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Advisory services: business tax strategy checklist

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Once your firm has aligned on a compelling vision, the next step in your transformation journey to offer advisory services is to lead with benefits your clients value. Most traditional multi-service firms spend most of their time and derive most of their revenue from tax preparation, writeup, cleanup and other compliance work. A firm owner with more than a thousand clients recently said, “If the government stopped requiring tax returns, I would have no clients and no business, because clients would not see a reason for my services.” That’s a sobering revelation that applies to most traditional firms.

Tax preparation is required, but not desired. Conversely, tax planning that communicates meaningful tax savings is valued by clients. Instead of being content as a forced expense on the client profit and loss statement, leading firms update their offering to communicate what is important to clients, rather than what is required. They still deliver tax preparation and compliance work, but also including tax planning in every engagement creates a competitive differentiation from the tax preparer masses. The beautiful thing about leading with tax planning with every client is that it opens the door to additional advisory services that help power prosperity for clients, delivering the growth and purpose that many traditional firms have found elusive.

Here is a framework to update your services, increase your value to clients and grow your firm’s revenue. This change to leading with tax planning is integral with the other steps in the transformation process.

Lead with tax planning. Instead of leading with tax preparation and making planning optional, make planning the entree that is included with every bundled service package. The depth of tax planning will change across your three packages, but each client package includes at least an annual tax planning meeting and basic plan. How you message the change is important, but if you increase your fees on the basic bundle by at least 25 percent over prior fees, the next two service bundles would be significantly higher. Next, design your tax planning process for efficiency without burdening clients for planning information. Instead of using paper organizers, which are a terrible client experience, focus more on the conversation. Use a linked calendar application so clients can self-schedule appointments. Lean into phone and video meetings to save clients and staff time. For clients in bundle two and three, plan on more frequent conversations.

Standardize your tax strategies. Start with a checklist to standardize tax planning strategies. As you employ certain strategies more frequently, consider creating a one-pager describing the background and strategy for clients. For some strategies, an onboarding video might be helpful to scale the strategy across a wider base of clients. For example, when changing clients from a sole proprietor to an S corporation to reduce self-employment, there are multiple steps that should take place, as well as new processes the business will employ to operate as a corporation paying W-2 wages to the owner and possibly accumulated adjust account distributions. An onboarding video that explains all these steps can help clients feel more confident about the change, better understand the tax savings behind the strategy and make it easier for your firm to implement the same strategy across many clients.

Document client goals. Everyone has dreams and goals for their career, business, family, education, savings, retirement and lifestyle. As an advisor, the first step is understanding what is important to your clients and documenting it. When interviewing both spouses, simply asking questions will likely uncover shared goals, as well as opportunities to reconcile goals for spouses who may not be on the same page. Once you understand the client’s goals, you can create a living tax plan that you update periodically with new information and as you collectively take action. Some tax-saving strategies may include reviewing the benefit plans of your client’s employer, while others may be more self-directed.

Track tax savings by strategy. Tax planner programs usually summarize complex tax calculations to precisely deliver an accurate tax calculation, and maybe compare two or three scenarios. In many cases, this is little more than an estimated adjustment to keep the taxpayer from being surprised with a balance due. The inverse of this process is actually calculating the tax savings of every action you take to help the client minimize their liability. Tax professionals do this naturally as part of the process, but almost never communicate it to clients. By dis-assembling your tax planning into discrete strategies, you will have more tools at your disposal to save your clients money. Rarely do clients take every action at once to minimize taxes, and by tracking discrete strategies and updating the plan periodically, you can reinforce the value of tax planning and savings, and de-emphasize the value of the tax preparation, which is more of a reconciliation at year end.

Communicate tax savings. Armed with tax savings by strategy, now you can communicate the value of your tax planning and tax savings to your clients. They view tax preparation fees as an expense, and everyone wants to minimize expenses. When you communicate the savings from tax planning services, they will view your fee as an investment with a clear return on that investment. Some firms go further and track savings annually and cumulatively, and publish their savings on their website. Prospects shopping for a tax professional are more likely to select a firm that demonstrates tax savings than one that leads with tax preparation.

Add advisory. The tax planning interview naturally leans into proactive, forward looking services to help families and clients achieve their goals. A recent QuickBooks® study found 32 percent of small businesses are unable to either pay vendors, loan payments, pay themselves or pay employees due to cash flow issues. Cash flow advisory is just the first area where you can lean in to help power prosperity with your clients. When they see you help them grow their business, improve cashflow and automate tedious work, they will view you as an integral partner to their business.

This Tax Planning Checklist for business clients is an example of how you can standardize tax strategies, quantify the tax savings impact and track savings by client. The checklist includes a tab to track client goals, which creates a launching point for more advisory services to help clients achieve their goals. Customize the checklist with additional tax strategies to fit your practice and your clients.

Editor’s note: This article was originally published by Insightful Accountant.

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