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It All Starts with Reporting

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Categories: For the SME, Accounting, Business Strategy

Reporting is an important function of accounting. Unfortunately, reports frequently end up being just that: only reports. There are major shifts are happening in the accountancy world. Reporting, how it is done and what comes out of them are at the root of this shift...

Some Elements Bringing the Changes

  • Cloud based accounting software is becoming the norm- think Xero, Intuit sun-setting their desktop QuickBooks for QuickBooks Online, Sage One, and other cloud based accounting systems growing market in the UK and EU.
  • The tax, audit, and compliance services of accountancy are getting commoditized all over the world. There is a downward pressure on revenues as more people find cheaper ways to fulfill business necessities historically done by CPAs and Chartered Accountants
  • Midsized accounting firms are pursuing broader services to smaller companies that are in the SME marketplace.  This is happening in Australia, New Zealand, and the United Kingdom.
  • The Big 4 in the USA are pursuing clients historically served by larger mid-sized firms such as Baker Tilly, Grant Thornton, Moss Adams, and others.
  • Two of the Big 4 in the UK have created a retainer based services model specifically targeted to the SME and new technology companies in the UK.

Like it or not, pressure is growing on the industry, and waiting around until they are “forced” to change will certainly mean the death of some firms.  These changes are happening faster than you can imagine.

Leaders from the International Certified Accountants of England and Wales (ICAEW) all point to CFO/ FD level services being a high-level priority for accountants to remain competitive.  The ICAEW is a group that prides themselves on being a world leader of the accountancy and finance profession, and with over 142,000 chartered accountant members world wide, they have good reason to.

The largest concern is that accountants, certified or not, lack the skills and experience to provide advanced services.  Certainly firms, like the Big 4, do not lack either.  The shift is they are now targeting the SME world and new/emerging technology companies in the UK; a market they previously never pursued. When it works, (and it will) you can be sure the mid-sized regional firms will be fast in their pursuit. 

If it works in the UK, the large firms will take it abroad.  Australia, New Zealand, and the United States are not far behind.  Where will that leave your accounting firm?

Keeping Ahead of the Changes

How do you transform a practice out of compliance and audit into services?  It all starts with Reporting…

Most accountants and CPAs are comfortable providing financial reports to their clients.  After all, this is a core piece of accounting.  Reports are easy; send it over, they have them, job done… 

Business owners may know reports are important, but many have little to no idea what the reports mean.  Every industry has its own vocabulary, and accountancy’s are not among the simplest.  Many business owners believe their “Profit and Loss Statement” tells them whether they are making money or not.  When faced with the question “Cash or Accrual?”, they may or may not know the difference, but how does it play into liquidity, forecasting, growth, reserves, or business planning?  The usual responses are “If there is money in the checkbook…” or “if we do that I probably have to cut back what I take home…”

Your business clients might not understand that if, for tax reasons, the company “loans” them their wages until you reconcile it at the end of the fiscal year. The amount of the money they paid themselves shows up as an Asset on the balance sheet.  Many do not understand that the interest on a loan payment appears as an expense on the P&L, but the principle portion only shows up in the Balance Sheet as a reduction in the company’s liability.

Lending institutions require Balance Sheet Forecast, or Triple Cash Flow Forecast Reports.  Do your business clients even know what that is?  They certainly are not going to build one. 

The key is not to attempt to provide comprehensive CFO/ FD-level services right out of the starting blocks.  It takes time to educate your clients on what our voluminous vocabulary really means.  They need to talk to you.  Start with the reports.

As your clients become comfortable with a bit of gracious, educational conversation (or perhaps you become comfortable with a bit of gracious, educational conversation), creating advances services gets easier.  Gradually adding advanced forecasting tools, creating budgets that can truly “benchmark” performance, tracking the company’s valuation quarterly (“Look!  As we do these things the valuation is going up!), and running the cash flow projections for the strategic business plan become a “natural” extension of what you do.

Don’t get buried by the competition, and don’t get left behind by the changes in accountancy.  It all starts with Reporting…

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