How to Grow An Accounting Firm – 7 Effective Strategies
Unlike other industries, the finance and accounting sector hardly suffered due to the pandemic. Forecasts even predict higher demand for advisory services as businesses seek advice for insolvency, restructuring, and cost-cutting amidst economic instability.
Growth rates for accounting firms in the United States, the biggest market for finance and accounting services, increased to 19% in 2020 from 13% in 2011. Europe, the second-largest market for finance and accounting services, will be a £921 million market.
With lucrative opportunities globally, scaling up provides significant benefits for improving bottom-line figures for accounting firms regardless of size.
A growth mindset is the first step to achieving expansion goals. Step two is all about creating a roadmap — and these seven strategies could kickstart your brainstorming process.
Plan for Growth
Expanding your accounting practice takes careful planning, budgeting, forecasting, and testing. Start by defining what growth means to you and set realistic goals.
Sole practitioners with fewer resources may take a different approach from partnerships with several owners.
Consider the pros and cons of growing your practice as you lay out the groundwork for growth. During the process, consider these things.
- Focus on attracting your ideal client rather than casting a wide net and signing more customers.
- Find your niche in the accounting profession. It could be SMEs, advisory services, or forensic accounting to offer more value to clients.
- Prepare to let some clients go as you transform your practice.
As you scale up, focus on quality over quantity. Transforming your practice could mean taking a step back to attract new clients with the ideal customer profiles.
Signing up ten clients paying a $5,000 monthly retainer beats having 25 clients paying $1,500.
Improve Your Value Proposition
Too often, clients see accounting firms as necessary only for tax filing. Accounting firms have to shake off the image of being a necessary evil during tax season to being an integral business partner. And it all starts with your value proposition.
Your firm’s value proposition should make you stand out. Tell clients and prospective clients why they should choose you. And highlight the advantages of working with your firm. Crafting effective value propositions begins with discovery calls.
Getting acquainted with your ideal clients is the first step to knowing what clients need and their pain points.
Make time for discovery calls to understand clients, their businesses, what they plan to achieve in the next few years, and what holds them back. The discovery process allows you to:
- Identify current and potential accounting needs of your ideal client
- Assess if the firm is capable of handling client needs
- Determine if a potential client meets your ideal customer profile
Investing time to listen to clients and plans provides you with the information you need to package your firm as a vital partner for your prospect. For a company looking to expand, which firm would be more attractive? A practice that offers budget assistance and cash forecasting services? Or a partner that could help the business owner scale up operations without running into a cash crunch?
Creating the right value proposition to propel growth allows your firm to do two things — sell additional services while solving a client’s concern.
Providing solutions to eliminate pain points markets the firm as an integral part of the client’s business, not just a tax return preparer.
As your firm improves its value proposition, it also pays to tackle service packages and pricing. Offer products as services rather than billable hours and craft service tiers to match the varying needs of your ideal market.
Proper pricing strategies allow accounting firms to earn enough profit to support growth while achieving practice excellence.
[Related Post: 55 Catchy Accounting Business Name Ideas]
Anticipate and Address Client Needs
Accounting firms should stay on top of changes in the business environment and understand how disruptions and changes in compliance requirements affect clients. But there’s another advantage to always staying on top of things. Unlocking opportunities to expand services and better address client needs.
During the pandemic, some accounting firms remained dormant — sticking only to traditional compliance services like tax preparation. On the other hand, top firms saw an opportunity to expand into providing loan advisory services for clients deciding on the right COVID assistance program for their businesses.
Clients naturally rely on their accountant for guidance on the most cost-effective government assistance for COVID recovery or dealing with debt due to sudden business disruption. Firms that responded to the demand attracted new clients and sold additional advisory services, while those that remained dormant left revenue on the table by sticking only to traditional services.
As you plan for growth, consider emerging trends and continuously evaluate service packages to address the rapidly changing needs of your clients. One difficult lesson the pandemic taught businesses is the importance of agility and rapid adoption.
Taking a proactive approach and reaching out to clients and prospective clients to notify them of changes that may affect their business and how your firm could help is vital for growth. Being one step ahead and understanding how your firm can assist clients with facing new challenges improves your firm’s perceived value.
Start by segmenting customers to determine opportunities for upselling and cross-selling to allow clients to maximize your firm’s services. After all, keeping existing clients is more effective than acquiring new ones.
Studies reveal that a 5% increase in customer retention improves profits from 25 to 95%. You only have a 5 to 20% chance of closing a deal with new prospects but for existing customers, the probability climbs up to 60 to 70%
Another important reason to keep clients in the loop, whether clients take advantage of your additional services or not, is improved client engagement. Regular updates, not just ad hoc communication during the tax season, make clients feel valued. Satisfied clients are more likely to recommend your business — which provides another avenue for growth.
Address Staffing Needs
By the end of 2021, there were 10.9 million job openings in the U.S. Businesses found themselves shorthanded as employees from different industries left their current jobs for greener pastures or decided to shift careers.
