Accountants need to show they really are business advisers

I’ve just been reading in Accountancy Age about how a senior official at HSBC considers that Accountants are better at advising distressed businesses than are banks.

Piyali Williams, head of professional proposition at HSBC is reported to have also said that:

“Accountants are in a better position than banks… We’ve always viewed them [accountants] and our customers have always viewed them as a more trusted source of…independent advice.”

That shouldn’t surprise anyone of course.  It’s as much a reflection on how business people view their bank manager – even assuming they know who it is.

My first question for readers of this blog however is what are you doing to build on this presumption?

Here’s a few more:

  • Are you continuing to run your practice as you did before the credit crash?
  • Have you sat back and considered what the impact could be on your business?
  • On your clients’ businesses?
  • What additional demands will they make?
  • What additional services will they expect?
  • Will you provide these within your standard annual fee?
  • What will clients pay extra for?
  • Can you get in first and make clear that additional services are available for an additional fee?
  • Can you highlight the benefits of them engaging you to provide those additional services – and sooner rather than later?
  • Are you really a business adviser or ‘just’ an accountant who records, reports and focuses on what’s already happened?

As the economy moves into recession I believe we will see a sharp contrast in the way that accountants evidence their skills.  Will everyone whose business cards describe the firm as Chartered Accountants and Business Advisers be able to evidence the truth in that description?

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Being the 'value add' at someone else's seminar

This is something that I did last week and it occurred to me that ambitious accountants could probably do much the same thing too.

Let me explain.

I was invited by Amitabh Natekar to be the guest speaker at a seminar he was organising for an audience of accountants.  The other speakers were William Parker, of AccountsIQ and Anant Govande of Offshore Accounting and Taxation Services Private Limited. (OATS). They were speaking about the benefits of online financial accounting software and of outsourcing accounting and related services to India. I was simply asked (and paid) to attend as an independent industry figure and to share my views as to the concepts generally. If possible to help remove fears and doubts. I was very impressed that I was not pressured or expected to endorse either of the services as I knew nothing about them before the event.

At the start of the seminar the audience (who knew I had been invited to speak) were reminded that I was there as the ‘value add’ to ensure that they benefited from their attendance even if they had no interest in either of the services that were being explained and promoted.

All seemed to go well. I received positive feedback and thanks for my talk. It ended up being partly what I had prepared beforehand and partly inspired by what I had heard from the earlier speakers. By all accounts the audience and my sponsors (for want of a better word) were all very pleased and we chatted for a while afterwards.

So, do think about your clients and especially those who present seminars and promotional events to increase awareness of their products and services. Could you offer to assist in some way? Maybe by making your office premises available for an event. This is a great way of enhancing awareness of your firm, of getting value from any large open space that is suitable for such events, and of getting in front of people who could be prospective clients.

Do you have free newsletters you could provide? Promotional postcards that attendees could use to indicate a desire to be added to your mailing list? Would you be up for an opening welcome speech? Could you act as host/MC to introduce the event and add a touch of gravitas?  Could you offer some headline tax and business advice relevant to the audience?

This is one of those business promotion ideas for accountants that you don’t often come across.  It’s low cost and potentially very worthwhile.  If you give it a try, do let me know how you get on.

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Being the ‘value add’ at someone else’s seminar

This is something that I did last week and it occurred to me that ambitious accountants could probably do much the same thing too.

Let me explain.

I was invited by Amitabh Natekar to be the guest speaker at a seminar he was organising for an audience of accountants.  The other speakers were William Parker, of AccountsIQ and Anant Govande of Offshore Accounting and Taxation Services Private Limited. (OATS). They were speaking about the benefits of online financial accounting software and of outsourcing accounting and related services to India. I was simply asked (and paid) to attend as an independent industry figure and to share my views as to the concepts generally. If possible to help remove fears and doubts. I was very impressed that I was not pressured or expected to endorse either of the services as I knew nothing about them before the event.

