financial analysis
Editor's Note: In "The Path to Refining Your Practice Begins with Streamlining Your Services," we discussed the importance of specialization in the services you offer. On Sunday, June 4, at noon, at "Scaling New Heights," Gale Kirsopp is presenting “Financial Analysis: Expanding Your Value-Add Services.” In this article, Gale expands on the concept of Financial Analysis services.
If you ask three Small Business Advisors (SBA) to define Financial Analysis, you will get three different answers. If you asked three different clients – two would respond with a comment about financial analysis relating to the P&L and the balance sheet.
Most business owners believe financial reports are synonymous with financial analysis. Business owners want to understand their businesses better; this has been established in many studies and on the main stage at "Scaling New Heights" last year.
But they do not know what to ask or if you are the person that can tell them. This creates a tremendous opportunity for us, the SBA.
The opportunity is showing them how to use the data within QuickBooks to provide meaningful ratios about their business’s performance and explain the business value in understanding these ratios.
We start that process by using their language, not ‘accountantize.’ I define’ Accountantize’ as:
- The art of speaking in accounting jargon
- The need to impress the client with our extensive knowledge of accounting.
Using "accountantize" sabotages us from the start.
Let me give you a simple example. If your client has a Line of Credit (LOC), on an annual basis, they are required to provide the bank a balance sheet in addition to several other reports. The client does understand what the bank is going to do with the information; they do know that based on the reports they share with the bank their interest rates might go up, or the LOC can be recalled. Neither is a welcoming thought.
We can go to the client and tell them the bank will look at their Current Ratio to determine if the bank believes they can repay the loan. And in that process, we have done nothing to build a relationship of trust or demonstrated the value we can add to their business. Because we have spoken in accounting jargon, their reaction is more along the lines of, "OK, whatever you say. What do I do if they recall the loan?"
But if we work with the client to review their current asset accounts and review their current liabilities, taking the time to explaining the difference between current & long term we are helping them better understand their business. We do the division of the Current Assets/Current Liabilities and explain that a ratio of under 1 indicates they would be unable to pay off their debt if it came due at this time.
We are preparing our client to see their business through the eyes of the bank. We are helping our clients to be in a position of having an informed conversation with the bank. The meeting can address how they are working to reduce their short-term debts or maybe, asking the bank for a reduced rate on their LOC based on their stable financial position.
By explaining and helping our clients be better prepared, we are also building trust. We are demonstrating the value of working with us. These conversations are crucial, but they need to be in language our clients understand.
** Mark Your Calendars – Gale also teaching two other sessions on reporting from QuickBooks and QuickBooks Online. Join her on Tuesday at 8 a.m. for "Making the Most of QuickBooks Desktop In-Product Reports" and on Tuesday at 5:20 p.m. for "Making the Most of Generating Reports in QuickBooks Online."
You can find more details about each of the sessions in a downloadable document located here: Download Course Descriptions.
Reminder: As your ever-faithful Sherpas, we stand ready to guide and encourage you along your chosen path. If you would like to consult with us about your path, please email me at coliver@woodard.com or Liz at ecolley@woodard.com.
Be sure to tell us your goals and what you hope to learn so we can recommend appropriate paths.
For 18 years Gale Kirsopp has been working with the QuickBooks product line as a back-office business consultant, entrepreneur and national speaker. During this time, Gale has actively participated in the technology driven realignment of the accounting industry. Gale’s goal is to provide her clients a better understanding of what technologies are available and how these technologies can improve productivity. Better processes increase the timeliness of useful data, allowing her clients to make better managerial decisions based on their accounting information and not based on gut assumptions. She is QuickBooks Advanced Certified, Enterprise Solutions Certified, QBO Certified and is a Gold Clio Certified Consultant.