There is little doubt that SME owners are becoming better educated about financial matters, perhaps also becoming more aggressive in choosing their accountant and bookkeeper. There is a simple, compelling reason for this: the advent of easy-to-use accounting software and low cost outsourcing options which has led to the commoditisation of compliance work. Which explains why accounting firms are racing to become ‘the valued advisor’. The bookkeeper too is under pressure. Business owners are smart and many early stage ventures have owners who can run rings around their paid bean counters in terms of business savviness. That leads to a profession where too many accountants and bookkeepers are working too many hours for not enough reward.
To become better at selling their services these professionals need to be more than technically competent, they need to be business savvy.
But business owners haven’t studied bookkeeping or accounting!
There is definitely an advantage to understanding accounting, particularly as a business grows, but it simply is of no value to a business owner to study accounting. Most business owners need accurate records and reports they can understand. A business owner should (and most do) have a good understanding of profit margins because small margins have a large impact on profit. Similarly, most businesses have a number of key indicators relating to revenue and productivity that will tell them how their business is performing in real time and not in a rear-view vision of quarterly returns.
Data entry may be commoditised but good data can be the low hanging fruit of advisory.
Not all data is useful
Metrics present business owners with a method of measuring results; they don’t however tell business owners what to do with the results. Metrics must meet three criteria to be useful in a business: they must be actionable, accessible and auditable (in other words, they need to be created using primary data). Accessibility means having data that is available to everyone not just finance experts. The business owner may well rely on metrics that can inspire or motivate other people – staff, partners and bankers – in short, an ability to show whether tangible progress is being made toward the end goal of profitability.
Reporting is part and parcel of the professional’s repertoire, but the wrong metrics can lean owners to make decisions that are ultimately detrimental. The right metrics presented by the trusted advisor can elevate her value and be the basis for an advisory service to augment the firm’s revenue and value.