Maximum Satisfaction

Maximum Satisfaction
Learning to Provide More Value to Business Clients

Financial professionals have business customers who rely on them for both information and guidance. A good CPA is invaluable to the principals of a company, as the accountant can provide the key strategic data that managers need to make better decisions. Unfortunately, it sometimes is the case that the CPA is viewed as a person who provides the numbers rather than regarded as a comprehensive financial resource who can help managers succeed. The problem is that business owners don’t always have a good grasp of the true total value of accounting firms. The accounting profession should take responsibility for communicating this value clearly to the business community. CPAs have vast domains of knowledge of both finance and business that they can leverage to provide truly unique value to clients.

There are two primary ways that CPAs can better meet the needs of their business clients:

1. CPAs need to think from the top down, not from the bottom up.
2. CPAs need to be able to clearly explain to managers what the financial statements mean and how to best use the information in those statements.

Painting the Big Picture

The bottom-up approach that some CPAs take is in many ways reflective of their training. For example, CPAs are trained to think at a transactional level. Remember all the accounting tests in school? Many of them were geared toward solving specific transaction solutions but weren’t necessarily designed to determine the overall financial impact of the transactions. Similarly, there also may be an inherent bias toward data, in which some CPAs are inclined to provide their clients with nearly overwhelming amounts of information.

One way to overcome the tendency toward bottom-up thinking is to try to determine which data is important to the company’s operations and performance. Many financial professionals have difficulty identifying the key financial metrics that are necessary for success. They are so immersed in gathering and reporting data that they forget that data in itself is useless unless tied to some decision or construct that needs to be addressed.

When possible, CPAs should remember to look at the “big picture”—the key pieces of data that make a company run efficiently. Most companies only need to manage a few pieces of data to run successfully. This is especially true for smaller enterprises, those under $50 million in annual sales. Of course, identifying key data sounds easy enough. The challenge is developing key metrics (also referred to as key performance indicators, or KPIs), which requires knowledge of the business as well as knowledge of finance.

CPAs can add truly unique value by understanding the business and developing key metrics for their clients’ managers. They should ask themselves, “What are the key operating items that can be measured that result in higher sales and profits?” These items should then be broken down into the daily or monthly actions that can be controlled by managers. For example, if a particular manufacturing plant is evaluated and it is known that the gross margin (gross sales divided by total revenue) is a key factor to overall profitability, the CPA can identify the key metrics that are important to keeping gross margins high. The key metrics differ from business to business, ranging from inventory cost control to percentage waste on materials. The more competent the CPA is identifying and developing these key metrics, the more successful he will be in meeting the needs of his clients.

Communication Breakdown

Conveying complex, technical information in terms that the average person can understand is another challenge that CPAs face. The purpose of gathering and reporting financial information is to help people make better decisions. If the managers of a company don’t understand the financial information they receive, how can they make informed decisions?

There is a widespread and faulty assumption that people can easily understand the data that is provided to them. This assumption can put managers who don’t understand the reports given to them in a difficult position, perhaps discouraging them from even using the information provided. CPAs shouldn’t take anything for granted. Instead, they should make certain the information they provide is fully comprehended by management.

When providing basic financial statements (such as the income statement, balance sheet or statement of cash flows) to managers, write a short description of the liquidity of the firm, the profitability and trends, and the asset and debt use of the company. A simple, plain-language description of the financial numbers is invaluable and will elevate the CPA in the minds of the recipients of the information. When writing the report, it is important to keep the communication both brief and easy to read.

The path to increasing value with the business client takes some work, but not the sort that falls outside of the normal business relationship. CPAs will always provide business clients with the numbers that are critically important to their operations, but in doing so, CPAs should remember to put the information in a clear and concise context that is most meaningful to the clients. Taking that extra step can mean the difference between a good client relationship and a great one.

Brian Hamilton is the chief executive officer and leader of the management team for Sageworks, Inc., a financial software applications developer (www.profitcents.com). Author of the Small Business Administration publication “Financing Your Small Business,” he can be reached at brian.hamilton@sageworksinc.com or 919-851-7474, ext. 501.