Category: trusted advisor

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Accounting Professionals: Is Your Value Tied Up in The Accounting Software?

Accounting Professionals: Is Your Value Tied Up in The Accounting Software?

Subtitle: when all you have is a hammer…

There was a time, not so many years ago, when it made sense for an accounting firm to take the position that all clients must use the firm’s preferred accounting software product or they would not be clients.  For these firms, the concept of standardizing transaction entry and data processing across the client base made sense, and provided a means to create maximum efficiency in handling the bookkeeping and accounting processes.  Typically, firms handling small business clients would select Intuit QuickBooks for client use, and offered QuickBooks training, QuickBooks transaction processing, and use of QuickBooks add-ons to support the model.  With Intuit QuickBooks “owning” the small business market for accounting software, it made sense for accounting professionals to leverage the popularity of the solution to the benefit of the practice.

As cloud-based solutions and online application services have emerged (including QuickBooks Online Edition and Intuit Partner Platform – IPP – integrations), many accounting professionals have simply continued with the philosophy of applying QuickBooks (the hammer) to every client engagement.  These firms focus on the software as a basis for delivering what they believe is value in the engagement.  In short, these professionals focus their value in the use of the product (licensing, installation, training and support), and in their data entry skills (efficiency in entering and reviewing transactions in the product), rather than in the greater value of business intelligence, insight and actionable advice.

The new challenge facing many professionals – the reality of the current market – is that there are myriad solutions and approaches available to address client bookkeeping and process needs which work really well, and it is not always a good idea to try to turn a client using one of them into a “nail” just so you can hit it with your favorite hammer – QuickBooks.   With Freshbooks, Wave Accounting, Xero and other solutions which handle various business accounting or bookkeeping requirements quite well and for an attractive price, small business owners are more frequently electing to implement applications outside of the QuickBooks product line even as their accounting professionals are continuing to promote QuickBooks for everyone.  The reason business owners are electing to use these other tools is simple: they work for them.

In reality, this issue has existed in some form for a very long time, and was perceived to be primarily in markets where technology adoption and use is low for various reasons.  The truth is that a lot of small business owners find ways to accommodate their information management and record keeping needs, and they use whatever approach works for them and what they want to accomplish.  Sometimes the approach involves Internet solutions and online applications, and sometimes it does not (Excel spreadsheets with stapled piles of receipts are still quite popular and in widespread use by SMBs and Entrepreneurs).  When that small business elects to engage the help of an accounting professional, the last thing they want to be told is that they have to make a big change to how they get things done.  It’s fine for the accountant to provide guidelines for when information will be made available to support getting the accounting work processed, but it is not necessarily okay to dictate immediate changes in software and systems supporting the business daily operations.  In a lot of cases, the accounting professional simply has no real basis for the requirement to change, other than to support their own efficiency (which is the wrong basis for making a client change their systems).   It’s that silly cost-benefit thing. If it costs the client a lot (change always = cost), and the client does not perceive or experience an expected benefit, then it makes no sense for them to make the change.

Consider a professional accounting firm in Los Angeles, California.  This firm serves small businesses, and has a pretty significant market available to sell to.  LA is a market where technology adoption is high and broadband Internet is cheap and reliable, so this firm has elected to use a product-based focus (e.g., the QuickBooks approach) in qualifying clients and crafting engagements.  Clients must conform to the solution set and the workflow in order to participate with the firm.

Now, consider a professional accounting firm in Elkton, Oregon.  This firm serves just about every business in town (population 195) as well as businesses from a few nearby towns.  Broadband Internet service is sketchy at times, and provider options are few.  This rural area of Oregon is not known for being particularly “high tech”, and computers and software and online application services are not among the things many of these business owners focus on or even care about.  The accounting firm serving this market is not focused on what accounting solution the client uses (or not), and they aren’t pushing to have all their clients purchase and install the same accounting software so that the firm’s processes can be more efficient.  Interestingly enough, this firm is likely doing better work and probably developed a closer and more intimate relationship with their client than those who have fully “standardized” the client base.  The reason is that the firm, whether out of necessity or out of desire, recognizes that each of their clients may have unique needs, and it is up to the firm alone to create maximum efficiency in meeting them.  Further, delivering personal service and useful insight instead of simply providing the work product has allowed the professional to more fully reveal their value to the client.

The truth of the small business accounting market is that there are more businesses like those in Elkton than in LA. Accounting professionals should consider whether they are in a position to “filter” their client opportunities based on use of certain software products and online solutions, or if they will accept that business clients come in all sizes and shapes – with various needs and wants and self-developed methods of getting things done – and that the firm is willing to embrace them as they are and work with them.

Make Sense?

J

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Being Proactive, Not Reactive – Accountants Need to Increase the Speed of Service Delivery

Being Proactive, Not Reactive – Accountants Need to Increase the Speed of Service Delivery

infoTechnology models are changing dramatically, with cloud services and mobile computing being the focus of the IT community and the customers they serve, and those technology changes are driving equally dramatic changes in how businesses and the accounting professionals who support them work together.

As the cloud enables an “anytime, anywhere” model for access to business applications and information, it is also driving accounting professionals to embrace those solutions in order to meet the demands of the business client  who wants their information anytime, anywhere… accurate and up-to-date.  For most accounting professionals, this means being more proactive in working with the client rather than taking the traditionally reactive, after-the-fact approach to providing service.  More frequently, accounting professionals will be judged by their prospective (and current) clients as to their ability to meet the demands of these savvy clients who know that having accurate real time information is critical to managing a business.

