Tag: decision support

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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?

J

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Accounting Professionals Should Do This: Be Proactive and Regularly Communicate with Clients

Accounting Professionals Should Do This: Be Proactive and Regularly Communicate with Clients

I’m not sure where I heard it, I think it was a sky diver on TV, who said about the sport “you’re dead until you do something about it”.  At the same time that I realized that I never wanted to sky dive, I also realized that this fairly desperate philosophy at some level applied to a lot of business situations. Weirdly enough, one of them was how this relates to public accountants and bookkeepers working with small business clients.

One of the things I’ve heard a lot throughout the years is that bookkeeping and doing other work for small business clients is tough, because they never bring you the information you need when you need it.  With a philosophy of “help me help you”, accounting professionals are trying to find ways to make it easier for the client to deliver the work to them.  The missing element, however, is a closer working relationship with the client, coupled with PROACTIVE and REGULAR (please note the big letters) reminders that getting the work to the professional is the only way to get it processed in time .

How many firms really communicate with clients only during tax season?  Is the client organizer your main method of reminding them that you’ve got a relationship?  It’s not even funny how many business owners couldn’t name the accountant who did their tax return last year, and who don’t seem to care to know.  This is definitely not the way to build and retain client relationships, yet it is the approach many professionals take.  And then they wonder why the client base isn’t growing, and why they are having a hard time “communicating their value” and they want to know how to get more of that profitable “higher level” work.

You’re dead until you do something about it.

Put into the context of the reactive accountant, it starts to make sense.  Accounting professionals must be proactive – be doing something to build customer loyalty and retention, be actively and regularly communicating with clients so it’s not a mad rush during tax season, and be implementing tools and solutions to help them offer more meaningful services to their clients.  This is how to make the firm grow and thrive.  So, go do something about it.

Make Sense?

J

Being Proactive, Not Reactive – Accountants Need to Increase the Speed of Service Delivery from Intuit Accountants News Central

Read more about Building Smarter Businesses: Staying Relevant in a Cloud Accounting World

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Knowing Enough to Run a Successful Business

Knowing Enough to Run a Successful Business

If you own and operate a business, you probably want to make it successful.  Granted, success comes in many flavors, and there are also “degrees” of success, where maybe you do okay but not as well as you’d like (or not as well as your local competitor).  Running a successful business, and crafting a business with sustainability and long-term value, takes information as well as know-how.   Remember that information = power and you want to be as powerful as possible when it comes to running your business.

While today’s information technologies, mobile devices, and “everything as a service” have the capability to deliver way too much information for the average business owner to make sense of, there are a few areas of the business where investing in a little insight and reporting can make a big difference in the level of understanding you have about the business.

Rather than making decisions based on guesses or gut, business owners should use actual historic data relating to these are key areas (and key performance indicators) to help predict sales and order volumes, estimate cash flows, and forecast profitability.

Getting Customers

The “customer lifecycle” does not start when someone buys from you, it starts when they become a potential customer (often referred to as a target).  Even before someone buys, your business may expend resources to expose your brand or product to them on websites, in advertisements, and through other marketing channels.  These marketing efforts will (hopefully) result in the generation of qualified leads for the business to sell to.  Unless the business understands the costs involved and the efficiency of the marketing and lead generation efforts, it cannot understand the actual cost of getting a new customer.

The next step in getting customers is turning a qualified lead into an actual paying customer.  The business will want to keep track of conversion of leads into customers, along with sales data including total sales, number of items sold, and how items were priced.  Powered by sales performance data, business owners can learn whether or not their lead qualification efforts are working, if their products are competitive, and if the pricing is in alignment with the industry.

Producing Work

When businesses operate, they essentially produce whatever work product their business model is designed to produce – whether it is a professional service, product, logistical support or whatever.  Every business produces some type of work product.  This is the operational aspect of the business, and business owners should want to know as much as possible about how well operations are running and how effective the operation is.   This isn’t just the cost of production, (the yield expected for a given investment in materials or equipment), it is also about the quality of the product (customer satisfaction) and the quality and value of the service behind it (customer retention).

Keeping Money

Money (more specifically, cash and the availability of it) is the metric that most small business owners tend to focus on.  It makes sense, too, given that most small businesses survive based on what they have in their bank accounts.   Then again, looking at the accounts receivable and payable won’t tell the entire story, either.  Business owners need to know how quickly their customers generally pay, and they need to know how much capacity or inventory they have before needing to buy or develop more.

