When it comes to the provision of business advice, I’ve previously suggested that accountants serving business clients, fall into one of four categories:
1 – It’s a no-go area: The accountant’s business experience is limited and perhaps they don’t feel that confident with the idea of providing business advice.
2 – Personal experience: The accountant is willing and able to share their own experiences of business over the years, perhaps drawn in part from working with other clients. Those accountants who have worked in (non-accountancy) businesses will also have a different type of experience to draw on.
3 – What others say: The accountant offers advice based on what they have read in books, magazines and websites and possibly what they recall from their studies and from attending seminars and conferences. However, their level of interest in developing this area of skill is much lower than their desire to keep up to date with technical knowledge.
4 – A systemised approach: The accountant has bought into a programme that assists them in adopting a structured approach to the provision of business advice and either they actively promote the service to their clients or they shy away from doing so and quit the programme.
Some commentators have provided near constant pressure over many years to encourage accountants to adopt the systemised approach. Nevertheless I understand that less than 10% of accountants in the UK have bought into the idea. The vast majority are evidently not convinced. Why is that I wonder?
Most accountants seem to prefer one or more of the first three approaches described above. Perhaps their clients do not seem to be demanding a more formalised approach (or maybe the accountant perceives that their clients are not willing to pay for it).
What do you think?
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That’s an astute and, I think, accurate division of the four types, Mark. I reckon most of the accountants I speak to come under category 2.
I had some involvement in creating and then marketing one of the well-known (and initially successful but now defunct) systems and of course I keep tabs on Steve Pipe’s latest doings etc. My view is that the systems are like diets – they all work if they’re implemented properly, but the reality is that not many are willing or able to implement. So the personality of the accountant is more important than the actual content of the system in determining whether it goes anywhere (they’re all more or less the same at root anyway – mostly it involves getting employees of businesses to examine processes), and therefore the firms that do buy into them tend to be the same ones. And as with dieters, a few really make a system work but more go from system to system hoping for one that makes it effortless.
But accountants endure anyway – it must be pretty frustrating for the gurus who’ve been hammering away for decades now at the message that accountants ‘need’ to do these things.
How did you come by the 10% figure? It sounds about right.
Hi Mark
I would argue that there are certain areas where most accountants may not be suited to giving advice – eg: marketing. Would you expect businesses to use a marketing consultant for accountancy advice?
Following on from Andrew’s comment that most accountants are happy to give advice based on their personal experience – in my view we all gravitate towards our comfort zones. So where we haven’t had the experience we are (in my view quite rightly) reluctant to give advice.
There are however areas where many clients would expect accountants to give advice and practical solutions; for example improving business information/visibility, profitability and cash flow and risk management (as well as supporting other activities such as marketing with useful information). These areas will be in the comfort zones of some accountants but not all.
Another issue (and a potential area of opportunity) is that whilst giving advice is one thing; actually putting things into practice is another. The challenge here, is that it may be time intensive and even if there is experience within the accountancy firm; will recoveries be in line with the charging structure?
As you know, I operate as an independent consultant doing the more time intensive stuff. Whilst I work with or have referrals from accountants, I can’t help thinking there are many I meet who are missing a trick. However some may need to overcome the idea of referring to other partners in their practice, before taking the quantum leap of getting help from someone outside!!
David –
And another issue is that even if such things as cashflow, business information etc are within the accountant’s comfort zone, if you make the advice ‘official’ – ie. you charge for it -you’re suddenly under a lot more pressure not to give advice that goes wrong. You’d need to have all sorts of disclaimers in place if the advice is official ‘consulting’ – for many accountants the whole thing might not be worth the effort and risk of turning the relationship sour if things go badly for the client.
Andrew
I take your point, and there are certainly aspects where that can apply (eg: telling a client to go heavy on collecting money from a customer, which then ceases to be a customer). However, there is plenty of advice and added value that can be generic or qualified.
I would suggest the point about fear of things going wrong comes back to some extent to comfort zones (actually that’s why I don’t give tax advice to clients).
I suspect that some firms will take “not being worth the effort and risk” view”. Although, it could be argued that telling the client (at least generically) that they need to get extra help might not go amiss; however this gives rise to the challenge of telling the client that they need help which the firm can’t/won’t provide.
