Value adding with specialist services
Peter Towers
Founder of ESS BIZTOOLS Pty Ltd | Certified Public Accountant | Business Advisor | Mentor and Coach
This is the fourth segment of the discussion with Andrew Geddes* about important issues currently facing the Accounting Industry.
Previous editions below:
*Andrew Geddes was the co-founder of the Financial Management Research Centre (FMRC) at the University of New England, Consultant and the Chair for ten years of ASX Top 200 company - Greencross Ltd,
How might an Australian Accountant heavily involved in compliance create an external CFO service offering?
The question Andrew Geddes has for accountants in Australia who may currently be heavily involved in compliance and finding it difficult to do much else, is “how might you create an external CFO Service offering?” Andrew continues “If you are going to create a specific division – Business Advisory Services Division, you’re going to have to put capital into it and possibly recruit specialists to work in it.”
Now, a lot of firms are reluctant to do that, because they don’t have the money and/or the time.
So, he says if we’re not going to put 50 or 100 grand aside and invest and try to make a specialist division can you evolve from your current compliance production model?
Andrew noted that ESS BIZTOOLS had an example of the type of service a small accountancy firm could offer.
Several years ago, ESS BIZTOOLS developed the Tradie Charge Out Rate Calculator from a prototype prepared by FMRC. The Calculator works in Excel.
The example refers to an accountancy firm that subscribes to the ESS BIZTOOLS Business Advisory Services Starter Package , which includes the “Tradie Charge Out Rate Calculator”.
This accountancy firm had about 20 Tradie clients when they subscribed to this package. At that stage, they were not offering any additional services to those clients other than the preparation of annual accounts and their income tax returns. They became subscribers specifically so that they could access the Charge Out Rate Calculator and use it with their clients.
At that stage, they may have produced an annual budget for clients, however it was basically a “guesstimate” of a sum of money that would be earned during the year. There was no link back to:
One of the biggest problems for the types of clients is what is the level of mark-up on external purchases for clients and is it to be applied consistently.
By using the ESS BIZTOOLS Charge Out Rate Calculator, the accountant was able to accurately calculate the required charge-out rates for individual team members, based on:
The ultimate objective was to ensure that the targeted profit was earned for the year.
Obviously, there are always variations, because of working hours, productivity achieved, mark-ups etc. And for this reason, the accounting firm indicated to clients that they wanted them to agree to monthly or quarterly financial accounts being prepared. These accounts were then analysed by the accounting firm and a monthly or quarterly business review meeting with the client was organised by the accountant. During the meeting, a full review could be made of actual performance compared to the Budget, and if required, fine tuning of the charge-out rates could be made.
Word got around, and the accounting firm now has 120 Tradie clients participating in this service without any specific marketing to attract Tradie clients other than “word-of-mouth referrals.” The accounting firm indicated that they are now charging fees of approximately $8,000 per annum per client over and above the fee that the client was originally paying for the preparation of annual accounts and income tax returns.
Within the ESS BIZTOOLS Business Advisory Services Starter Package , there is a similar package for professional service firms.
It is all about the pricing – getting that right and then by monitoring each month or quarter, the Tradie businesses have been able to achieve their profit targets or clearly understand why their profit target was not achieved.
This is a service that virtually every accountant could provide because most represent Tradie clients. The key discussion points are:
If you are helping your Tradie clients with their pricing, you will then be able to have a discussion with them about all aspects of their financial performance on a monthly or quarterly basis.
In these discussions, you, their accountant, will be able to provide more information relating to the Tradie’s pricing. This is the secret to expanding your practice, because the Tradie’s business will improve profitability and cash flow as they grow. They will then have more money to put into superannuation or to invest in other businesses. Your average fee will keep rising as they require more services. The range of services you can provide to clients can grow significantly by sitting down and asking them questions about how they’re running their business and how they price their services, and outlining the commercial services that you can provide to them.
