business analysis – Page 3 – Cooper Mann Consulting

March 7, 2013

Global CFOs returning to fundamentals

Accounting professionals in the United States have recognized for some time the value of offering what many refer to as “high level” services to their clients. For the accounting professional and the client business, consulting regarding strategy and growth represented value for both parties – guidance for the business client and profitable service for the accountant. However, as the economy began to decline and businesses tightened their belts, accounting professionals around the world recognized the opportunity and the need to return to focusing more on client operations and not simply on strategy and growth.

A recent article on CFO.com discusses the results of a survey performed by the ACCA (the Association of Chartered Certified Accountants), discussing how accounting professionals around the world are adjusting their approaches to accounting – adjustments at least partially fueled by global economic difficulties.

“There has been a little bit of a shift following the economic crisis. Pre-crisis there was a lot more focus around growth,” says Lyon. As the recession hit, Lyon says, global CFOs began to immediately question “What’s my cash position from day to day? What’s happening to my costs? What’s happening with my controls?”

Such anxieties may have triggered a shift back to the basics. “The CFO is a key adviser to the strategic (decision makers); that’s not in question. But there is a balance to be had in these times. That balance is around cost management and certainly managing risks,” says Lyon. “Finance as a function has been slightly brought back into focus.”

I would suggest that shifts in the approaches by accounting professionals are (at least in part) due to the various impacts of economy, technology, and globalization. There have always been different types of accounting professionals, with some focusing on management issues and others on strategy. Today’s accounting professionals must find a way to find a balance while addressing holistically the needs of the business client. This belief is also in line with the findings of the survey:

The complete finance professional 2013 summarises our thinking on why businesses need finance skills and capabilities across the entire finance value chain. We also recognise that this new environment requires finance professionals to bring a much broader range of finance skills to the table. The challenges faced by finance functions in supporting businesses are not constrained to a particular accounting or finance discipline. To strive to become world class, finance functions must excel in a broad range of capabilities, from supporting businesses to manage risk, developing effective strategies for growth, driving financial insight, continuing to maintain appropriate levels of control across the organisation as well as ensuring its statutory and regulatory responsibilities are met.

There are a lot of US accounting professionals out there who once approached their clients with a “holistic” service offering, focusing both ON and IN the business. Today, competitive pressures are driving professionals to re-engage with their clients in deeper operational roles, combining cost and cash management with guidance on growth and sustainability. It’s kind of like going back to the good old days of the full-service accounting office, and that’s a good thing for businesses.

Make Sense?

Joanie Mann Bunny Feet J

February 27, 2013December 7, 2017

Accounting Professionals, You’re right – your clients don’t care about the numbers.

Accounting pros, what your clients care about is how they’re doing and if they’re on the right path. Are you helping them understand that, or are you just the guy who works with the numbers to make sure they’re accurate?

Accounting professionals are having a hard time of it right now, with clients demanding more insight and assistance in helping to build value and profitability in their businesses, yet accounting professionals continue to be mired in the details of the numbers. It’s like the old saying about not being able to see the forest for the trees. You spend time in the trees, counting trees and making sure the trees are properly categorized, but are you seeing how this group of trees performs compared to others in the forest? The analogy isn’t that far off. You see, if there are other trees in the way, or if it doesn’t rain enough, the tree won’t grow and thrive.

This is what it’s like out in the world, where your business is just one of many. It’s not like you can grow and thrive no matter what others are doing. If they’re bigger than you and take all the light, then you can’t grow. If they take all the nutrients and resources, you can’t grow. If it doesn’t rain, you can’t grow. Somehow, some way, you have to find a way to stand above the others, get the light and the resources and the rain. Someone in the business should be paying attention to this bigger picture, and it is often the business owner. Their accounting professionals, on the other hand, tend to remain in the dark, below the sun, counting numbers because the owner isn’t interested in counting. The owner is interested in growing.

