By Alex Vuchnich, CPA, CFE - I think often we expect our clients to just accept that our services are valuable without demonstrating value in concrete terms. Some might suggest that this is due to the compliance nature of our work. However, I would argue that this is actually a cause of why our services are devalued and perceived as commodities rather than evidence that they are compliance services. If we can demonstrate that some ROI can be achieved through our service than we have an argument that the services we provide rise above mere commodities. In order to illustrate this to our clients and thereby begin to shift perception of our services we can start by going back to audit and accounting theory as a starting point. The simplest value proposition of attest work lies in the assurance it provides to third parties, such as potential lenders. We can demonstrate to our clients the additional interest costs associated with higher risk loans that waive audit or review requirements or the opportunity cost for lost profits associated with a client who is unable to obtain the necessary financing for a particular project. I concede that this may not be as compelling a value proposition for many clients but in the current credit environment lenders are exercising more scrutiny and so the additional assurance we provide is more relevant than it may have been over the past several years.
Moving past theory, ROI can be demonstrated in many other engagements as well if we just take the time to identify inefficiencies and ineffectiveness in our clients operations and tactfully point out what it is costing them. For example, in the course of performing an audit, a staff auditor determines that the client has been prepaying their health insurance premiums two months in advance. Typically the $25,000 premium is due by the first of the month so one month of prepaid expense is expected. However, due to a lag in posting by the provider, the bill always show a prior balance due so the client has doubled up on payments to 'catch up'. The client also carries a $100,000 operating line of credit for working capital needs. The line has a net balance of $50,000 and carries a rate of 8.75%. By simply pointing out this operational inefficiency the auditor can save the client $2,187.50 a year by simply deferring the overpayment and using the freed up cash to reduce the line of credit by $25,000. In larger engagements this may fall under the guise of immateriality but few clients will pass up this cost savings if they are made aware of it. The important step though is that we communicate these types of demonstrable value propositions to clients so they can begin to understand the benefit of our services.