Turbulent Times Survival Series – Managing in a Turbulent Economy – Survival or Opportunity

In my discussions with CPA firm managing partners, there has been a consistent concern as to what effect the current economy will have on their firms following tax season. Many (most?) firms rely heavily on compliance services to provide the majority of revenue. These services, including preparing financial statements and tax returns, generally report on the past. In fact, it could be said that many CPAs spend most of their time looking at the past. However, the opportunity for a firm to provide value-added services and differentiate itself in the market place lies in forward thinking.

Tough times call for better management and businesses need their CPA to help them survive the current economic downturn. This is an opportunity for firms to elevate their level of service and relationship with their clients.

Frequent communication, listening intently and some good old-fashion hand-holding when needed can move the relationship to that of trusted advisor. Here are several areas where CPAs can apply forward thinking to help their clients:

Risk Management:

 1. Client education – discuss the increased risks facing the business.

 2. Perform a risk assessment of internal and external factors and provide solutions to mitigate findings.

 3. Determine where the company may be vulnerable to fraud.

 4. Review internal controls and compliance with policies.

 5. Assess possible loan covenant violations and work out a plan to meet requirements.

 6. Counsel the client on the potential risks brought about through downsizing the workforce.

 7. Provide surprise bank account reconciliations.

 Internal Finances:

 1. Assist the client in preparing their survival plan, especially if going concern issues exist.

 2. Prepare cash flow projections and update them periodically.

 3. Prepare financial budgets assuming several scenarios and determine the plan of action for each.

 4. Review expenditures for opportunities to eliminate those not providing a satisfactory ROI.

 5. Review planned capital expenditures with an eye toward deferring them into future periods.

 6. Specifically identify expenditures that should not be deferred so as to strengthen the company for the eventual economic upturn, such as training and marketing.

 7. Review inventory levels and the receivable aging for opportunities to increase cash.

 8. Consider preparing a refinancing plan to improve cash flow.

 9. Analyze product and service line results and determine their viability.

 Internal Operations:

 1. Devise a plan to retain the valued workforce and improve employee morale.

 2. Look for opportunities to improve processes and systems in the office as well as in production thereby reducing inefficiencies, waste and bottlenecks.

 Other:

 1. Review tax law changes that may improve cash flow.

 2. Assist the client in brainstorming additional services and products.

 3. Revisit retirement, estate and succession plans.

 CPAs have an opportunity to exhibit their real value to their clients. In doing so, they will strengthen their relationship with them and differentiate themselves from the competition.

Taking a proactive approach will transform the firm from being known for providing compliance services to one specializing in consulting. And that reputation will serve the firm well beyond the current economic downturn.

 About the author: Timothy I. Michel, CPA is a consultant to CPA firms and a former managing partner of a Top 100 CPA firm. He helps CPA firm owners create value in their practice by drawing on his own experiences to assist them in identifying and overcoming obstacles and focusing on opportunities to increase growth and profitability. For more information, visit the website at www.michelconsultinggroup.com or contact Tim directly at tim@michelconsultinggroup.com.