The message underlying this entire discussion is that fact that you can’t analyze what you can’t quantify (no information = no power), so it is essential that systems be in place to capture information from the business and its activities.   Further, recognize that it takes some skill and experience – perhaps from your trusted accounting professional – to put the information together so that it makes sense and is useful.

Make Sense?

J
Measure, Manage and Succeed.  It’s all about knowing how to speak the language of finance

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Lean and Mean – Improving Sales and Distribution Performance

Lean and Mean – Improving Sales and Distribution Performance

It is surprising that, even in this world of Internet marketing and online commerce, many businesses are operating at levels far below their potential.  Reliant upon people rather than information and process, these businesses are weighted down by their legacy approach to getting things done.  They throw money and personnel at the problem, adding more “fat” to the business and making sustainability just that much harder to achieve.  The right approach, and the mantra of all manufacturers and distributors, should be to work “lean and mean”, applying technology and business principles which support agility and improved process efficiency.

The center of lean business is in operations, and includes all aspects of the “order” processing and support systems.  From the point where an order is sought, to the point of order entry, and through to delivery and service – all aspects of the operation must be addressed for the business to achieve maximum success.  Innovating in operational areas, such as in order management and distribution, can help the business rise above others in the market and create a significant competitive advantage.

What becomes challenging for many businesses is the fact that years of working in established “silos” often makes it difficult to introduce the cross-functionality necessary to support lean operations.  It is not sufficient to simply suggest that the organization work collaboratively to streamline processes from order through to service and support.  Work groups and team members must work together and adapt to delivering process improvements, following through with the actions necessary to turn the philosophy into bottom line results.  Good support is required to keep customers, and a good product is necessary to support increased sales.  No aspect of the operation stands alone, so each is necessary to participate in making end-to-end improvement.  Additionally, back-office processes must be aligned to work collaboratively where required, supporting efficient operations rather than creating unnecessary bottlenecks or delays.

The key to developing a lean and mean, high performance operation is applying the technology and principles which translate into improved profitability and customer retention.  In many cases, the same solutions which create customer “self-help” capabilities are also solutions which can address similar needs for internal business users. Ultimately, the goals are elimination of redundant or error-prone processes, establishing the sharing and secure collaboration of information throughout the organization, implementing integrated systems which allow users to efficiently perform their particular tasks, and working cooperatively with others in the supply chain to maximize the real-time capability and efficiency.

Rather than continuing to utilize basic record keeping solutions, or accounting products which aren’t prepared to address the specific operational aspects of the business, owners and managers should be looking to the tools and solutions which will help them develop the framework to support improving operational performance, turning people knowledge into sustainable business profitability.

Make Sense?

J

Accountants and Small Manufacturers: Getting in Front of the Ball

There’s a lot more to accountability in a manufacturing or inventory-based business than simply keeping track of money in and money out.  Particularly in an economy when nobody can afford to build or stock products too far ahead of demand, it is essential that these businesses have a means to not only track and manage purchasing, manufacturing, distribution and stocking activities, but to understand conditions or trends which impact the flow of materials and cash through the business.  Read more…

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Virtual CFO Services and Partnering with Bookkeepers

Virtual CFO Services and Partnering with Bookkeepers

Many accounting professionals seek to become more involved with their business clients, helping to institute the controls and establish the processes which support sustainability and higher levels of business performance and value.  Acting as the Virtual CFO to the business, these professionals use historical financial information and detailed operational data to guide their clients towards stated goals.

While this move to engage clients are deeper operational levels is a worthy effort, there is often a disconnection in the supply chain for these services.  In too many cases, there is discord or a lack of understanding and trust between the CPA and the bookkeeper supporting the daily processing of the business information.

The business bookkeeper is the person “in the trenches”, getting daily information organized and processed, reconciling accounts, and generally tasked with recording transactions resulting from business activities.  Because the bookkeeper operates very closely with the business, they are perhaps in the best position to provide insight into how operational tasks and various business functions are performed and “accounted” for.  While the bookkeeper may not have the skill or experience to design change in these systems, they are a particularly powerful source of current process information and, in some cases, represent the barrier to change.

