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Accounting

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

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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.

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Accounting

How to Reconcile Cash Flow Statements with Bookkeeping Records

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Reconcile Cash Flow Statements with Bookkeeping Records

In the world of financial management, reconciling cash flow statements with bookkeeping records is an essential process that ensures financial accuracy, transparency, and alignment. Far from being a routine task, this practice validates financial reports and offers deep insights into an organization’s financial health. Let’s explore the steps and strategies involved in this critical reconciliation process.

Understanding the Reconciliation Process

At its heart, reconciling cash flow statements involves comparing them with the general ledger and bank statements. This three-way alignment ensures that all cash movements are accurately recorded and categorized. By identifying discrepancies, businesses can maintain trust in their financial data and make more informed decisions.

Step-by-Step Reconciliation

A systematic approach to reconciliation is vital. Start by confirming the opening and closing cash balances in the cash flow statement against the corresponding balances in the ledger and bank statements. Next, work through the three sections of the cash flow statement: operating, investing, and financing activities. This methodical process ensures every transaction is accounted for and helps isolate variances quickly.

Leveraging Financial Software for Automation

Advanced financial software can significantly simplify the reconciliation process. Many platforms now include automated tools that flag discrepancies, generate exception reports, and streamline adjustments. These technologies not only save time but also reduce the likelihood of human error, enabling finance professionals to focus on analysis and decision-making.

Addressing Non-Cash Transactions

Non-cash transactions such as depreciation, amortization, and unrealized gains or losses require special attention. While these items do not directly affect cash balances, they are integral to accurate financial reporting. Ensuring these transactions are correctly recorded in the cash flow statement without artificially altering cash totals is crucial for maintaining transparency.

Maintaining Accurate Timing

Timing discrepancies are a common source of variance during reconciliation. To prevent mismatches, ensure that all transactions are recorded in the correct accounting period. This practice not only avoids artificial discrepancies but also provides a clear and accurate picture of cash flow for the designated timeframe.

Documenting the Reconciliation Process

Thorough documentation is a cornerstone of successful reconciliation. Every adjustment made during the process should be explained and supported by detailed notes. This practice creates a clear audit trail, simplifies future reconciliations, and ensures transparency during external audits.

Benefits of Regular Reconciliation

Frequent reconciliation offers numerous advantages. It ensures that financial statements remain accurate and compliant with regulatory standards, strengthens internal controls, and enhances decision-making capabilities. Moreover, regular reviews can uncover inefficiencies, detect fraud, and provide early warnings about potential cash flow challenges.

Conclusion

Reconciling cash flow statements with bookkeeping records is more than a compliance requirement—it is a strategic process that safeguards financial integrity and supports sound decision-making. By adopting a structured approach, leveraging technology, and paying close attention to non-cash transactions and timing, businesses can achieve financial alignment and transparency.

For finance professionals and business leaders, mastering this process is key to maintaining accurate financial records, building stakeholder trust, and driving sustainable growth in today’s competitive business environment.

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Accounting

Gig workers unaware of lower Form 1099-K threshold

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Millions more taxpayers will be receiving the Form 1099-K in the mail this year for the first time if they were paid $5,000 or more last year through a service such as Venmo, PayPal, Cash App, StubHub, Etsy and Airbnb, and most won’t be expecting it.

New research from tax automation provider Avalara found 61% of gig economy workers are unaware of recently lowered 1099-K reporting thresholds aimed at capturing unreported online sales income, Nearly three-fourths (73%) of the gig workers surveyed don’t know the payment threshold above which they would receive a Form 1099-K and be required to file an IRS tax return.

Gig workers will be looking for advice from a tax preparer. Over 20% of the survey respondents plan to pay a tax professional for the first time as a result of 1099-K reporting changes and complexity.

Last year, the IRS extended its transition relief for the new Form 1099-K information reporting threshold, setting it at $5,000 for 2024 and $2,500 in 2025 before reaching the statutory level of $600 in 2026 and thereafter. The previous threshold was $20,000 in gross proceeds and over 200 transactions, but it was lowered to $600 and any number of transactions by the American Rescue Plan Act of 2021. While there have been a number of bills introduced in Congress to raise the threshold, none of them has passed so far, prompting the IRS to repeatedly delay and plan to phase in the requirement, raising the ire of some lawmakers who have complained the IRS doesn’t have that authority.