However there can be downsides to not advising. Not least if you badge yourself as a business advisor then what are the client’s expectations? And what happens if something goes wrong and you haven’t advised? There may not be a claim, but there won’t be any brownie points either.
I recall an extreme example. I had a conversation a few years ago with a partner in a medium sized firm. Mark had interviewed me for an Accounting Web article about the benefits of part time FDs; I’d sent this chap a link to the article. The conversation went something like this:
– partner: “we’re a bit wary of part time FDs”
– me : “why’s that?”
– partner : “we lost our biggest client through one”
– me :”why’s that? tell me more”
– partner :”he took them away to Large Firm”
– me :”did you introduce him”
-partner :”no the client found him”
One can only read between the lines…but a more proactive involvement may have resulted in a very different scenario.
Hi Mark,
Good post. This has certainly been a hot topic for many, many years. Believe part of the problem is the fact that for many years a lot of accounting firms bought into systemized products / services / training that were actually too prescriptive!. Clients then pushed back as the accountants were selling them a solution that was disconnected to their real day-to-day issues (and had no flexibility, 4 page check lists etc. and really built purely to sell to accountants rather than be useful to clients) and the result was the accountant losing confidence to head down that path again. They then fell into one of the 4 categories you have listed above. The influx of business coaches over the past 15+ years has also muddied the waters around this area with many clients already having a business coach of sorts and thus not seeking that perceived support from their accountant.
Overall there is no doubt that businesses globally in volatile times are requiring more assistance with implementing strategies, vision, cash-flow, profit, growth etc. The question as to the depth an accountant goes to with each client in the advisory space comes down to whether it suits the dynamic / skills of the partner. It may be their skills are better used in traditional areas and they should bring on expertise to help in certain parts of business advisory to grab the opportunities if that is part of their overall strategy.
Each firm should have their own unqiue competitive advantage that plays to the strengths of the partners and caters to the needs of their target market clients. These two factors will then dictate if their business model involves revenue derived 80% from business advisory, 20% from business advisory or 0% (and they may have an alliance to help clients in that space). I don’t think there is a one size fits all answer here.
Great discussion to be having and agree with David’s point that regardless of their model any advisor should be more proactive with clients or opportunities will continue to slip through their fingers
Great post James
Your absolutely right that the firm’s own strategy should influence the way forward on this.
The partner’s relationship with the client is paramount and making sure that is not jeopardised is critical. Whilst bringing in skills or collaboration (internally or externally) may be a LOGICAL way forward, I believe there are barriers that often need to be overcome before this is accepted:
– The first I call “big cheese syndrome”; this happens where the client looks up to the accountant as the fountain of all financial/business knowledge (I guess this is more likely in a general practice environment) . Admitting that this is not the case, may be a step too far for some….could it weaken the relationship going forward?
– Secondly can the people with the complimentary skills be trusted not to poach the client and to respect the relationship? In my opinion this concern may be unfounded; it doesn’t make sense to bite the hand that feeds you. This is recognised by the Big 4 who have panels of external business turnaround specialists (usually accountants) that they bring in to ailing clients; when those guys are looking for services what firm will they look to? In fact it can also work the other way; recently one of my clients (a small firm of accountants) was looking for a firm of auditors for a £12m turnover business and asked me to suggest 3 firms that I thought might be suitable; I knew several firms that would have suited – to trim the list down I naturally favoured the ones that had referred business to me!
– the third issue is whether the person with the complimentary skills will actually do a good job and get on with the client. I think that this is a more valid concern; clearly getting to know the person and (if they are external) references can help. If the partner wants to maintain some involvement, a modus operandi can be be agreed…but when push comes to shove the proof of the pudding is in the eating.
Decisions are be based on weighing up risks and benefits. In practice judgements are often made quickly, (dare I say) without serious analysis of all the pros and cons. Furthermore accountants are often risk averse – many will naturally give more weight to tangible short term risks than to potential upsides (or longer term (less tangible) strategic risks). With this background it is small wonder that for many firms it will always be “business as usual”. Fortunately there seems to be a growing minority that take a different approach.