Accounting is about numbers, but growing a successful business is about numbers and strategy. Historically, the numbers tell you how the business has performed up to this point. Adding in the elements which speak to strategy, you can then look at what your potential performance will be in the future, and then make the necessary adjustments to make sure that the potential is realized. The accounting professional acting as a small business CFO must be prepared to help business clients look beyond the numbers to their meaning and what they say about the business today, factoring in elements relating to business strategy and market forces to reveal what they indicate about the future.

Accountants, it’s time to recognize that you are the only ones really worried about the numbers. Business owners just want to understand what the numbers mean and what they can do about them.

Reducing costs and managing expenses and cashflow is critical, yes, but how many business owners actually know what they’ll be up against when looking for financing, or a buyer? Or do they even realize that they’re not on the path they wanted… building something valuable they can leave to the kids? Sure, the cashflow may be there, and they’re taking a healthy monthly salary… but does that really tell the entire picture or show them where they’re likely to end up? No, it doesn’t, and every accounting professional knows that truth.

While it’s true that bad accounting data turns into bad decisions really fast, it’s also true that too many accounting professionals THINK their client’s don’t care about what the numbers SAY just because they don’t care about the numbers. I would suggest that maybe small business owners care far more than their accounting professionals recognize… and they care about building value and not just accurate digits. This is one of the reasons why KPI dashboards, dynamic reporting tools, and business valuation solutions are so popular among small business owners – they are able to have a conversation with their business data that their accountant isn’t having.

Can self-help reporting and valuation tools be useful to business owners? Well, that’s sort of like asking if trying to figure out what you’re worth (or not, as the case may be) will hurt your business. Information is power, and every business owner wants to believe they have the power to succeed in their own hands. Just because they’re not having this conversation with their accounting professional doesn’t mean they’re not thinking about it. Maybe they’re just not asking and the accountant isn’t offering.

Accounting professionals, go ahead and continue to monitor KPIs and crunch the numbers and show cash flow (real cash flow, not just today’s bank balance). But if your client had 1 hour per month to actually spend working ON the business (on the forest), trying to make sure their business is heading where they originally planned to go with it, wouldn’t it be a good idea to show them where to spend that time? Yes, it would, and adopting the use of realtime reporting and analysis tools for business clients can help do that.

Data dashboards and decision-support solutions are important tools which help business owners understand their businesses better. Rather than viewing these tools as dangerous or competitive, accounting professionals should view financial analysis, business valuation and KPI reporting tools as something they can use to help build value in the information they develop, rather than trying to convince clients that the value IS the information and not the guidance it suggests. The data won’t make the tree grow, it’s the guidance that feeds it.

Make Sense?

Read more about Bookkeeping and Benchmarks – Getting the Numbers Right
Read more about Data Dashboards and Financial Analysis: Comparing Apples to Aardvarks
Read more about how accountants need business intelligence, too
Read more about how there’s no fear and loathing in accounting
Read more about the pressure on accountants to deliver more value and intelligence to their clients
Read more about Data Warriors: accounting in the cloud

February 19, 2013August 9, 2019

Bookkeeping and Benchmarks – Getting the Numbers Right

I am a big fan of business analytical and reporting tools. I very much believe in using industry benchmarks as a means to understand various aspects of business performance as it is compared to others. I feel strongly that this type of information is essential at all stages of the business, and is useful for planning and forecasting as well as in daily business management. There are a lot of tools available now which provide KPI (key performance indicator) reporting, dashboards, and industry comparisons. The thing that none of these tools provides is an assurance that the underlying data is any good.

For data-driven reporting and analytical tools, the reliance upon customer- reported and accumulated benchmark data is both the benefit and the problem. Drawing upon actual customer financial data is what makes the reporting solution useful – reflecting the realities of the business as they are revealed in the accounting data. The problem is that the data will often be flawed in some manner due to the lack of accounting knowledge of the user. Particularly when small business owners take it upon themselves to perform their own bookkeeping work, there is a large potential for the information to be incomplete or erroneous, or at least not truly reflective of the business finances.

It is essential that accounting professionals be involved in the accounting process to ensure the accuracy of the information presented to any analytical and reporting solution, thus improving the quality and value of the information. Further, I would suggest that accounting and business professionals would look to these types of tools to assist in the identification of issues or conditions which exist in the business requiring attention. Business owners would get far greater value from the services of their accounting professionals, and accountants would deliver a much higher level of tangible value to their clients.

