By Alex Vuchnich, CPA, CFE - In the previous posting, I explained why it was important for CPAs to begin to better communicate the value of the services we provide if we want to change the current trend of commoditization with our professional service offerings. In many cases I think that as CPAs we sometimes lose perspective on how challenging financial information can be for our clients to grasp. Things that seem so obvious to us when we look at a set of financial statements can be completely lost on our clients. Good use of technology and software can bridge this communication gap when used effectively. A variety of products exist that can be used to help communicate and analyze the numbers we are presenting in a more accessible format for our clients. We can use tools such as Excel and Powerpoint which have excellent charting and graphing options and more powerful business analytic and financial analysis applications to demonstrate key points of interest. The key to effectively using any of these applications is to use it to highlight a few meaningful insights in the financial statements. What we want to get away from is the information paralysis that occurs when we put a complete set of GAAP basis financial statements in front of our clients who are not versed in financial reporting and analysis.
A practical example of this is an analysis of the cash flow gap. I tried to explain this to a client by preparing a beautiful (in my eyes) spreadsheet which detailed out their inventory, accounts receivable and accounts payable turns and days. I prepared a calculation of the number of days of float between the time they paid their vendors and when they collected on their customer accounts. They were not impressed and did not see what the big deal was all about. Convinced that if they could understand the benefits of narrowing the gap, I could save them a lot of money and demonstrate the value of my services I modified my spreadsheet and added a graph to it. I simply created a bar chart for each of the key turnover metrics and positioned them in a time-line format using Excel's built-in charting features. I colored the section representing the cash flow gap in red and included the interest rate on their operating line of credit in that section of the graph. Voila, they got it. They began immediately looking into what procedures could be implemented to narrow the gap.
Although a few bar graphs set side-by-side comparing revenues, ratios or cash-flows from one period to the next may seem elementary to our professionally trained eyes, this type of visual analysis can speak volumes to our clients.