When Andrew Geddes speaks – smart accountants listen.
They’d be crazy not to.
Andrew has over 40 years in the accounting and financial industries.
He was a co-founder of the Financial Management Research Centre at the University of New England and the former Chair of Greencross Ltd, as it built from a single veterinary practice to a nationwide success story.
Today, Andrew Geddes is respected as a top financial industry guru.
In a podcast this week, Andrew has issued a timely warning to accountancy firms that they need to diversify – and do it now. He says “diminished returns flowing into practices relying solely on tax compliance work are going to impact sooner rather than later.”
His concerns are backed up by the Tax Commissioner who recently warned of dark times ahead for firms that rely principally on tax clients.
According to Andrew Geddes, the smart move for accountants is to transition into Business Advisory Services.
However, he also warns that any transformation can’t be a knee-jerk reaction. Everything must be considered, discussed and executed to a developed and agreed plan.
Andrew stresses that before you or your partners start offering Advisory Services to your SME clients, you’ll need to undertake a detailed investigative process.
In other words, he believes these are not services you should be offering to every client. You need to select the right candidates, because your ongoing reputation depends on your success in helping those business grow in value.
Andrew commented “you should carefully select an SME to undertake a “Strategic Review” of where their business is now especially with respect to its financial performance (margins, cash flow and Balance Sheet)”.
“Then identify what we need to do to improve the business – say two or three “Business Improvement Initiatives” involving the SME’s staff; then preparation of budgets to be monitored monthly”.
Andrew emphasised “this is the strength of accountants – predicting financial performance and goalsetting then monitoring results.”
“A mid-sized multi-partner accounting firm needs to determine how much additional work it can reasonably take on with its current infrastructure and resources” says Andrew. “By determining this, you’ll know how many of your top clients you’ll be able to give your full attention to while you’re still learning the advisory process.”
In making this transition, Andrew says “some practices will probably try to teach themselves from a standing start and reinvent-the-wheel, or they can use pre-developed and researched packages that can help guide them through the process.”
He looked at two firms that have been highly successful in making the transition.
One, he says, is a five-partner regional practice that has become the most profitable firm he’s seen in 45 years.
“Both of these practices transitioned by using the ESS BIZTOOLS Business Advisory package to get them started” claims Andrew.
While independent from ESS BIZTOOLS, Andrew says “the detailed information and various procedural forms in their Business Advisory Services package help accountants get up to speed quickly in their new advisory roles.”
In his recent podcast, Andrew gave good advice on how accountants should make the transition.
He’s adamant that accountants who are committed to offering a broad range of business services need to become proactive in their marketing and client communications. However, he also recognises that this is something that most accountants aren’t necessarily good at.
“Marketing and IT improvements can be outsourced to specialists in these areas” Andrew said.
Next, Andrew says, “as an accountant, you need to select which clients you’ll put on your candidate list. You need to be sure that your efforts are going to have a good chance of producing significant outcomes. Your reputation depends on this success.”
“You’ll also need to look at the current state of each company, analyse its financials and assess its potential, before you decide if that company will make the cut.”
As an experienced consultant, Andrew recommends offering clients only a small engagement to start with. He believes once you’ve demonstrated your value, you’ll find it a lot easier to expand your advisory role with the company.
SMEs that need your help are more likely to embrace a ‘dip your toe in the water’ approach than a daunting, all-encompassing financial deal.
Andrew commented on the opportunities for accountants – “accountants can become the external CFO for their bigger SME clients who can afford this role.”
“In time they may hire their own internal CFO but the accountant can then sit on the Advisory Board due to their involvement with that client as they have grown.”
Andrew Geddes’ model states that within your own practice, there’ll be three groups of people – Finders, Minders and Producers.
The Finder will be the person who assesses which clients are the best to go after, and then offers or pitches the idea of Business Advisory Services to them. Finders will probably be partners.
