The business world is constantly changing, and boy, has it made us rethink the role of accountants. Today's businesses are after more than just number-crunchers. They're on the lookout for strategic advisors who do more than balance the books—they want relationship builders. This shift in expectations has led to the birth of two distinct but equally important types of accounting—relational and transactional accounting.
Why relational vs transactional accounting?
As a firm in the accounting and finance sector, you know how critical it is to have a team of talented, qualified, and eager beavers on your side. They are the ones who can deliver top-notch service to your clients. But let's face it, finding and hanging on to such talent is no walk in the park, especially in today's market where there seems to be a never-ending shortage of accountants, and the demand for their services is through the roof.
According to the Bureau of Labor Statistics, we're looking at a 7% uptick in demand for accountants from 2020 to 2030. But here's the kicker: the supply of accountants isn't keeping up with the demand. With many baby boomers heading for early retirement and millennials and Gen Zers gunning for jobs that offer oodles of flexibility and competitive pay packets¹, we have a real challenge on our hands.
This means that if you want to attract and retain the best talent for your accounting and finance firm, you need a game plan. A major piece of this puzzle is getting your head around the difference between relational and transactional accounting and knowing how to choose the right talent for each type of engagement. This is where the rubber meets the road in your strategy.
The difference
Think of transactional accounting like a fast-food restaurant. You walk in, place your order, get your meal, and walk out. It's quick, easy, and you get exactly what you asked for - no more, no less. Transactional accounting works much the same way. It focuses on the basic tasks - recording financial transactions, ensuring compliance with laws, and producing financial statements. This is great for businesses that just need their day-to-day books kept in order and their taxes filed correctly.
On the other hand, relational accounting is like a sit-down restaurant with a personal chef. You not only get your meal, but the chef also spends time understanding your dietary needs, preferences, and even your lifestyle to tailor a meal just for you. Similarly, a relational accountant not only takes care of the basic tasks but also invests time to understand your business's financial health and future goals. They provide advice on tax planning, budgeting, and business growth strategies - customized to your business's unique needs and objectives.
So, why talk about the difference? Well, it's because businesses need to understand what they're signing up for. A small start-up with straightforward financial needs might be perfectly happy with the fast-food style transactional accounting. But a bigger company with more complex finances might need the tailored service of the relational accounting approach.
In the same way, accounting firms need to know what kind of service they are best at providing and advertise it accordingly. By understanding these differences, they can ensure that they have the right mix of transactional and relational accountants to cater to the varying needs of their clientele. Ultimately, knowing the difference helps everyone make more informed decisions.
What is Relational Accounting?
Relational accounting is a type of accounting that takes a more holistic approach to the client and their business. Relational accountants want to know the client, and their goals, and get invested in their success. They don't just complete the requirements of the engagement, but they also offer value-added services that help the client achieve their objectives.
Some examples of relational accounting services are:
- Tax planning
- Advisory services
- Business valuation
- Financial analysis
- Budgeting
- Forecasting
- Strategic planning
Relational accountants are ideal for clients who need more than just compliance-based services. They are suitable for clients who want to grow or improve their business, who face complex or changing situations, or who need ongoing guidance and support.
What is Transactional Accounting?
Transactional accounting focuses on completing the requirements of the engagement, but these are more compliance-based items. Transactional accountants get in, do their job and get out. They don't spend much time getting to know the client or their business, and they don't offer much advice or guidance.
Some examples of transactional accounting services are:
- Preparing financial statements
- Filing tax returns
- Auditing financial records
- Processing payroll
- Bookkeeping
Transactional accountants are ideal for clients who need basic or standard services. They are suitable for clients who have simple or stable situations, or who only need occasional or one-time assistance.
How to Choose the Right Talent for Your Accounting and Finance Firm
As an accounting and finance firm, you need to have a mix of relational and transactional accountants on your team, depending on the needs and preferences of your clients. To choose the right talent for your firm, you need to consider several factors, such as:
- Your goals: What are you trying to achieve with your accounting and finance firm? Do you want to offer a wide range of services or specialize in a niche? Do you want to serve a large number of clients or focus on a few?
- Your budget: How much can you afford to spend on your talent? Do you prefer a fixed or variable fee? Do you value quality or quantity?
- Your expectations: What do you expect from your talent? How much communication and involvement do you want? How much trust and rapport do you need?
- Your preferences: What kind of talent do you prefer? Do you like someone who is friendly or professional? Do you like someone who is proactive or reactive?
Based on these factors, you can decide whether relational or transactional accounting is better for your firm. You can also look for referrals, reviews, testimonials, credentials, and portfolios of potential talent to evaluate their suitability.
How to Attract and Retain Accounting and Finance Talent
Understanding the difference between relational and transactional accounting can significantly influence how accounting and finance firms attract and retain talent. It helps them tailor their recruitment strategies, develop their teams, and provide the right training and resources.
Firstly, when it comes to attracting talent, accounting firms need to consider the type of services they primarily offer. If a firm is more focused on transactional accounting, it will likely look for candidates who are detail-oriented, efficient, and good with compliance regulations. On the other hand, if the firm leans more towards relational accounting, it'll be interested in candidates who show strong interpersonal skills, strategic thinking, and a deeper understanding of business operations.
In addition to this, knowing this difference allows firms to create a workplace environment that aligns with the type of work their accountants will be doing. Transactional accountants might thrive in a fast-paced, high-volume work environment where efficiency and accuracy are key. In contrast, relational accountants may prefer a more collaborative, client-focused work setting that allows for strategic thinking and long-term planning.
Retaining talent also requires understanding the different needs of transactional and relational accountants. For example, transactional accountants might value ongoing training in the latest compliance regulations and technologies to streamline their work. On the other hand, relational accountants might appreciate opportunities for networking, client relationship building, and developing their advisory skills.
Conclusion
understanding the difference between relational and transactional accounting, firms can ensure they're recruiting the right people for the right roles, creating a work environment that supports their team's success, and offering the opportunities and resources that will keep their talent engaged and committed to the firm. This can lead to a stronger, more efficient team that's better able to meet the diverse needs of its clients.
References:
https://www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm
https://www.roberthalf.com/blog/management-tips/finance-leaders-reveal-their-biggest-hiring-challenges
