The best business people I know are always ahead of the financial data they possess; that is, they possess an inherent understanding that good management decisions are always based upon what is going to happen rather than on what has already happened.

Historically, accountants report on past and current results – working in the here-and-now. Conversely, clients live in the what-might-become. While the best business decisions might be based upon a careful review of future conditions, not on past conditions, business people also need to understand the past in order to be able to make their futures happen. Oftentimes, business people cannot develop a good framework for future decisions because they don’t know what is happening now.

CPAs can connect what has happened (the results from financial statements) to what business people want to happen in the future.

I once worked for a CEO who said it best: financial statement data is a vital strategic weapon that can be deployed as a real asset in the marketplace.

Financial statement information is vital information, but it is also massively under-used by both accountants and the clients they serve. Why? There are four major reasons:

1. Business people are so busy making ends meet they don’t have the time to sit down and look at and analyze financial data.
2. Business people are intimidated by accounting (and accountants) and they don’t know how to read their financial statements. This is a HUGE part of the client engagement process and we need to be fully aware of this. Nobody wants to feel stupid, so people are afraid to ask the questions they should ask.
3. Accountants are so busy making ends meet they don’t have time to sit with clients to look at and analyze financial data. Many are focused on simply getting work done.
4. Accountants are intimidated to admit they may not always know the intricacies of interpreting financial statements. We were trained to do accounting, not necessarily to “use” the information we produce. Financial analysis, and indeed finance, is quite different from accounting.

How To Conduct a 30-Minute Financial Check-Up
By sitting down with clients at least once a year to review financial statements, accountants can build a bridge from the past to the future. While a 30-minuted financial check-up is not time consuming, it is highly productive. At a minimum, it will deepen the relationships you have with clients. It may also generate additional fees, as clients will learn you are more than a tax preparer/compliance professional.

Here are some basic things to include in your
30-minute check-ups:

1. Explain the financial statements in plain and easy-to-understand language. Make sure it’s not a one-way communication – no lectures – and the client understands the issues being discussed. Numbers from a Balance Sheet or Income Statement don’t mean anything to the average and highly intelligent business client. Break things down and make sense of the financial numbers. This point is vital.
2. Develop some understanding of margin management. Most business people don’t understand the importance of margins. In large part, either the gross margin or the net margin drives the business in most companies. (Gross margin is Sales less Cost of Sales divided by Sales. Net Margin is Net Profit divided by Sales.) Many good business people think the key to success is increasing sales volume. They don’t have an appreciation for how volume increases both cash and profit. Many times, increases in sales may decrease profits or cash or both.
3. Point out some very simple areas the client can work on. The vast majority of businesses are driven by three or four key pieces of data. If these are managed well, the business does well. If they are not managed well, the business does not do well. It is important to identify these before the session.

The sessions should be informal and brief. If the session goes well, the client will view you as a true strategic partner, a friend and ally. If it does not go well, then at least the client will know you care. In all likelihood, your clients will be surprised and impressed that you took the time to help them. And, you may also generate additional fees from these sessions since they oftentimes lead to further questions, challenges and work.

About the Author
Brian Hamilton is the chief executive officer of Sageworks, Inc., which develops ProfitCents, an application that aids accountants in communicating with clients.