If the accounting professional is not regularly discussing business issues and conditions with the small business client, the client can use their own tools to attempt to gain the insight. HOWEVER (note the big letters), any small business owner who tries to do their own books and use their own decision-support tools is likely to run into problems. While it is true that some accounting professionals are not offering the level of guidance and insight (“value intelligence”) that some analytical and reporting solutions might try to offer a small business user, suggesting that the DIY reporting tool is useful when coupled with DIY accounting is questionable at best. Why? Because most small business owners and untrained bookkeepers do not know how to perform proper accounting. And bad accounting data turns into bad business decisions really fast, even with the coolest-looking reporting tool.

badaccounting

What’s the bottom line? The participation of a qualified accounting professional is necessary to make sure business bookkeeping information is properly accounted for, even and especially when great tools and solutions designed to help small businesses get their work done are being used. The accounting professional is necessary to make sure information is classified correctly, connected and associated with the proper supporting information, and that the data is complete. This is a lot of work if done on a regular basis (which it should be) yet many accounting firms don’t even offer the service, or offer it affordably.

Accounting professionals working with small businesses, look at it this way: it makes more sense for you to engage a contract bookkeeper and make a bit of money on the work they do to serve the client than it does for you to

a) lose the client to an accountant offering bookkeeping services, or
b) charge the client to re-write up the information, which isn’t really profitable for you and isn’t as valuable to the client

Serving larger businesses may provide firms with an ability to be more selective of the services they offer, but small business accountants need to take an entirely different approach. Small business accounting professionals need to be full-service providers and help clients get the complete range of services they need, including daily bookkeeping.

Accounting professionals helping their small business clients get complete service – from basic bookkeeping to insightful planning and advice – that’s the benchmark for high value accounting in the world of small business. It’s the only way to make sure the numbers are right, and that the business owner is looking at the right numbers.

jmbunnyfeet Make Sense?

Read more about Data Dashboards and Financial Analysis: Comparing Apples to Aardvarks
Read more about how accountants need business intelligence, too
Read more about how there’s no fear and loathing in accounting
Read more about the pressure on accountants to deliver more value and intelligence to their clients
Read more about Data Warriors: accounting in the cloud

January 22, 2013June 5, 2015

Why is asset management important to a business?

Knowing how efficiently you manage and use business assets to drive revenues and generate earnings is essential to understanding how to increase business value. While various dashboard reporting tools and solutions designed to monitor receivables, payables and cash flow are helpful in addressing daily decision-making needs, the question asked most frequently by business owners is actually one of overall business value and how to increase it.

Business value is generating sustainable cash flow. If you run a highly efficient business, the more top-line growth you deliver, the more cash flow you enjoy. For capital-intensive businesses (either through the need for capital equipment or working capital), growth can actually lower your cash flow and diminish your business value. To understand which side of the equation your client resides, accounting professionals will often look at the return on total assets calculated over time, dividing the operating income for each period from the P&L by the appropriate period values of total assets from the balance sheet. The resulting metric describes how efficiently assets are applied to creating earnings.

Understanding the return on total assets helps business owners understand whether or not the business has to spend more money in order to grow the same volume of earnings. A higher number indicates the business uses its assets efficiently and effectively to drive revenue, while a lower number demonstrates a higher cost of growth. Accountants and business advisers should be monitoring this metric for their clients, helping to identify which path to profitability and growth makes the most sense for that particular business.

The numbers will vary with different business types, so comparing client performance to others in the same industry can provide a great deal of strategic insight. The “return trend” may also be benchmarked against the competition and peer businesses. If the business is utilizing assets more efficiently than competitors, it can represent a significant business advantage.

Accounting professionals need to take a proactive approach to working with clients, and make use of the historical information they’ve developed to deliver business insight and intelligence to help them more profitably move forward. While every business needs a tax return completed, they also need help understanding how to increase profitability and overall business value. Knowing that there are several ways a business can increase profitability, you can help your client understand that driving more sales and improving margins is only part of the story. Businesses can also improve cash flow and their return on total assets metrics by decreasing the base of business assets, disposing of excess equipment, or simply by doing more with less. By doing this, business owners will drive up their business value and create more options for their future.

