Only 3.7% of Canadian SME demand is suited for a “generalist approach.” Source: Canada Accountants
Generalist accounting firms don’t specialize. They work with a wide client base from diverse industries. It’s a system that works well for firms that provide compliance services. However, it’s not structured to support the deeper operational understanding required for meaningful advisory insights.
Compliance services are time-consuming and leave little time for accountants to relearn sector dynamics across clients’ varied industries.
Firms that follow this model risk being left behind by competitors that are quicker on the uptake, as they swing towards focused expertise.
Standardization of advisory delivery is a challenge
One of the most important factors in scaling successfully is the practice’s ability to streamline and standardize processes. However, for the many CAS practices that have grown opportunistically by taking on new clients and adopting disparate processes based on their individual needs, this can be a daunting challenge.” – Source: CPA.com
Generalist accounting firms face several challenges when adding advisory services to their mix. One of the biggest challenges is the time it takes to develop unique workflows for each client engagement. Standardization is a challenge because reporting formats and financial metrics vary by industry.
This affects operational impact by:
- Fragmented internal processes within the firm.
- Adjustment to multiple operational models.
- Time-consuming research for each entity.
A major problem is increasing inefficiency because accountants must juggle complex advisory services with their daily compliance tasks. The best solution is to build repeatable service models, but building models across industries takes time. Quality in one or both inevitably suffers, and so do professional reputations.
Inefficient advisory preparation persists
Why do advisory services cause inefficiencies?
They require in-depth research into each client’s industry and a complete understanding of each industry’s nuances so advisors can provide meaningful, insightful reports.
For instance:
- Each client must have KPIs relevant to their business and the wider industry.
- Knowledge isn’t necessarily transferable.
- Clients within the same industry or who provide similar services require independent research and analysis.
These requirements are time-consuming and affect balanced resource allocation. Because financial frameworks can’t be reused, cognitive load increases. Because of the specialized nature of the services, the burden falls entirely on senior accounting staff, affecting the efficient use of their time.
Advisory quality is inconsistent
So far, the focus has been on how the technicalities of generalist models affect the delivery of advisory services. But what about the advisors themselves?
The problem lies in subjectivity. That’s not to say that advisory-focused firms are purely objective, just that generalist models lend themselves more easily to variable subjectivity.
Accountants required to manage multiple industries are often limited to surface-level reporting. There isn’t time to expand their expertise in every area covered.
As a result, advisors slip back into familiar territory, specifically historical reporting.
Operational consequences include:
- Limited experience limits the ability to interpret data beyond traditional historical reporting levels.
- Junior staff might not be trained to understand advisory context, making it difficult to push through historical barriers.
- Inconsistent advisory standards.
Sliding back into familiar (historic) territory is comfortable and saps motivation to grow institutional knowledge.
The risk of limited structural scalability
To scale value-added services, firms need system automation to handle day-to-day transactional work because otherwise every new client adds workload linearly.”
Inconsistency doesn’t just affect quality and reputation; it also has a significant economic impact on accounting firms, a lot of which stems from the availability of expert hours.
- Clients pay a premium for expert services. The time required to deliver meaningful advisory services can drive up costs to a prohibitive level, especially for small clients.
- When junior staff are responsible for preparation, less time is spent on billable hours, which eats into profit margins.
- Firms might increase headcount to fill the gap in billable hours.
Another significant challenge is pricing advisory services. What is expertise worth, and at what stage do services become billable?
Lack of industry focus slows knowledge development
Shared institutional knowledge is essential to success. The problem with generalist models is that they aren’t designed for sharing. Instead, advisory knowledge is employee-specific. This means that when senior employees leave, they take their knowledge with them, creating a giant gap in advisory services.
Critical challenges related to slow knowledge development include:
- Knowledge gained isn’t transferable across client engagements, making it difficult to build internal playbooks.
- Training programs must expand to cover multiple industries simultaneously.
- Continuous professional development is complex and difficult to maintain.
The net result is the slow development of specialist advisory teams.
Keep advisory services front and center
What do frameworks require for optimized operations?
One of the most important requirements is that frameworks must be repeatable across industries, sectors, and clients.
Furthermore:
- Dashboards must match industry metrics.
- Reporting and advisory prep must be standardized.
- Defined industry verticals must be favored over horizontal markets.
The whole transition requires a strategic shift; a change of mindset that supports sector specialization and facilitates the scalability of advisory services.
Ultimately, advisory doesn’t scale when firms chase general client needs. It scales when firms focus on specific industries and standardize with repeatable frameworks.