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Consulting as a growth opportunity.

A number of small and mid-size accounting firms are unexpectedly finding themselves being stalked in a highly competitive market. For many, it is no longer enough to provide only traditional services. Present experience would clearly indicate that there is a legitimate and logical place for more diversified practices like business consulting. To grow, practitioners must develop new areas of interest while retaining their passion for financial statements and income tax. Needless to say, accountants furnish information that is relevant to the decision-making process, and consulting services are usually based on this kind of information gathered during traditional engagement. This may be another profitable niche to explore.

The integration of additional areas of concentration will allow practitioners to develop better relationships with clients and build more profitable practices. Limiting a practice and turning away clients needing additional services is a frightening and risky step. This article describes how consulting provides accountants with the opportunity to render better service to their clients and provides practical suggestions on how to build a more profitable accounting practice through consulting.

Scope of Services

Before a decision is made to expand a service, the accountant should decide which product or products to offer -- financial consulting or other comprehensive services. Here are some of the business categories we have identified as growth areas.

Software Consulting

Installation of accounting software and a choice of computer systems can be a highly profitable venture, generating not only revenue in its own right but opening the door to new clients as well. During an engagement, the consultant should take the opportunity to review the client's accounting systems to ensure the client is getting the desired results and to impress their client with an accounting expertise. The result is the conversion of a one-time meeting into a long-term accounting or tax engagement.

Financial Planning

Financial planning involves analysis and recommendations relating to topics such as:

* Cash flow and cash management;

* Investment planning;

* Retirement planning;

* Income tax and estate planning;

* Forecast and projection of a client's financial position; and

* Risk management evaluating.

Usually a commitment to comprehensive financial planning is meaningless without supervising the implementation of the strategies and periodically updating the strategies, depending on the changes in the economic environment. When a comprehensive engagement is undertaken, however, the process of financial planning becomes more complex. It creates the opportunity for firms to provide services to the clients in the form of system selection that benefit both the client and the accounting firm.

Human Resources

The creation and implementation of a personnel policy for a firm can offer significant benefits. In recent years, there has been a limited supply of people with the potential to work over 2200 hours per year and the ability to solve interdisciplinary problems. Firms are more willing to invest in training, incentive compensation, management assessment and organizational analysis. Businesses expect major changes in human resources areas as "a result of" or in "response to" the frequency with which minor (or major) day-to-day changes have to be employed and in light of their relative effectiveness. This is where the potential market for consulting exists.

Activity-Based Management

A new attitude of cost management toward pricing product focuses on tracing costs to activities and then tracing costs from activities to product, eliminating redundant efforts to save money and time. This step might cost an entire activity and determine value-added steps and non-value-added steps for cost management or only review and improve activity-based cost system. It is a highly specialized field of cost accounting and is recommended for mid-size firms.

Getting Ready

Contrary to popular belief, a number of accounting firms are not able to render accounting and consulting services in all areas. If one of the primary motivations of the consulting service is to make money, regardless of the quality services, forget the whole thing. Developing the new services usually takes an investment of time, money and, to some extent, specialization. While small firms may have the technical competence to perform certain jobs, they lack the manpower to put larger number of staff people in the field for a longer period of time. A good way to begin a new practice area is by specialization or mastery of one or more subjects. On the other hand, practitioners take a considerable risk by limiting their consulting practice. Those who choose to narrow consulting practices have a new option contract for services. Many of the assignments will be called once or only a few times. It does not make any sense to keep a special employee for rare assignments. The economic aspect of specialization is obvious. It is less costly than hiring new staff, but also very risky. Sometimes, individual consultants can outgrow the firm and take away clients from you.

You can also consider a merger. Some firms enjoy broader practices by merging with firms that already have some consulting services in place. Careful evaluation of the types of services offered by the prospective firm can identify those which are more compatible with your firm's goals. Merging can mean the scope of practice increases, the ability and horizons of both staff and the partners are broadened. The size of the new firm enhances both resources and stimulation. There are several reasons against merging as well as for it. Possibly the most disruptive problem relates to economic and organizational integration. Partners tend to decrease direct client contact as the firm's size increases. Unfortunately, it is exactly opposite of what we expect from a merger.

