The Ever-Evolving Landscape of Accounting Services

Gusto Editors

Is your accounting firm adapting to the evolving landscape of accounting?

Society is constantly changing with new technology and standards on the rise every day, and people need to keep up with the times to stay relevant. When you look at the world of accounting, things move at a similar pace. Instead of offering procedural tasks based on data analysis, CPAs now need to provide services that transcend ledgers and calculations—they need to focus on their clients as people.

At Gusto, we want to help accounting professionals move in a strategic direction to stay on top of the evolution of accounting. That’s why we have partnered with CPA Academy to bring you the webinar, “How To Unlock Your Firm’s Capacity for Advisory Services.” In this presentation, Will Lopez and Yoseph West unpacked how your firm can level up your People Advisory Services.

For those who do not know our speakers, Will Lopez is the head of Gusto’s accountant community and has a passion for connecting CPAs with the tools they need to help their small business clients thrive. Yoseph West is the co-founder and CEO of Relay Financial, a next-generation online banking and money management platform for small businesses, who loves to assist companies in growing to their full potential.

In this article, we will take a look at the ever-evolving landscape of accounting, the advantages of scaling your firm, and the purpose of accounting as that landscape continues to change.

What are the types of accounting?

One thing that makes the accounting industry unique is the wide variety of services CPAs provide to clients. From monthly bookkeeping to real estate tax management, accountants have an incredibly long list of choices when choosing a strategic direction to follow when providing services to clients. However, you can divide the extensive list of accounting services into five main divisions: tax planning, monthly bookkeeping, assurance work, valuation, and forensic accounting.

“I think [dividing accounting services into five buckets] makes it more manageable when you’re thinking about the types of accounting work and their general purpose, but simply understanding these categories doesn’t give us enough insight into the potential strategy at our firm. … They explain how the work is done, but they don’t tell us what to do.”

– Yoseph West
Team discussing business analytics on digital tablet and discussing graphs.

To gain a better perspective of how you should direct your firm’s strategy, you need to look beyond the services you offer. David H. Maister’s book, Managing the Professional Service Firm, provides insight into how you should look at accounting beyond the services. Instead of looking at the types of work, Maister recommends viewing your possible services on a spectrum.

“So there’s two ends of the spectrum. We’ve got procedural work. It’s characterized by routine tasks, often measured solely on efficiency, and typically low-cost work. Good examples of this are bank reconciliations or running payroll. Then, on the other end of the spectrum, we’ve got ‘rocket science.’ This is highly customized work. It’s challenging stuff and a very niche segment. You have a few qualified clients, and they’re really paying for your reputation. Perhaps you’re doing complex M&A work.”

– Yoseph West

On one end of the spectrum, you have procedural tasks. These services are efficient, routine services that typically focus on data analysis. The middle range is called the “gray hair” zone. Tasks within gray hair are more complex and require more experience than procedural tasks. As you move down the spectrum, you enter the “rocket science” end. Rocket science services require expert-level knowledge and are generally custom projects. Striking a balance between tasks on the spectrum helps firms reach their maximum potential.

Where does advisory land on the spectrum?

In relation to Maister’s spectrum of managing a professional service firm, advisory falls into the “gray hair” area. You need more than basic skills to assist your clients in making informed decisions about how they should direct their business financially. To be effective at advising clients, your firm needs to have the experience they can lean on when helping customers.

“In the middle of the spectrum is “gray hair” work. … This is work that is often complex and project-based. You still have to do [data] analysis at this stage, but often, professionals have worked on similar projects before. … I think this is when we start to think about advisory work.”

– Yoseph West

Working in the advisory realm takes more than procedural work for your clients. You need a thorough development of accounting skills coupled with an awareness of current and future money trends. This professional knowledge enables you to better understand where your small business clients are coming from and opens opportunities to provide insights that help them focus on creating an environment where their employees want to work.

Is there an advantage to scaling your firm?

Many firms seem to hit a ceiling as they grow when it comes to accounting firm size. Recent census data shows that nearly 72 percent of accounting firms only have one to four employees in the business, and under ten percent of firms have fifteen or more members. 

“So when we look at firm size across the board, I think we can’t see exactly where they fit in the spectrum, but we can look at a few things that might hint at how services get split across firms [by size]. … We can see that almost 72% [of firms] stick to the one-to-four employee category. Almost everyone is at five to ten staff maximum.”

– Yoseph West

Much of the reason accounting firms tend to trend at smaller employee counts is revenue streams. When a firm scales $500,000 to $1,000,000 in billable work, the one to four employee size is ideal for partners to work with clients and run the business together:

“This can be great. If you build a business that’s doing half a million a year to a million bucks in revenue, and you have one to four employees, you’re probably pretty happy. You’re taking home a good salary, you’re able to pay people fairly, and it’s pretty exciting. But perhaps you want to scale on that.”

– Yoseph West
Board room meeting at a business company.

There are definitely advantages if you are on the fence about growing your firm to medium size. Both small and large firms charge similar costs when looking at the average price per monthly package. However, medium-sized accounting firms can charge more for their monthly services.

“[When you look] at the average monthly packages by firm size, small firms and large firms are surprisingly congruent. … But the midsize firms actually seem to have an advantage where they can charge more for monthly packages. I think we can start to think [that they work] in the gray hair segment [here]. They’re not just doing procedural work or highly-complex work. It’s that kind of middle-of-the-road work, where a bit of thought has to go into it.”

– Yoseph West

Mid-sized firms have multiple employees with more experience under their belt, which means they can expand their range beyond procedural tasks and into a more advising-focused role. This focus on advising opens the door for medium firms to charge more because their services are more valuable. As advisors, CPAs go above and beyond typical services packages and provide extra support for their clients.

Learn more about scaling your firm in a strategic direction

Knowing your firm’s value and taking a step beyond procedural services are two critical aspects of growing your accounting business. Expanding your repertoire to include value-added services like people advisory is something that will set your firm apart and give you a pricing advantage. To start moving toward advising, begin by thinking about a long-term strategy.

“When you’re running a business, it’s quite challenging to make sure you’re taking a step back and really thinking about how things are running. What is the strategy? How are you setting yourself up for success over the long term? I think that general approach or line of thinking applies in the context of spinning up an advisory services line in your business”

– Yoseph West

To learn more about scaling your firm’s profitability and capacity through advisory services, be sure to watch the entire webinar here. Also, be sure to keep an eye out for Part Two and Part Three of this article series on how to increase your profitability and capacity and how to build a strong foundation for your firm with Gusto + Relay.

Our mission at Gusto is to give CPAs the tools they need to scale their firms successfully and grow into people-focused advisors. Be sure to look into our People Advisory Program to learn how you can add value to your firm by helping clients reach their potential. We also provide a partner blog full of resources for all your advising needs. Visit our Gusto for Accountants page for more information on utilizing people-based accounting within your firm.

Gusto Editors Gusto Editors, contributing authors on Gusto, provide actionable tips and expert advice on HR and payroll for successful business management.
Back to top