  addressed “advisory as an enhancement” (where you are differentiating your firm’s services from competitors by enhancing them with an advisory service) and “advisory as an upsell” (where you upsell existing clients to a higher-margin service). But advisory as a replacement is the most radical and transformative of all options.

At their core, advisory services are essentially consulting services offered by trusted financial professionals to guide their clients toward having a growing and successful business. Based on the trust and relationship between a client and their accountant/bookkeeper, advisory services use the financial data of a business to provide powerful and actionable advice. 

Unlike the other two business models, advisory as a replacement requires you to take the biggest leap. You have to cut the cord tethering you to the compliance work of old, and completely change the way you do business.

Here’s what that looks like, and why it may be a great option for someone who wants to get out of compliance or transactional work altogether.

Advisory as a replacement

This is a firm that has completely replaced their compliance services and has positioned themselves as a highly-sought-after outsourced advisor.

Owners of an advisory as a replacement firm usually spend half their time servicing clients and half their time finding new clients, assuming their firm is not already at capacity. The firm owner is usually the head advisor, and also spends time training their team in advisory services.  

This type of firm will make all of its revenue by offering advisory services. If they have any clients needing tax and/or bookkeeping, they usually have a small network of service providers whom they’ll refer business to, or white-label their services.

From a client’s perspective, they get to work with a firm of professionals who focus exclusively on advisory services. They can trust that they are receiving the best possible advice from a team that has vetted the numbers and forecasted all possible outcomes.

From your perspective, your firm becomes a specialty practice. You have risen above compliance and now offer services of much higher quality and value that are much higher-margin.

You no longer have to worry about dealing with demanding clients and low-margin work. 

You also have the opportunity to niche your firm even further. By focusing exclusively on a single industry, you can become the go-to firm for advisory services within a certain sector, which only further increases the fees you can charge.

The ultimate goal is to become a firm that is sought out by clients, eventually reaching the point where marketing and searching for new clients is something of the past. They will come to you — and you may even have to turn some away.

There are further benefits to you as well, depending on the size and reach you desire for your business. It is equally valid to want to remain a small boutique firm that services only a few high-value clients but leaves you with a plethora of free time. 

Advisory as a replacement requires the largest change for you and your firm. It also offers the most upside. Many firms will eventually become a “replacement” firm but only after going through stages of “upselling” or “enhancing” with advisory services. 

However, advisory as a replacement should be your goal as a firm owner. It requires facing the largest challenges, but it also offers the biggest rewards.

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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