If you have a Client Services Manager on staff, they’ll be the ‘Minder’ looking after the client once they’re engaged and ensuring they’re satisfied with the services they’re paying for. The Minder’s job is to keep the client happy.
Finally, the Producers will be the members of your team who provide the accounting expertise and deliver the required services – the engine room, if you like.
Of course, in very small practices, all these roles could fall to just one person – you.
When it comes to single partner accounting firms, Andrew suggests limiting your Business Advisory Services to about a dozen clients and make sure you service them well. (The small firm that Andrew was referring to is operated by a sole practitioner with 4 team members some of them working part-time. The partner performs an external Chief Financial Officer role and the team members do most of the tax advisory or compliance work.)
In larger firms, the degree to which you initially diversify will likely depend on:
- how much capacity you have within your existing teams for additional work;
- the level of expertise amongst your staff; and
- how quickly you want to change the focus of your business.
Many firms claim a major reason for not having already made the move into Advisory Services is industry staff shortages and not being able to recruit good people. Yes, it is tough out there at the moment.
But, this is a bit of a chicken-and-the-egg situation, as providing highly interesting work, like Advisory Services, has been proven to attract and keep quality people for far longer than repetitive tax compliance work.
Andrew Geddes strongly believes that the first client every diversifying accountancy practice needs to look at is itself. He says “you need to determine how you can offer your new Business Advisory Services most effectively. With a critical review, you’ll be able to work out what needs to happen inside your operation before you’re ready to take your expertise to the marketplace.”
When assessing which of your clients should become Business Advisory candidates, Andrew is adamant “you need to do your homework thoroughly.”
He says “it’s critical to investigate each client with an on-site business review, if possible, and produce a cashflow forecast and a risk review.”
Working with clients as an advisor means thinking about your role in a different way.
Andrew Geddes says “you can’t try to ‘lay down the law’ as you may have to do sometimes when it comes to tax work. Effectively, as their Business Advisor, you become part of their management team and you need to work interactively, asking your clients what they think, not just telling them what to do.”
“Once your advisory relationship is established with each client and they come to rely on your advice more heavily, you can scale up the services you offer them” says Andrew.
“You should also try to develop a relationship with clients outside the workplace” he suggests “I often think an informal dinner with the management team once a month is a good way to get to know the people you’re working with.”
Andrew has independently reviewed the ESS BIZTOOLS Business Advisory Services package in-depth and believes it provides virtually all the tools you’ll need as you and your partners begin to diversify.
He says inclusions in the package, like the Initial Assessment Questionnaire, documentation supporting Scalability and the Job Costing Module for Tradies are great resources for accountants who are starting their advisory careers.
Andrew also liked the ability for subscribers to access updated webinar briefings and the way the ESS BIZTOOLS team regularly provides additional case study articles.
He gave some closing advice to those accountants who are ready to add Business Advisory Services to expand their practice.
“The other trend occurring is the addition of wealth management services (financial planning, risk and finance) as a vertical add on to tax and accounting.”
“Licence holding companies are offering add on para planning and financial advising specialists who will visit your office if you don’t have the employees. It deepens the relationship with bigger SMEs via SMSF’s particularly.”
“Start small and produce top results for your clients” says Andrew Geddes. “Once you do, word will spread and referrals will not only see more demand for your advisory services, but it will feed back into your compliance work as well.”
Andrew Geddes concluded “in summary – add external CFO offerings then financial services to avoid irrelevance.”
If you’re one of the 67% of accountants that the CommBank Accountants Market Pulse Report says is planning to diversify into Business Advisory Services in the coming months, then read on.
ESS BIZTOOLS Business Advisory package offers you an efficient way to begin your transition process. Virtually everything you’ll need to seamlessly offer these new services to your clients is contained in this package. No need to reinvent-the-wheel – all the preparatory work has been done for you.
Visit our ESS BIZTOOLS website www.essbiztools.com.au and get started today.