Accounting

Enhance, upsell or replace? The three models of advisory for accounting firms

Published

9 months ago

April 7, 2024

As the accounting profession trends towards commoditization and automation, you may have considered how to differentiate your practice from your competitors. Transitioning your practice into an advisory firm is probably near the top of the list — and if it’s not, it should be. However, before you pivot, you should consider the type of advisory firm that you want to have.

At its core, advisory services are a revenue stream that you sell to business owner clients. The main offering is your expertise as a trusted advisor who can guide them toward owning a growing and successful business.

Advisory services are also referred to as outsourced or fractional CFO services. They are essentially a consulting service, but, unlike most business coaches and consultants, you are relying on numbers to drive your advice.

From your clients’ standpoint, they would prefer the financial professional in their lives (their accountant) to be the one giving them advice.

Why?

Because they already trust you.
They know that you know their numbers (an area where they are usually insecure).
They know that businesses live, or die based on a number (cash flow).

For these reasons, business owners prefer their accountant to be their advisor more than simply ensuring that they are compliant when it comes to taxes or ongoing bookkeeping and accounting work.
The three types of advisory services are:

Type 1: Advisory as an enhancement;
Type 2: Advisory as an upsell; and,
Type 3: Advisory as a replacement.

In this article, we’ll look at “Advisory as an enhancement.” This type of firm still offers tax, accounting and/or bookkeeping services; however, they enhance their existing services by equipping their team to offer advisory services.

The team members are performing the actual tax, accounting or bookkeeping work and are also trained in performing advisory services.

The practice owner will either train existing staff to be the advisors, or they themselves will delegate all tax, accounting or bookkeeping work to junior staff while they become the firm’s main advisor.

The idea is that the existing tax, accounting or bookkeeping work is still being performed as normal; however, from a clients’ perspective, they will receive an extra deliverable — namely, a monthly strategy session where their trusted accountant is reviewing their numbers to ensure that they are on the right track towards hitting certain goals as well as giving advice on what areas in their business to focus on to have a growing and successful business.

From a client’s perspective, they will get the best of both worlds. They can be confident that their tax, accounting or bookkeeping work is being handled by someone they trust and they are receiving advice from the same trusted financial professional on what to do to have a growing and successful business.

From your (the practice owners’) standpoint, a benefit of having a firm that offers “Advisory as an enhancement” is that you will differentiate yourself from your competitors who merely offer a commoditized version of a tax, accounting, or bookkeeping service. You will be seen, in the eyes of existing and future clients, as an accountant who is also an advisor and will be able to provide more than compliance or transactional work.

Another benefit of having a firm that offers “Advisory as an enhancement” is that you will be able to retain clients longer, which will allow your firm to spend less time on marketing and selling and more time to service additional clients.

Since you are enhancing your existing compliance and transactional services in a way that appeals to your clients, you’ll have a much easier time demonstrating your value proposition because you can clearly show why you are different from most other accountants.

“Advisory as an enhancement” firms have the advantage of fulfilling both wants for their clients as a one-stop shop. Yet there are other approaches to selling advisory services that could be a better fit for you and your firm, including the “Advisory as an upsell” strategy, which can greatly increase your revenue and which we will cover in the next article in this series.

Look for the next two articles in this series in the coming weeks.

Accounting

M&A roundup: From Minnesota to Memphis

Published

3 hours ago

December 18, 2024

Business Finance News

DSB Rock Island merges with fellow Minnesota firm Meuwissen, Flygare, Kadrlik and Associates; Smith + Howard adds Richmond-based consultancy Fahrenheit Advisors; Reynolds, Bone & Griesbeck adds fellow Memphis firm Scott and Pohlman; and GBQ expands its credit union practice with Lillie & Co.