Years ago, as CPAs removed themselves from daily bookkeeping services to focus on “higher level” work, the opportunity was created for outsourced bookkeeping services to fill the gap in providing daily book and record keeping tasks for small businesses.  Small business owners in particular need help with the management of their bookkeeping and accounting, and without the availability (or affordability) of getting this service from the accounting professional, businesses turned to the bookkeepers who stepped in to fill the gap.  Yet every year, businesses turn over their bookkeeping and documentation to CPAs who simply re-create the bookkeeping in the form of “write-up”, trusting only their own work when it comes to tax and financial statement preparation.

It would seem that there would be a naturally occurring desire of CPAs to partner with professional bookkeepers in order to provide a full service capability to business clients and eliminate the need to reinvent and write-up the information, but this is often not the case and may be partly due to the reality that CPAs are trained on accounting principles while many bookkeepers are really only trained on the use of a software product.  Too often, bookkeepers gain their education primarily based on using QuickBooks software, and “speak” the language of QuickBooks rather than “accounting” resulting with a minimized view of the bookkeeper value by the CPA.

The CPA is thinking in terms of AR and AP subledgers, while QuickBooks bookkeepers think in terms of customers, invoices, and bills to pay.  While the language of QuickBooks has been designed to be meaningful to the non-accountant user, it is this very language and presentation which has made QuickBooks both a popular small business accounting solution as well as a foundational solution for an outsourced bookkeeping offering.

Working more closely with the bookkeepers, CPAs could help their clients not only achieve a more accurate and timely accounting of activities, they could also influence areas where necessary controls should be implemented, or where inefficient processes might be improved.  Providing not just information but also direction and actionable ability, these accounting professionals are now positioned more directly to provide the CFO services businesses need.

CPAs must find a way to get past their prejudices in working with business bookkeepers, and recognize that these operators “in the trenches” could be their most useful resource – and their most powerful ally – in the supply of Virtual CFO services to the client.

Make Sense?

J

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An Educated Guess is Not a Crystal Ball – Forecasting the Future

An Educated Guess is Not a Crystal Ball – Forecasting the Future

If every business could peer into the future to see how they will perform, there wouldn’t be a need for historical data and performance benchmarking.  Unfortunately, nobody has a crystal ball, so it becomes necessary for business owners to plan for the future.  By making educated guesses with valuable information gleaned from the past, companies can establish the path they will take to growth and profitability.

Accounting professionals are great at producing accurate historical financial performance information.  The value in this historical data is only partially found in the periodic reports and financial statements generated.  The primary value, the insight delivered from this historical data, is the information it reveals about the business operation over time.  It is from this historical data that certain trends are identified, providing a basis for making the educated guesses necessary to learn how the business will look in the future.

Forecasting is very important for businesses, as it provides the framework for laying out your expectations for the business.  In essence, it is a way to (hopefully) predict what your business finances will look like in the future based on forecasted growth.  And, armed with the forecast, you can now more confidently build a reasonable plan to reach your stated business goals.  While there are myriad approaches to creating a business forecast, it makes sense to simplify the process and focus on the area you likely spend most of your time attending to: sales.  Use your sales goals and projections as the basis for establishing a forecast, setting realistic goals for the current year and for a few years after that.  Once you’ve forecast the new sales goals, you can more easily appreciate what it will take in personnel and other costs to support that growth.

Recognizing that the forecast is simply an educated guess, it is important to regularly compare actual performance to the forecast to see if the business is on the right path to reach the established goal.  If sales are not growing as projected, then the business may need to make adjustments in terms of personnel hiring and other plans to ensure that costs don’t outpace sales.  Without a path to follow, business owners will not necessarily know if the operation is “on track”, as there is no track to be on – there is nothing to measure success against.  Certainly, profitability is the goal, but it is a matter of degrees of success, and the business will not know whether it is being as successful and profitable as it might be.

Accounting professionals should help their clients create realistic forecasts, along with organizing the information and formulating a plan for the business owner to follow.  On an ongoing basis, the accounting professional’s involvement delivers continued value by helping the business owner recognize and respond to changes in the business, adjusting plans as necessary to keep the business on the right path.  And, no crystal ball is required.

Make Sense?

J

Read more about Building Smarter Businesses: Staying Relevant in a Cloud Accounting World

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