At the start of the seminar the audience (who knew I had been invited to speak) were reminded that I was there as the ‘value add’ to ensure that they benefited from their attendance even if they had no interest in either of the services that were being explained and promoted.

All seemed to go well. I received positive feedback and thanks for my talk. It ended up being partly what I had prepared beforehand and partly inspired by what I had heard from the earlier speakers. By all accounts the audience and my sponsors (for want of a better word) were all very pleased and we chatted for a while afterwards.

So, do think about your clients and especially those who present seminars and promotional events to increase awareness of their products and services. Could you offer to assist in some way? Maybe by making your office premises available for an event. This is a great way of enhancing awareness of your firm, of getting value from any large open space that is suitable for such events, and of getting in front of people who could be prospective clients.

Do you have free newsletters you could provide? Promotional postcards that attendees could use to indicate a desire to be added to your mailing list? Would you be up for an opening welcome speech? Could you act as host/MC to introduce the event and add a touch of gravitas?  Could you offer some headline tax and business advice relevant to the audience?

This is one of those business promotion ideas for accountants that you don’t often come across.  It’s low cost and potentially very worthwhile.  If you give it a try, do let me know how you get on.

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Does the impending recession provide more or fewer opportunities for accountants?.

As the preparation continues for a new seminar I’m presenting next month I started to think about the specific tax advice that might be relevant as the economy moves toward a recession.

Let me stress that I’m referring here to the technical definition (two consecutive quarters of negative growth). From a  personal perspective I see more rather fewer business opportunities.  What about you?

Have you considered, for example the range of generic tax saving ideas that you could mention to clients? Remember they won’t know you’re thinking about ways to save tax if you don’t tell them – face to face is best; otherwise at least in emails and newsletters that you send to them. ( I addressed this issue in a previous blog post: Getting straight to the answer may not be best).

Here’s a short list of simple tax ideas off the top of my head:
– ensuring that clients are claiming all allowable business related expenses as deductions from their taxable income;
– moving suitable clients onto the VAT flat rate scheme and reducing the VAT they pay each quarter;
– maximising the claims for capital allowances;
– securing early relief for trading losses;
– taking advantage of the tax free benefits in kind that even owners of their own company can have;
– reviewing the balance of salary and dividends paid out of their own company;
– registering for tax credits so as to ensure they can get maximum amounts if their income is lower this year than they had hoped;
– claiming all available allowance and reliefs;
– switching to a car that qualifies for additional tax reliefs (in terms of the offsets available against business income);
– seeking a repayment of the sums paid on account in January and July this year if their tax liability for 2008/09 is likely to be lower than it was in 2007/08.

There are also ways to plan to reduce other taxes too – such as capital gains tax mitigation, inheritance tax planning and the taxes that can arise when reorganising groups of companies, such as on demergers or sale. Falling share and property values actually present specific tax planning opportunities for the wealthy – in terms of CGT and IHT, also for those companies wanting to incentivise staff through share option schemes.

Not all accountants have the necessary specialist expertise to advice on such matters. And it’s rarely low cost advice so it’s not for everyone. Many accountants outsource such specialist tax expertise. And that’s another win:win opportunity in the current economic climate.  It must be more cost effective to use the services of vetted independent tax advisers than recruiting or replacing full time in-house tax experts. More info at: www.TaxAdviceNetwork.co.uk (where you’ll also be able to sign up for our free weekly practical tax update written especially for accountants in general practice).

I’ll be addressing these and many other subjects in a talk I’m giving to accountants next month: Mastering the credit crunch – your practice, your advice, your future.

So, going back to the question I asked in the heading to this blog post: Does the impending recession provide more or fewer opportunities for accountants?
My own view is that there certainly aren’t fewer opportunities. There may be fewer people willing pay good money for advice, but if the cost/benefit equation is right then there’s no need for accountants to worry. Service and value for money are as important as ever.
What do you think?

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How do you set charge out rates?

I posted an item on this blog last month on the subject of Setting fee rates – using costs incurred or value provided?

Related to that issue is the question as to: How do you set charge out rates?

