Is Client Accounting Services Overhyped?

Source: CPA Trendlines Research

New CPA Trendlines study shows broad interest in CAS, but also widespread failures to achieve hoped-for goals.

By CPA Trendlines Research

Client Accounting Services (CAS), the full-menu offering of taking over many of a client's routine internal bookkeeping chores, is fast emerging as an essential growth strategy for accounting firms across the nation, according to a new CPA Trendlines Research study, perhaps the broadest such study undertaken in the field so far.

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But most firms admit they're falling short of their financial and operational goals for CAS, illustrating the daunting challenges for accountants seeking to shift from traditional compliance services to the high-margin, fast-growth role of a so-called trusted advisor.

Hitendra Patil
Patil

"Almost all firms recognize that CAS is cash," says Hitendra Patil, chief architect of the research project, a contributor to CPA Trendlines, and author of Accountaneur: The Entrepreneurial Accountant. "But many are apparently still struggling to cash in."

The survey is designed to reveal the winning strategies for firms offering client accounting services, to help firms evaluate adding CAS to their practice, and to create a roadmap for adopting CAS offerings.

The findings so far indicate the hurdles created by an inability to change the core business models of accounting firms – from compliance to advisory, according to Patil, who also serves as director of customer success at AccountantsWorld.

"CAS is an either-or enigma for many firms," according to Patil. "As an accounting firm, you can either make more money with CAS or you can forever struggle with its challenges. You can't do both. Fortunately, quite a few practitioners have cracked the CAS-success code."

"It's clear that client accounting services have seized the imagination of practicing accountants at firms of all sizes and styles," says Rick Telberg, founder and CEO of CPA Trendlines Research. "But firms are finding they need to clear a lot of obstacles to make it work."

"They're finding problems in re-building their technology systems, adjusting their workflows, training staff, converting skeptical or hide-bound partners, finding the right clients, pricing the offering, and in sales and marketing," Telberg says. "Most all, finding success in client accounting services demands a fundamental shift in the philosophy and mindset of each individual practitioner to cross the chasm from traditional compliance services to become the pro-active business advisor clients really want today."

The power of client accounting services to strengthen and build firms is clear from those who are jumping into the specialty:

  • 9 in 10 firms offering CAS today say it's "important to the firm's future."
  • 8 in 10 firms report CAS "provides superior revenue growth."
  • 6 in 10 say CAS deliver above-par profit margins.
  • 5 in 10 report CAS boosts "staff morale."
  • 9 in 10 cite improvements in "client satisfaction."
  • 8 in 10 are "attracting new clients" with CAS.
  • 8 in 10 confirm CAS "creates new opportunities" for the firm.

Yet, despite the potential dividends in providing client accounting services, many firms are struggling to perfect their offering to make it a baked-in part of the firm's DNA, and ultimately obtain all the hoped-for benefits.

  • Only about 15 percent of firms say they are "very satisfied" with the financial and operational performance of their client accounting services, and 40 percent are merely "satisfied." The rest are ambivalent (30%) or dissatisfied (16%).

The new study, which covers more than 8,000 firms, apparently more than any other conducted in the profession to date, includes firms offering CAS, as well as those who are shying away from it, and those who have tried CAS and failed to make a go of it.

KEY FINDINGS

The CPA Trendlines Research study provides

  1. a snapshot of the state of client accounting services in the profession,
  2. answers the most salient questions firms encounter about CAS practices and procedures, and
  3. offers a roadmap for firms to launch and advance a CAS business.

The power of client accounting services to strengthen and build firms is clear from those who are jumping into the specialty:

  • 9 in 10 firms offering CAS today say it's "important to the firm's future."
  • 8 in 10 firms report CAS "provides superior revenue growth."
  • 6 in 10 say CAS deliver above-par profit margins.
  • 5 in 10 report CAS boosts "staff morale."
  • 9 in 10 cite improvements in "client satisfaction."
  • 8 in 10 are "attracting new clients" with CAS.
  • 8 in 10 confirm CAS "creates new opportunities" for the firm.

Yet, despite the potential dividends in providing client accounting services, many firms are struggling to perfect their offering to make it a baked-in part of the firm's DNA, and ultimately obtain all the hoped-for benefits.

  • Only about 15 percent of firms say they are "very satisfied" with the financial and operational performance of their client accounting services, and 40 percent are merely "satisfied." The rest are ambivalent (30%) or dissatisfied (16%).

Pricing the new service line still needs to be sorted out, with many firms trying a mix of strategies.

  • 32% of firms are billing by the hour.
  • 28% are experimenting with value-pricing.
  • 43% are charging flat rates or fixed fees.
  • And 36% are trying a mix of pricing strategies.

