Top Challenges Accounting Firms Face – Blog Series Part 3 – Moving to Advisory

Welcome to the third installment of our blog series on accounting firms’ top challenges. In the previous blog, we explored the challenges of adopting IT and innovation in the industry.

In this part of the challenges segment, we’ll dive into the challenges firms face in pivoting from their core offerings to expanding their horizons and moving to advisory services.

With the inclusion of technology, accounting firms are also evolving. Evolution can prove to be a boon for new-age accountants and CPAs, who understand the technological impact better. However, many traditional accounting firms face pressure to adapt and expand their service offerings to meet their clients’ evolving needs.

More than 58% of registered CPAs are over 40 across the country. People with more than 20+ years of experience working with a process find it difficult to shift. However, moving to advisory services presents a unique set of challenges but also offers significant opportunities for growth and differentiation in the market.

Understanding the Shift to Advisory Services

Almost all industries are experiencing a digital transformation. In addition to their core offerings, organizations need to expand their zone of providing added services to grow faster than their competition.

What is causing this transformation?

Technical Advancements

Automation, AI, and the adoption of cloud – empowering remote work have paved the path to creating more streamlined and fast processes while eliminating most redundant tasks. These new advanced technologies allow employees to work on more high-value activities while reducing their time and effort on mundane accounting tasks.

Catering to New Demands

Clients want more from their accountants and bookkeepers, not just traditional accounting solutions. They’d like their accountants to help them make more rational and risk-free decisions, navigate through the complex business environment, and achieve their business goals.

Increasing Competition

Increasing competition is one major force that drives any firm or organization to grow more and perform better in its industry. Offering just traditional services to clients can create your name for some time in the market, but soon, it will turn into a commodity that can only offer one type of solution. Firms need to expand their core offerings to advisory and other services to garner more recognition and better business growth.

There is a saying, “Jack of all trades, master of none…” however, this is an incomplete saying:

It goes on as “Jack of all trades, master of none, though oftentimes better than master of one.”

Clients are no longer content with just compliance services; they want strategic guidance and insights to help them navigate complex business challenges and achieve their financial goals. This shift has prompted many accounting firms to explore new revenue streams and expand their service offerings to include advisory services.

Challenges Accounting Firms Face in Moving to Advisory Services (and Their Solutions)

Cultural Shift

Cultural resistance is one of the biggest challenges accounting firms face when moving to advisory services. Many firms have a deeply ingrained compliance-focused culture, and transitioning to a more advisory-oriented approach requires a fundamental shift in mindset and behavior.

Firms must invest in training and development to cultivate a culture that values strategic thinking, creativity, and client-centricity.

Talent Acquisition and Development

Another significant challenge is building a team with the right skill set and mindset to deliver advisory services. Advisory services require diverse skills, including strategic thinking, business awareness, communication, and relationship-building.

Accounting firms must invest in recruiting top talent and providing ongoing training and development to ensure their team is equipped to deliver value-added advisory services.

Client Education and Buy-In

Successfully transitioning to advisory services also requires client buy-in. Many clients may not fully understand the value of advisory services or may be hesitant to invest in additional services beyond compliance.

Accounting firms must educate their clients about the benefits of advisory services and demonstrate how they can help drive business growth, improve decision-making, and mitigate risks.

Pricing and Value Proposition

Determining the right pricing model and articulating the value proposition of advisory services can be challenging. Unlike compliance services, which are typically billed based on hours worked, advisory services are often more value-based and may require a shift away from traditional billing practices.

Accounting firms must carefully consider their pricing strategy and communicate the value they provide to clients to justify the investment in advisory services.

Technology and Tools

Leveraging technology and tools is essential for delivering effective advisory services, but many accounting firms struggle with selecting and implementing the right solutions. Firms must invest in technology to streamline processes, gather and analyze data, and deliver actionable insights to clients. Adopting cloud technologies such as managed hosting services for accounting can be the first step in transforming their business into a digitally reformed solution provider.

However, navigating the rapidly evolving landscape of accounting technology can be overwhelming, and firms must carefully evaluate their options to find the best fit for their needs.

Opportunities in Advisory Services

While moving to advisory services presents challenges, it also offers significant opportunities for accounting firms to differentiate themselves in the market and drive growth.

By offering strategic guidance and insights, firms can deepen their client relationships, expand their service offerings, and increase revenue streams. Advisory services also allow firms to move up the competition, shifting from compliance-focused service providers to trusted advisors and strategic partners.

By investing in the right resources, technology, and talent, firms can position themselves for long-term success and capitalize on the significant opportunities the shift to advisory services presents.

In the next installment of our blog series, we’ll explore the challenges the accounting industry faces from a cybersecurity perspective and how to mitigate them. Stay tuned!