The Avalara survey found that while 61% of respondents claim to be knowledgeable about Form 1099-K and its purpose, an equal proportion of 61% don’t know the 1099-K reporting threshold is lower this year and subsequent tax years. For subsequent tax seasons on the way to a $600 1099-K reporting threshold, only 18% surveyed could identify the correct threshold for 2026 and the final $600 reporting threshold for the 2027 tax season.

The respondents offered various predictions for how they would fare from the new income reporting requirements: 37% believe their business will be profitable following tax season, 36% responded they’ll likely break even, and 17% predict they’ll lose money due to the IRS changes.

More than one-third (37%) of gig workers surveyed said this is the first year they’re receiving a 1099-K, so 21% of respondents plan to engage a tax professional for the first time. Another factor in seeking professional advice could be the number of gigs these workers are juggling: 75% of survey respondents have two or more sources of income, 45% have three or more, and 16% have four or more. Accountants and bookkeepers will be essential to helping 1099-K newbies sort out the reporting and tax implications of multiple income sources.

The survey also indicated how respondents plan to move forward after tax season. To avoid crossing the $2,500 1099-K threshold next year, over 20% of workers expect to be quitting one or more of their gig economy jobs and 19% are changing their earnings strategy, while 15% will be using tax software for the first time. Another 20% intend to take on more under-the-table work, and 15% will switch to Zelle to avoid IRS reporting rules associated with PayPal and Venmo. Some 40% of those surveyed say they’ll take on one or more additional gig economy jobs. And 16% of survey respondents said they will be leaving the gig economy altogether and pursuing different work.

“Our survey data reveals the urgent need for basic knowledge and orderly direction on the part of gig economy workers to determine how best to comply with the lowered 1099-K digital payments threshold,” said Avalara general manager Kael Kelly in a statement Thursday. “This scrappy segment of our economy demonstrates DIY drive in creating a living from engaging in multiple jobs, non-traditional work, and sometimes essential services that support how consumers want to buy and receive goods and services – and they’re now faced with the additional challenge of sorting out new, last-minute tax regulations and reporting requirements. Businesses of all sizes, including independent workers, need a fast, robust, easy, and affordable way to e-file 1099 forms, and that capability is within reach through modern cloud software.”  

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Accounting

ACCA foresees global economic growth in 2025

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The global economy is poised for “reasonable, but not particularly exciting” growth this year, yet uncertainties abound, according to a new report from the Association of Chartered Certified Accountants.

The report, released Thursday, is the second edition of the ACCA’s annual economic outlook. 

“The global economy should continue to grow at a reasonable, but not particularly exciting pace in 2025,” said ACCA chief economist Jonathan Ashworth in the report. “But it is a world marked by significant uncertainty. The risks are predominantly on the downside, amid potential changes in U.S. trade policy, a challenging geopolitical backdrop, political uncertainty and rising government bond yields.”

Economist Charles Goodhart suggested the U,S. economy may perform strongly in 2025, but Europe and the U.K. could struggle. Goodhart believes inflation could fall in the short run but will probably rebound in 2026 and 2027. 

“My guess, on which I would not place a great deal of weight, is that the U.S. economy will do very well in 2025,” he said. “Both Europe and the U.K. will do relatively badly. Not only will higher U.S. import tariffs be a problem for Europe, but higher U.S. tariffs on imports from China will probably mean that China will want to export more of its goods to Europe, at a time when Germany’s business model is already under extreme stress.”

The emergence of AI agents promises new productivity breakthroughs, but hybrid solutions integrating other technologies will be crucial for sustained value, according to the report.

The ACCA interviewed seven CFOs from across the globe in various sectors for the report. While the interviewees did not appear to be expecting a notable slowing in global growth in 2025, there was some caution given the significant global uncertainty, including that related to the policies of President Trump. 

“Technology, particularly AI, continues to be a priority, with businesses recognising both its potential and disruptive challenges,” said the report. “A wide range of risks were highlighted, including inflation (and changes in the price of important commodities), policy changes in large economies, cybersecurity, exchange rate movements, supply chains, climate change, social tensions, geopolitics, and fast-changing consumer habits. The latter two were also cited as opportunities. A recurring theme among  CFOs is the need for agility, innovation and resilience in navigating an uncertain economic landscape.” 

The ACCA also releases a quarterly Global Economic Conditions Survey in conjunction with the Institute of Management Accountants. Most recently in the fourth quarter of last year, they found economic confidence growing among accountants in the U.S., but plummeting globally.

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