If you are considering the Tradie example, focus in on one or two clients who may benefit from your advice.? Learn a bit about their business, so you can help them grow. This was the original function of FMRC – we used to focus on industry sectors and learn about them and then attract more from that sector so it is the same type of service that you could implement with your clients and associates of your clients.
The American accountant who pioneered virtual CFO services in the USA indicated that to offer these types of services, you need to have developed industry/customer knowledge that is “an inch wide and a mile deep” – this is the benefit of starting with a few clients in a particular category and developing this knowledge.
You should also refer to industry benchmarks to advise your client of any aspect of their business that varies from the industry benchmarks. Those areas may need review.
My experience is that accountants can pick out some receptive clients in a sector and get to know that industry sector by simply asking questions and listening and driving the conversation into budgeting and monitoring processes. Within six months they’ll be on top of it and getting referrals to other clients in that sector.
It is necessary to develop a clear understanding of your client’s business. Remember, “an inch wide and a mile deep”. That accountant who specialised in Tradies, is a great example of someone who has used that process to get a clear understanding of how he/she can help Tradies to understand the cost of production and to make sure they price their jobs appropriately. In some cases it can be smart to put a “value price” on to improve the margin.
This concept of in-depth knowledge of your client’s affairs has been demonstrated by another accounting firm that I advise who have developed skills in business valuations.
They now suggest to clients that the business valuation process should be prepared annually. Word is spreading through their client base that they have the expertise to undertake these valuations. As a result, they are finding they are getting more and more enquiries from their clients about this service.
So, whilst this is not a particular industry skill, it is a skill and knowledge that can be applied to virtually any type of business. It is a sound concept to suggest to all business clients that they have a regular valuation prepared on their business.
Assisting tradies and Professions to set Charge Out Rates which will generate the targeted profit and then monitoring actual performance via the preparation of a Weekly Performance Report and Monthly Financial Accounts and discussing all of the issues with the client’s leadership team is interesting and challenging work for the entire accounting team
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Next Issue
The “Dawn of a New Era” series of Accountants Minute will continue next week, with “Implementing ‘monitoring performance’ helps SMEs to SCALE UP”.
ESS BIZTOOLS Product Packages
Starter Package
$1,529 (including GST) for a 12-month subscription (normally $2,100). Monthly payment is also available at $149 (including GST), normally $197. Click here to find out more and to subscribe.
Advanced Package
$2,519 (including GST) for a 12-month subscription (normally $6,500). Monthly payment is also available at $239 (including GST), normally $596. Click here to find out more and to subscribe.
Financial Forecasting Package
o??? 52 week business enhancement system
o??? Virtual CFO services templates
o??? Research and Development product system
o??? Business Plans
o??? Raising capital advice
o??? section 708 Corporations Act
o??? Early Stage Innovation Company Capital Raising
o??? Crowd Sourced Funding Equity Raising
o??? Corporate governance mentoring
o??? Board of Advice
o??? Board of Directors
o??? Personal Property Securities Register System
o??? Charge out rates calculator for Tradies to earn targeted profits
o??? Charge out rates calculator for Professionals to earn targeted profits
o??? Retail industry mix of stock categories with mark-ups to achieve targeted profits
o??? Risk management
o??? Strategic Planning
o??? Succession Planning
This package would normally cost $11,000 (including GST) for a 12-month subscription.
To celebrate the new financial year, we are offering this package for $6,199 (including GST) for a 12-month subscription. Monthly payment is also available at $578 (including GST).
NOTE: NO GST payable on the PlanGuru software package.
Click here to find out more and to subscribe.
Want to know more?
Visit www.essbiztools.com.au .
If you would like to have a discussion about how this concept of virtual CFO services can be supplied by Australian accounting firms please ring our Managing Director, Peter Towers, on 1800 232 088 and we will arrange a complimentary 15-minute Zoom meeting to discuss your firm’s position and to give you our advice.
We believe that this is the blueprint for the delivery of an enhanced range of services by Australian accounting firms to assist SME businesses to add value to their businesses and to assist accountants not only to attract but to retain outstanding talent who want to be involved in the delivery of “real accounting services”.
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