Cash management is one of the biggest challenges for a business owner, and this is an area where the accountant or bookkeeper is an essential player, making sure that bank accounts are reconciled frequently and reporting accurately on outstanding receivables and payables.  Business owners need to know where they stand financially, yet many accounting professionals only provide reconciliation and reporting at period ends.  The result is often a client who watches the bank balance and works from that, not realizing that there were outstanding checks or undeposited funds waiting to clear.  Clearly, this owner is not working from current and accurate information, and they will eventually realize it if they haven’t already.

The cloud is increasing the speed of business at all levels, and accounting professionals must also increase their speed of service delivery in order to retain relevance in the changing market.  While there will be hold-outs and businesses that elect to take the more traditional approaches, those clients will start to become fewer and the opportunities they represent more limited in scope.

For a little while, accounting professionals may rely upon traditional approaches to client service delivery, and continue with their position as the last person to know what’s going on in the client business.  But only for a little while.

Make Sense?

J

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“Business as Usual” Isn’t Cutting It

“Business as Usual” Isn’t Cutting It

For a lot of businesses today, “business as usual” just isn’t cutting it.  Competition is getting more aggressive, and clients are demanding more while margins are shrinking and the cost of operating the business just seems to go up.  Business owners and their CFOs must recognize that it’s time to change the way they operate.  By leveraging innovative technologies and cloud solutions, it is possible to transform the way critical business decisions are made and to radically improve how the business serves their customers, empowers their sales force, and keeps mobile workers working.

Business intelligence comes from all aspects of the business, not just accounting and finance.  Particularly in volatile economy, where uncertainty weighs heavily on each and every business owner, it is essential that the business make the best possible use of its information assets to eek out every bit of insight it can in order to not simply survive, but to find a way to identify and capture opportunities which will propel the business forward.

Data is just data, but information is power.  It takes skill and experience to turn raw data into instant insight, and this is where accounting and finance professionals should be placing their focus.  With a wise and intelligent approach to “enabling” businesses with tools to help streamline and improve process effectiveness, and structuring systems to capture and integrate data throughout the operation, CFOs and accounting professionals can assist their business clients in turning operational and financial data into actionable information supporting better decision-making.

Make Sense?

J

Read more… What will my business be worth when I need it to be worth a lot?  Your Exit Strategy

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What will my business be worth when I need it to be worth a lot? Your Exit Strategy

What will my business be worth when I need it to be worth a lot?   Your Exit Strategy

An exit strategy, as defined in Wikipedia, is “a means of leaving one’s current situation, either after a predetermined objective has been achieved or as a strategy to mitigate failure.”  With planning, a solid approach to managing business finances and operations, lots of hard work and a little luck (and more planning), your exit strategy from the business will look more like something from the first category rather than the latter.

It’s important to note that having an exit strategy doesn’t necessarily mean that the sole purpose of the business is to sell out for a bunch of money – not right away, anyway.  For many small business owners and entrepreneurs, the exit strategy is really about where they want their businesses to be in the future, and what they hope to get from it now and later.   For every small business owner, it is a balancing act between meeting today’s needs and reaching tomorrow’s goals.  The “Exit Strategy” is the essential plan for recouping the capital (money, time, effort) that has been invested in a company, whether that “recouping” happens earlier or later.

Not every business owner is in business to become a Fortune 500 company; some small businesses exist largely to support the lifestyle desired by the owner, and to perhaps leave a legacy behind for the heirs.  As with any investment strategy, a well thought out plan must be developed and followed in order for the entrepreneur to have a chance of reaching the desired outcome with the business.  What is really difficult is getting that plan in place, and then monitoring progress and making adjustments over time.   Business valuation – establishing the worth of the business – isn’t done based on data from a single point in time, it must capture historic performance data over several years of operation.  Business value also takes into consideration whether or not there is a profitable future for the business given its current condition, based not just on historic information but on industry outlook as well as economic and competitive landscapes.

Because business value is a dynamic thing, potentially changing with any given activity or event, it is essential that the business owner monitor performance and how it impacts the value “goal”.  Too often is a business owner caught off guard, believing that things were going very well because the cash flow was good, only to find out that they have drawn too much cash out of the business to allow it to grow in a healthy manner.  If the goal of the business is to support the owner lifestyle, perhaps this is not a problem, as additional growth of the business may not be the primary goal established.  The following quote from an article on Entrepreneur.com described this type of business owner pretty well:

“I asked the owner of a small, fabulously profitable manufacturing company why he didn’t grow the business bigger and sell it for a gazillion dollars. His response: “Excuse me? You’ve had way too much schooling. What part of 30-hour work weeks and a $5 million personal income don’t you understand?”

For most small business owners, this is where the struggle becomes visible – understanding that what you do now in the business impacts what you will get from it in the future.  If the business needs the money to grow, then taking too much out will stifle that ability.  If part of the exit strategy is to build value in the business and position it for acquisition, then a growth strategy is likely a requirement.  On the other hand, if you’re getting what you want and need from the business, and growth isn’t your imperative, then it is good to know that, too, and plan accordingly (the cash cow won’t be alive forever without proper care and feeding!).

The key for every business owner is to establish the goal – the result they wish to achieve from having the business – and to then make a plan and follow it as best they can, adjusting to changing conditions and situations, but never letting the path and the goal get out of sight.

Make Sense?

J