Do accountants really understand what offering a business advisory service means?

Several years ago, as part of a Principa marketing initiative, I conducted a telephone survey of 58 accounting firms in northern Nevada and California who had described themselves in the phone directory and/or their web site as being accountants (CPAs) and business advisers.

We had planned to contact 100 firms that had ads in Yellow Pages indicating they offered business advisory services. Our plan was to start a relationship with those firms by asking them what services they offered, what tools they used to provide those services, and what barriers they faced when selling and delivering their services.

It turns out we were only able to identify 58 firms that met our selection criteria. We excluded firms that only described themselves as CPAs because we were specifically interested in firms that “held themselves out” to offer business advisory services either by specifically stating so e.g. by attaching the words “Business Advisors” to their CPA designation or by listing the services they offered which included business advisory-type services.

I and a couple of my team called the firms and asked to speak to the person in charge.  The opening scripted question we asked was “I see the advertisement in your phone book [or web site] mentions that your firm offers business advisory services, could you tell me specifically what that entails.”

Here are the results of that survey:


% # Firms
Did not answer the phone 10 6
Said they would call back but didn’t 16 9
Total we were unable to connect with 26 15
The firms we did speak to offered: 43
Tax preparation

Tax planning

Tax effective entity structure

Advice on and assistance setting up an accounting system e.g. QuickBooks

Bookkeeping service or support

Financial statement preparation

Payroll processing

Business valuation



Litigation support

100% 43
Most of the above plus assistance with:

Cash flow and profit projections

33% 14
The above plus assistance with:

Assistance with the preparation of business plans

Strategic planning facilitation

Advising on profit improvement strategies and their implementation

Preparation of a KPI reporting dashboard and regular scheduled advisory meetings

7% 3

We had a list of service lines that are summarized in the above table and we simply asked each firm which of these they provided to their business clients. All of the 43 firms we spoke to provided most of the services in what I call the “compliance suite” although only a small number (we did not keep the data for this) offered the last 4 services – business valuation, auditing, insolvency, and litigation support and most who offered payroll services outsourced it to a specialist provider like Paychex or ADP.

However, as we moved down the list of services into what I would describe as forward-focused “value adding” services which include things like cash flow and profit planning, the number of firms that offered these fell. For example, only 33% routinely did this for/with their business clients.

And when we got down to what I’d call hard core advisory services the level of involvement dropped significantly. This included strategic planning, profit improvement services, and hands-on management support which in my opinion are the things that should properly be described and business advisory.

Interestingly when we initially established contact we mentioned that we were calling them because of the “advisory services” their promotional material (Yellow Pages and website) mentioned. They confirmed that they did offer accounting and advisory service but in my view that only applied to about 7% of firms.

In retrospect I can see the point that several of the services listed in the “compliance” section of the above table could reasonably be described as advisory but they are almost exclusively associated with a “compliance” element of business operations. They are also services most likely to be disrupted by technology and they are the ones that now are subject to the most margin pressure.

I think it fair to say that when people talk about accountants needing to move into “advisory” –I hate that description – they mean services that are focused on helping people grow more profitable businesses not just pay less taxes. If I’m right about that and if most firms who hold themselves out as accountants and business advisors but believe that simply includes “advising” on the things in the compliance list my guess is they are going to be in for quite a shock.

What about the cash flow and profit projectors?

There were 14 firms in our tiny sample that offered the range of compliance services and prepared cash flow and profit projections for their clients. For the most part, we were told the cash flows were generally prepared to support bank loan applications or reviews and were usually only prepared annually and never looked at by the client. The difference between providing business advisory services and simply acting as a spreadsheet journeyman is well illustrated by this.

In my opinion, a true advisory firm would not only work with a client to build a projection but would tie it back to the businesses’ strategic plan. The assumptions upon which the projections are made would be viewed as hypotheses that would be tested by quarterly reviews and recast as necessary.

But more importantly, the underlying causes for variances should be reviewed with the client and their consequences for cash flow and profitability assessed. Options for corrective actions need to be considered and an action plan implemented.

This is the sort of thing 3 out of the 43 firms routinely did with at least some of their clients. They said they were actively engaged in services designed to help their clients improve profitability, design and implement strategies to give them a competitive advantage in their market and so on. These firms proactively engaged with some of their clients and met with them on a regular basis which typically involved monthly or quarterly cash flow and profit planning rollovers.

Based on this tiny and very informal survey that was done many years ago before today’s wide range of analytical and planning tools were available it seems less than 7% of firms can truly be considered as being in the advisory space. I would like to think it’s a lot higher today, but I wonder. Simply pointing a client to a dashboard with a bunch on financial KPIs is not business advisory and it’s certainly not strategic.

It has become quite common for people to talk about giving business clients “strategic advice” but I wounder if most people know what that means. Strategy is about positioning. Specifically, it’s about the choices management makes in relation to resource allocation with the objective of creating a sustainable competitive advantage over the firm’s competitors.

Back in 1978 Gluck, Kaufman and Walleck, in a McKinsey staff paper titled The Evolution of Strategic Management made the point that “As soon as a new management concept emerges, it becomes popularized as a buzz word, generalized, overused, and misused until its underlying substance has been blunted past recognition.” My sense is that’s happening with the word strategy in all its various forms.

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