Make Sense?
J

Special thanks to Matt Ankrum of BodeTree for helping me get this right. We don’t all have the years of experience or expertise to “just know” what the right answer is, and sometimes we know the data is telling us something new, but we’re not sure what it means or what to do about it. BodeTree is the tool advisors and consultants can use to not only identify items that need more attention, but to understand what actions to take to make the necessary adjustment or improvement.

January 14, 2013October 28, 2015

Re-defining the role of the accountant, or going back to the good old days?

I grew up in a small town in Oregon where my parents ran a “business accounting office”. Many of the businesses in and around town were my dad’s clients, and we all got to know each other pretty well. Dad, you see, wasn’t simply the accountant, and the people working for him weren’t just bookkeepers. Dad was the business advisor, purchasing negotiator, collections agent, and anything else the client needed that he could provide. He fought for lower worker’s compensation insurance rates, got better prices on truck tires, and in general helped his clients with just about every aspect of running their businesses, including getting more customers and managing growth.

I had always believed that this approach, a consultative approach where the professional was intimately familiar with the business and proactively worked from inside the organization, was what all accounting professionals did. This proved to not necessarily be the case. Over the years, I have found that many accounting professionals focus primarily on the historic reporting of activities in the business, rather than actively helping to improve client business operations and performance on a daily basis.

According to one source, describing the differences between a CFO and an accountant: “CFOs are focused on working inside the business helping it generate wealth – ensuring proper capitalization, fostering the right banking relationships, addressing compliance issues – focusing on the company as a whole. Often CPAs tend to be more focused on specific tasks. Is the year-end audit done? Is the tax return done? …While both are vital to a business, a distinction we see is that the CPA’s dominant focus is historical – looking back to prepare tax returns and financial statements. The CFO, though, needs to be a forward-looking, integral part of the management team”.

It has become a reality that many accounting professionals are somewhat disconnected from their clients, a result perhaps of removing themselves from daily bookkeeping and other tasks. Recognizing the disconnect, many firms are now taking steps towards rebuilding those intimate client relationships by offering services which address more operational and strategic aspects of the business. These firms are offering “CFO Services” to their clients in addition to the standard offerings of financial statement and tax preparation. They have recognized the need become closer to the client business, delving deeper into the intricacies of the operation in order to find areas where improvements may be made and necessary controls instituted.

Accounting professionals seeking to increase the value of the services offered to clients should give strong consideration to what the client recognizes as valuable. Historic reporting is necessary, but finding ways to fund budgets, controlling expenses, helping to guide cash investments and taking steps to improve profitability are how a consultative accounting professional delivers real value to the client, building up the basis for long-lived and mutually beneficial business relationships like the ones my father once built.

Make Sense?

Joanie Mann Bunny Feet J

Small Business Owner to Accountant: Make Accounting Valuable to ME

January 11, 2013

Trends Impacting Every Business | Forbes.com

You think good accounting isn’t a big factor in getting business credit? Consider this tidbit from Intuit’s CEO Brad Smith, from a recent article on Forbes.com:

Two-thirds of Intuit’s QuickBooks customers were declined a loan due to poor FICO scores and other credit measurements. In the Loan Finder trial, a business could opt-in to allow banks to use QuickBooks data to evaluate if a prospect was a credit risk. As a result of this additional data, the banks provided several hundred new loans with an average of $10 million dollars.

Accounting professionals… isn’t this something you could be helping your clients with?

Read more about helping make small businesses bankable

Make Sense?

Read more about how accountants need business intelligence, too
Read more about how there’s no fear and loathing in accounting
Read more about the pressure on accountants to deliver more value and intelligence to their clients
Read more about Data Warriors: accounting in the cloud

Global CFOs returning to fundamentals

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Why is asset management important to a business?

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Re-defining the role of the accountant, or going back to the good old days?

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Trends Impacting Every Business | Forbes.com

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