You know those clients – the ones that insist on doing their accounting on their own but always seem to be behind on their books. At the end of the year, they’re scrambling (which leads to you scrambling along with them) to figure out what their income and expenses were for the year.
It’s hard enough to work with cash-basis clients that have messy books, but if your clients are on an accrual basis, then it can be nearly impossible for you to reconstruct the books accurately.
So, as accountants, we all end up thinking that if they would just let us handle the books, they would be done accurately and on time. That’s where offering client accounting services come into play.
The term client accounting services (CAS) refers to completely outsourced accounting work. If you offer this service, you handle the complete accounting cycle for your clients and act as their outsourced accounting department.
For small businesses starting out, the owner often handles the bookkeeping themselves (or maybe hands you a stack of financial statements at the end of the year with the request that you figure it out). With small client lists and a minimal number of transactions, it’s manageable even while building a growing business.
As your client’s business grows, they often find that they do not have time to manage the accounting along with their regular duties. If they haven’t hired anyone with an accounting background, they often find that they need additional help, but can’t afford (or do not need) a full-time accounting staff member.
Though there are plenty of part-time accountants, having a single, external person who is responsible for all of their accounting means that they have a single point of failure. This is where CAS enters to fill the gap.
Bookkeeping is the most basic of services included in CAS. Each month your firm will receive statements from your clients (or, better yet, collect them yourself), record the transactions in the accounting system, and reconcile the accounts.
By keeping up with the books regularly, it’s easier to discuss unknown items or new vendors with your clients when the transaction is fresh in everyone’s mind. The list of tasks should be the same each month unless there are new accounts.
Some clients will want you to receive their bills, input them in the accounting system, and either schedule electronic payments or write checks. When offering this service, depending on the client, you may also be given signing authority for checks that will allow you to pay the bills without needing prior approval.
Other clients won’t have operations that live entirely in accounting software and will want you to print checks and hand them to the client to sign. For this service, it’s especially important to ensure that you are on the same page as far as which expenses you can pay without approval and which expenses need client approval.
If your client has several clients of their own, they may need assistance with billing the clients accurately, sending out invoices, and following up on outstanding invoices. In the event they do not want you to follow up on outstanding invoices, it will be up to you to point out any delinquent accounts so that they can follow up with their clients.
Additionally, if you are tasked with accounts receivable, you’ll want to collect the bills and make the deposits on your client’s behalf so you can verify that the incoming payments are being applied correctly to the invoices.
The majority of clients with employees will need assistance with payroll. Payroll processing requires specialized knowledge of state and federal rules regarding withholding, required payments, and form filings.
While it’s practical for your accounting firm to stay up-to-date on the applicable regulations, it’s typically not practical for each of your clients to monitor payroll law and rate changes.
Preparing financial reports
On a regular basis, your client is going to want updates on their financial position. Depending on the client, this could be as often as weekly or as infrequently as once a year. A lot of this will depend on the nature of the business and the cash flow of the company. In any case, the client will want to see a balance sheet and profit and loss statement to stay informed. This helps with other financial reporting such as forecasting and tax planning.
Before jumping into CAS, you need to evaluate your firm’s current capacity. By outsourcing their work to you, your clients are going to want you to be on call for them, their vendors, and clients. Once you’ve decided that your firm can take on this work, how do you get started?
The first step is marketing your services by adding the offering to your website and other marketing materials. There are several terms that you may want to include such as “fractional or virtual CFO services”, “outsourced accounting services”, or “full-service accounting firm.”
Once you’ve updated your material, you should look at your current clients and see if any of them are either struggling with their accounting, have asked for more services, or are rapidly expanding. Prior to approaching your clients, you should determine what workflows will set you up for success, what information you need to get started, and the time involved in each project.
You should adjust your sales process to include mention of all the services that your firm can offer. Instead of waiting for your clients to ask for certain services, you should proactively approach them to see if you can be of assistance. When new business owners are starting up, they may not be aware of the full extent of your expertise and all the services you can provide or even know to ask for them.
1. Set clear expectations.
Prior to signing a contract, you should have a meeting with your client to set expectations. This meeting should include a discussion of which services the client needs, how often you expect to interact with the client, and how much authority you have over the client’s finances (such as paying bills, processing payroll, etc).
Once you’ve reached a consensus, a clear, written proposal should be provided to the client and services should not start until the client has signed and accepted the proposal.
2. Have a clear understanding of billing with the client.
Are you going to be billing your client a flat rate or will you bill by the hour? What happens if the scope of the project expands or the client suddenly has a much larger number of transactions to handle each month? The initial proposal needs to explain what is included in your flat fee or what the hourly rate is for each team member that will be working on the project.
3. Know which team members are responsible for what tasks.
For each team member involved in the client account service project, their role should be clearly defined. Using shared task lists or robust workflow management tools, such as Jetpack Workflow, will ensure that every team member knows what the expectations are and tasks are not overlooked.
4. Have backup team members.
Though the initial workflow tasks should be assigned to a single person, you should cross-train your team members so that one person’s absence doesn’t mean that client deadlines are missed.
A good workflow system will let other team members review tasks assigned to teammates so they can step in if there’s a need. Providing uninterrupted services to your clients is key to making your client accounting services a success.
5. Keep records up-to-date.
Regularly updating your clients’ books, bills, and invoices will mean that when your client calls, you’ll be ready with an answer. If you get behind on their accounting or wait until the last minute, you won’t be ready for the call. Staying up-to-date on your client’s work makes you look more professional and gives clients the impression that their books are in good hands.
6. Understand how often your client is going to want updates.
When setting initial expectations with your client, you should determine how often they want updates on their accounting and how involved they want to be in the account processes. Do they want to approve transactions or do they want to be entirely hands-off?
7. Review your accounting tools.
Regularly review your accounting systems to ensure that you have the most efficient and robust systems for your accounting services. The more integrated your payroll, accounting, and document systems are, the less time you will need to spend on each client and the less point of potential errors.
You could track all of your upcoming deadlines on a shared task list or using your calendar, but that leaves room for errors or overlooking items.
To ensure that you are taking care of your clients’ accounting, you should consider a robust workflow system like Jetpack Workflow that can handle complex projects such as client accounting services. With the ability to handle recurring tasks and manage your team’s workload, your clients will be impressed by your responsiveness and efficiency and they’ll be better equipped to make smart and timely business decisions.