Sholto MacPherson for BoxFreeIT writes: Accountants looking for more profitable services than compliance have begun turning to packaged advisory services often marketed as a “virtual CFO”.
In some cases firms have been pushed into this area by their business clients who, no longer satisfied with an annual tax return, are desperate for advice in growing their business. Small and medium companies are searching for an adviser who can give them a set of KPIs that will help them grow more profitable, more stable, and quickly.
But before an accountant can add a virtual CFO service to their portfolio they need to change some fundamental aspects in the way they run their firm, says Reckon’s managing director of the business group, Pete Sanders. (Sanders is also speaking at the July 30 event, Future Series: Virtual CFO, along with Intuit and Deloitte).
A firm needs to update the expectations of its clients as well as its internal processes before committing to the virtual CFO route.
BoxFreeIT: How should firms change their engagement models?
Sanders: The first thing is to change the intention with the client and to tell them we have a brand-new model going forward. Clients have come to them for years, giving them an end of year tax file.
Now the opportunity for the accountant is to say, “I‘ll do that work but I want to see you in a month’s time and review it together. Let’s see how you went over the past 12 months.”
The accountant can say we can keep engaging as we are, or we can help you along the way.
BoxFreeIT: What must an accountant be prepared for in that conversation?
Sanders: Changing the expectations of the client in terms of their relationship. The day the client walks in and the accountant says, We’re going to do things differently, the accountant must make sure the client sees value and says, I want that.
If the client says yes then the accountant needs to have a plan. firm doesn’t know what htey’er selling or how they’re delivering it, then how will they make sure you’re getting the right outcome for your business?
BoxFreeIT: What type of technology and tools are required to support a virtual CFO?
Sanders: I think a review pack or a pack of reports that were meaningful for the client. There’s a tendency to go deep on detail but the client really wants to have summary reviews like graphs.
For example the profit and loss statement – we’ve always plugged it to clients once a year, and they take a quick glance and say, That looks right.
But if you map the P&L on a quarterly basis the client should say, what changed to get that result? And the accountant can ask, what did you change in the business? Your staff, approach to market?
Cashflow is another one. How many people are actively managing their cash flow if they’re going to be short or to invest extra cash?
Then you have the detail beneath. The accountant can say that’s interesting, where did that come from? Let’s look at it together and work out how it happened.
The great thing about a virtual CFO is that they can do it over the phone and still go into real data. With cloud accounting software they’re seeing the data at the same time. Maybe you use Skype or Google Hangouts to share your screen and show them where you are looking in their (online accounting program).
BoxFreeIT: How comfortable are accountants at using those collaborative programs?
I think some accountants definitely are. The consumer world is dragging the professional world to where it needs to be. Ten years ago we all had Nokia phones and now the iPhone and Android devices are so powerful, why can’t we use it for professional use as well?
So accountants are not comfortable yet but they’re heading in that direction, for sure.
BoxFreeIT: How can accountants turn their schedules around from in-bound work driven by the compliance cycle to out-bound work? How can they strike the right balance?
Sanders: The first challenge is working out what the typical week or month looks like and how much time is spent doing client facing work, either billable or business development. Then look at what do we change so we can free up my diary and have more time for advisory.
The reality is that accountants can get real efficiencies in their business (through regular virtual CFO work). If you’re talking to the client every month you’re looking at the accounts in detail and it shortens the cycle at the end of the year.
Going through that review cycle every month or quarter means you’re front-ending that work and that levels out the spikes and troughs (in the firm’s capacity) throughout the year.
BoxFreeIT: There’s a big opportunity for accountants to move beyond the basic measurements and look at metrics which are more relevant to their clients. How do they go about educating an SME business owner?
Sanders: One of the big firms in Brisbane said the number one question from clients is “how am I performing against my peers and the rest of the market?”. Small businesses are great technicians but they haven’t got any indication of how the market is performing because of all the media hype.
Instead, business should ask how do we grow more or have a different business?
It’s the potential, that you don’t know what you don’t know. I’m working really hard, I think I’m doing well – but am I? I’m not sure.
That’s the opportunity to educate for accountants. What if they ran growth strategies sessions for their clients? A business community would develop within the firm. They would be seen as a trusted advisor on the compliance side but a thought leader in helping those businesses grow.
BoxFreeIT: It’s a big change moving to more client-facing work. Will it suit the personality of accountants?
Sanders: For some people it will definitely be a challenge. But if you put numbers in front of an accountant they love to talk about it. The challenge is making sure the accountant is comfortable with the engagement model. If they’re not the client will say, What’s this really about?
BoxFreeIT: What does this mean in terms of staff development and hiring strategies?
Sanders: I heard one accountant tell me recently that when the accounting grads come out of uni they want to go out and talk to clients. But in the traditional model they’re not allowed to talk to the clients for a couple of years unless a director is involved.
These young guys have great skills, they didn’t go to uni to prepare compliance work. It’s a great opportunity for them to start engaging clients very early.
BoxFreeIT: What about the risk of sending untrained young accountants out to deal with clients?
Sanders: The key is to give them a structured framework around how it would work. You can’t give advice, but you can build a relationship with the person in the future.
BoxFreeIT is an independent news site covering cloud software for Australian and New Zealand businesses which launched in July 2011. The site is published by Sholto Macpherson, a business technology journalist in online and print media for over 11 years. BoxFreeIT operates in accordance with the MEAA (Australian Journalists Association) Code of Ethics.
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