What to know before offering client accounting services

Hosted by Courtney Vien

With the advent of new technologies, more firms of all sizes have begun offering client accounting services to their clientele. Mary May, principal, and Stephanie Howard, client accounting services manager, at tonneson + co in Wakefield, Mass., discuss how client accounting services can benefit both firms and clients, and share their best advice for firms that are looking to add or expand their offerings in this area.

In this episode, you’ll learn:

  • What’s driving the recent growth in the area of client accounting services.
  • How client accounting services can help you add value to engagements.
  • Why client accounting services can be a growth area for smaller firms.
  • What firms need to know before offering client accounting services.
  • Why clients may be resistant to adopting cloud technology and what firms can do about it.

Play the episode below or read the edited transcript:

To comment on this podcast or to suggest an idea for another podcast, contact Courtney Vien, a 
JofA magazine senior editor, at Courtney.Vien@aicpa-cima.com.


Courtney Vien: Hello, I’m Courtney Vien, a senior editor at the Journal of Accountancy, and this is the Journal of Accountancy podcast. I’m speaking with Mary May and Stephanie Howard of tonneson + co, a firm based in Wakefield, Mass. And they’re going to be talking with us about client accounting services. Hello, Mary and Stephanie.

Stephanie Howard: Hello there.

Mary May: Hello Courtney.

Vien: Can you each tell me a little bit about your background?

Howard: Sure. This is Stephanie. I am a client accounting services manager here at tonneson. I’ve been in the accounting field for over 30 years, working primarily in the private sector. I’ve worked within the insurance, software, communication, and semiconductor industries.

Vien: And Mary?

May: I’m a principal here at tonneson + co, where I’ve worked for over 30 years. I am a director of the employee benefit plan audits. I also share responsibility of performing pre-issuance reviews of financial statements. And I’m a member of the strategic planning group here at tonneson, which is a group that is constantly looking to move the firm forward by developing strategic initiatives and looking to create a shared vision for the future as an employee empowered firm. In my newest task of the last nine months is that I share the responsibility of managing the client accounting services department here at tonneson.

Vien: Thank you. So, to give everybody a little context. What kinds of client accounting services do you offer at tonneson?

Howard: Well, we provide all of the typical services you would expect from a CPA firm, including audits, reviews, tax, and advisory services.

And specifically within our client accounting services department, we offer the basic data bookkeeping services, including payroll, payroll compliance, bill pay, and account reconciliations, to name a few. And all the way up to a fully outsourced CFO service, which might include things such as account analysis, cash flow reporting, budget to actual variance analysis. Another service we provide is the preparation of Forms 1099 for our existing clients, both within our client accounting services department, as well as our tax department. And we also support our clients in assessing their accounting software needs and helping them to manage conversions.

Vien: Tell me, why did your firm get started offering these kinds of services?

May: Well, fortunately, client accounting services has been a focus of our practice since our inception more than 40 years ago. We basically realized then that the need was there. So at the time, our tax clients needed assistance in generating and maintaining their accounting records, and we saw this as an opportunity to be able to deliver the services that they were looking for and to add that value to our clients. So, that’s really where it all started was with our tax clients.

I’ve been in this profession for more than 30 years, and when you look back, we would have clients who would literally bring in a shoebox that they would drop off for us and we’d have to go through every canceled check, bank statement, receipt, and invoice to generate a trial balance that was then used to prepare the tax return. We have successfully built a client accounting services department, and we’ve built many client relationships that have spanned the decades. So, obviously, client services look very different today than it did 30 years ago, but that’s basically how we got started.

Vien: So the shoebox thing isn’t just a myth?

May: It’s not a myth [laughter]. Not at all. I was there. It’s actual.

Vien: Client accounting services has seen a lot of growth over the past few years. What’s your take on why this has happened?

Howard: Well, there definitely has been substantial growth in this area, mainly due to automation and technology. We’re able to access so many different platforms, the bank, payroll, credit cards. And many of our clients have online sales, so we can directly access their sales activity at any time. We’re able to set up direct feeds into our accounting software, which eliminates the time-consuming data entry.

Vien: What services are firms able to offer today that they might not have, say five to 10 years ago?

Howard: You know, I think if you go back five or 10 years, a lot of our clients felt like they needed to have an employee in-house, on a daily basis, to perform the necessary accounting functions. And technology really has been instrumental in shifting that mentality. Clients are more receptive of an outsourced approach, and we’re good partners. We have the knowledge, the expertise, credentials, and really overall our industry is known for its integrity, so clients really trust us.

Vien: What are some of the most important ways that client accounting services can benefit a client?

May: I would say probably the largest benefit would be cost savings, by eliminating bookkeeping, accounting staff, or even a full time position or a role out of business. Outsourced services can offer the work and expertise at a much lower price. As you know, there are substantial costs and time associated with hiring, training, monitoring, managing, and even terminating employees. So turnover of a bookkeeper or an accounting staff can impact all aspects of a business. And unexpected or accelerated growth of a business, although it’s a positive thing, it can lead to issues with keeping up to date with financial data. So outsourcing eliminates all of these costs and issues.

And also, another benefit to clients would be hosting their accounting software. At tonneson, we work 100% in the cloud. I know not all accounting firms are there yet, but for firms that are, this is certainly a benefit for all of the clients.

As a CPA firm, we are held to a very high standard in the terms of cybersecurity. Given the amount of sensitive data that we work with on a daily basis, our clients would also benefit from this as well. So, naturally, we become advisers because of our interactions are much more frequent. We have clients that want to be on the phone with us every other week, so we are in constant communication to be able to offer valuable insight to help them make their business decisions. And our client services department works very closely with our tax execs. So, for our tax clients, there really is a seamless transfer of information for tax services.

