Introduction
What’s A & F services?
Cloud accounting and financial services
Conclusion
Introduction
The industry of accounting and financial services is changing in so many dynamic ways that only few people could have imagined just few years ago. With the rapid and explosive growth of Xero and other cloud accounting and financial services software. This means that accountants and bookkeepers need to adjust their business model quickly. To be able to keep up with the new expectations of their customers. The traditional model for accounting and financial services businesses has often be based locally.
Before now small business owners always had a tax accountant that they could meet in their local area. And they are always recommended to them by their family or network. Then client would then give all their documentation for the year, and the tax accountant would then handle all their financials. But it didn’t mean that they were an expert in their customer’s industry. These were always long term relationships with clients in partnership with the same accountant for upto 15 years. Basically, the local accountant would have been a professional in tax accounting, they would look at the figures. Solve the tax implications and by helping their clients to build the best structures for their business in order to minimize tax. But they might have had small insight in any other financial aspects of running a small business like product profitability, pricing and budgeting.
More insight
When it came to big business, the traditional model has always been quite different. In large companies you would see a CFO with their team of fellow accountants and accounting staff around as well. They will process the transactions and put together the reports for a proper decision making. While tax is always a factor, the major priority is to use accounting and financial services information to improve the performance of a business. This includes the following:
- Regular management reporting
- To track the actual performance against KPIs and budget
- Project the future performance with cash flow forecasts
- Financial models for various scenarios.
What’s accounting and financial services?
Accounting and financial services includes different kinds of services used in a business that will comply with federal, state and local rules and regulations. Services equally involve consulting and planning to be able to improve business performance and other necessary needs of the business.
Types of accounting and financial services
Bookkeeping services
Bookkeeping services (bookkeepers) will help businesses to manage their cash flow transactions that will include all their purchases, sales, receipts, and payments. They will make sure that your transactions are posted to the correct ledger in accordance with the accepted accounting and financial services. It is important that bookkeepers do maintain accurate records because this information is always used to prepare tax returns. Bookkeeping software will help to maintain accuracy. As well as to eliminate much of the paperwork that will be associated with manual bookkeeping practices.
Payroll services
Payroll services will handle all aspects of your payroll processing and your employee payroll tax filing. Employers will submit their payroll data to the payroll service provider electronically or through the phone. These payroll service companies will process this data and then transfer the appropriate funds from the employer to their employees. After the payroll processing has been completed, the payroll service companies will provide the payroll reports to the employer.
Tax services
Tax services will prepare federal, state, and local tax returns for business based on a business cash flow for the year. Many businesses will choose to consult accounting tax service providers for guidance to make tax efficient business decisions. Additionally, accounting tax services will provide consulting in relation to tax law and compliance.
Audit services
Accounting audit service providers will ensure that their clients’ financial information is managed well. Both public and private companies will often choose to work with auditors to be able to certify that no dishonest behavior. Such as misuse of funds is going on inside the company. This practice will reassure investors and employees that the company is managed properly. Audits will then be performed by an external auditing firm or by any internal member of the accounting department. However, internal accountants will not be able to audit any documents with which they were directly involved in any way. Some companies will choose to use external auditing team in order to eliminate the bias. Any discrepancies that will revealed by an accounting audit need to be resolved immediately. Here are some items to be reviewed for discrepancies during an accounting audit:
- Ledgers
- Bank statements
- Payroll
- Accounts payable
- Tax information
- Internal financial reports
- Official published reports
- Accounts receivable
Many accounting firms that do offer audit services are equally able to offer attestation, which means bearing witness in any legal setting.
Financial planning services
Financial planning firms will help a business to plan for their future. Business owners are known to be consulting financial planners to be able to determine the best steps to take to reach their monetary goals. The financial planning process will involve to set objectives, evaluate resources, and make plans to work towards the objectives.
Banking services
Banks are known to be providing different services for individuals and other businesses. Some of the common banking services include the following:
- Secure storage of cash and valuables
- Checking and savings accounts
- Money transfers
- Loan services
- Foreign exchange services
- Investment services
Before you choose any bank, you should think about the service required. You should equally look for a bank that will best match that need. It is equally wise that you find out if the bank is insured.
Software consulting services
Some accounting and financial firms are offering training or consulting with regard to accounting and financial services software.
Accounting and financial services standards
The Financial Accounting Standards Board (FASB) establishes the standards of financial accounting and reporting in U.S. The U.S. Securities and Exchange Commission do recognize FASB standards, or Generally Accepted Accounting Principles (GAAP), for preparing of corporate financial reports. Accounting principles for tax purposes in U.S has a set of accounting standards which is different and distinct from GAAP.
The American Institute of CPAs (AICPA) are known for providing standards for attestation engagements (SSAE) to be set guidelines and rules for CPAs that are providing attestation services.
Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board are in charge of regulating and insuring banks.
Qualifications
Accountants are free to specialize in more than one area of expertise; therefore qualified accountants are known to often hold many accounting certifications. Let’s see some common types of accounting certifications are:
- The Certified Public Accountant (CPA)
- Certified Management Accountant (CMA)
- The Certified Financial Manager (CFM)
- Certified Internal Auditor (CIA)
- The Certified Fraud Examiner (CFE)
- Enrolled Agent (EA)
- Certified Government Financial Manager (CGFM)
- The Certified Financial Planner (CFP)
Service considerations
Consider the following when you are about to hire an accountant or accounting firm:
- The accounting service requirements of the organization
- Is the accountant knowledgeable about GAAP?