Hi David,
I agree with your points. We VERY rarely see a formal relationship / alliance work between an accounting firm and an external advisor. You have noted many valid reasons for why it doesn’t work but I would also add that it’s very difficult for there to be equality in the relationship in most cases as one party is typically doing 95% of the referrals but getting little in return. The rare ones we have seen work have a clear win – win, trust, similar values and they a good operators.
We have seen various models work to avoid all these ‘barriers’ where:
1. The partner drives the coaching relationship (so quarterly meetings, discussing strategy, helping set the vision) and brings in a facilitator for more specialist tasks, larger group work, technical consulting.
2. Soft ‘referrals’are given to a range of providers. By this i mean there is no formal alliance but the partner knows of a greater facilitator who can run a specific workhop for 40 people (that they aren’t confident to do). They suggest the client has a coffee with that person but makes up their own mind on whether to go with that advisor or not. This reduces the ‘risk’to the firm if it doesn’t work
3. A Virtual team of soft ‘referral’ sources can then by developed around the firm to cover areas clients need help in but the firm doesn’t want to deliver as it doesn’t fit with their valiud strategy. This virutal team of advisors can then be chopped and changed over time based on feedback and delivery quality. The great news for the firm is this has a much greater tendancy to get referrals to them also as the advisors in the virtual team aren’t soley reliant on referrals from one sources (so are self starters) and will typically be good networks / connectors.
Again it comes back down to the firms strategy and desire to grab more opportunities (some are happy with status quo) as to what option (if any) they adopt. For the advisors tapping on accounting firms doors wanting to create a relationship if they first thought through the 3 options (to address the barriers) i’ve listed above and thus tackled the discussion with the firm strategically (rather than falling into the trap of just suggesting an alliance) they may have a better chance of a successful relationship.
James
Thanks for your insights.
Regarding the inequality in terms of referrals. One of the accountants I work with has told me outright that he sees me firstly as a supplier. If accountants expect quid pro quo referrals, then they are likely to be disappointed. The main benefit to the firm is not referrals; it is about enhancing their offering (ergo: retaining clients and growing). Having said that when referrals happen they are quite likely to be fairly chunky.
Your comments about engaging firms more strategically is much appreciated. Certainly gives food for thought! It does makes sense, although I guess for some firms partnership dynamics might also come into play!
Many thanks for all the comments and discussion on this thread. I will return to the subject later in the year.
Time could be the scarcest resource and unless it is managed very little else can be managed.
Business, greater than another occupation, is often a continual coping with the future; it is just a continual calculation, an instinctive exercise in foresight.
Dealing with mainly small one man businesses, I feel that point 2 is probably the most pertinent.
I originally was a time served agricultural engineer, before becoming a master ironmonger, retail shop manager and, after various other positions, and home studies,an accountant leading to being Company Secretary to 3 firms. I feel my broad, non accounting experience, enables me to give advice to a limited degree.
Point 3 also has a bearing, as I feel current knowledge is essential.
This is a very interesting debate on a topic close to my heart.
My MBA dissertation was on the role of business advisers to help firms avoid or move away from financial difficulty.
I argued that accountants were in a much better position to proactively help clients than small business consultants and coaches because of their existing trusted relationship, their inside knowledge of how the firm is really performing and insight into the attitude and skills of the business owners.
The accountant should be interested. The lifetime value of an accounting client is high and deserves to be protected.
However the research I did at the time showed that accountants fell into a variety of categories ranging from purely compliance based, through to business finance advisors and at the extreme, all-round business advisors who were happy to help with marketing, staff management etc.
Interestingly when I investigated referrals, I expected compliance accountants to give most referrals and general business advisors to give the least. This hypothesis proved to be very wrong.
The more interested the accountant was in the overall business of the client, the more referrals they gave to specialists. Those who were heavily focused on compliance gave very few referrals.
I wonder which clients felt most cared for and valued?
I argued that accountants were in a much better position to proactively help clients than small business consultants and coaches because of their existing trusted relationship, their inside knowledge of how the firm is really performing and insight into the attitude and skills of the business owners.
The accountant should be interested. The lifetime value of an accounting client is high and deserves to be protected.
I really enjoyed this blog post and will be subscribing to your RSS feed. Thanks again for sharing your advice.