While client accounting services have become one of the fastest-growing service areas in accounting over the past decade, even pioneers in the space still have a ways to go, according to experts at this year’s Digital CPA conference.
“The challenge is how to elevate, enhance and evolve CAS to bring the next level of service, what we’re calling CAS 2.0,” explained CPA.com president and CEO Erik Asgeirsson, in a keynote panel at the annual conference, which was held this week in Nashville, Tennessee. “No firm has fully optimized the service line yet.”
One place to start is for firms to recognize the unique nature of the offering.
“Stop running the CAS department like you’re running the audit or the tax department,” urged panelist William Pirolli, the current chair of the American Institute of CPAs, and a partner at DiSanto, Priest & Co. in Rhode Island. “No disrespect to them, but it’s a different animal.”
Given that difference, CAS practices can require different incentives. “You want to grow CAS? You have to change the compensation model to really reward CAS and empower management teams,” said Pirolli, whose firm’s CAS practice has grown to 15 people, and is about to promote its first partner. “The reason that CAS is doing so well is that we finally figured out that we’re not going to run it like everybody else in the firm.”
Getting the incentives right will require identifying the right measurements of success.
“At most firms with a CAS practice, the rest of the firm doesn’t necessarily fully understand what that practice is,” noted panelist Jennifer Wilson, co-founder of consulting firm ConvergenceCoaching. “And the leaders don’t understand how it differs and how it’s similar. They try to measure it identically. That’s the first mistake, and they hold their practice leader accountable for measures that don’t apply.”
“With partner compensation and compensation in general, it needs to be performance-based,” she continued. “It has to be on measures that make sense for the CAS leader. It can’t be measures that don’t. It can’t drive the wrong behaviors. This is an investment practice, and it is really a huge high-return practice at firms. But the partnership has to understand it and they have to shift the way that they manage and measure it.”
As an example of the rethinking that still needs to be done around measuring success, Asgeirsson pointed to the data that recently came out of CPA.com’s recent CAS benchmarking survey. “One takeaway is that the net fees per professional aren’t as high as some of the other areas of the practice, and I think there’s things that we need to factor in related to that, such as pricing strategies and understanding the value that you’re providing,” he said. “We’re going to continue to figure out the right KPIs.”
(Listen to our podcast with Erik Asgeirsson and Jennifer Wilson on the latest CAS benchmarking survey.)
Beyond thinking differently about themselves, firms that want to optimize their CAS practice need to think differently about their clients.
“We have to be super-choosy who we help because we’re overwhelmed from a capacity perspective out there,” said Wilson. “Firms don’t understand who the ideal target client is. They don’t understand that we can’t support every general ledger out there.”
Firm leaders also don’t always understand the central role of carefully curating their technology stack to keep the practice efficient, Wilson added.
Even more important on the technology front is the need for firms to stay up to date, according to panelist and Digital CPA chair Elinor Litwack, who is also outsourced accounting & advisory services partner at Maryland-based GRF CPAs: “Tech solutions are key year over year because you can’t just sit on cruise control,” she said. “The landscape is constantly changing and you have to remain innovative and agile and be willing to test-drive things to stay ahead of the curve.”
For all the work and rethinking that may need to be done to boost CAS practices, it’s well worth it, according to the panel.
“The growth has been phenomenal. I was super-excited to see 20% growth in the benchmark survey, and to see the margins in this space,” said Wilson. “It is so important for us as a CPA firms and consulting firms to claim this space, because it’s right in our sweet spot. It makes such a difference for clients. … I think it’s a seller’s market for this service, and the need and the demand is high because we make such a difference for clients.”