What are advisory services, and what do they mean for your practice?

Practice Management Find your ideal client

Tax planning, advisory workflow, bundled services

In our profession, the term “advisory services” is used frequently, but there is little consensus about what it actually means. When we ask multi-service firms which advisory services they offer, the spectrum of responses is incredibly broad and often overlaps with traditional compliance services.

Why does it matter?

Compliance services are required, and there is very little differentiation in the deliverable between practitioners. A tax return or financial statement usually looks the same no matter who prepared it. The fact that most firms include the exact same compliance description on client invoices reinforces that there is nothing special about the compliance report.

Conversely, the advice, expertise, planning and strategy that went into the process before the report was created are very differentiated. Advisory services grow from our unique experiences and expertise, and are the secret sauce that creates value for our clients.

We know this intuitively, but many firms do a poor job of separating advisory from compliance, and communicating their advisory expertise to clients. Advisory supports specialization, which leads to higher-value services and separation from the sea of generalists. However, if we can’t articulate our advisory expertise, it’s a certainty that clients won’t be able to untangle our compliance services from higher-value advisory services.

Defining advisory services

The AICPA defines advisory services as those services where the practitioner “develops findings, conclusions, and recommendations for client consideration and decision making.” AICPA further provides examples of advisory services that include “an operational review and improvement study, analysis of an accounting system, assistance with strategic planning, and definition of requirements for an information system.” This is helpful, but this definition feels more formal and narrower than how practitioners describe advisory services in their firms.

In a recent Intuit® Tax Council roundtable, firm owners defined advisory services as “taking client challenges and applying strategies to create opportunities in service to their growth.” This definition feels more outcome-oriented than the AICPA definition, and still aligns with the AICPA’s recommendations for client consideration and decision making.

Compliance and advisory services are interdependent — advisory services requiring a foundation of current, accurate books to provide actionable insights. While the suite of compliance services is constant across firms, the offering of advisory services tends to be personalized for each firm. Without a clear line of demarcation between services, some firms deliver advisory services while getting paid for compliance work.

To better define advisory services, here’s a comparative analysis to illustrate where compliance ends and advisory begins.

Dimension Compliance Advisory
Definition

Reports and filings required by external stakeholders to comply with regulations and standards.

Taking client challenges and applying strategies to create opportunities in service to their growth.

Service Examples Tax preparation, estimated tax payment adjustments, payroll processing and filing, bookkeeping, controllership, monthly close, financial statement preparation, sales tax compliance, tax agency correspondence; taxpayer representation. Tax planning and strategy, onboarding and training, technology stack implementation and maintenance, management reporting, cash flow forecasting, key performance indicator dashboards, industry benchmarking, business performance reviews, process automation, budgeting and goal tracking, strategic planning, product price testing, profitability consulting, wealth management.
Deliverables  Compliance reports are the primary value communicated, delivered and invoiced to the client. Actionable insights and strategies are the primary value communicated, delivered and invoiced to the client. Compliance reporting is a byproduct of well-defined advisory services.
Workflow Attributes
  • Deadline driven
  • Historical client records
  • Data entry and formatting
  • Verified calculations
  • Done by the professional
  • Undifferentiated reports
  • Year-round activity
  • Real time data
  • Ready for review
  • Automated reporting
  • Collaborative strategies
  • Personalized insights

 

Create your own advisory journey

To avoid scope creep and help shine a spotlight on your advisory expertise, carefully define your menu of services. Advisory services and your financial acumen are what set you apart from every other firm. Also consider creating packages of bundled services to supersize your compliance services with more planning and advisory services. Bundled services can help transition annual compliance engagements into monthly or quarterly advisory engagements, where you can communicate your advisory expertise.

Editor’s note: The Intuit Tax Pro Center has many articles on how to structure your advisory services for a variety of industries and services.

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