- Certification(s) of the accountant
- What kind of experience does the accountant have
- Is the accountant familiar with the industry in which the customer’s business operates?
- Does this accountant have references?
- Will this accountant attest to his/her own services?
- How much does this accountant charge for the service(s) required?
Cloud accounting and financial services
Nowadays, there is need for smaller businesses and start ups to have those large business elements embedded into their financial processes as well. Here at Teejaytrue, we believe that one of the major shifts we are going to witness in this industry. That small businesses are going to adjust their accounting and financial services teams so that could be similar to big businesses. They are going to have more of a focus to use the accounting figures to be able to make decisions about their growth and direction of their business. Instead of just doing their tax returns at the year end.
This particular shift to data driven decision making will bring in powerful change into both small businesses and the accounting and financial services industry. Let’s consider those things that will bring this change:
Niching down to scale up
Few years ago, business owners were known to hire an accountant within their immediate environment. And their relationship with this accountant lasted for decades. These days, there is more competition among accounting firms, and there is equally an increase in the number of specialized online businesses.
For instance, there are many happenings around eCommerce bookkeeping that a tax accountant. Who only works with restaurants and coffee shops in an environment might not know about. This is one of the best ways to be able to differentiate your own accounting firm in the upcoming year 2021 is to choose a niche. And become an expert in that particular niche. This will allow you to avoid competing solely on price and rate.
Your niche specific productized services
Compliance work will soon be delivered at the scale by businesses who do have productized their service. And will be to deliver a standard service at a very low cost. To be able to succeed with your productised service business model. Your firm need to develop a replicable process that will work for every of your new client and will be reliably reproduced every time.
The web development industry are giving us a perfect instance of productized services in action. When a business needs a new website, they will be left with two options before they get started. They will choose a pre-packaged theme, which will be a fixed template that will be customised a little bit. Or they will choose a custom built platform that will be completely unique and created for the particular needs of their business.
We believe that productized services will be the model that will emerge as the perfect way to do business for accounting or bookkeeping firms. This will be transformative shift for accounting and financial service businesses. Accountants and bookkeepers basically will take an agency approach: they will work out what their customer will need. They will create a custom proposal for the business, and then do everything within them to deliver.
As the accounting and financial services industry moves online, their capacity to reach particular markets outside of a geographic location will increase.
All round accounting services
Right now the trend going on is that accountants and bookkeepers are now using value based pricing. Instead of them to charge for the number of hours they will work. With all these offshoring and outsourcing going on, there is tendency it made huge margins. As well as costs of service delivery to drop, but accountants still charge at the same or higher rates. We don’t think that it take time until the market catches up, then put a serious pressure on accounting fees. Certainly, this will force a different business model to come up.
The technology to make it all possible
All these scalable services we know today, weren’t possible prior to cloud accounting and financial services. Accounting and financial services software used to be available on desktop computers, this means there were no cloud capability, until recently. There was no way you could have an accountant in a another city unless you posted them a USB with your data in it.
There are two major shifts in the evolution of cloud accounting and financial services.
First, there’s a massive rise in opportunity and flexibility: a business owner could be in another country, while their tax accountant is another country and their bookkeeper is some where else. This flexibility will create more opportunities for both parties to be able to grow their customer base. Because they are operating in different markets and timezones without them been physically present.
The other major shift is that underlying data is now very timely. Before now with desktop accounting, it was a very big hassle for clients to get their data to their accountant. That made it to only take place once a quarter. But with cloud accounting and financial services software connected to your bank feeds and other of your financial tools, all the data is all synced at least once daily.
With this, accountants are able to give advice weekly, monthly or quarterly, instead of annually.
The increase of the Virtual CFO
Many accounting and financial services firms are now trying to move towards a recurring revenue model. Since tax returns need to be carried out annually, this particular service will be really suited to any subscription model. So firms try to come up with a service that will be done monthly. The most logical step to achieve this, is to provide a virtual CFO service.
The role of the virtual CFO will be to ensure that accounting and financial data is accurate and crucial reports are delivered, but equally to think strategically. They will tell the story underneath the numbers and will help the business to use the numbers to make perfect decisions. It will be their role to be able to understand the business and the industry. As well as to understand the people in the business and also their information needs, and then be able to put it all together.
While accounting and financial services firms are all racing to enter this space, the evolution of the Virtual CFO online marketplace keeps evolving. The virtual CFO will become responsible for the areas in the business. Also it will act as the project manager in order to ensure that everything needed is executed properly.
Conclusion
Well, accountants are the ones to make a decision. Should they move into the productized service path and be able to build a business that will deliver at scale? Alternatively, should they be competing for the hotly piece of the contested tax advisory work? Better still they should become independent experts who will work as part time virtual CFOs for a number of businesses?
You should understand that accountants traditionally haven’t been been great at marketing, and haven’t needed to be. Because majority of their work always came from word of mouth referrals. Now, if they try to go beyond their local market and target a particular niche, then they will have to develop some marketing strategies. That will stand them out from their competitors and will focus heavily on how to build trust with their potential clients.
If you are into productized service or advisory firm, then you will need to improve at marketing your business, and when it is the virtual CFO path. Then you will need to improve at marketing yourself. To be sincere here, it will be hard for accountants. They have done a lot of ethics training that always focuses on not to try to sell anything. As well as to try to do what is right for their customer. This actually means that accountants often undersell themselves: they don’t always be seen as salespeople. To avoid eroding the trust placed on them by their customers.