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The path to profitability for accounting firms: Upsell to advisory

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All accounting firms want to be more profitable. But how?

How can accounting firms become more profitable when the commoditization of compliance work is forcing fees lower and lower?

Well, to become more profitable firm owners need to look to new services. Specifically, firm owners need a new service that has higher margins, cannot be automated, is in demand, and is something that a financial professional is uniquely suited to provide.

The perfect answer? Advisory services.

Simply put, advisory services (sometimes referred to as outsourced or fractional CFO services) are a consulting service in which you use your expertise and knowledge to help guide your clients to create a growing and more profitable business. Crucially, advisory services differ from business coaching in two major ways:

  • First, you rely on the financial data of your clients to drive your advice.
  • Second, you’re already a trusted financial professional. From the perspective of your clients, you’re ideally suited to provide the advice they desperately want.

In a previous article, I introduced the three most popular types of advisory services and went into detail on how you could add advisory services as an enhancement to your firm. In this article, you’ll learn about the next option: advisory as an upsell.
 
Advisory as an upsell

A firm using the upsell model of advisory services offers tax, accounting and/or bookkeeping services. However, it has the explicit goal of upselling its clients to higher-margin advisory services.

These firms will either train existing staff to be advisors or they’ll delegate tax and/or bookkeeping work to lower-level staff, and more senior staff will handle the advisory part of the service. The firm’s owner will usually become the main advisor.

Firms that upsell their existing tax, bookkeeping or accounting clients to advisory clients will see an improvement in their profitability because of the simple fact that advisory services have much higher margins than traditional transactional or compliance work.

In the minds of your clients, advisory services are more valued because your clients want (not just need) someone like you (whom they already trust) to guide them on having a growing and successful business.

This is because the firm’s clients already trust their accountant and, once advisory services are explained in detail, clients will be more willing to pay for the advisory service.

It works this way for a simple reason: The client wants your help in having a successful business, even if they don’t know what that looks like until you explain it.

In addition, by upselling your existing clients to advisory services, you can position your firm as a one-stop shop for all of your client’s financial needs. Compliance and advice under one roof — you can never overstate the importance of convenience in a client relationship.

There are many similarities with this type of firm and a firm that offers advisory as an enhancement (which I covered in my first article.) From your client’s perspective, all the compliance work is already being handled by someone they trust, but now those numbers are being used for something “useful.”

Remember, most business owners don’t really care about compliance or bookkeeping work. It’s something that must be done, a necessity that comes around every month and culminates during tax season. For your clients, it’s a burden that they are happy to offload.

Except now, they know that compliance work is being funneled into a service they truly care about: getting actionable advice from someone they trust during monthly strategy sessions.

This is a great benefit to your clients, as they are getting what they need and what they want. They can be confident that the compliance work is being handled by someone they trust (which is what they need) and that the numbers provided are then being translated into advice that can be used to build a growing and successful business (which is what they desperately want).

From your perspective as a financial professional, you get to offer a wide range of services to your clients, upselling when you can and offering only compliance work as an alternative. More importantly, you differentiate your firm from your competitors, becoming a highly-sought-after firm that provides more than just a commoditized version of compliance work.

Yours becomes the go-to firm, positioned as the only firm a client requires to fulfill their needs.

Another added benefit is that your firm will retain clients longer, allowing you to spend less time and money on marketing and more time on servicing those clients.

By continuing to offer compliance services, you also keep more options open to your firm by retaining clients who only want tax or accounting services. However, you also have the opportunity to upsell these clients, potentially increasing your revenue further without the need for any additional marketing.

“Advisory as an upsell” as a service model is perhaps the most flexible of all the options for the firm owner. You get the benefits of all firm types, while having the flexibility to transform your business into an advisory as a replacement firm with relative ease.

Look for a third article in this series next week.

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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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