Vien: So it sounds like it helps you build a closer relationship with these clients that you might have otherwise.

May: Absolutely. There just seems to be so much more communication on a regular basis.

Vien: Now, not all firms are offering client accounting services. Why should firms consider getting into this arena?

Howard: Well, like Mary mentioned previously, the need is there. We have the knowledge to provide the services, and most importantly, for firms, it’s another growing stream of revenue. Clients are seeking a much broader array of services that they need to help maintain and grow their business. And I think with technology, any size accounting firm can be successful in offering client accounting services. There’s so many opportunities that are available within value added services to support all your client’s needs.

Howard: What would be important for smaller firms, or for any firm really, is to think about your marketing efforts. We’ve been working towards this initiative in bringing our client accounting services team out to networking events, many with local chambers of commerce.

We’re trying to engage in speaking opportunities and having a presence at local trade shows. We’ve invested significantly to increase our digital footprint.

Vien: What are some things firms should be aware of when they’re offering client accounting services?

May: Firms should be aware of how important selecting and maintaining the right talent can be. You need the talent to fit your current client needs, and you also need to anticipate future needs. So, we find that we need talent with the ability and willingness to change and adapt to changes in technology and business practices. For example, five years ago, we didn’t have as many clients that engaged in online sales, and we had to adapt to that change.

And I think something else to be aware of is to consider the pricing structure of these services, which can look differently than an accounting firm’s historical billing practices, which are based on flat fee and hourly rates. Some firms are getting away from the hourly billing rate in light of the rising use of technology. Even though we can do things quicker, the service being offered to the client is still as valuable as it always has been.

Vien: Can you tell me a little bit about your billing structure?

May: I guess I would say that we do have some clients that we continue to bill on an hourly rate. Those are typical clients that are a little bit on the smaller side that have minimal activity on a monthly basis. When you get to it, some of the larger clients, we’re looking to bundle that service so that we can reap the benefits of our investment in technology.

Vien: What are some of the biggest roadblocks or challenges that you’ve encountered in developing your client accounting services?

Howard: You know, a challenge that we’ve encountered includes resistance to change. I’m sure every accounting firm sees information in various forms. As Mary talked about previously, there were times when clients brought things in in a shoebox. Recently, I’ve even seen some green ledger sheets. So, it would really benefit us and our clients to take advantage of the efficiencies and the technology. Another challenge is actually choosing and streamlining various software systems that will work together and benefit our clients. Although some clients are already using a particular system when they come to us, so we tend to wear many hats when it comes to software.

Vien: Do you find that clients are resistant to go on the cloud if they’re not already there?

Howard: You know, for some of the smaller clients, there is a resistance, somewhat of a resistance to technology just because it’s the unknown. I know some clients don’t want to provide access to different accounts, even if it’s view only, where that access might help us build feeds into different softwares, and just make things easiest overall in feeding the information into our accounting systems.

May: And I just think that some clients they just like to do things the way they always have and to really get them to change is not that easy.

Vien: How do you convince them to see the light, so to speak? How do you overcome that resistance?

May: I think you just try to explain all the benefits of being on the cloud. You know, real-time accounting instead of the after-the-fact accounting where they’re sending us information at the end of the month, end of the week, or even at the end of the year. You know, if we can get them on the cloud and host their software, we can be maintaining information and getting them reports back that are really in real time.

Vien: What advice would you give firms that are newer to offering client accounting services?

Howard: Definitely being adaptable, specifically when it comes to systems and staffing and the needs of clients. For us, we find a lot of our clients that are using various systems, it becomes difficult to manage that. We’ve thought about streamlining software, but in a lot of cases that’s not an option. So, we have to adapt and invest in training our staff to satisfy the needs of our clients.

May: I know the best advice that I could give a firm that is new to client accounting services is to invest in your employees, your current clients, and technology. The employees drive your business and make you who you are today. You want to attract and retain the best, so you want to create a workplace that has the right culture and conditions so employees are able to perform at their best each day. And you want to provide them opportunities to promote their professional development by offering them the ability to attend various conferences and seminars. And finally, I think you want to be able to acknowledge and recognize the employees for their performance and their efforts and their accomplishments. Employees are the key to success.

Howard: Definitely true. And you know the best place to grow client accounting services is with your current clients. A lot of times this can occur through conversations, working with other departments within your firm, and really educating your clients on what you can actually provide for them. And I think, finally, remember the importance of investing in technology and staying current with trends within this area. This really applies to any business.

Vien: What do you foresee happening in the world of client accounting services in the next few years? Do you predict continued growth?

Howard: Personally, I do see client accounting services growing. We’ve already seen an increase of outsourced accounts payable and receivable services. Really, this is just another layer that will save businesses time and money as well as put their information in the hands of someone that really excels in that area.

Because of today’s technology, there seems to be more entrepreneurial businesses starting up, and many of those business owners don’t possess the accounting background. They have the vision, and they look to firms such as ours for not only the accounting services, but also the advisory piece.

May: For firms who are looking to start offering client accounting services, I think it’s important for them to be cautious of accepting clients that actually fit their model. You know, for example, take payroll. Payroll is an area that a lot of accounting firms could expand into. But if you don’t have the necessary knowledge or skill set in house to take on that responsibility, you might want to consider hiring an internal payroll specialist or aligning yourself with a third-party payroll service.

So, I guess what I’m saying is, just make sure that you understand your client’s needs and make sure that they fit into your model.

Vien: That was Mary May and Stephanie Howard of tonneson + co in Wakefield, Mass. This has been the Journal of Accountancy podcast. Thank you for listening.