Compliance vs. Advisory: How Accounting Firms Can Find the Right Balance for Profitability and Stability

In recent years, artificial intelligence and other technological developments have increasingly automated basic accounting tasks. As a result, many CPA firms have shifted their focus toward advisory services to bolster their bottom lines and provide greater value to clients.

The strategy has proven incredibly effective, with client advisory service (CAS) practices reporting a 61% increase in median annual revenues since 2022, according to the 2024 CAS Benchmark Survey conducted by CPA.com and the AICPA.

However, as promising as advisory services are, they should complement your compliance services—not replace them. Let’s discuss why it’s so important for accounting firms to strike a balance between the two offerings and explore some effective strategies.

Compliance vs. Advisory: Why the Balance Matters

Advisory services are an undeniably lucrative opportunity for accounting firms. CAS practice revenues grew at a median rate of 17% in 2024 and are projected to grow a whopping 99% over the next three years.

With such promising numbers, it’s clear that expanding your advisory practice should be a top priority. But doing so can’t come at the expense of your compliance services, which still provide several critical benefits:

• Relationship building: Consistently delivering high-quality compliance services helps clients fulfill their financial responsibilities and avoid costly penalties, creating trust and credibility. That typically establishes the foundation of your relationship and paves the way for higher-value advisory services.
• Foundational data: Compliance work, like financial reporting and tax preparation, generates the historical data necessary for advisory services. For example, advisory engagements typically begin with the analysis of historical information in order to generate insights that inform strategic decisions. 
• Operational stability: Compliance services provide a reliably recurring revenue stream that can anchor your operations as you scale up your CAS practice. Having diverse service offerings can also help you avoid over-reliance on a single revenue source and weather fluctuations in client demand.

Compliance and advisory services are inextricably connected, with compliance forming an essential foundation for a successful and scalable CAS practice.

Only by finding the right balance between the two can you maximize profitability, maintain financial stability, and position your firm as a trusted partner that meets your clients’ immediate and long-term strategic needs.

How To Balance Compliance and Advisory Services

Here’s a framework you can follow to find the ideal balance between compliance and advisory services for your accounting firm.

Analyze Your Current Balance and Set Initial Goals

Before making strategic adjustments, analyze your current division between compliance and advisory services. Calculating certain data points will help guide your efforts and provide a valuable baseline to refer back to as you implement changes.

For example, here are some essential metrics to track:

Use this information to assess your current balance between the two types of services and set goals for your advisory practice that are appropriate for your size, capacity and client base.

Pro Tip: The CAS Benchmark Survey found that respondents generated a median of $1.6M in annual CAS revenue, constituting a median of 21% of total annual revenue. If your business falls short on both metrics, it’s a good indicator you’re underutilizing your CAS practice and can afford to push advisory services more aggressively.

Create a Scalable Advisory Model

Compliance services typically revolve around concrete deliverables with predictably recurring deadlines, like financial statements and tax returns. As a result, they’re relatively easy to package and scale.

Standardizing your advisory services can provide similar benefits for your CAS practice, making it much easier to grow the advisory side of your business. However, that can be trickier due to the inherently personalized nature of advisory services.

Here are some strategies to help you get around that:

• Define deliverables: Clearly outline the scope of work and deliverables for each advisory engagement. For example, instead of promising cash flow forecasting services, specify that you’ll provide a monthly report analyzing cash flow trends, projecting the next three months, and recommending strategic actions.
• Avoid hourly pricing: Hourly pricing makes advisory engagements difficult to predict for you and your clients. Instead, transition to fixed-fee packages, with payments due monthly, quarterly or annually. Aim to bill by the hour only when necessary, such as for out-of-scope work.
• Standardize workflows: As you dial in your advisory offerings, break them down into repeatable steps and standardize them as much as possible. Consider using workflow management software to help organize your efforts and automate many of the administrative aspects.

Keep in mind that this process takes time. With each CAS engagement you complete, track your team’s efforts and gather client feedback. You’ll naturally discover ways to systematize and refine your offerings.

