As an accounting professional, you are not alone if you are wondering, “I have always done accounting for my clients. If that’s not CAS, what is?”
Traditionally, client accounting services meant that you, the accountant, do most (if not all) of the accounting work for your clients. That means you perform:
- After-the-fact financial statement preparation (write-ups);
- Transaction processing, bill payment, processing of AP, AR, and bookkeeping;
- Payroll and payroll compliance;
- Periodic tax payments/compliance (sales tax, etc.); and,
- Outsourced CFO and/or controller services, which entail ongoing, higher-level services to review financial performance and provide input on strategies to improve business.
While these are the services that make up CAS, and you may already be offering many of them, the objective and scope of true CAS goes beyond this.
The true scope and objective of CAS
You are a true practitioner of CAS if you are able to customize your accounting practice for each of your clients to best serve their needs and add value to their businesses, while maximizing your firm’s profits. CAS has to be a win-win.
The definition of CAS starts with your clients and includes all the services in traditional CAS and then some. It goes deeper into identifying the needs of different types of clients so that you can deliver the best possible services.
Since CAS is about the best way to serve the needs of all your clients, it is important to analyze which categories your clients fit into:
1. Clients who write manual checks. Chances are your firm has some clients handling things this way. This is traditional after-the-fact write-up work.
2. Clients who want to perform some of the accounting work (for example, transaction processing) in their office by choice and not because it has been imposed on them.
3. Clients who want to offload all their accounting work to their accountant. This is outsourced accounting services (not to be confused with offshore accounting services, which means taking accounting work offshore). Outsourced accounting services is clearly a segment that has been underserved.
A true CAS practice:
- Focuses on the needs of the clients in each of the categories listed above; and,
- Optimizes the firm’s processes for each of these categories to maximize margins.
A very important factor to recognize is that even though these three categories seem distinct from each other, any given client can – and many will – climb through these categories to become a great fit for the higher level of services. However, such clients may be so very busy with running their businesses that they simply may not have the time to think about what more you can do for them. You should proactively make them aware of the higher-level options your firm offers to make their lives easier and make their businesses grow.
Important prerequisites for profitable CAS
Before we go any further, it is very important to understand that the only practical way you’ll add more to your bottom line is by leveraging all the capabilities cloud and other technologies have to offer to make your firm more efficient and productive i.e. use far less time to produce the same or higher volume of work, deliver more and higher value services, more accurately. Hence, to achieve high margins from your CAS practice, you must get away from the hourly rate by adopting primarily the fixed price model or value pricing where possible.
Now, let’s revisit the three distinct categories of accounting clients and the types of services you can provide for delivering effective CAS to each of them.
1. Clients who write manual checks. Surveys suggest that 25-30 percent of small accounting firms still pay employees by writing manual checks, and still make payments by debit and credit cards. This creates a significant amount of data entry for a low-paying commodity service. How do you make this service more profitable?
The only practical way to do so is to leverage automation in accounting technologies. Download the bank, credit card, and debit card transactions in electronic form right into your accounting system. Most accounting systems offer this capability. Make sure to use this feature. This could reduce data entry for after-the-fact write-up by 70-80 percent, making after-the-fact write-up more profitable.
Even though they are still after-the-fact clients, this does not necessarily mean that they need to be “after-the-year-end” clients. You can automate this work to keep updating transactions daily/weekly and to keep producing financial statements monthly or quarterly. By spreading out the work during the year, you can greatly reduce the tax season crunch resulting from these write-up clients dumping everything on your desk at yearend.
In addition, you can deliver profit and loss insights faster than ever before so that business owners can actually use the “fresh and timely” information to better navigate their businesses. If you are not on a monthly retainer, the faster you deliver the service, the faster you can bill for it.
2. Clients who want to perform some of the accounting work. Clients who want to perform some accounting run some of their business processes off accounting software. For example, they may issue invoices for products/services sold to their customers, pay vendor bills, or reorder inventory items using accounting software. However, clients entering such transactions into an accounting program themselves does not mean they are doing “accounting” work. This is really “business transactions processing,” not accounting.
In the desktop and pre-Internet era, businesses were restricted to keeping such software in their offices and there was a disconnect between accountants and their clients. That was the primary cause of one of the major challenges accountants faced – client errors. However, with the cloud you and your clients can work collaboratively. You can set up a chart of accounts, and assign appropriate accounts to vendors and customers. In some cloud systems, you can limit client access only to the functions the client is capable of performing reasonably accurately. This can help you minimize client errors.
CAS also significantly increases your ability to manage clients’ cash flow and advise them on financial management.
3. Clients who want to (should) offload all their accounting work to their accountant. Outsourced accounting is the primary growth area for CAS. Given the choice, a significant number of clients want to offload the accounting work they do in their offices to their accountants. However, until now, most accounting firms were reluctant to take that work over as it presented much hassle and lower margins.
The cloud has changed that. With the right cloud solution, your staff can do what your clients’ staff currently does, only better and more accurately in half the time. That makes outsourced accounting highly profitable.
The most comprehensive CAS practice handles a vast variety of activities necessary for running a business efficiently. This includes managing payables, receivables, cash flow, payroll, banking, taxation (sales tax/payroll tax/income tax/tax planning), trial balance, financial statements and periodic regulatory compliance. Consequently, it means significantly more collaboration with your client, extensively deployed processes that speed up information flow between your clients and you – and the mindset of an “in-house” accounting department for the client.
Advisory services are more impactful with CAS
Higher-end advisory and outsourced CFO services are more effective and impactful when they emerge from CAS. Just reviewing the accounting work done by others to discover insights for providing advice is like going back to the “rear-view mirror” type of services. Such rear-view services do not help business owners to better navigate their future. Client accounting services do.
While doing the work and delivering CAS to your clients, you may notice decisions that could have detrimental impacts on a client’s business. CAS is better for your clients as it leads to better business management for them and improves their chances for greater success while it helps you strengthen your client relationship – as well as your stature as their most trusted advisor.