A third, a third, a third

When I started in practice over 30 years ago (yup, I’m that ‘old’) the traditional approach was to set rates at about 3 times salary costs.  The idea being that for each hour you worked you would generate 3 times the cost of that for your employer.  The charge out rate being equivalent to one-third salary, one-third overhead and one-third profit.

It was never quite that simple of course. There are lots of ways of computing the hourly equivalent of an annual salary for example. And also for identifying which overheads should be taken into account – in practice I don’t think anyone worried too much about that. It was the principle that was important.

The hourly salary cost of someone earning £1800 a year (which is what I started on) might have been computed as follows:

365 days less weekends less bank holidays less training days = 228 working days.

At 7 hours a day (which is what we worked then)  you get to c1600 hours a year.  Salary per hour = a pittance (even adding employer NICs). And charge out rates would have been under £5 per hour.  Seems incredible looking back.

100% markup

In the old days(!) overheads were higher than they are now – in many ways. There is now more flexible working, fewer offices, more open plan areas, less secretarial support and more hot desking. Technology has also made us more efficient. And of course salaries have risen faster than fee rates. (Haven’t they?)

As result a more modern approach is to set charge out rates at simply double the salary costs. This leaves 25% towards overheads and 25% profit.

Banding

It’s often the case that staff compare their charge out rates and seek to identify each others’ salaries – and those of their managers. In practice it is far better to band staff at a particular level together and to give them one standard charge out rate regadless of their precise salary.  This also ensures that the client doesn’t benefit or lose out because staff member A did the work rather than staff member B.

Fundamental

I must refer back again to my earlier posting Setting fee rates – using costs incurred or value provided?

Clients will often ask about your charge out rates and seek to compare them with those of other advisers. Ultimately though they are more concerned about the level of the fee for the work that you do and the problems that you solve.  Many firms are moving away from publishing their charge out rates. Instead they quote fees for the job.  Some have abandoned time sheets altogether. Others still keep timesheets to assist the partners in determining the relative profitablity of different types of work and of the work performed for different clients.

I’d welcome examples of how you set the charge out rates in your practice, and other approaches that you have encountered.

Like this post? You can now obtain my ebook containing loads more insights, short-cuts, tips and advice aimed specifically at accountants who want to STANDOUT and become more successful. You can buy the book or download a summary for free here>>>

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Ideal Client Profile

How often do you turn away prospective clients?

During my talks about ‘How to avoid professional negligence claims’ I refer to that awful feeling you sometimes get in your gut when you meet a new client (or, more accurately, a prospective client). It’s the feeling that makes you think this person could be more trouble than they’re worth.  Sometimes you just know.  Other times you are consciously aware as to why you shouldn’t take someone on.

Maybe their only interest seems to be in how low you will set your fees.  That’s never a good sign is it?

In another of my talks about ‘How to make more profits from your smaller clients’ I stress the benefits of being clear as to the sort of clients that you want.  This is more than simply identifying a specialism or niche.  It makes you choosy. Selective.  And that will often make you more attractive as an adviser.  It’s as if it’s a privilege to become your client.

And, best of all, it reduces the prospect of you taking on clients that are not worth the effort. It allows you to FOCUS and, in so doing, to build a more successful, profitable and enjoyable practice.

Think accountants can’t do such things?  I disagree.  If it’s good enough for an IFA, then I’m quite sure that ambitious accountants can adopt the same technique. Here’s the ideal client profile for an IFA practice, Informed Choice, run by a friend of mine, Martin Bamford.

If you possess some the following attributes, you are likely to receive the greatest value from our
professional services.
• You have investable assets (including pension funds) of between £200,000 and £1m
• You are 35 to 65 years old
• You are prepared to seek professional advice and you are able to make decisions
• You are married with children, or family is important to you
• Your attitude towards investment risk is neither extremely cautious or extremely adventurous
• You have at least a basic understanding of personal finance but appreciate the value of good
advice
• You are nice to work with, have a good sense of humour and are polite (because we are—
always!)
Of course this is not a definitive list and we do work with clients who do not possess all of these attributes, but when we are looking for new clients to work with, we find that this tends to be the best description of our ideal client profile.

