Client Accounting Services BD

The Five W’s of Client Accounting Services: Developing a Service Offering You Can Sell

To many, client accounting services (CAS) is one of the hot new services for CPA firms. But, in reality, accountants have been providing accounting and bookkeeping services for their clients for decades!

Is there a single formula to use when setting up or growing your CAS practice? Unfortunately, not. But you start by answering the five “W’s.” As an accounting marketer or business developer, you can guide your firm through these important questions and help shape the strategy for a successful practice.

What is CAS?

According to The Smart Accountants, cloud-based accounting applications became available in 1998 with the introduction of NetSuite. In the past 20 plus years though, there is still inconsistency defining what client accounting services is. Depending on who you ask, it can be:

  • Back office support for clients with either PC or cloud-based accounting software.
  • Payment automation and expenses tracking – think SAP Concur.
  • Write-up work, which typically involves the client bringing their business’s financial records to their CPA after the end of a filing year. A team of folks then begin preparing a financial snapshot, a trial balance, financial statements and then they move on to the business tax return.

The generally accepted definition for CAS (according to CPA.com) is taking on the responsibility for all facets of accounting for your client, including accounts payable, accounts receivable, expense tracking and coding, preparation of financial statement, month-end and year-end close and advisory support.

You need to know how your firm defines CAS so you can market and sell it, as no two firms are alike. This is unlike a tax return which is pretty similar no matter where you go. It’s a chance to differentiate what you do and package it in ways that resonate with buyers. How you deliver and what KPIs come with your month-end close documents can provide great value add, especially if you’re overlaying your CAS offerings on top of an already thriving tax or assurance focused industry niche.

Why All the Interest in CAS?

 Prior to the pandemic, small and mid-sized businesses and nonprofits were asking whether they should be in the accounting business. For many entrepreneurs, CEOs and executive directors, it is more important to be able to make decisions based on good financial statements and information than it is to produce those statements and information in-house. For many organizations it is far less expensive and time consuming to outsource this function to financial experts than to build, retain and manage a finance and accounting team. While each case is different, the savings of buy versus build can be substantial. These are all solid selling points.

While the CAS value proposition is attractive for firm clients, CAS is also appealing to firm leaders. Unlike compliance work, CAS is a consulting service and is inherently less risky for firm owners. Properly planned and implemented, a CAS engagement is significantly more profitable than either tax or assurance engagements. Since CAS engagements are typically billed monthly, the revenue and margin for the work you perform is distributed evenly through the year. Revenue from CAS engagements may also be significantly larger than either tax or assurance engagements. For example, there was a firm that sold a nearly $200,000 per year CAS engagement. The audit and 990 for that same client was $35,000 per year. Which of these engagements would you prefer to win for your firm?

CAS is a growing service because it’s a win for the client and the firm. Recognize that you will have to talk through some tough issues regarding your service offerings and when to walk away from an audit engagement for a CAS engagement. The opportunity to grow revenues from doing so is definitely there, but some accountants may need convincing to give up the tried and true they know.

Who is Providing CAS Services?

 There are a number of web-based fintech start-ups that provide low-cost solutions for sole practitioners, small businesses and franchisees. Their clients are not typically looking for advisory support and their tax compliance needs are generally basic. There are a number of successful CAS-only practices that are run by CPAs, but they are structured as consulting firms, not CPA firms.  Finally, there are a number of CPA firms that have built successful CAS practices organically or that have acquired existing CAS practices.

The most successful CAS practices typically build their practices and their books of business by being specialists. Just as assurance and tax practices often grow based on industry niche-based expertise, this also true with CAS practices. CPA.com recommends that you build your practice by starting with a single industry. Grow your expertise and your book of business in that niche. You can further grow and diversify your practice by adding secondary and tertiary industry specialties.

Competitive research is part of a solid CAS strategy. Know who is out there, what services they are offering at what level and what buyer group they are targeting. It will help you decide who to be as you are not looking to do what others do, but to find your unique place in the marketplace you define.

Where Should Your CAS Practice be Located?

Location, location, location is the mantra of real estate agents. Where you built your practice was critically important, even as recently as the early 2000s. In the location model for tax and assurance practices, the client comes to you or you go to the client. This does not apply for CAS practices. While it has taken a global pandemic to truly embrace work from anywhere, cloud-based CAS practices have been leveraging remote workers and remote clients for more than a decade.

It may be impractical for a Detroit-based firm to do assurance engagements in Houston. However, there is an Ohio-based CAS practice which serves a Texas-based 12-unit quick serve restaurant group. There are also CAS practices that support dental practices throughout the United States.

Don’t limit your CAS strategy to businesses in your own back yard. If you pick an industry vertical for CAS that matches what your firm is doing, you can easily take your CAS practice regionally or nationally. How you sell may be slightly different as you won’t be meeting buyers at your kid’s soccer game or at a chamber dinner. But you can easily find an association or event that your targets participate in and engage with them there.

When Will Your Firm Start, Grow or Acquire a CAS practice? 

Barry Melancon, CEO of the AICPA, recently shared that client accounting services, as a core service, now represents 10% of revenue at top firms (for many years it didn’t show up). A number of DC-based local firms have been acquired over the past couple of years. Each firm had a substantial nonprofit niche, and each generated a significant portion of their revenues from client accounting services. Without knowing the terms of the acquisitions, it’s possible the acquirers found these local firms attractive because of the annuity revenues and high margins from their CAS practices.

Many of the nation’s Top 100 firms have stated they want their firms to become less reliant on compliance work and to have a larger share of revenues and margins coming from their advisory service lines. Will your firm chart a similar course?

A Role for Marketing and BD

As you work with firm leadership to establish and sell CAS services, you need to think through the five “W’s.” This is a growing field and the perfect opportunity for marketing and business development people to coach their firms on how to set-up and sell CAS services. Marketers know how to target and reach buyers. Business developers have a wealth of information they get from talking to clients and potential clients. When marketing and business developers come together with firm leadership, you can take your firm further down the path of advisory services and help your clients in all new ways…and make more money along the way.

About Ed Warren

Edward D. Warren, MBA is Business Development Director at Dinams. Ed is an accomplished sales executive with over 15 years of professional services sales, marketing and leadership experience. He’s worked for Allinial Global and RSM Alliance member firms and serves on the board of the Association of Accounting Marketing.

Ed Warren on LinkedIn

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