People Skills Needed

Simply identifying areas of your interest is not enough. Some firms, especially small ones, may question whether their staff will be able to handle the variety of demands associated with new services. This is a risk factor that is difficult to measure in advance.

A top quality, well-qualified staff is the key. Otherwise, the result may well be unhappy clients, higher turnover and related expenses. Take a "skill inventory" of your staff. The person who is in charge of personnel should develop a questionnaire that lists the various consulting skills based on the predictive services for clients. A skill inventory allows firms to identify staff weaknesses and areas for improvement. Also, it can be used to put together a team with skills that complement each other, making sure that a success of each engagement less dependent on a single staff member.

Price Policy

Consulting can be extremely profitable if you reach a broad category of clients and apply broader price concepts. You are a professional. Charge for your specialization and knowledge. When people go to medical specialists they expect to pay more per visit than they pay their own doctor.

Price policy is seldom a simple concept. It is determined by numerous market considerations. Your price should include a review of the "market price" as well as any liability associated with the services offered which may affect the price. Set up a pricing policy in anticipation of realizing specific marketing objectives. You can adopt a one price policy or multiple price policy. The one price policy may be more appropriate in serving a heterogeneous market. What you provide are professional services. You can be faced with "perishability." Your product/service cannot be stockpiled to sell during slow periods. There is a challenge to balancing staff against workload and cash inflow with cash outflow. Probably you will have to charge more in the hot season and less in the slow one. Be willing to offer discounts or to make special allowances, especially during a transition period.

Marketing Tools for New Services.

Needless to say, competition is intense. Competence and quality service are the key issues to expand a practice, however, much more is needed. Commitment by partners to a marketing program is essential. Everyone in the firm should be responsible for marketing, just as all are responsible for the quality of accounting work. To succeed, an accounting firm needs three components: technical expertise, marketing ability and management ability. All of these talents need not be present in all partners to the same degree. Here are some marketing tools that can be an integral part of marketing ability to be used by small and mid-size firms.

Announcements

This is a simple formal business card stating the basic information about expansion into a new practice area. It is necessary to send an announcement to all you clients. Also, you can issue company brochures that identify your firm, list areas of expertise, information about your company goals, suggestions and other information.

Use Former Employees of Clients

This can be an excellent source of new clients. Keep in touch with former employees of clients. If you had a good relationship with the controller or bookkeeper for a client, that person may recommend your firm to a new employer.

Special Mailings

This is a more expensive and more sophisticated marketing tool. It can take any number of forms and be formal or informal. To get the most effective use of special mailing remember to: highlight issues that are not broadly covered in the general media; explain the subject matter and potential monetary and non-monetary consequences of the action, avoid the sales pitch and be precise. You can target potential clients through special mailings.

Searching the "Key" Contract Files

Review the current client's file to address the specific issues and needs of the clients. Outline how you can help them to resolve a specific problem.

Client Survey

The client survey, although sometimes sophisticated and time consuming, can be an effective and profitable method of performance evaluation and practice development. It provides the opportunity to promote the firm's capabilities and to sell additional services. This approach can be as simple as periodically asking the client, "How are we doing and what else can we do to improve and expand our services?" Remember that there is no one easily identified strategy. Which marketing techniques or tools you apply and how many clients you gain are up to you.

Conclusion

Consulting can be somewhat more complex than believed at first glance. In contemplating and expansion of your firm through consulting, keep in mind that you are making an investment in your firm. It costs time and money. The rewards from expansion are usually in direct proportion to the effort you put in it.

Christopher Zorski, PhD, CPA, is an associate professor of accounting at the University of Detroit. He is managing partner at Zorski and Associates, PC.
COPYRIGHT 1992 National Society of Public Accountants
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Zorski, Christopher
Publication:The National Public Accountant
Date:Sep 1, 1992
Words:1731
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