It’s the time of year where ghosts and monsters lurk around every corner, and some of us even go looking for a scare by watching horror films and visiting haunted houses. But one “fright” that hangs around all year is the fear of change, or venturing into the unknown.
We’ve talked a lot about the future of the accounting industry, and what steps firms need to take to ensure they stay relevant. It’s clear that automation and expanding into financial planning and analysis (FP&A) advisory are two main categories that will be crucial for firms looking to remain valuable to their clients.
But if you’ve never ventured into the complicated waters of FP&A, or considered how advisory services would be structured at your firm, where do you begin? How do you make the mind shift from viewing FP&A and the unknown as the boogeyman, to a revenue driver and value prop for your firm? We’ve broken the process down into four steps that will at least help you start thinking about how this transition could look for your firm.
1. Evaluate where your firm stands today
The first step in making any significant change to your business is to evaluate how you’re operating today. Because before you can think about what you want to change or new things you want to implement, you need a clear understanding of the processes you have in place now.
Essentially, you’ll need to perform an audit of your current operations. Ask yourself:
- What are you automating today, and is it working for both your firm and your clients?
- What processes or tasks would you be happy to never have to do again?
- Of the tasks you’d like to eliminate, can automation help in making that happen?
For most accounting professionals, tedious data entry and traditional functions like aggregating and checking (and fixing) historical data fall into that category of “things I never want to spend time on ever again.” These areas are a great place to start introducing automation, which we’ll dive into a little later.
If your firm is spending a lot of time on manual data entry and collection, chasing down clients for their financials, it’s likely that there’s not much time left to actually properly analyze the data. This is where the advisory piece comes into play. Sure, you can deliver reports to clients all day, but the most value comes from what the data can tell us about your clients’ businesses moving forward. As you expand into FP&A advisory and offer client advisory services (CAS), the conversations you have with your clients can shift from simply what happened in the past, to what the information and data can tell you about the future.
Evaluating how your firm is using financial data is another important part of the audit process. Consider Gartner’s Data Analytics Maturity Model and where your firm falls on the maturity spectrum.
Are you operating mostly from the descriptive analytics level? This is where the historical data lives, or what’s happened to your client’s business in the past. The 3-statement financial model is an example of descriptive analytics, and it’s where many business owners spend the majority of their time—looking at the balance sheet, income statement, and cash flow statement.
Here you might discover that your client is losing margin and profits, but it won’t necessarily tell you why. It’s simply descriptive in that it relates what has happened in the past. And while this is important information to have in your back pocket as you begin to have these advisory conversations, you’ll need more to help your clients take their businesses to the next level.
Maybe your firm is further along, and you spend time at the diagnostic analytics level. This is where you’d work with your client to diagnose the problem and answer the “why.” Let’s say the client who was losing margin and profits operates a restaurant. In this step, you dig into the data to discover that inflation is causing food costs and employee wages to rise. You’ve uncovered another piece of the puzzle, but now your client wants to take that diagnosis and figure out a cure.
This is where you move into predictive analytics, which, as its name states, helps you predict what might happen if your client makes changes to the business. Using the restaurant example, maybe your client wants to increase revenue per plate, or expand the business by adding more tables. Here you’re using both historical data and forecasts, and comparing budget vs. actuals to gain insight into how your client can move their business forward.
The final maturity stage is prescriptive analytics. At this stage you’re not only thinking about what will happen, but how to make it happen, truly becoming a strategic advisor to your client. With the right technology solutions, you can offer custom planning and actionable, strategic insights, which we’ll explore a little later. If your firm is operating at this level, you’re already miles ahead of most.
The final two stages are where you really get into the nitty gritty of FP&A. By definition, FP&A is a set of four activities that support an organization’s financial health:
- Planning and modeling
- Forecasting and budgeting
- Integrated financial planning
- Management and performance reporting
You can’t truly provide FP&A advisory services without making that shift from historical, “what happened,” to the forward-looking, “what will happen, and how can we make it happen?” services.
This exercise helps you not only establish where your firm stands today, but gives you an idea of how you’ll structure your firm’s services and how you work with clients moving forward.
2. Decide where you want to take your firm in the future
Once you have a clear understanding of how your firm is structured and operating today, think about how it could evolve and the goals you want to set for yourself.
What do you want to be doing five years from now? Do you want a succession plan? Do you want your firm to be acquired? Do you want to hire more staff? Do you want to expand or reduce your client base? Do you still want to handle payroll or only offer tax services? How can automation support your goals?
Factor the maturity model into your planning—do you want to advance your firm into a more forward-looking strategic partner for your clients? Many firms are staying where they are, but research shows that opting to remain stagnant is a risky choice.
As we mentioned in a previous article, a survey released last year showed that accounting firms which produce more revenue from audits and reviews are actually less profitable. Instead, firms doing the least amount of this work — 8.6% of their total fees, on average — were 34% more profitable. There’s money on the line for firms willing to advance past simple transactional work into strategic advisory and FP&A services. In fact, the last CAS Benchmark Survey from CPA.com found that CAS practices saw a 20% growth rate, with respondents reporting higher net client fees, higher fees per professional, and higher CAS net client fees per client.
