Accountants as business advisors

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By Mark Lee.

Many accountancy practices claim to be both accountants and business advisers. Is this borne out by the way they operate? And do they take their own advice?

I suppose the answer to the first question depends on whether you approach business advice as:

  • Something you provide automatically; or
  • An extra service that business clients only get if they ask for it and pay for it over and above the fee for recurring accounting and tax work.

The Banker’s view

A while back I saw this quote attributed to Piyali Williams, head of professional proposition at UK's HSBC bank: “Accountants are in a better position than banks… We’ve always viewed them [accountants] and our customers have always viewed them as a more trusted source of…independent advice.”

Whilst this is good news for accountants, such a suggestion shouldn’t surprise anyone.  It’s as much a reflection on how business people view their bank manager - even assuming they know who that is.

The insolvency practitioner’s view

I have also been made aware of a surprising statistic. Apparently a senior insolvency practitioner attributes 80 percent of corporate insolvencies are caused by poor financial management.

What does that say about the advice being provided by accountants?  Are they just missing out on opportunities or are they failing their clients?

What do business clients want and need?

Let me offer a theory I have developed by reference to my conversations with many business owners and accountants over the years.  It’s not a universal truth, but it may explain the 80 percent figure above.

Most business owners go to an accountant because they want to pay less tax, not because they want a set of accounts. To the extent that the business owner wants the accountant to do accountancy work, it’s largely because they need their accounts for the bank, for their funders, and for the taxman. And many accountants are happy to focus on providing these backwards-looking tax and accounting services.

The challenge is for the accountants to help their business clients appreciate the need for effective financial management before it’s too late.  If you look at many accountancy firm Web sites and promotional material, however, this is not an area on which many of them focus.  And they aren’t well placed to sell such services to new clients as an additional spend, over and above the quoted fees for the traditional compliance work - unless the business is already in financial difficulty, in which case it could all be too late.

Many accountants would prefer to focus on providing the traditional services that they have always provided year in and year out.  Expanding into new services might mean first devoting time to developing additional skills to build up confidence that the advice they provide will be worthwhile.

When clients require tax advice that is outside of the accountant’s area of expertise they can involve external specialists such as Tax Advice Network. But what about when a client needs solid help to implement effective financial controls? Some accountants are well placed to advice on such matters. Many are not.

Rather than ignore the situation, however, such accountants could outsource the provision of advice in effect by engaging an independent specialist who has the expertise, experience and time to work with the clients who need help. 

I should also stress that even when the accountant offers to prepare regular management accounts, this is still not the same as helping the client implement effective financial management controls and procedures.

What else?

If so many corporate insolvencies are attributed to poor financial management (whatever is the true statistic), are accountants to blame, or are they simply missing an opportunity to help their clients and to earn valuable additional fees in the process?

Let me pose a series of questions for accountants who claim to also be business advisers:

  • Do you promote your ability to provide business advice distinct from your accountancy services or as part of them?
  • Do you take the initiative or wait for clients to specifically ask you for your business advice? Will you provide these services within your standard annual fee?
  • What will clients be prepared to pay extra for?
  • Can you get in first and make clear that additional services are available for an additional fee?
  • Can you highlight the benefits of engaging you to provide those additional services - and sooner rather than later?
  • Do you walk the talk? Have you considered the application of your own advice to your own business?
  • How accurate is your firm’s claim to be “accountants and business advisers”? Are you really a business adviser or just an accountant who records, reports, and focuses on what’s already happened?

Mark Lee is Consultant Practice Editor of AccountingWEB and Chairman of the Tax Advice Network. His personal Web site and blog are at:

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