When business is bad for your client, you are the trusted advisor who can provide expert financial recommendations that could help turn business around. If the economy or the client’s industry is in a downturn, you can help them get through and prepare for the future. However, if your client’s company seems to be struggling in an otherwise healthy economic environment, the problem is clearly within the company.
Improving your client’s financial position
As the accountant, you are charged with helping your client-company improve its financial position. This does not mean that you can’t make observations about the quality of their product or their sales team. Their major problems might not actually be connected to their finances. But your primary objective is to recommend ways to improve the financial position.
Review your client’s accounts payable policies and outstanding invoices. Recommend changes to billing that can include incentives for earlier payment (such as discounts), a phone call or reminder as the bill comes due, and faster referral to collection agencies.
Potential customers often request special credit arrangements with the promise of future business. Provide the sales department with detailed procedures to evaluate the financial health of the customer before agreeing to terms. The company must carefully choose those to whom it extends credit arrangements and terminate as soon as legally possible the agreements with customers who are not paying on a timely basis.
Examine all expenses closely. Consider with your client which items that can be eliminated or which can be obtained less expensively. Recommend evaluating production processes to find ways of improving efficiency and saving money. This could include expenditures on new equipment or technology that would pay for itself through increased efficiency and future cost savings. Consider leasing as an option to avoid a significant outlay of cash.
If your client maintains an inventory, how much capital is tied up in it? Can an online store help move some of the older inventory off the shelves and provide cash? Are more popular items often out of stock, resulting in lost business?
Help your client review the compensation package. Is it in line with the industry and attracting the right talent to help the company succeed? Review the current staff. Are all the employees productive, or do some not justify their expense? Can some positons be changed to part-time or contractors?
Help your client review the company’s pricing structure. How do prices compare to the competition’s? If your client’s prices are lower, consider raising prices. If higher, is it because cost of production is too high, or is it because they provide superior quality or service? If it’s because of costs, analyze and discover ways to decrease costs. If it’s because the product is simply better, recommend evaluation of the marketing strategy in order to make potential customers aware of this superiority.
Preparing for the future
Finally, help your client with forecasting, creating short-, middle-, and long-term plans based on company goals and industry trends. If your client is currently dealing with an industry or economic downturn, develop a strategic plan to prepare the company to take advantage of the boom that will inevitably come.
As an accountant, you have the opportunity to make the difference between success and failure for your client. By applying shrewd analysis and looking carefully at all aspects of your client’s business, you will become an indispensable asset, ensuring long-term committed clientele and future growth for your practice.