Accounting

Major AI players back Basis with $34 million series A

Published

6 hours ago

December 18, 2024

Business Finance News

AI-specialized accounting platform company Basis has raised $34 million in Series A funding to bolster its autonomous AI agent product, with an investment round that was led by Keith Rabois from Khosla Ventures, alongside Nat Friedman and Daniel Gross, along with additional contributions from heavy hitters like Larry Summers, former US Secretary of Treasury, Jeff Dean, the chief scientist behind Google DeepMind, Noam Brown, the lead researcher for OpenAI’s o1 model, and Jack Altman, former CEO of Lattice and the brother of OpenAI head Sam Altman, and many others.

“We’re putting every dollar back into the platform and team – to invest in ML research, to continue to bring the most cutting-edge AI to accounting firms, and to open additional slots for firms,” said Matt Harpe, Basis co-founder, in an email.

Basis, which emerged from stealth last year with $3.8 million in funding, uses generative AI and language models built specifically for extremely high accounting performance to perform various workflows such as entering transactions and double-checking data accuracy. This is in contrast to things like chatbots which can only read data and produce text. The product also integrates with popular ledger systems like Intuit’s QuickBooks and Xero as well as AP systems such as Bill.com and file systems such as SharePoint or Box. It is already in use by firms such as Top 100 firm Wiss and Co., which partnered with Basis earlier this year. The product was compared to having a junior accountant, which Basis said allows human staff accountants to spend their time reviewing the AI agent’s work, rather than doing the work manually.

“This technology is a new paradigm for accounting. Learning to work with your computer, not just on it, might be an even bigger shift than going from paper to digital. Over the last year, as accountants have experienced what’s possible with the most cutting-edge AI, we’ve seen more and more firms decide that AI must become the top strategic priority. We’re excited to continue to equip firms with AI that actually works,” said Mitch Troyanovsky, Basis co-founder in an email.

Basis sells exclusively to accountants versus selling directly to businesses or building ‘new’ accounting firms, and is tailored specifically for use by expert accountants. Basis focuses on building agents that understand, and can operate on, accounting broadly instead of isolating only a specific task. This allows Basis to work across clients and workflows without losing context, and to quickly take on new workflows, said Basis. Accountants onboard Basis to engagements and assign it core workflows for one-time or ongoing execution

“Accounting is a massive industry, and Basis is clearly leading on the AI side. This is one of the few AI agents that’s already deployed and working. Matt and Mitch have put together the best NYC team in the applied AI space,” said Vinod Khosla, founder of Khosla Ventures, who also co-founded Sun Microsystems.

Accounting

Platform Accounting Group adds Illinois and Indiana firms

Published

7 hours ago

December 18, 2024

Business Finance News

Platform Accounting Group has added two more accounting firms, based in Indiana and Illinois, bringing the total firms that have joined the Utah-based company this year to 12.

Platform Accounting Group, founded in 2015, invests in and acquires small accounting firms, and announced it received an $85 million minority funding round to support its expansion in February.

Midwest Advisors, formerly known as Philip+Rae & Associates, is headquartered in Naperville, Illinois, and has provided fractional CFO roles, controllership and back-office accounting operations for more than 30 years. Additionally, the firm offers tax preparation, accounting and auditing, financial planning, estate planning, payroll services, small business consulting, bookkeeping, back-office accounting, small business consulting and more.

In operation for 30 years, Indianapolis-based Crossroads Advisors, formerly Peachin Schwartz + Weingardt, serves high-net-worth individuals, closely-held businesses and not-for-profit organizations. The firm supports clients throughout their life cycle, from the startup phase to mature businesses seeking an exit or succession strategy.

“Because of my experience and time there, I deeply value the tight-knit community and small-town feel of the Midwest,” said Reyes Florez, CEO of Platform Accounting Group, in a statement. “We are thrilled these firms, who like us, prioritize relationships and roots, are joining our group and will be able to invest even further in their clients and communities.”

Platform Accounting Group has nearly 1,000 employees across 12 states and expects to add a few more accounting firms in January, the company said.