By now it is well known that the CPA either internal or external to the business is expected to be “more strategic”
But what does this more strategic really mean!
The answer is to look at what business owners need and want.
Owners and business managers at their core strive to improve how effectively the business competes. The ultimate scorecard of this result is reflected in the financial statements. And who is the owner of the financial statements the CPA of course.
Taking this point further, business effectiveness is the result of cumulative good decisions that drive the business behavior and the results that this behavior delivers.
The financial statements are the accumulation of all transactions that result from these decisions.
As such the financial statements are a perfect vehicle to explain the how these decisions either consciously or unconsciously have impacted performance.
At the granular level take a sale transaction. This is a result of a decision in that someone set the selling price and authorized the transaction at that selling price. This process may be highly automated but at the core it is a result of a decision.
By now you know where this is going.
Why don’t we use our financial statements to translate how decisions impact performance?
The secret is that there is an art to performing this translation. Before we consider the nature and the process let’s review what is sometimes done in practice and why it fails.
- Communication is done in lengthy complex reports. These reports consume significant energy and resources and often are not even looked at. The belief system is once the report is done the job is done. This is not what most owners want. They are looking for meaning, how should I do things differently based on this data.
- In person communication is often cumbersome using sophisticated spreadsheets moving from one sea of numbers to another. Participants are usually lost, confused and do not come out of the meeting with any tangible direction. This leads to greater “gut” reliance that may or may not drive good decision making.
- What I call Fractional communication. Where the whole picture is not presented. Here I am referring to the focus on the income statement without reflecting the balance sheet consequence of the decisions. This is often done as due to habit or that is what people believe is the “thing” others understand. Fractional communication can often lead to poor conclusions.
The above examples show that the desire is there on behalf of the CPA to do the right thing. Yet the result is often not effective.
Getting back to the secret.
Firstly, communication must be in person. In today’s environment, this is very easy using various meeting technologies.
Secondly it must be simple delivering 1 to 3 key messages
Thirdly, it must integrate the whole story, the income statement the balance sheet and the way cash is created and or consumed.
Fourthly, it should be interactive, engaging delivering measured impact.
Lastly it must provide key directional conclusions that managers can absorb and act on.
The points mentioned above appear “easy” yet I have found very few CPA’s that feel comfortable with explaining the financial statement story. However, the most qualified person to do so is the CPA.
The is a reason why this secret is not deployed.
Firstly, there is no common standard to do so that at least sets the foundation to use the financial statements as a vehicle to discuss and direct good decision behavior.
Secondly there is no easy platform of tool to use.
This is where the One Page Scorecard becomes most effective.
The one page scorecard solves these barriers allowing
- The comprehensive picture in one page including the income statement the balance sheet and the key components of the story (5 chapters). This allows instant identification as to where attention should or should not be made
- Fully interactive facilitating the impact of doing things differently (making different choices or decisions). The “what if” functionality measures the impact of doing something.
- Delivering the current state and the ability to create the future state through the automated budget functionality that creates the income statement, balance sheet and the cash flow statement on the fly.
With all the features of a tool communication platform people still have difficulty delivering what we call the Business Health Test or BHT.
The learning from this problem has been the mission of Mick Holly and mine for many years. We had the absolute belief system that “if you provide the means people will use it”. That has proven not to be the case. We have over 300 CPA firms and individuals that have engaged in the tool with a varying degree of success.
This has prompted us to talk to our customers (very novel I am sure you will agree) and we have had some hard pills to swallow.
The CPA’s that have been most successful in deploying the tool all had one thing in common. They invested in a process, a standardized way of doing things ensuring a specific quality of output and client or participant engagement.
This was our awakening moment. The “means” does not cut it without the method.
What we believe is natural is not so for others. I said to Mick it is similar to a CPA giving us a tax return program that they use and successfully deploy each day and say “here you go please do the same” and expect us to make it work. That just won’t happen even though we sort of know how to spell tax.
This knowledge has left us in a dilemma. The product has all the help and how to that we thought was the way people would get to use it. What we are now realizing is that this is not about the software or the tool. All the tool provides is a communication platform. What people need is a systematic way to deliver the message to their audience that
- Provides the confidence that the message and the delivery mechanism will resonate, engage and help their audience
- Is repeatable irrespective of the type of business or the numbers that the business produces
- Can be delivered in an efficient manner
For this reason, we have developed our online course that includes the tool and the systematic way to present the financial statements.
If you wish to know more, please click https://financialstatementstory.leadpages.co/creating-highly-engaged-clients/
For those of you that want to review the course please http://financialstatementstory.teachable.com/p/advanced-training-to-add-high-ticket-consulting-to-your-cpa-or-advisory-practice
We would love to hear your feedback.