Tag: financial data analysis

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Predicting Outcomes and Providing Guidance | Being Nostradamus| Proformative.com

I have a gripe with the accounting profession.  My gripe is with the fact that accounting information delivered to most business owners is old news.  Stuff happened, the professional properly recorded it and reported on it,  you paid your taxes, and that’s that.  Game over.

Once upon a time, accountants had to work with book ledgers, pen and pencil (mostly pen, putting that single line through incorrect entries), and stacks upon stacks of paper documents.  Just keeping up with the process of recording transaction information, adding it all up (and making sure the footing totals jibe), and then summarizing the information into usable form took all the time available, and the focus was on the accuracy of the work – not necessarily the timeliness of it.  With the advent of computers and computerized accounting systems, the process of creating and storing the data became easier, but the volume and nature of information increased and thus the complexity and time to process increased (the “everlasting gobstopper” problem.. it never really goes away).There isn’t any argument over the critical value and importance of that work.  Every business owner understands that not properly accounting for business activities can mean increases in tax burdens, penalties and interest, and more.  It’s good work… but what do you do with it?  My intent is not to try to diminish the value of today’s approach to accounting.  Rather, I’m trying to point out how the accounting profession could make a huge impact in today’s pathetic economy, help businesses get financially healthier, and help put the small/medium business market on a path to growth and success.  It involves seeing into the future.

These days, technologies exist which facilitate acquiring the information (even in paper form), converting that information into digital data, and then actually interpreting the data to arrive at a transaction.  Traditional software and cloud service providers alike are recognizing that mechanical data entry is passé, and do-it-yourself solutions for accounting and bookkeeping will rely upon “smart” engines which can read and properly understand what each scanned document means.

So – once the accurate data entry problem is solved… what’s the next logical step?  Analytics!  It’s only really possible now that online solutions have brought the business information to the accounting professional in real-time, and have allowed the accounting professional and the business owner to collaborate and share data faster than ever before.  If information is power, we have a lot of power in our hands… but do we really know it?  This is where BI (business intelligence) and analytics come in, and where the opportunity exists for the accounting profession to become a guiding force in rebuilding our economy.

What if an accountant could not only tell his client that the business lost money last year or last month, but that they’re going to lose money through this month and year if they don’t change their behavior?  And, what if the accountant could run a variety of scenarios which would help forecast the most positive business outcome based on certain choices which could be made, or certain activities which could be handled in different ways?  What if the accountant could help his client peer into the future, and get an inkling of what the business could look like if certain economic or business conditions continued… changed… ?

Maybe I’m a little overzealous when it comes to believing that the accounting profession could have recognized the economic trauma which was coming, or that they could have prepared their business clients for it.  But I don’t believe I’m very far off the mark in believing that not nearly enough “analysis” occurs in the typical public accounting engagement, and even when it does… is the suggested path the right one?  I would submit that BI is new enough to so many people that it may not be.  Learning what the numbers are telling you is one thing… staving off disaster is quite another.

I would encourage all BI and Data Analytics fanatics to check out an article on CFO.com on this subject:  That New Big Data Magic  http://www3.cfo.com/article/2011/8/analytics_that-new-big-data-magic

A few memorable takeaways from the article:

“you may be spot-on about a problem, but the solution doesn’t magically appear out of the data.”

“what you do with [data] is a people-based activity, a skill base you have to mature.  And it doesn’t come quickly.”

“CFOs have a gut sense that there’s money out there in all that data… The challenge is how to turn that data into new opportunities.” The good news.. is that new technologies are making it more economical to make sense of Big Data… The caveat is that those technologies will not provide those opportunities. That’s still up to the people who make business decisions.”

jmbunnyfeetMake Sense?

J

reblogged from Proformative.com  Being Nostradamus – Predicting Outcomes and Providing Guidance

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Trends Impacting Every Business | Forbes.com

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?

J

  • 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
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Dashboard Reporting Tools: Gauging Accounting Relevance

Dashboard Reporting Tools: Gauging Accounting Relevance

Dashboard reporting tools can be of great assistance when accounting professionals want to help their clients understand how the business is performing.  In most cases, these tools do a good job of showing owners the details of the profit and loss or cash flow reports, presenting the information in a way that non-accountants can understand.  Many accounting professionals have turned to these reporting solutions to increase the value of the accounting work performed.  After all, if the client can’t really understand the P&L and the Balance Sheet, then the reports won’t do them much good.