Most firms are relying on their customary marketing techniques to develop their CAS business.

  • 50% are "proactively seeking referrals."
  • 48% are relying on their websites.
  • 35% are using old-fashioned networking for new business.
  • 15% are investing in search engine optimization.
  • 12% are going to social media and influencers.
  • 11% are developing content marketing and thought-leadership campaigns.
  • 8% have "assigned a specific person" to take the lead.
  • 7% are promoting CAS with webinars, events or podcasts.
  • 5% are using telemarketing and email promotions.

But policies and procedures to support and expand the CAS business are lagging.

  • Only half of firms offering client accounting services are using CAS-specific engagement letters.
  • 25% have created marketing or sales collateral describing their CAS offering.
  • 23% use standardized CAS report sets.
  • 22% "have a checklist for identifying potential CAS clients.
  • And only 12% have settled on a standardized list of the key performance indicators they'll monitor for clients.

The firms who are still sitting on the sidelines of the CAS craze have plenty of good reasons, chief among them: people problems.

  • 48% of the firms who are not in the CAS business say they "don't have the staffing for it."
  • 24% say their "clients aren't asking for it."
  • 21% calculate that CAS would dilute profits from other services.
  • 18% report CAS are simply "not the right fit for our firm"
  • 16% "don't have the technology for it."
  • 10% simply "don't see a good reason to do it."

Still, 47 percent of those on the sidelines say they are monitoring the marketing and are currently "considering" jumping into client accounting services.

To be sure, though, 24 percent have no plans to consider launching a CAS practice and 8 percent "have tried it and dropped it." Another 21 percent admitted ignorance, checking off: "Huh? What's 'Client Accounting Services?'"

By most definitions (and there are a number), client accounting services include a range of tasks and activities usually handled by the client. Among CAS-practicing firms:

  • 92% handle basic bookkeeping.
  • 90% provide financial statements, P&L's, and reports.
  • 78% take care of sales tax filings.
  • 76% deliver payroll and payroll tax services.
  • 76% also give business advisory and consulting services.
  • 71% do write-up.
  • 70% process payrolls.
  • 69% calculate sales taxes.
  • 53% handle accounts payable and pay bills for clients.
  • 44% provide outsourced or virtual CFO services.
  • 42% monitor and manage cash flows.
  • 36% assume invoicing responsibilities and take charge of accounts receivable.

But many CAS-shy firms are already just a couple steps away from full-scale CAS capabilities. Among the firms not offering CAS:

  • 60% do basic bookkeeping.
  • 57% provide financial statements, P&Ls, and reports.
  • 53% also give business advisory and consulting services.
  • 48% take care of sales tax filings.
  • 47% do write-up.
  • 46% deliver payroll and payroll tax services.
  • 40% process payrolls.
  • 40% calculate sales taxes.
  • 20% handle accounts payable and pay bills for clients.
  • 14% assume invoicing responsibilities and take charge of accounts receivable.
  • 13% monitor and manage cash flows.

CAS-less firms also provide routine, as well as, high-value, services:

  • 95% prepare tax returns.
  • 58% advise on tax strategy.
  • 19% provide audit or assurance services.
  • 17% handle personal financial planning.
  • 10% consulting on technology.
  • 9% do business valuations.
  • 8% are into wealth management.

"Client accounting services may be the new buzz-word for today's notion of a full-service accounting firm," Telberg says. "But clearly, there are challenges, and it's not necessarily the answer for every firm. That said, we're still in the early stages of adoption, and many firms are just waiting for the right moment to jump into CAS."

Methodology

The survey was initially launched in June 2019 using an email invitation to more than 100,000 CPA Trendlines subscribers representing a statistically valid sample of the tax and accounting industry. More than 8,000 completed an initial questionnaire and nearly 700 completed a more detailed questionnaire. The methodology provides a 95 percent level of confidence for a 3-5 percentage point margin of error.

The survey remains open at this time and readers of this report are welcome to share the report and the link to the survey with colleagues and peers who may also be interested in the results.

 

One Response to “Is Client Accounting Services Overhyped?”

  1. Alice Wright

    Informative blog and Yes, According to the survey I am totally agree that CAS are important to Firm’s future

    You are a genuine professional of CAS in the event that you can customize your bookkeeping practice for every one of your customers to best serve their needs and increase the value of their organizations, while boosting your company’s benefits. CAS must be a success win.

    The meaning of CAS begins with your customers and incorporates every one of the administrations in customary CAS to say the very least. It goes further into recognizing the necessities of various sorts of customers with the goal that you can convey the most ideal administrations.

    Since CAS is about the most ideal approach to serve the requirements of every one of your customers.

    Reply

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