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Estimated reading time: 4 minutes, 43 seconds

Summer: Focus on Advisory Services

ConsultingMost tax and accounting firms follow a predictable annual cycle. There are quarterly estimates due, key extension deadlines to be aware of and, of course, tax season.

However, tax planning season is not on the calendar for most firms. As the busy spring ends, summer is an excellent time to proactively tax plan for clients to get ready for the following year in advance.

Most firms don’t consider this. If you’re like the majority, you wait until close to year-end when there’s no time left to implement any tax saving strategies and clients are busy with the holidays. Or, you wait until the next tax season, only to realize you’re already too busy. 

Firms that use their summer season to focus on tax advisory work can see a significant revenue jump and serve their clients much better year-round. It’s all about building a new annual cycle focusing on high-margin advisory options; classic tax preparation and compliance work are pushed as supplemental to the leading advisory service. 

Why is summer the best time to do tax advisory work? Here is typically what happens: You’ll prepare the client’s tax return based on what happened in the previous year, knowing that you could give recommendations for next year, but since it’s the middle of tax season and you’re swamped, you put it off. Then, when the end of tax season arrives, you feel burned out and never get back to your clients until closer to year-end. 

While waiting until close to year-end seems like a logical time to tax plan, summer is far better. This vicious cycle of postponing tax planning should stop so that clients can get more value than just tax preparation and your firm can create more revenue. 

Commonly, tax prep is generally low-margin work and a price race to the bottom. The average national fee  for tax preparation was $400 for a 1040 with a Schedule C and just $221 for a nonitemized 1040 and state return. Many firms need over 1,000 clients charging at those rates. 

With these types of low margins, some firms have rejected going after quantity and instead are focusing on quality and high-margin work.

Tax Advisory Services Are Great Summer Upsells  

What are tax advisory services? Simply put, this means you do most, or all, of the tax tasks for your clients. It can include tax planning, making recommendations on tax positions, estimating taxes owed, implementation of tax strategies, making quarterly payments and filing annual tax returns.

Think of it like tax prep, super-sized, with more significant fees (and profit). The summer off-season is the perfect time to learn how to market and sell this service and actually do it. 

This is why many firms around the nation are scrapping the old way of doing things -  focusing their whole year around the spring tax season -  and pivoting to a new annual cycle using the summer to tax plan to better serve their clients during the spring. 

Will clients pay for higher-priced advisory work? Think about it like this:Many taxpayers are overpaying in taxes because they are filing returns that don’t reflect their facts and circumstances. Many of your clients could possibly save money on taxes if they knew strategies specific to their situation and implemented them.

Let’s look at an example. A taxpayer owes $123,392 in taxes, but paid $169,382. This overpayment resulted from incorrectly filing or missing three items that properly filed would have resulted in $45,990 tax savings. Additionally, the taxpayer can implement four strategies for an additional $27,239 of tax savings. 

In this simple scenario, the taxpayer has gone from paying $169,382 to only $96,153 in taxes, which is a $73,229 savings (40%+). This is precisely why many clients are more than happy to pay top dollar for tax advisory services.  

Why Many Firms Haven’t Yet Made the Transition 

Many great accountants just feel they do not have enough information about tax planning to move forward with offering this much-needed service to clients. They feel intimidated by the U.S. tax code, which is thousands of pages long and counting, seemingly growing every year. 

Then there are the constant changes from legislation passing and new regulations being implemented so it’s hard to keep up with it all. It can become paralyzing, and the result is they never begin to offer tax planning as a service. 

What I tell firm owners is that it’s not as intimidating as you think. If your goal is to get your clients to the optimal tax situation where they are getting as much savings as possible under the tax code, that is a lot of pressure you are putting on yourself. 

Instead, change your perspective to get the client into a better state than they were in before they started working with you - because that is entirely achievable. When you see yourself as a resource to help your clients as much as you can, getting started is less daunting. 

Many articles and even new technology can help tax planners hit the ground running. So don’t go through the annual tax season cycle as most firms do. Use this slow season to take your firm to the next level. Moving from compliance to advisory work is never easy, but it certainly beats the alternative! 

Andrew Argue, CPA, is the CEO and founder of Corvee, a software and solutions company serving tax and accounting firms. At Corvee, Argue works to help tax and accounting firms increase their revenue and profitability through tax planning.

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