While simplified graphical reporting solutions are beneficial to the business, providing more insight into historical business performance, they don’t do much for the client on a daily basis if the accounting data isn’t up to date.  Accounting professionals should recognize that these dynamic reporting solutions, tools which can provide business owners with real-time information on business activities and performance, can go a long way towards increasing the relevance of the accountant’s involvement in the client business.

Accounting professionals today are fighting battles on several fronts, and remaining relevant to the client is one of them.   This isn’t too surprising, given that many accounting professionals see their clients only at year-end when the tax return needs to be prepared.  In some cases, the business owner doesn’t even remember the name of their accountant – they just know they went there last year at tax time.  This arm’s length relationship between the accounting professional and the business clients leaves a lot of opportunity on the table for both parties.

When accounting professionals aren’t closely involved with their clients, they risk losing the client to a more attentive, consultative professional.  Many firms believe that the low profitability of bookkeeping and processing daily work for clients means that they should focus only on “higher level” opportunities, yet business owners will tend to seek advice from those who work with them on a regular basis, and who understand the issues that challenge growth and profitability.

Accounting professionals who recognize the value of providing regular bookkeeping services to their clients also recognize the value of working closer with the client, providing useful and actionable information rather than historic data long after-the-fact.  These professionals are more likely to reap the rewards of “higher level” engagement opportunities from the client, because they help to identify the need and are able to support it with real data and insight earned through regular involvement with the business.

Make Sense?

J

  • Read more about how accountants need business intelligence, too
  • Read more about how there’s no fear and loathing in accounting
  • Read more about Data Warriors: accounting in the cloud
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Managing The Purchasing Process: More than just expenses

Managing The Purchasing Process: More than just expenses

When a business owner hears the term “expense management”, they immediately get a vision of traveling employees with piles of receipts and vouchers to be organized, accounted, and possibly reimbursed for.  The image is fleeting, gone out of mind with no lingering thought, because this business owner does not have personnel who travel frequently, and does not have to deal with volumes of expense reports from employees.  Expense management solutions aren’t anything this business owner is looking for.

Yet, what does happen every day is that equipment, materials, supplies, and services must be purchased to keep the business operation going.  Calls are made to vendors, price quotes are developed, and purchase requests are typed up in Excel spreadsheets and piled on the owner’s desk for approval.  The business owner rifles through the various requests, and brings in the bookkeeper to help work through the decision of which items to authorize based on current cash availability.  Because the availability of working capital changes frequently with billings being sent out and receipts being deposited daily, the owner and the bookkeeper spend much of their time together figuring out which purchases to make and when.  It is a continual and ongoing process, taking a lot of time and attention away from other important business matters.

Too often, thoughts of managing these efforts with more structure places the problem “in a box” and addresses only half of the issue – the purchase.  While managing materials requirements and predicting when parts or supplies will be needed is one side of the problem, factoring those purchasing plans in to the cash requirements of the business, and having a meaningful and effective way to monitor current cash, expected receipts and purchase requirements together is essential.  This ability requires that the payments management solution also address receivables in order to have the cash flow and availability information necessary.

Expense and purchase management processes generally involve three main steps: planning, tracking, and reporting.  As the process involves planning, it suggests a proactive rather than a reactive approach to cash management and purchasing activities.  By bringing together all of the critical data which describes “inflows and outflows”, the business owner has the information necessary to not only forecast (plan) cash requirements but to also understand the availability of working capital.  Knowing ahead of time that traditionally slow paying contracts aren’t factored into immediately available cash is important, and being able to make adjustments to purchase schedules based on availability of funds is essential.

Expense reporting may not be a big part of the business, but managing cash flow and purchasing goods and services is, even in the smallest of enterprises.  Make sure the business has the tools in place to help bring an additional level of intelligence to purchasing activities, and that those tools deliver the benefits of a structured (but not time-consuming) purchasing approvals and proactive cash flow management process.

For accounting and finance professionals, this is a highly valuable area of service you could be providing to your clients – helping to implement the tools and solutions which not only allow you to work in more depth with client businesses, but which deliver immediate visible and actionable benefit to the client.  This is just one of the ways accounting professionals can work closer with their clients, and the benefit is delivered each and every day (not just at tax time).

Make Sense?

