How accountants can learn 'advisory'

We have all heard the rhetoric, the spiel that has been shoved down our throat. The same message preached by the apparent ‘thought leaders’, marketers, software vendors and technologists.

The accounting profession as we know it, will be disrupted by Machine learning, #AI, #Blockchain, [#insert SiliconValley buzzword here].

The work we do day to day, the way we earn our margin, is largely ‘commoditised’ work - bookkeeping, tax compliance and basic accounting. Brace yourselves - it's all going to disappear.

The suggested antidote to being replaced by a faceless robot is that we, Accountants, must focus on doing “advisory services”.

As explored in a previous post, "Advisory" services are a subjective term, and is creating great debate.

But what does it mean to be an advisor? 

For the purposes of this article, I am going to assume that Advisory is financial consulting. That is, analysing a set of financial statements to understand the drivers, viability and profitability of a business. To help our clients improve their current financial situation, using business as their wealth vehicle.

In other words, for the purposes of this blog, advisory has nothing to do with tax or wealth management (financial planning).

How to develop ‘advisory skills’

Speaking with accounting firms, the dialogue is always about how we can train our staff to be advisors. How we can train our accountants, who are typically left brain, rational, ISTJ’s to stop thinking that accounting is the process reconciling balance sheets and completing tax forms.

To encourage them to think differently about the numbers. To engage the financial statements from a different perspective.

I am not offering a magic formula, a “10 step process” or Management hack.

Why?

Well firstly, I am not your guru. 

Secondly, I believe you can’t learn to be an advisor from a ‘how to’ guide or a webinar. Being advisor requires you, only you, to embrace the emotional labour. It is bespoke, deeply personal and requires intimate knowledge of the client, the industry and their goals. But mostly, it requires experience.

Rather than offering a process, I am offering ideas. A few insights that I have learned from peers, and tactics we are testing within our own business.

1. Critical thinking

Reflecting back to my time in business services, the metrics of my performance were centred around:

• How quickly I could get a final package completed and sent out the door
• The number of review points
• The WIP balance compared to budget.

This focus on time and billable hours limits our ability to engage in work that demands critical thinking. When you’re trying to solve an interesting problem, the pressure and fear of being ‘over budget’ is not conducive to deep thought. We are not encouraged to dig deeper, to uncover the root problem and resolve it. Rather, we’re incentivised to simply ‘flag it’ and move on - to leave it for someone with a higher pay packet. 

The underlying problem is not timesheets, it’s the process

The term ‘compliance work’ in our context is the routine work that pays the bills. Tax returns, BAS, ASIC lodgements. Etc.

In the real world, the term ‘compliance’ is viewed differently. From the lens of laymen, it implies a process. That we must do as we’re told, to follow a prescribed course of action. Rules like keeping track of every 6-minute increment on a timesheet, following the 21-step workflow process set by management. The process of leaving hard problems for your manager to resolve.

Rather than be told to follow a process, us leaders should offer a framework, a set of principles and values. Empower staff to work within these constraints, and not be afraid to fail or challenge assertions. 

KPIs should be designed around the questions being posed, not providing right answers. Reward experimentation, new insights, different perspectives. 

I must admit, it is often challenging to balance commerciality with experimentation. But that’s where innovation happens. 

Consider that time R&D on your P&L. 

A practical example

I empathise with this situation because I’ve been on both sides of the coin. I did the grind for a reputable business service firm. I spent 10 years of my life keeping track of time during work hours. 

This habit stopped when I worked in Corporate Finance. Performance was rewarded on outcomes. A deal getting over the line, commercial issues identified in a due diligence. Our ability to collaborate with other professionals to provide an optimal solution for our clients. We never bothered timesheets, as everyone realised there’s not a correlation between the number of hours and revenue. 

This provided freedom, flexibility and authority to hypothesise. To test alternative scenarios, to see things differently. To evaluate circumstances, information and form assertions.

2. Effective communication

The great irony of accounting is that financial statements were invented to document what is true. The reality is this truth can be interpreted in many different ways.

Why is that if you give the same set of information to three different tax accountants, all of them produce a different tax outcome?

It's because we all see things differently.

‘Advisory’ is not a report, it’s contextualization

Financial software companies like Futurli, Fathom and Spotlight reporting have training programs for accountants on how to become ‘advisors’. Aspects of this content are useful, at a theoretical level. The value that these apps add to accountants is that they make us look good in front of clients. They make the numbers look pretty. They also save time that would be otherwise spent manipulating data. They allegedly do all the hard work.

Sending a pretty report is not ‘advisory’.

Rather, advisory is contextualising this information to their client’s circumstances. The software is simply a tool. A tool to augment the storytelling process.

Empathy

Sometimes it’s challenging for us to see the world through our client’s lens. To understand why they do what they do. We’re quick to label them as stupid or irrational because they did not listen to our advice that would have produced a better financial outcome.

If you can understand how and where they are coming from, only then can you build the trust to show them how you see the situation. To communicate your ideas, data, advice in a way that they can engage with.

“Seek first to understand, then to be understood” — Steven Covey.

A complete understanding of someone’s view is the necessary first step to making change.

Practicing empathy can help us be better advisors.

Do the work

‘Advisory’ is a craft - not a service offering. There is no ‘playbook’. The only way the skills can be developed is by doing the work.

But what if my clients don’t want to pay for it?

Why do you need to charge for it?

Be generous. Don’t underestimate the power of a gift. Frame it as an opportunity to be better, to be more generous. To hone your craft.

Forget about the WIP. If you have a Manager or Partner that is invested in your future, they will not be concerned with the accumulation of imaginary numbers on a report.

If you don’t have the confidence or authority to use your clients as guinea pigs, practice on a friend or colleague. The internal financial controller of your firm is probably the smartest accountant in your entire organisation. She is, after all, the accountant for accountants.

3. Continous learning

To be a leader to you need to decide to act like one. Change your posture and focus on continuous education.

Here are a few recommended technical and non-technical readings for Accountants that want to level up as an advisor.

• The Emyth, Michael Gerber
• Warren Buffett and the interpretation of financial statements, David Clark
• Winning with data, Thomas Tugunz
• The Rockefeller Habits, Vern Harnish
• Profit First, Mike Mollawicz
• Linchpin, Seth Godin
• The Management Accounting & Applied Finance, ICAA program
• The Valuation of Businesses, Shares and Other Equity, Wayne Lonergan
• The Coaching Habit, Michale Bungay Stanier
• Getting to Yes, Roger Fisher

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Anything else?

I would love for other practitioners to add to this.

Feel free to add your thoughts in the comments section. Let’s build a set of principles to better our profession.

Jason