Over the past few years, more and more accountants have started to pivot their services from being solely compliance based to more of an advisory service model. However, as accountants have started down this advisory path, a common issue that arises is that they don’t know the best methodology around providing advisory services or don’t know how to provide this service in a consistent and scalable manner. One of the best ways to provide your advisory services is centering that service around Key Performance Indicators (otherwise known as KPIs). These KPIs are metrics that we can calculate to determine if the client’s business is heading in the right direction. Here are three ways you can create your advisory service using KPIs.
Taking an Integrated View
In your quest to advise your clients and before we decide on what KPIs to track and measure, we need to take a holistic approach in understanding our client’s needs and their goals. By identifying the goals our clients want to achieve, we can then help determine the best course of action to get those outcomes. This allows us the opportunity to identify what KPIs we should be tracking to ensure we are on the right path. We also want to know about their qualitative goals as well. If we just focus on the numbers, we may miss other things that are important to them and lose the opportunity to incorporate those goals into our advisory services.
One aspect that can help provide you with the right knowledge to advise your clients is if you niche in a specific industry. In my firm, Lance CPA Group, we have a niche in craft breweries which provide us with deep knowledge in that industry. This provides us with information that other accountants may not know that can help our brewery clients achieve their goals.
Make sure to join Joshua Lance, CPA, as he shares how key performance indicators can help you make better decisions about your service lines, and bring more value to your clients in this CPE webinar on Sept. 29th. We’ll discuss KPI tools and resources, and touch on some KPIs that can be used across various industries. You can register here.
Advising using KPIs
When you are using KPIs to advise your clients, it is important that you have the right approach. Just selecting a handful of common KPIs might provide you with data, but it won’t be aligned to the goals and outcomes of your clients. We usually recommend looking at 3-5 KPIs that can be tied back to the different goals we are working on with our clients. These KPIs might be switched out if goals change or outcomes have been met. Once we land on the KPIs, we want to make sure we are calculating those KPIs on a regular basis and providing that information to our clients. Using softwares like Fathom or Futrli integrated with Xero, we can easily track these KPIs and present them in a visually appealing way to our clients. We also want to avoid presenting absolute values and instead provide the trends of those KPIs over a period of time. [Text Wrapping Break]
If you do have that niche industry you work with, you can also do benchmarking which allows you to compare your client’s KPIs to their competitors. Using data from other clients (make sure you get permission first!) or from trade associations in that industry, you can use those benchmarks as another way to determine if your client is on the right track.
Using Strategy Sessions To Drive Action
Calculating out your clients KPIs and presenting that information in a nice report is good, but that is not advising your client. Take the KPI information you have compiled and have regular strategy sessions with your client to go over that information with them. Paint the picture of what those KPIs are saying, how they tie back to your client’s goals, and what your client should do now that they have that information.
For example, your client may have a goal to increase their net profit margin from 10% to 25%. Looking at KPIs around revenue, costs of goods sold, and key expenses, we can identify from those KPIs if they are able to achieve their goal. In this scenario, maybe revenue is increasing and costs of goods are decreasing, but they might still not be hitting their net profit margin goal because operating expenses have increased as well. We might advise the client to rein in some of those expenses around personnel costs or supplies costs and point out how if we can get operating expenses to decrease by 10%, we can achieve the desired goal. When we meet with them next, we will go over those KPIs and see if the trendlines are changing around the operating expenses we are looking at.
If you are ready to start advising your clients using KPIs, the first thing to do is to try these services out with a select group of clients. This will allow you to test the waters and help you figure out the best way to provide these services to your clients. Once you feel comfortable with this advisory service, the next step is to roll this out to your clients and new prospective clients you talk to. In scaling this service across your client base, it is important to get your team involved as well. If providing advisory services is only done by firm owners or partners, you won’t be able to provide this service in a scalable way. Using KPIs to drive your advisory services is a great way to give your clients the strategic advice they need.
Make sure to join Joshua Lance, CPA, as he shares how key performance indicators can help you make better decisions about your service lines, and bring more value to your clients in this CPE webinar on Sept. 29th. We’ll discuss KPI tools and resources, and touch on some KPIs that can be used across various industries. You can register here.