Things have changed for so many public accounting firms as Client Accounting Services (CAS) has emerged as the profession’s fastest growing and most profitable service area. This shift is fundamentally altering how firms operate, how clients perceive value, and how entire practices are valued and sold in the current marketplace.
The evolution from offering basic write-up or bookkeeping services to where firms now act as an outsourced, ongoing accounting department for clients has brought new life to the accounting industry! Client Accounting Services range from the traditional bookkeeping, payroll, and bill payment services to much higher-valued services such as financial planning, forecasting, budgeting, and CFO services. Many of these firms use a subscription model, bundling the services the client needs and charging one monthly fee.
This move from “after-the-fact” compliance services to a more proactive strategic approach in the client’s business is driven by client demand. Using technology, automation has freed up accountants from data processing, allowing them more time to focus on delivering meaningful business insights. Business owners are reaping the benefits of the increased support from their accountants, allowing them to focus on running their businesses more efficiently.
When analyzing a firm to purchase, buyers view a firm that offers CAS services as more valuable than a firm that offers only traditional accounting and tax services. Here are a few reasons why:
- Working closely with clients through the CAS engagements develops strong relationships that support the idea their accountant is their trusted advisor. Buyers view these relationships to be more beneficial, which creates more value in the firm.
- Advisory work commands higher margins than traditional compliance work.
- CAS services are more engaging and value-driven than traditional accounting services, which helps firms maintain and attract good talent.
- Buyers are seeking strong, recurring revenue streams and firms that are focused on growth through CAS services will draw a wider pool of buyers, including other CPA firms, wealth management companies, and private-equity groups.
- High quality firms command a higher price. Firms with well-developed, profitable CAS practices are more likely to receive higher prices and better terms than firms offering only traditional accounting and tax services.
For firm owners preparing for a future sale, working to build a healthy CAS practice now is a strategic move that can boost firm profits in the short run and increase the firm’s value at the time of a sale. Firm growth is attractive, but the focus of a firm’s growth should consider labor and time constraints and be in highly profitable areas such as CAS services.
The decision to add CAS services will require commitment to the new business model, which will necessitate adding new tech stacks, educating staff members, and marketing these new services to existing and hopefully new clients. The outcome will be a more valuable, resilient, and desirable practice that can yield a better sales price.