Increase Advisory Sales and Reassess Your Balance Regularly

With your advisory services clearly defined and engagements organized into repeatable processes, you can focus on increasing your CAS sales more aggressively. Ideally, that should come from a mix of:

• Onboarding new clients: As you search for new business, look for clients with the potential need for compliance and advisory services. Compliance can still be your way in, but prioritize companies with more complex finances that might one day benefit from advisory services, even if they don’t want them yet.
• Upselling existing clients: Review your current compliance clients’ financials and business goals and pitch advisory services to those who might benefit from them. For example, if you notice a startup client experiencing rapid growth, you might offer fractional CFO services to help them navigate fundraising.

As your CAS practice grows, review your progress and reassess your firm’s balance between compliance and advisory services regularly. Consider scheduling an annual or quarterly review of key revenue and resource metrics, like those we discussed previously.

It’s also beneficial to check in with your CAS practice managers and get their opinions on the recent developments. They can also help you spot signs your advisory growth may be outpacing your capacity, such as overextended employees or declining deliverable quality.

How To Sell More Advisory Services

Here are some practical tips to help you sell more advisory services to both existing compliance clients and new prospects:

• Demonstrate return on investment (ROI): Track the impact your advisory services have on your clients’ finances, and reference the data to demonstrate your value during one-on-one consultations and pitches. For example, highlight specific instances of your budgeting services leading to cost savings or of your profitability analysis leading to higher revenues. 
• Brand your firm as a strategic partner: Update your marketing materials to emphasize CAS and develop thought leadership content that positions your firm as a trusted advisor, rather than a transactional service provider. Publish blog content, webinars or case studies that present the same data you use to demonstrate ROI when pitching.
• Foster strong client relationships: Building trust and a strong relationship with compliance clients is often the best way to upsell them into advisory services later. Get to know their business and maintain lines of communication even when there’s no immediate need for advisory services. When they encounter financial challenges, they’ll naturally turn to you for support.

Over time, these tactics will help your firm grow its CAS practice and develop a reputation for not only delivering reliable compliance work but also impactful strategic guidance that produces measurable results.

How To Deliver More Advisory Services

Here are some tips to help you maintain high service quality and avoid overextending as you scale up your CAS practice.

Upskill and Expand Your Team

Compliance and advisory services require significantly different skill sets, so as your CAS practice grows, you may need to take steps to ensure your team has the expertise to deliver high-quality advisory work.

For example, here are some strategies to consider:

• Invest in training and mentorship: Implement in-house training programs that develop advisory-specific skills and encourage your more experienced team members to mentor others.
• Hire new staff with intention: When expanding your team, prioritize candidates who, in addition to strong accounting fundamentals, have experience in advisory areas like data analytics, financial forecasting and strategic planning.
• Leverage fractional talent: If hiring more full-time employees isn’t immediately feasible, use platforms like Paro to access fractional CFOs and other advisory specialists who can provide interim support and make up for a talent shortage.

Ideally, you should invest in your team’s advisory capabilities before you start scaling your CAS practice. If you wait until advisory engagements are already starting to pile up, you risk not being able to deliver on your promises.

Leverage Technology and Automation

Technology also plays a pivotal role in balancing compliance and advisory services as you scale your CAS practice.

Automation tools handle repetitive compliance tasks, freeing your team to focus on higher-value work. Meanwhile, tools like data dashboards analyze historical data and reveal trends, helping you present actionable insights.

Here are some tips to help you build a tech stack that can do both effectively:

• Prioritize integration: Choose tools that integrate seamlessly with each other, allowing data to flow smoothly between compliance and advisory processes. Ideally, they should also integrate with any legacy systems you plan to keep.
• Allow for scalability: Make sure whatever solutions you incorporate can continue to support operations as your CAS practice grows so you’re not constantly retooling your setup as volume increases.
• Provide adoption support: Changing technological systems and upskilling for advisory services is a lot to ask of your team at once. To avoid overwhelming them, make sure you provide sufficient training and time to adapt.

Before investing in any new technology, conduct a comprehensive review of your current systems. Identify which tools work well for your team and where there’s room for improvement to help minimize unnecessary disruption.

Partner With Paro Experts To Grow Your CAS Practice

As the accounting industry continues to evolve, balancing compliance and advisory services will be increasingly essential for optimizing your firm’s profitability while maintaining financial stability. If you could use additional support as you expand your advisory practice, Paro can provide the expert help you need. Our network of fractional accounting and finance professionals can step in to handle client work, facilitate staff training, optimize your tech stack and more. Get started with Paro today to connect with an expert who can help you achieve your goals.