The Client Assessment Opportunity | AccountingWEB

The Client Assessment Opportunity

By Jennifer Katrulya, CPA, CITP, CGMA

If your firm provides outsourced accounting services to clients, you've likely had the type of experience I'm about to describe.
You just met with a prospect who owns a rapidly growing company in an industry that's exciting to you. The prospect wants your services and wants you to begin right away. You've been hearing and reading all about the advantages of fixed-fee value pricing, so you decide to take the leap and have your prospect sign an engagement letter that provides for a fixed, monthly fee for your services. You jump in to work with your new client, excited about the possibilities!
That's when the surprises begin. You might find that your client has outstanding payroll, sales tax, and/or other matters that need to be addressed right away. As you dig deeper into the client's accounting data file, you find that the sub-ledgers don't reconcile to the financial statements. You try to communicate with the contacts at the company who were promised to make themselves available to you, but you can't get information or answers from anyone.
You can feel the engagement quickly unraveling and find yourself wondering what you could have done to prevent it.
Adding a client assessment as a required short-term project for every new client – before agreeing to a long-term engagement – can provide countless benefits for you and the client. It can also help you uncover those unfortunate surprises early on before you're under any obligation to commit to working with the client for the long haul. 
The idea of the client assessment stems from the fact that most prospects come to us because they have pain points they need addressed, problems with their financial reporting, some level of staff turnover, or they might even be growing rapidly and realize they need a higher level of professional expertise.
Whatever their initial reason for contact, nearly every new client engagement begins with a series of tasks and onboarding steps that require more time and a higher level of expertise than the long-term engagement will need once it has been standardized using your firm's selected technology solutions and standardized workflow. Many firms realize this, but decide to "eat" the fees in these early stages for the implementation and for any unforeseen surprises because they want the client for the long term and think the engagement will be profitable over time.

Show Your Stuff

As you gain an understanding of the client's current processes and procedures, you'll want to do the following:

  1. Create flowcharts using Microsoft Visio or a similar solution that show the client's current process/workflow steps in visual detail.
  2. You would then add narrative information to the report, providing a more detailed description of the processes and procedures you illustrated in your flowchart. This represents the "before" section of your client needs' assessment.
  3. You'll then add the "after" section of the report showing the flowcharts and narratives that give the client your suggestions for technology solutions, workflow, and other changes that will help them make positive changes and see results.
With this deliverable, you would also provide the client with your proposal for the short-term project of helping them implement these suggested changes and improvements, provided both you and the client feel reasonably confident that a long-term working relationship is likely.
An alternative is to provide this billable (and highly profitable) short-term, two-part engagement that provides the client with a documented analysis of current technology and workflow, compared to the technology and workflow your firm recommends. The bottom line is that this two-part engagement will help the client save time, get better management reporting, establish improved internal controls, and often even reduce IT and related costs. 
What types of information will you want to review as part of the client assessment? That will vary a bit depending on the type of client you're analyzing. As a general guide, the following is a list of some of the areas you'll want to explore:
  • Company documents and tax filings – This includes documents such as the company's articles of incorporation, federal and state tax registrations, bylaws, minutes from the last board of directors meeting, and partnership and/or operating agreements. You'll also want to review the company's most recent income tax filings and the most recent audit or review, if applicable.
  • Cash management – What bank, credit card, loan or other similar accounts does the company maintain? What is its process for handling payment advances/retainers? What is the billing/invoicing and collections process, and how and by whom are the accounts reconciled?
  • Accounts payable – What is the company's process for obtaining purchasing approvals? How are incoming vendor bills received and processed? What is the approximate transaction volume per month? What are the petty cash policies? What are the overall internal controls that have been established relating to overall accounts payable practices? The accounts payable analysis would also include a review of the company's practices for obtaining and maintaining W-9 forms from vendors and issuing 1099s at year-end. 
  • Accounts receivable – What is the company's process for invoicing customers? Does it receive payment at the time of sale, or does it e-mail or mail customer invoices? What forms of payment are accepted and what are the payment terms? How are accounts receivable balances periodically reconciled? What are the write-off policies and procedures for any uncollectible debts?
  • General accounting practices – Does the company have any revenue recognition and/or allocation requirements that need to be considered? Are there periodic adjusting journal entries that need to be posted? Are there any encumbrances? What is the company's asset management policy? Is there any other information that's critical to maintaining accurate financial reporting information? 
While this isn't a complete list of all of the information you'll gather during your client assessment engagement, it does highlight many of the most important areas you'll want to consider during your review.
These initial short-term steps allow you to truly bill for the value of your expertise and the level of service you're providing, while also giving you and the client several clearly defined points that one or both of you can use to gracefully exit the relationship if there are signs that it's not a good long-term fit. This approach also will mean that you'll generally dramatically increase the likelihood that the clients you do offer long-term outsourced accounting agreements to are the "A level" relationships you want to dedicate your firm to serving.
More articles by Jennifer Katrulya:

About the author:

Jennifer L. Katrulya, CPA, CITP, CGMA, is president and CEO of BMRG, LLC. Katrulya provides advisory and mentoring services to growing and large CPA firms seeking to successfully establish best practices, educate, and motivate management and staff during periods of change and to streamline integrated processes in a hosted and SaaS environment. She is a frequent author and instructor on a wide range of technology topics. Katrulya also serves as a consultant for a number of software developers who seek input from her regarding their anticipated road maps and strategic plans, constructive feedback about solutions and/or features as they are developed, and ongoing feedback from her as her firm and BMRG's clients use many of the solutions. Contact her at


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