J

  • Is your purchasing and expense approvals process holding up your business? Read more…
  • Read more about using the cloud to extend “connectedness” beyond traditional boundaries 
  • 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
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Knowing More: CFO and Accountant Value in Understanding Business Operations

Knowing More: CFO and Accountant Value in Understanding Business Operations

Accounting professionals are being pressured to deliver more value and intelligence to their business clients every day.  The pressure comes from a variety of areas, not the least of which is the fact that a lot of do-it-yourself tools are now available which lead business owners and managers to believe that they know what’s going on in the business.  Lots of charts, graphs, and dashboard presentations make the numbers more readable, but they don’t say whether or not the numbers are even right.  Even more important, they don’t deliver insight based on experience and understanding.  This is where the accounting professional’s value really comes from – providing insight based on good data and quality data analysis backed by experience and understanding of the business.

You can’t be a good CFO or a strategic business partner to your CEO until you thoroughly understand operations and how they drive performance,
CFO.com (http://s.tt/1rtoZ)

Knowing what makes a business valuable is important, but what many business owners don’t fully understand is how to best increase that value.  Generalized reports which summarize financial information, distilling it into a standard set of metrics, often don’t tell the business owner what they really need to know – how to go about increasing the overall value of their business, whether it is through improved profitability or through growth.

The business owner understands the operations, but not necessarily how operational activities actually impact value and profitability.  Helping owners know more about their enterprises requires that the accounting professional also know more, where gaining a deep understanding of operations and learning what business functions are addressed and how becomes the key to bridging the gap between operational knowledge and business valuation. This is where the accounting professional or CFO can really make a difference, and can help to apply their knowledge in building business value directly towards those areas which fundamentally impact it.

Make Sense?

J

  • Read more about how accountants need business intelligence, too
  • Read more about how there’s no fear and loathing in accounting
  • Read more about Data Warriors: accounting in the cloud
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Cash flow troubles can get you in more than just debt: CFOs can be liable for Payroll Tax liability, potentially criminal

Cash flow troubles can get you in more than just debt:

CFOs can be liable for Payroll Tax liability, potentially criminal

With the economy being sluggish and, in some regions, stalled and even worse, a lot of businesses both large and small are feeling the crunch.  Cash isn’t coming easily for anyone, and the cost of running the business and employing workers just keeps going up even if revenues don’t.  Managing cash flow is important when there is cash to manage, but keeping it all going when there isn’t much coming in takes real skill and planning.   Knowing where to cut or limit expenses is essential, but knowing what NOT to forgo when paying the bills can be just as critical if not more so.  You don’t pay the light bill, maybe the lights to out.  You don’t pay payroll taxes, maybe you go to jail.

A recent article on CFO.com discusses the findings where, in cases where payroll taxes were unpaid by the business, specific individuals were held directly and personally responsible for the liability.  And the liability is not contained solely within the walls of the C-level; it may extend to any and all individuals considered to be responsible.   Those who control the purse strings, making the daily decisions on what to and what not to pay, are the folks being identified as responsible for the failure to pay whether they were able to come up with the funds or not.

Responsible individuals, according to the penalty, may include corporate officers, directors, shareholders, bookkeepers and even third parties, such as CPAs, or corporate counsel. In exceptional cases, responsible individuals can have criminal tax liability for failure to pay payroll taxes.
CFO.com (http://s.tt/1p9wf)

To be fair, insufficient funds may seem like a logical reason for not paying payroll taxes. But the Ninth Circuit Court of Appeals in another case, United States v. Easterday, 564 F.3d 1004 (9th Cir. 2009), determined that Easterday could be convicted of a crime even though he may have been able to prove that his company didn’t have enough funds to pay the payroll taxes.
CFO.com (http://s.tt/1p9wf)

Accounting professionals working with businesses and acting as the Trusted Advisor can help their clients avoid facing this type of decision and risk by helping them to monitor and actively manage their businesses more closely – at an operational as well as financial level. Rather than relying upon a current bank account balance or after-the-fact financial reporting to provide the information for making decisions each day, business owners need continuous, real time, actionable data to help them keep the business going forward, and to help keep them out of trouble.

With better information, trend analysis and a little forecasting, accounting services and consultative advice from a trusted accounting professional does not simply help the business stay in business, it could help prevent the business owner, CFO or controller from having to wear an unfashionable orange jumpsuit and shackles.

Make Sense?

J

  • 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