Are you concerned that increasingly your audit and tax preparation work is becoming a commodity-like engagement for your firm? Just think how your clients must feel. Each year they pay for information that may not add much value other than compliance with bank loans or mandatory tax and regulatory filings. What is there to differentiate you from the many hundreds of CPAs competing for your client's business?
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Every CPA firm tells their clients that they provide extraordinary value based on the level of service they deliver. Are you really offering a higher level of service than the competition? In what way do you go the extra mile for your clients? Do most clients really care that you've completed your fiftieth straight peer review with no letter of comment?
Clients expect you to pass a peer review in much the same way that they expect an airline pilot to pass an annual physical exam. Indeed the bar has been raised in what your client expects from a proactive, service-oriented CPA firm. Are you providing the extra level of service your clients now expect?
What is the differentiating factor between the CPA firm that follows along with what was done last year and the superstar firm that constantly under-promises and over-delivers? Are you leveraging the power of your firm's audit software to produce helpful, client-focused reports outlining their business performance and how it stacks up against similar businesses?
Analytic software is a new area for many working paper suites that goes farther than just the list of ratios produced by most working paper software. Instead you'll find that the current crop of analytical software supports many additional services, including business ratio analysis, comparisons to peer-group financial averages and trends, what-if scenarios, going-concern analysis, budgeting, forecasting, bank financing, and due-diligence analysis.
When reviewing the different available packages, make sure to consider these features:
Integration to working paper software. The ability to directly pass data from your write-up or audit software into the analytics program can be a significant timesaver. Most of the programs reviewed allow for directly keying information into their database. Where possible, you'll want to look for a solution that either integrates directly or supports easy import and export.
Pre-formatted reports. The best reports are pre-formatted and will combine both text and graphics. Providing a listing of financial ratios to a client is not very helpful if the client cannot readily interpret the results. In most cases, you need to be striving for a paragraph or two of explanation about what the ratios mean. Since a picture is worth thousands of words, you should also present graphs and charts as much as possible. Where you can really start to shine is the addition of peer group information (industry averages) to your charts. This allows your clients to see at a glance how their business is trending versus similar companies.
Because you'll want to have all levels of staff producing the reports, the more tools the software provides, the better. Think of it as having the software give you the first draft of a report that you'll review, add information to, and approve prior to delivering to your client. Therefore, you will want a software package that can do as much of the initial reporting as possible. This will allow your staff to create the first drafts without having to wait for a more experienced manager or partner.
Industry averages. Possibly the biggest value-added extra service you can provide to your client is feedback on how their business compares to the competition. It can be difficult for many small business owners to truly get a feeling for how well (or poorly) their business is performing versus other businesses of similar size in the same industry. Comparison to industry averages can serve as a re-assurance that their companies are performing above the average, or it can prove a wake-up call to pay more attention to areas in which their businesses lags those of their peers.
Comparative databases. Several of the products interface with databases in order to summarize key ratios for the industry that your client is involved with. You may pay a yearly fee to keep this database up to date, but without it, you may be overwhelmed trying to find ratios for the unique client asking how the client's business stacks up against the competition.
Easy import. You've spent thousands of dollars adopting a standard working paper software package and you use it year after year to collect client financial data. Wouldn't it be nice if all that financial history that is locked up inside the database could be put to good use? Make sure that any software package you select to perform these analytical procedures has an easy way to import data directly into the system. Without that easy-import ability, you'll find over time that staff will stop entering data and you will not use the software to the extent that you need to in order to maximize its benefit.
What-if analysis. Taking the extra step of not only reporting on the past, but also predicting the future, is certain to be a service that can catch a client's attention. When you change variables, such as inventory turnover or accounts receivable levels, you can show them the effect of any recommendations or decisions that may arise during the year-end financial statement preparation.
In most cases, you can manipulate not only the actual accounting numbers, but also allow for different budget scenarios so that you can now create virtually unlimited what-if forecasting and budgeting.
Easy export. Once you have the report created in the analysis software, be sure you can easily put it in the format you most prefer. For most firms, this means that you are able to export it to an additional file format such as Word or you can create an easily shareable file such as one fashioned in the Adobe PDF layout.
With these tips in mind, let's look at six of the leading brands of analysis software presently available.
Financial Analysis CS
If your firm is an active user of the popular Creative Solutions Write-Up CS or Trial Balance software, then you'll want to seriously consider Financial Analysis CS. This package reads the years of historical data stored within the sister software programs and creates comparison reports that enable you to benchmark client data against a peer group or entire industry.
With this package, you can easily compare data from multiple years (a maximum of five years' historical data) and multiple bases (book, tax, etc). Within that financial data, you'll easily be able to drill right down to the most profitable departments or locations and perform profitability analysis to show the best-performing segments of a client's operations.
The application's interface is similar to CSI's other software modules, laid out in a spreadsheet format for simple data entry. There are many different options that can be independently set for each of the columns, including what types of data can be pulled in for financial comparison.
Standard templates are included with the software, and you can use them as is to get you started with your reporting, or they can be further enhanced to match standards established by your firm. The reports also allow for customization with graphs that can just as easily be viewed on screen as embedded into the middle of your reports. Start with a boilerplate report to present the basics, and then touch that report up with more information to fashion it for your client's operations and specific industry.
Because the software integrates with the applicable Creative Solutions suite components, you'll be able to print archive copies of reports to File Cabinet CS, a definite advantage for those firms striving for the paperless office and creation of documents that can be accessed by everyone on the engagement team.
Indeed, if your firm is a Creative Solutions suite user, it would be difficult to imagine why you'd want to use any other analytics software. Aside from the shared user interface and single source of technical support, the integration with Creative Solutions' entire suite of software is tight, making for a much smaller learning curve and more satisfied client base.
Financial Analysis CS
Price: $600 (renewable);
CCH Profit Driver
The CCH ProSystem fx suite has garnered praise from many CPA firms by virtue of its flexible group of programs, as well as its tight overall integration with the popular ProSystem fx Tax software.
Over time, many firms have learned the benefits of entering data once into their software suite and having that data populated throughout the other inter-connected software modules.
And that's the case with Profit Driver, an analytical tool that is one of the newest entries in the CCH software family.
Up to 40 consecutive periods of data can be selected for analysis within Profit Driver, providing for simultaneous comparison of performance data against various industry standards (ratios, benchmarks, etc.).