Conquering CAAS Chasm

Dear Subscribers and Readers: Happy New Year, 2024!

Client Accounting Services (CAS) has become the top new revenue segment for the Top 100 accounting firms. According to CPATrendlines Outlook 2024 research, over 59 percent of firms currently offer CAS, and another 21 percent are considering it.

At the same time, CAS has been steadily evolving into Client Accounting and Advisory Services (CAAS). But...

..... CAAS is a chasm, that takes accounting firms quite an effort to cross.

Why? And how can you not only cross the chasm but conquer it?

Let us clear the fog.

In "The Definitive Guide to Client Accounting Services (CAS) ," I have comprehensively explained several aspects of CAS.

To truly grasp what CAS is, what CAAS is, what is the real difference between CAS and CAAS , and what is this CAAS-chasm, we need to be on the same page about all these terminologies.

What exactly is CAS?

You are a true practitioner of CAS if you are able to customize your accounting practice for each of your clients to best serve their needs and add value to their businesses while maximizing your firm’s profits. CAS has to be a win-win.

A true CAS practice:

• Focuses on the needs of the clients in each of the categories listed above; and,
• Optimizes the firm’s processes for each of these categories to maximize margins.

What exactly is "advisory" in CAAS?

First and foremost, why is advisory a mystery? Or is it not?

The need for clarity is embedded in the different lenses through which the profession can view advisory service opportunities.

The accountants’ “what:” The first lens is the “what” lens. What do accountants do in advisory? Which services do they offer under the advisory umbrella?

The more widely communicated definitions of advisory services give lists of some of the services firms provide under their advisory packages. For example:

• Financial dashboards;
• Ratio analysis and industry benchmarking;
• Cash flow forecasting;
• Budgeting and tracking budget versus actuals;
• Business process consultation;
• Technology recommendations and implementation;
• Business analysis and reviews;
• Outsourced/virtual CFO services;
• Management reporting;
• Tax planning; and,
• Wealth management.

Take a closer look at this list. Most of it is about defining the “what” you can do (and probably “how”) if you want to offer advisory services. It does not tell you what your clients should do with the advice hidden under these service segments.

Now, let us explore the advisory landscape from the strategic lens of accountants.?

The clients’ “what”: Any advice is not just meant to be given; it needs to be understood by the recipient and implemented to take the recipient to a better/enhanced situation.

Therefore, the more important question is: what should your clients do with your advice??

Let me give you a couple of examples here.

• One of my ex-clients, the owner of a firm specializing in the restaurant accounting niche, would identify how pork skin prices change with weather patterns. If prices were likely to go higher, he’d recommend restaurant owners buy and stock more pork skin. That would save the restaurants a significant amount of money. The key to such actionable advice was the underlying data and, of course, the professional understanding of that data to work out valuable advice.?
• Another accountant figured out that the profitability of a client’s business was somewhat lower than the similar types and sizes of businesses she served. A deeper dive into inventory valuation revealed that the inventory quantities used were not producing the intended number of final products this client was selling. The accountant started asking deeply probing questions to the employees of that business. Within two weeks, a couple of employees quit without giving any notice. The inventory theft stopped. The profitability returned to normal benchmarks in about three months. Did the accountant only give some advice? Or was the advice delivered as an action that produced an outcome??

Client advisory services being such a comprehensive, expansive array of services accountants can deliver to their clients, the actions, and hence the impact arising from the “advisory” can be experienced by clients in a multitude of ways. Therefore, irrespective of which niches/industries you focus on or your chosen advisory services segments, you’d find the following guidelines helpful:

When it comes to advisory in CAAS, remember the two words:

Actions,

And

Impact.

For your clients to experience positive impacts, the insights from the accounting information you turn into advice must be “actionable.”

Now, what exactly is "CAAS-Chasm?'

chasm (noun)

: a marked division, separation, or difference

Advisory is not about new reports, different/additional services, more data analysis, etc. - these are only the methods or precursors to get to advisory services.

Advisory is about what happens (or should/must happen) because of these new/additional things you do for your clients.

The CAAS-Chasm is the distance between what you are doing as advisory and how it impacts / should impact your clients.

Crossing this CAAS-Chasm is only about aligning your what with your clients' what (they need and want). It is about producing CAAS delivery.

Conquering the CAAS-Chasm is about taking the necessary steps to ensure your clients get the benefit of what you are doing for them. It is about helping/guiding/mentoring your clients to implement your advice. It is a collaborative joint effort.

As an example: would it not be surprising if an accounting firm offered tax planning services as simply a report delivered to a client, but not resulting in tax savings?

A communication sent does not mean it is received. Similarly, CAAS delivery does not mean the benefits/impacts of CAAS are received by your clients.

How to cross and then conquer the "CAAS-Chasm?'

Just to remind you, your clients are not accounting professionals. They don't and won't understand your accounting acumen - unless you simplify it down to action points, in specific ways they can grasp.

And you won't (really) know:

• what your clients value and need unless you regularly ask them.
• which actions clients are taking or not taking unless you monitor the expected impact of your advice

Therefore, you will often need to guide and coach your clients on:

• how to express their needs and wants, and
• how to take the actions you recommend.?

The advice you deliver needs to be that they should:?

• Do something (that is currently not being done by the client);
• Not do something (that they are currently doing that is damaging the business); and/or,
• Continue to do something (which is also valuable advice when you see the client has implemented your advice and is therefore benefiting from those actions arising from your advice).?

The path to conquering CAAS-Chasm can become ultra-specific based on your specific services, e.g., if you provide tax planning services, it can be very specific to the types of businesses, the relevant industries, and the regulations applicable to such industries. As an example: would it not be surprising if an accounting firm offered tax planning services as simply a report delivered to a client, but not resulting in tax savings?

What next?

Conquering the CAAS-Chasm is fascinating, massive subject matter, but we will take a deeper dive into some specifics in each successive edition of this newsletter. So, stay tuned.... and if you haven't subscribed to it, please subscribe now.

Have immediate questions about CAAS? Message me here on LinkedIn.