Analyze This

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Over the years, there has been a lot of talk about the need for accountants to become more forward-looking, less backward-looking.

Having better tools is going to make the job a lot easier for practitioners IF they have the mindset to adjust to the changed thinking that is required to use them. Over the last two years, a new crop of analytical tools has come to market that appears likely to channel more CPAs into providing business advisory services, rather than providing historical information, such as financial statements and tax returns.

These include products such as the Comprehensive Financial Organizer from Accpac, Profit Driver from CCH, and CaseWare Scenarios from CaseWare International. These things have a lot in common. CFO and Profit Driver are both based on a product from an Australian company called InMatrix, and CaseWare’s entry into the market was triggered by clients interested in getting a product with functionality like that provided by CFO. It’s hard not to envision other companies hitting the market with products with similar functionality in the next few months.

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In “Hiring Again,” Associate Editor Carly Lombardo looks at the staffing and hiring trends, and how a rapidly shifting market is affecting those firms that need people with technology skills.

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These products provide the ability to do what-if analysis. Users can import financial data from other applications and create financial statements that are completely malleable. Change one number—say, reduce accounts receivable from an average of 90 days to 70 days outstanding—and the results ripple through the system.

Such systems go beyond merely providing reports that show the mathematical calculation of ratios and providing easy-to-read reports and graphs. But it takes business knowledge to go beyond the numbers—any decent student in a financial analysis class can calculate a current ratio and working capital, or describe the impact of the change of cost of goods sold on profitability.

Talk and analysis must become proposed action. In talking to firms that are using such tools, the phrase that comes up repeatedly is that using these kinds of packages gives the partners a chance to get in front of the clients more often—which leaves you wondering why they weren’t able to do that to begin with, except that doing so requires the sales and marketing mentality that many firms lack. And there is the challenge. Firms need to know why they are getting in front of clients and what to do with the numbers that these software packages produce.

Because to come up with recommendations that a client needs to improve collections means that the accounting firm better be able to provide details on how that can be accomplished. Otherwise the client is going to wonder why the firm raised issues that it can’t address. Firms must be able to propose new business and close deals. They must sell new services to existing clients.

Any accounting software reseller worth their salt would offer a free technology review annually, and come up with projects that the firm would propose implementing for a price. This kind of approach for advisory services would seem to be what the smart firms will do in using analytical software as a sales and marketing tool.

Okay, so will more CPA firms do this? Are practitioners ready to discard rear-view mirrors in favor of a better view of the future? The smart ones will.

**Need Insights?**
Editor Robert Scott also writes “Consulting Insights,” a free, twice-monthly electronic newsletter that addresses issues concerning the consulting and reselling market. It’s insight with an attitude. If you want to subscribe, put the following in your browser address line:
subscribe.webcpa.com. You can also visit us at
www.accountingtechnology.com

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