Already advising clients? You should charge for it

Too many practices are giving away tax and business advice for free. It seems well-meaning – your small business clients face a difficult economy. But that cycle of generosity doesn’t always benefit your clients or your practice.

Free advice doesn’t carry the same weight as an actual, structured consulting meeting. It may in fact give business owners a false sense of confidence.

In this article, we explore why small businesses rely on their accountant’s advice – and how giving this advice for free, even with good intention, may do your practice a disservice.

Few business owners are confident in their finances

37% of small businesses surveyed report feeling anxious or nervous when it comes to filing taxes, and 25% say they don’t even know how to file. Many small business owners don’t feel confident navigating more technical aspects of budgeting, forecasting, financial analysis, and accounting.

For example, 76% turn to their bank for help on these matters. And as bankers are often incentivized to open new accounts and sell products, this could lead small business owners to getting involved with things they don’t need.

Other small business owners turn to employees, friends, and social media where recommendations can often be anecdotal or misguided. Today, just 48% of U.S. adults can answer questions in a way that suggests they are financially literate, according to a study by the Global Financial Literacy Excellence Center. This number has been slowly declining since 2020.

Does a lack of financial savvy actually hurt business owners? It can – this is clear in how little cash they hold:

• 57% of small businesses have just 27 days cash flow on hand - JPMorgan Chase
• The median small business with a Chase bank account holds just $12k in cash - JPMorgan Chase
• 24% borrow money on a regular basis - NFIB
• 33% say their business’ financial health is “okay” or worse - NFIB

Whether they ask for it or not, many small business owners can benefit from additional financial help. But they may not know what kind of help they need. Should they get a loan, raise or lower prices, or maybe even just know how much cash they will have at the end of the month? That’s where you come in – every accountant in your firm should be able to see the story in their financials.

Plus, the advising is already happening

If you’re thinking to yourself, “I wonder if a simple receivables process would fix their cash flow,” you’re correct. Accountants tend to know more about running a business than they give themselves credit. These seemingly obvious financial principles and workflows are second nature to accountants, but may be relatively new to their clients.

“Business owners are realizing they need this help at the same time as accountants want to offer it – we are also business owners ourselves,” says Kristy Monahan, Director of Operations at the firm Accounting Elements. “We accountants have some experience here.”

At the same time, accounting practices are living through an automation revolution that is freeing up time, allowing them time to give more advice to clients.

“There’s been a shift in the industry and we’re seeing many accountants use AI and give advice beyond tax accounting,” says Monahan. “But some of us have been giving that advice all along, you know. Client advisory is something many accountants already do naturally.”

Many accountants do not always charge for advisory services. They see it as a free giveaway to help retain clients and ensure those clients are successful. According to our latest State of the Industry Report, 85% of accounting practices now offer paid client advisory services, but they are not using it evenly across all clients.

This is similar to the reluctance to charge based on how much a project is worth, known as value-based pricing. Though 91% of practices offer value-based pricing, just 57% offer it for one quarter or more of their engagements.

Why might accountants resist charging for advice? “Accountants are generally not about hard sales or confrontation,” ventures Monahan, whose firm does charge for advisory. “We’re not going to throw it in your face like, ‘You need this service!’”

But what if this resistance is actually bad for clients?

Businesses get more value from paid advisory

Banks or financial institutions may be the first place a small business owner turns to for financial advice, but accountants are the second resource (43%), followed closely by employees (39%), according to a study by PaymentsJournal.

If accountants are not an owner’s first choice, it may be because their advice isn’t always taken seriously, which can happen when offered for free. Free advice tends to be less followed and less effective.

People are less likely to believe free advice

When accountants set the price of their advice at zero, their clients do as well. Simply attaching a price tag makes people pay closer attention, and believe it is valuable and worth acting upon.

It is similar to the flood of emails your practice may receive offering to do free business development or build an app for free. How much do you trust those?

People are less likely to act on free advice

It seems counterintuitive, but people value free advice less. When there’s no cost, it’s easily discarded. Researchers attribute this to the sunk cost fallacy where people follow through on something because they have already spent on it.

People may not actually realize they are being advised

If clients do not have to sign any paperwork or pay an invoice, they might not actually realize they are being consulted. Said one small business owner in Denver, “My accountant helped us figure out we should transition to an S-Corp from an LLC and we needed to file that with the government really quickly … they helped us put together a spreadsheet for cash flow to know when we should be hiring someone versus when it makes sense to keep them as a contractor … but no, they don’t really advise.”

Free advice is lower-quality advice

If your advisory is free and that time and energy isn’t billable, your accountants may not devote any more effort than needed.

As a result, your accountants’ advice will tend to be surface-level; they won’t spend the time or resources to really dig into the data and deliver meaningful recommendations that truly benefit your clients. For example, unless your firm charges for that S-Corp analysis, you may not formally analyze to confirm if it's the best move.. Or if a client is losing money, the recommendation to “revisit the pay structure” won’t be sufficient. That accountant needs time to build an effective model and run scenarios on what the new pay structure can do. Charging for your consultation may actually give yourself permission to dedicate the time and focus to make it even more valuable.

Free advice may give owners a false sense of security

If owners do realize they are being advised, but the advice is surface-level and does not involve research, modeling, or presentations, they may take your advice but apply it in a way you did not intend. This can be frustrating to both parties, leading to negative outcomes and experiences.

In our experience, businesses do need more than just “free” advice.

For every high-financial-maturity client of yours who just wants your help with bookkeeping, there are probably three who are unclear on how accounting, bookkeeping, and accounts payable are different.

Said one small business owner in California, “My finances aren’t that unique, there should be a way to make it efficient. I’m signing up for Harvest and Gusto and the account reps are like, ‘They all can talk to each other,’ and I’m like, ‘I just want one app.’ And now our VP of Operations is telling me we need a tax accountant too? What exactly is the difference here?”

Many owners do not have a detailed understanding of finance and accounting. Though they are very savvy at the core of their business – building a product and running a great service – many do not care how finance is done. They just want to know what to do and to trust in those recommendations.

If anything, many accountants are frightening clients away from paid advisory by not charging the value. If they do not trust their own advice, who will?

Being hesitant to charge for advisory services can accidentally send the wrong message to clients. Without a price on advice, it can come across as less valuable or trustworthy to clients.

According to the Denver business owner:

“We really don’t put that level of trust into our accountant. Because I feel like from an accounting perspective, you’ve got an accountant who handles debits and credits. They know how to allocate expenses from a taxation perspective. And then you’ve got someone in finance. They do financial projects and strategy.”

The more accountants undercharge their value, the more they perpetuate outdated stereotypes about what accounting is.

Help your clients, consider charging for advisory

If half of business owners struggle with cash flow, they could use better advice. That could be the same advice your team already gives, only through a paid engagement, especially since paid advice carries a heavier weight than free advice.

Paid advisory is not just good for your firm. It affords your team the time and resources they need to provide actual models, forecasts, and insights. This becomes a cycle – the recommendations from a paid consulting project are more compelling, more tangible, and something clients are more likely to act upon.

Your accountants already advise, and many of them love to do it. As the practice owner, it’s up to you to help your firm move past the “free” phase and show everyone that charging for advice is the greatest way to help.