While high employee turnover is a persistent problem for accounting firms — one out of six firms lose 20% or more accounting talents annually — the Great Resignation pushed employee retention into the limelight. According to an Accounting Today survey, 35% of firms face issues with recruiting and retaining good employees.
Tackling employee acquisition and retention is the cornerstone of a successful growth strategy. High turnover resulting in having fewer staff members and additional work could result in low-quality audits — which may have consequences for business owners and stockholders, banks, and other institutions relying on accurate audits.
A Florida State University study looked into defining factors for the success and accuracy of audits and findings. Research revealed that junior team members had the greatest influence on the quality of the team. Errors see a dramatic spike when junior members work 55 hours or more. Coincidentally, the average team member works the same number of hours, 55 hours, during the busiest season from January to March.
Rather than forcing employees to work longer, firms looking to should invest in employee retention. Improving year-on-year staffing continuity is crucial to operating a profitable business and it is also more cost-effective. Studies reveal hiring to be much more expensive and replacing an employee costs about 50% of that employee’s salary.
Find ways to improve employee engagement which may include:
- Offering flexible and hybrid work schedules
- Reducing workload to manageable levels even during tax season
- Providing training and other opportunities for upskilling
- Engaging employees in one-on-one conversations to know what they want and how to keep them
Automate Repetitive and Time-Consuming Processes
While clerical processes are integral to accounting processes, it is a pain point for many accounting firms. Often, staff members spend more time and energy on data entry, coding, and other manual tasks rather than on analyzing information.
As your firm attracts larger clients, dealing with large transaction volumes could be challenging as it requires significant time and resource allocation. One solution is to use artificial intelligence to speed up processing without compromising quality.
Technology allows an accounting firm to reduce, if not completely eliminate, manual data entry when entering expenses into the system.
For instance, introducing Artificial Intelligence in areas that do not require human input like expense and invoice processing reduces employee workload.
AI software like Envoice comes with auto-extract capabilities that capture relevant information from electronic invoices and scanned receipts. With AI, employees would no longer have to spend hours going through receipts and entering each one manually — saving time and effort.
Depending on the software capabilities, self-learning AI could also automatically categorize and code expenses. Managers will also be notified as employees submit new invoices and expense reports — and directly approve requests even from a mobile device.
By letting technology take care of tactical processes, employees could focus on analyzing and reviewing the accuracy of information. Not only will this speed up closing at month-end or during tax season, but employees can also redirect their focus on more value-added activities for clients.
Develop Workflows to Streamline Production
Developing processes to replace your role in the business is vital when scaling up. Hiring more people is essential in growing an accounting firm and so is proper training.
Create a training plan for properly training staff to take on different roles in the business process. Ensuring uninterrupted production starts by creating workflows to define the most efficient way to distribute tasks within the organization.
Streamlined processes allow leaders and key performers to reduce time spent on delivering services to more value-adding activities.
If junior staff members, part-timers, or gig workers can handle certain tasks, let them handle the work. Create standard procedures for completing tasks when needed.
From there, you can delegate tasks to certain team members and identify who can perform the task when the person in charge is unavailable.
With processes in place, losing a valuable staff member could still be challenging, but the firm can still function since there are workflows in place.
When the production side can function independently, you can focus on growing the firm rather than delivering services to clients.
Integrate Technology Into the Process
While creating workflows so the firm can run on its own is critical, it’s equally important to make technology part of the process. Using AI to automate manual tasks, data entry, expense reconciliation, and reporting is only one part of the process. As uncertainty continues to loom due to the pandemic and its economic effects, businesses will have a constant demand for updated information.
Finance leaders and accounting firms, by extension, have to work with tight timelines for providing financial data. However, speed should never come at the expense of quality. Poor data quality could be detrimental to an organization and is the second-largest concern after cybersecurity.
One study revealed that 70% of companies made significant business decisions while relying on inaccurate financial data. Integrating human aspects of running the firm with technology creates maximum efficiency and creates a useful backbone to expanding into other in-demand services like data analytics.
Technology undeniably plays a central role in scaling a business and increasing revenues without taking on more workload. Integrating expense management systems with accounting programs like Xero and QuickBooks eliminates manual coding, allowing accounting teams to streamline.
Growing an accounting practice used to be one of these two things — achieving organic growth and expanding to cater to client needs or being part of a merger or acquisition. Innovations in technology created a third path for growth-oriented practices.
AI software, RPA, and intelligent systems allowed accounting firms to have more bandwidth for new clients. Actual strategies for growing an accounting practice may vary from one business to another but combining human resources with technology will be at the heart of every growth strategy.
With technology filling gaps and taking over time-consuming and tedious processes, scaling up successfully becomes more attainable. And it all starts with finding tech partners to support your plan for growing your accounting practice.
Bring innovation into your practice and start leveraging technology to propel your practice to the next level. Partner with Envoice to unlock efficiencies using an AI-enabled expense management system and automate processes to simplify workflows and allow your firm to focus on growth.
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- Don’t spend time on manual work
- Streamline processes
- Automate your invoice flow
- Integrate with the tools you rely on every day