Now how could you adapt that approach for your practice? Even if you don’t publicise it you will do well to have it mind when meeting with prospective clients.

I have written a 10,000 word ebook drawn from my talk on How to avoid professional negligence claims, containing tips and risk management advice for accountants in practice. You can buy the book or download a summary for free here>>>

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Blogging myths for accountants

There are so many misconceptions about blogging and I am frequently surprised when I encounter bloggers who seek to encourage accountants in general to start blogging.  I would stress that I enjoy blogging.  This blog now has almost 250 posts on it – built up since 2006. I also write a tax insights and commentary blog for the Tax Advice Network and have a third blog on which I share Accountant jokes and fun.

But I’m not in practice. Given that I’m an enthusiastic blogger and spend a fair part of my time helping accountants to build more successful practices you might expect me to also advocate blogging by accountants. But I don’t.

Here are 5 blogging myths – ie: reasons often given to encourage people to blog regularly and why I think that accountants are different:

Build your credibility – This only works as regards people who see and read your blogs. Most accountants in practice are not seeking to build credibility across the UK, let alone the world. Their target audience is more local than that. Will your target audience (prospective clients, advocates and potential staff) find your blog and read it sufficiently to be influenced?

Enhance your SEO – This refers to ‘Search Engine Optimisation’. How easy is it for your target audience to find you on the web? Not the people who know your name or the name of your practice but those who don’t know you and are looking for someone just like you. Might I suggest that the best starting point here is to arrange for your website to be Optimised before you start blogging – if this is your objective.

It’s fun – I’d agree with that. But then lots of things are fun. How many fun things can you fit into your life? It’s also time consuming.  Is it enough fun to warrant the time and effort?

Emphasise your niche – If you have one. During my talks for accountants I often stress the benefits of focusing on a niche and of highlighting a specialism.  The strength of the argument for doing this sometimes comes as a shock after years of trading as accountants to anyone and everyone. But if you do have a niche then the same points apply in the ‘credibility’ para above.

Distinguish yourself from the others – I’m a great advocate of the idea that it’s ‘more important to be different than to be better.’  But those features that distinguish you need to be evidently of benefit to your target clients. Being 7 foot tall and always carrying a bright green briefcase will make you memorable but do those differences benefit anyone? In the same way, will anyone feel that they are getting more value for money or a better service simply because you are a regular blogger?

The other side of the coin

I’ve been blogging here for over two years now. The frequency of my posts varies but it seems to average about 3 per week. I get to post my thoughts and ideas here to help readers and I am then able to collate the posts to create articles for the press and for other websites.  I also often adapt my blog posts to create supporting material for my courses and seminars for accountants.

I am aware of a relatively small number of accountants in practice who seem to enjoy blogging. I know of far more who gave it a try and then gave up. The benefits didn’t live upto the hype.  I don’t think that’s a reflection on the accountants. I think it’s more to do with the hype.

What do you think?  Please add your views as comments to this post.

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Negotiating fees when times are tough

I’ve written a number of previous posts on related subjects and thought it would be useful to provide a one stop link to each of them:

I think there are 4 different scenarios where it may be necessary to negotiate fees for your services:

  1. The annual fees you charge to existing clients;
  2. The additional fees you charge to existing clients for ad-hoc and advisory work;
  3. The fees and terms you quote to prospective and new clients for recurring compliance work; and
  4. The fees and terms you quote to prospective and new clients for one-off and advisory work

Existing clients

I’m a great advocate of regular monthly billing (or payments on account). Given the unprecedented financial turmoil in the economy and business world accountants must look after their own. You could never afford to risk non-payment of your annual fees. Now there is a greater risk than ever before that clients may not be able to pay those bills.

Accountants who consider themselves to be business advisers should practice what they preach (or what they should be preaching).  Now is the time to review your billing practices so as to reduce the risk to your firm/practice.

