Accountants wearing more hats to fill needs

By Mark Fagan

A generation ago, accounting firms rarely competed against one
another. In fact, it was considered “bad manners” to poach a client
from another firm. Those days are long gone, replaced with fierce
competition between firms, as well as the ongoing struggle against the
commoditization of accounting services.

In order to be successful, accounting firms must now differentiate
themselves, create brand loyalty and establish a clear value
proposition. If a firm is seen as merely a provider of tax returns and
financial statements, the cost of switching from one firm to another
becomes less important. If there is no sense of added value to these
services, and they become commoditized, clients can simply grant the
engagement to the lowest bidder.

While a challenge for the accounting profession, this shift toward
differentiation has been to the benefit of those using accounting
firms, particularly in the recent financial crisis, when pressures
caused most business owners to make very hard decisions, including
layoffs, closing of facilities, salary and benefit reductions. This
environment has taught the business owner to do more with less. The
smart ones made these changes in late 2008 and early 2009, while many
others who waited longer did not survive.

Accordingly, this has been a very active time for the accounting
profession. The business owner needed to know how a 20 percent, 30
percent or even 40 percent reduction in revenue would affect their
business. How many people to lay-off? Should I lay-off, or reduce the
work week? How do I explain to my bank that I will not meet my
financial covenants? Should I renegotiate my lease? Should I continue
to advertise? To what degree do I need to change my spending habits?

Many accountants were working with these business owners on a day-
to-day basis, providing cash flow projections, attending meetings with
bank officers and calculating best and worst case scenarios for 12
months or more. Going through this crisis was painful, but as a
result, many accountants established deeper relationships with their
clients, forming the basis of a new and more consultative
relationship.

If you think about it, an accountant is in the best position to advise
the business owner. The accountant has access to, and has been trained
to understand, everything that is required to run a business. That’s
because whether it is business insurance, payroll, health benefits,
union labor agreements, shareholder agreements, cost of goods, costs
to rent office and warehouse space, expenditures for technology,
websites or cloud computing, and so forth, the one common denominator
is money, and understanding the financial picture of a business is
exactly what the accountant does best.

Now, some accountants of the old school will still take all of the
information and create tax returns and financial statements, and stop
there. But the best accountants of this generation take this
information to another level. They analyze, compare and evaluate
financial and non-financial information to help the company become
more profitable. For instance:

• Review business, health, and workman’s compensation insurance to
make sure the rates are competitive (accountants know and work with ma
ny insurance agents);

• Discuss the pros and cons with using union labor, and make the
business owner aware of the cost to leave a union (most unions have
defined benefit plans which would require a payout from an employer
who leaves a union);

• Read the shareholder agreement and determine if it is up to date
with the objectives of the owners, including funding vehicles if an
owner dies or becomes disabled;

• Analyze the company’s profitability by product types, location and
segments, to identify where the company should focus its efforts, or
cut its losses;

• Help design timely financial reporting, including flash reports and
dashboards to allow management to run their business with timely,
accurate financial information;

• Advise management on its best use of technology, which is often a
balance of using outside consultants and employees;

• Help management establish processes and procedures to improve;
collections of accounts receivable; to reduce the amount of capital
being invested in inventory, equipment, facilities and people.

Just like we all need a good doctor looking out for our health, every
business owner needs a good attorney, banker, insurance agent and
accountant to look after the health of the business. While the first
three have knowledge of certain parts of a business, only the
accountant is involved in all aspects of the business — because almost
everything in a business involves money.



Mark Fagan is a managing partner in the Connecticut office of Citrin
Cooperman, a regional accounting, tax, and consulting firm with
offices in New York, New Jersey, Connecticut, Pennsylvania, and the
Cayman Islands