But even with the data clearly showing that CAS practices are more profitable, that fear of the unknown can still have a stronger pull. Start by defining what CAS looks like for your firm. For Dawn Brolin, CAS in her firm means being proactive with data to help educate her clients on how to improve the profitability of and efficiencies in their businesses. In other words, it’s having the conversations that will help them plan for the future. When you break it down into its simplest terms, CAS can seem less scary and more like a no-brainer for your firm. Maybe you’re already having these types of conversations with your clients, but just didn’t realize they could be productized, which we’ll get to later.
If you’re still on the fence, or unsure of what you want for the future of your firm, get feedback from your clients. Ask them what value you’re bringing to their business to decide whether your current service offerings are enough, or if they could see greater benefits from an advisory relationship.
Regardless of whether you expand into FP&A advisory, automation can still be a key revenue driver for your firm, which we’ll explore next.
3. Implement technology solutions to automate tasks
Why automation? If your firm is mainly focused on descriptive analytics and hindsight, automation can save you time and the headaches that come with manual data entry. With automation solutions that connect directly to your clients’ data sources, you can generate accurate historical statements and reports with the click of a button.
As we mentioned earlier, these time-consuming, consistently-repeated processes are the best places to start with automation. Once you’ve standardized these processes with automation across your company, you’ll have more time to either expand into other, higher-value services, or simply add more clients to your base if you decide to stay within the boundaries of transactional work.
If you choose to expand into FP&A advisory, this automation of the historical data allows you to focus more of your time on the insights within that data, which you can then use in advisory conversations with your clients. With the automation capabilities of an FP&A solution like Jirav, you can easily populate and update dashboards, models, and more by integrating with your clients’ systems of record, pulling in accurate and up-to-date data with the click of a button and no manual entry.
From there, you can help clients compare budget to actual, create and compare multiple scenarios to find optimal growth strategies, or instantly generate a variety of reports and automate into client-ready report packages. Implementing this kind of solution into your firm takes you into the predictive and prescriptive analytics levels of that maturity model we explored earlier.
To really do FP&A advisory right, however, it’s crucial that you package your services in a way that optimizes and stabilizes the revenue they bring in for your firm. Remember before when we said you may be offering these types of advisory services without productizing them? If you’re billing by the hour, your clients may be afraid to have these important discussions with you for fear of being billed. Or, you may be leaving money on the table by having lengthy advisory conversations without properly billing your clients.
Break down your new services into monthly-recurring deliverables—things like dashboards, variance analysis, rolling forecasts, management reports, and board or investor packages are now offered at different service levels to help set expectations for your clients and what they’ll get out of this new advisory relationship.
For example, here's how Dawn Brolin has packaged the services for her firm, Powerful Accounting.
Dawn created packages that helped her understand what level of commitment her clients wanted from her. And, as you can see, the monthly recurring packages will help her firm see more revenue per client. Rather than charging a one-time fee for tax services each year, she can now bring in $750, $1,500, or even $2,500 per month, per client, depending on which service level they choose. This is where you can really start to see how FP&A advisory services can be a major revenue driver for your firm.
4. Work with partners who can support your journey
When it comes to successfully launching FP&A advisory services or failing, the difference is in the training and methodology. In our experience, failure often occurs in not realizing that there are two parts to master when launching an FP&A practice. The first part is how to produce, interpret, and advise on FP&A services and deliverables. This is where you pinpoint where you want to be on the data analytics maturity model, and what types of services you’ll need to offer to deliver that level of data maturity to your clients. The second, which is often missed, is how to price, package, sell, and market these new service offerings, since there isn’t yet a “standard playbook” or “benchmark” for FP&A services.
At Jirav, we spend an equal amount of time on product training and how to produce FP&A deliverables as we do training firms on how to price, package, and launch their new services. We found early on that many of the firms that struggled did so because they experienced challenges packaging their services, creating the right client expectations, and protecting themselves against (monetizing) all of the additional insights that clients would request once the initial insights were provided.
To help ease into advisory and overcome the “FP&A fear factor,” we structure the onboarding journey from a “crawl, walk, run” approach, so that no one feels as if they’re taking on too much too quickly. We partner with you and your firm to build a plan for success. Using this perspective, our onboarding includes the following learning tracks:
- Learning the software (month 1)
- Deploying out to select clients (month 2)
- Developing your product and service strategy (months 2-3)
- Developing your go-to-market (sales and marketing strategy) for scale (months 3+)
To ensure success through each of the above learning tracks, we’ve developed detailed, step-by-step modules as onboarding resources. We deploy these learning aids through online webinars, videos, and 1:1 sessions with our accounting partners. Learn more about joining our partner program here.
To recap, FP&A advisory services can seem scary, but once you break the process down into actionable steps and explore what it looks like specifically for your firm, it can feel like finding out there are no monsters under the bed after all.
We recommend taking these four steps:
- 1. Perform an audit of your firm’s current services to understand where you are today
- 2. Looking at the full picture of how your firm exists today and where you could go from here, decide on future goals for your firm
- 3. Depending on your future goals, implement technology and automation solutions that can help you get there
- 4. Choose vendors and partners who will support your goals and help you create a plan for success
Finally, no matter what you decide for your firm, make sure your clients align with your business model. As important as it can be for your business to acquire new clients, it can be just as important—or sometimes even more so—to part ways with clients who won’t help move your business forward. “Firing” clients who no longer align with your vision for your firm is an important, albeit scary, part of the journey in ensuring your firm stays on track to meet your goals and objectives.
Reach out today if you’d like to learn more about how to make the transition into FP&A advisory, and how Jirav can partner with you to make the journey a little less scary.