Previous posts that address this issue:

–  Detailed fee quotes and bills for professional work

Don’t just increase your fees, vary them

Setting fee rates – using costs incurred or value provided?

“You can charge more if you have SEX with your clients”

Fixed fees

Prospective and new clients

All new clients should be obliged to agree to make monthly payments on account. You need to establish systems to facilitate this and to issue the monthly invoices for VAT purposes.  There is no good reason for allowing new clients (who owe you no loyalty and whom you barely know) to pay you long after the work has been completed.

Where you are not providing recurring compliance services you would be justified in seeking a payment on account before starting work for a new client. I always do so when providing consultancy and mentoring services. My standard approach these days is 50% payable before I start work. The balance is then payable about 3/4 of the way through the contract.  If payment is late, I will stop work. I’d be a hypocrite if I didn’t insist on strictly commercial terms as that’s often one of the subjects on which I am advising the firm that has engaged me.

Previous posts that address this issue:

Clients will pay high fees for good advice

Timesheets and value pricing professional services

What is a fair fee?

Estimated fee ranges

No reference to fees and plenty of free advice time?

Are you charging enough?

Should you put your fee rates on your website?

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I told him. Once. 12 months ago. How dare he forget.

Imagine that you have a great system.  When you take on a new business client you explain to them that you don’t just deal with day to day issues. You also have expertise in  inheritance tax (for example) and at such time as the client starts thinking about their will, you’d love to help them.

The relationship develops and you do some great work for the client. You feel the business relationship has developed well so you are really quite upset to find out a year or two later that the same client has taken inheritance tax advice from a tax specialist.  “Why did he do that?” you wonder.

You decide to ask him and find out that he didn’t know that you could advise on inheritance tax matters. “But I told you”, you want to say.

The problem is that when you told him he wasn’t interested. He might not have heard and he evidently didn’t remember. In my experience few people remember things that they didn’t hear in the first place (names are another example).

You cannot afford to hope that clients will remember all the things you told them. Once. Twelve months ago.

Can you think of anything that you expect your clients to remember about your service capability, your expertise or your terms? Is it realistic to expect them to remember? Would it be better to do or say something, in passing, to ensure they don’t forget?

The same point is true as regards your service levels. You might have told them what to expect but did they take it in? Do they remember? Managing client expectations means more than just telling them once.

Any examples anyone?

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Now is the time to invest in your staff

I often receive calls from recruiters asking me if I know of anyone who might suit this vacancy or that opportunity.  In recent weeks I’ve been telling them that I’m aware of far more vacancies than potential candidates.  Few people are looking to move from one firm to another in the current economic climate.

In one of my posts last year I asked whether you Hope, Pray or Train key staff?  I made the point that:

Employers will spend a fortune in an effort to ensure that ambitious professionals keep upto date with technical developments. But when it comes to maximising the professionals’ potential to do their job, to progress and to get more done, little time or money is invested.

One reason for this is the difference between a short term and long term perspective. Everyone needs to be uptodate with their knowledge of technical developments.  The alternative is to risk the provision of out dated advice with  all the adverse consequence that can then ensue.  Thus there is a short-term need to train staff in technical matters.

On the other hand, the development of personal and management skills is something that has more of a long term impact.  Until quite recently many partners in accountancy firms were concerned that such training would simply help key staff to become more marketable. In effect there was sometimes a fear that the firm’s investment might not be worthwhile as it would benefit a future employer.

There are still plenty of opportunities for good accountants (especially those with specialist skills (eg: tax).  The difference today though is that staff are far less willing to risk a move to a new employer during what are perceived as tough economic conditions. They are likely to stay put if they can.  I remember making much the same decision during the last recession.  Better the devil you know….

What this means is that firms can afford to invest in their staff more now than ever before. Not only will the staff value the support but the firm will gain a longer term benefit from the investment.

And at this stage I should of course draw attention to my white paper on Personal development for ambitious professionals.

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