A CPA firm, like any business, should always have its eyes on the horizon — looking at what’s next for its clients and its future. This often includes expanding the firm’s services or restructuring existing ones. There are several major categories of services in the accounting industry — tax, audit and advisory — and each has its own benefits.

Tax

Traditionally, tax planning and preparation services have been significant contributors to the work of CPA firms, but are they the most productive services?

Pros:

• Everyone must file taxes. Taxes are a constant; CPA firms review the tax complexity of each client and evaluate tax credits and opportunities. Offering these tax services to individuals and businesses annually provides a steady source of income for a firm.
• It’s the least expensive service. Unlike advisory services, taxes are formulaic, and new tax software has streamlined the process significantly. This is more cost effective for clients and less intensive for the firm’s staff. 

• It only happens a few times a year. Most people and businesses only file their taxes once or twice a year. This leaves little room to develop the necessary relationships with clients to ensure their return.
• The market is shrinking. Tax software companies are marketing more types of taxes as DIY, shrinking the need to go through a firm to file. This makes it harder to compete in the market.

Takeaway: Tax services are a great place to build upon for emerging firms, but they don’t present much added value if the firm is already established and looking to grow.

Audit

Like taxes, audits have traditionally served as a primary source of revenue for CPA firms. This is where the most value can be added for a firm that is considering how to develop its presence in a competitive market.

Pros:

• It’s cost efficient. Assurance services are formulaic in nature, making them cost-efficient. 
• It facilitates multi-service clients. While assurance services require a firm to be independent, if different teams are doing work, these clients can also become tax or advisory clients, building a stronger relationship. 
• It’s required. Audits are required for many different businesses and business transactions, making them a consistent source of income for a firm. 

Cons: 

• It comes with risk to the firm. When a firm executes an audit for a business, it creates a level of liability to the firm. If the audit was part of a loan process and that business defaults, the firm could be held liable to the extent that lenders or other entities relied on the accuracy of their findings. 
• It’s a transactional service. Like taxes, audits are not an ongoing service. They are executed annually or semi-annually, leaving little to no added value for the firm once they are completed.

Takeaway:Assurance services can be a beneficial addition for clients, but they do pose risks. When considering adding them, it’s important to understand the tradeoffs and make a decision that reflects the firm’s goals and needs.

Advisory

Advisory is usually added to established firms that are looking to expand. While these services require a great deal of maintenance, the added value can be worth it.

Pros:

• It creates loyal customers. Because advisory generally is an ongoing engagement rather than a one-time, transactional service, the primary benefit is the door it opens to creating long-term relationships with clients. Relationships create loyal customers, and loyal customers create a sustainable revenue source.
• It creates more-valuable clients. Advisory clients often become tax or assurance clients in other firm departments — increasing their overall value as clients.
• There’s added value throughout the process. Being a client’s advisor often puts the CPA in the driver’s seat to streamline processes for interacting with other departments in the firm. If a CPA is helping clients prepare statements throughout the year, there will be less clean up when it comes time to file or submit for an audit.

Cons:

• It can be expensive and time-consuming. Landing an advisory client can take a lot of time and effort. The high-touch nature of the relationship can strain a firm’s team if the adequate time and resources are not allocated to complete the assessment.

Takeaway: Advisory services may be more time-consuming than others, but they can provide your firm with sustainable growth over the years.

Looking Toward the Future

A key factor in planning a firm’s future is evaluating where it is today. Start with an analysis of the current operations and work from there to determine if and how to modify or expand services.

It’s important to target the efforts towards remaining cost effective and up to date with current technologies to stay competitive in the market and show clients the firm is committed to growth and moving forward together.