look backward for your cas processes

smart design will save you time.

by hitendra patil
client accounting services: the definitive success guide

we have examined how you can enhance your firm’s internal processes and what factors influence those processes. in this post, we will focus more on cas-specific processes that can give you competitive advantages. however, this post is not about the technicalities of accounting processes. as a professional accountant, you already know the accounting fundamentals required to create your processes for each of the segments of the services you provide.

more: make sure your differentiation is truly different | is it time to outsource? | your firm’s cas team: who and how many | two tech approaches to cas | when to start building your cas tech stack | stop derailing cas | show your priciest cas package first | your firm needs a cas champion
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are client accounting services processes different than what you have been doing until now? yes, and no.

yes, because cas is about the outcomes of your work, from the clients’ perspective. cas outcomes are useful, insightful and advise clients in ways that routine, traditional reports cannot deliver. the outcomes you provide from your cas offering need to relentlessly focus on the relevance, usability and importance from your clients’ point of view. compare this with general perceptions of what accountants deliver – financial statements and tax returns, i.e., more of compliance assurance rather than competitive business intelligence.

no, because the fundamentals of the experience and expertise required to produce accounting information do not change.

how are cas processes different?

in a traditional client-accountant business relationship, the accountant produces books and financial statements and delivers them to the business owner. it is up to the business owner to interpret what the books and reports mean, and (hopefully) take actions based on that meaning. while this may sound too simplified a way of stating how accounting work usually gets utilized, it is more true when it comes to small businesses. but it is important because small businesses form a significant part of the total number of clients firms of almost all sizes serve.

however, accountants can easily find crucial insights that can help small business owners make better and timely business decisions, and many times even avoid potential problems that can threaten the very existence of such businesses. so here are some core fundamentals in which your cas processes will be different:

• produce and interpret: cas processes ensure that accountants “produce and interpret” accounting information and insights so that they can effectively advise the business owners.
  • key takeaway for you to develop your cas process: think of how you will interpret which information to provide insights that your clients will find useful and actionable. your cas processes will need to include standardized processes to do so.
• insights and business intelligence: cas processes cannot be good enough if you are unable to derive and deliver insights and business intelligence to your clients. this requires you to identify what are the vital insights your clients must look at periodically and lay down process steps so that you generate those insights to your clients without fail. the cas process must include standardization of the tasks required for producing the information that leads to generating insights and business intelligence. you cannot let only the partners or the most experienced people at your firm be responsible for this process. it has to be systematized.
  • key takeaway: your cas process needs to ensure setting up of processes that produce insights and business intelligence. although you can standardize the process steps for this purpose, you need to customize the outcomes of this process for each client as every client’s business is different. hence, insights and business intelligence will be different for each client.
• frequency and timeliness: cas processes include more current, real-time work, e.g., weekly payables and receivables reporting and related cash flow planning. it is not about the rear-view analysis of the past to just “learn lessons.” it is about helping business owners take the day-to-day actions in their business processes.
  • key takeaway: think as if you are the owner of your client’s business. because you are also a professional accountant, you are able to better know the insights from the books and accounting reports. armed with this ability, which actions will you take to run your business better? your cas processes should produce such prescriptive/recommendatory actions.
• getting the information from clients: your work starts after you receive information from your clients – source documents, bank statements, credit card statements, check stubs, information about unusual transactions, and so on. historically, and to some extent, even now, accountants have been chasing client information. you don’t get paid until you produce work from client information. your operating costs increase because you need to follow up with clients to receive information. delay by clients in providing you the information means a delay in your revenue, causing cash flow challenges for your firm. technological advances have made it possible to fetch client information from multiple sources automatically. and that is what you want your cas processes to ensure – minimize, if not eliminate, the need to chase client information.
  • key takeaway: your cas processes should include not just what work you and your staff does. cas processes also include how you set up your technological processes. on-demand, periodically automated, periodically pushed by clients’ banks – there are many ways to automate information collection and the timeliness thereof. your cas pricing strategy can make this happen for you, e.g., charge less to those clients who agree to automated information delivery to your firm.
• delivering information and insights to clients: your firm’s deliverables – reports, financial statements, insights, etc. – are what clients think they pay for. in other words, there is an economic exchange. it is tactical. clients must feel and see they received something in return for what they are paying for. it is human nature. just like automating the receipt of client information, you want your cas processes to deliver information to clients automatically. again, technology makes it more possible than ever before.
  • key takeaway: your cas processes must include the technological processes of your service delivery. do not stop at just emailing reports to your clients. set up automated alerts and notifications that are triggered by thresholds that are important for your client’s business. create client portals so that clients can log on to those portals to get the information they want, anytime, anywhere. leverage mobile apps to provide information to the business owners – right in their hands. invest your own time and cost to educate your clients on such choices and how to use them. the return of investment on such an investment will always be positive for your firm. your cas pricing strategy can also make this happen for you, e.g., charge less to those clients who agree to automated and electronic information delivery to them. in most cases, you will need a periodic phone or videoconferencing interaction with clients to ensure they understand the insights and business intelligence you are delivering and that they know which actions they can take based on what you tell them.
• advisory services: cas processes lead to an ability for accounting firms to offer advisory services. even if you do not separately charge for advisory service to your existing clients, you should still deliver advice based on insights and business intelligence. advisory services are not random musings and casual discussions about such actionable intelligence. you need a structure to package the advice. later on, you will be able to include the key common business intelligence into your marketing and sales processes. that will become the hook to get new clients to also secure the cas work from your new clients.
  • key takeaway: advisory services emerge from cas. think like the business owner receiving advice from the accountant. what would you like to hear/see/understand? your cas processes should have the capability to produce the necessary insights to cater to such client expectations as part of your advisory services.

creating cas reports

if you are wondering whether cas needs a different set of reports, you are in the right place. at the same time, it may be confusing how you can produce reports that are different than those your software provides out of the box.

as we discussed earlier, cas is about the outcomes of your work, from the clients’ perspective. cas outcomes are useful, insightful and advise clients in ways that routine, traditional reports cannot deliver. the outcomes you provide from your cas offering need to relentlessly focus on the relevance, usability and importance from your clients’ point of view. one of my ex-clients, an experienced and expert cpa from san diego – who had mostly high net-worth individuals with multiple businesses as his clients – told me, “after 19 years in practice, i realized that small to medium business entrepreneurs are not really concerned with managing their balance sheets. it is the job of the accountant.”

sure, cas reports will include traditional reports like income statements, balance sheets and so on. but that is just the baseline. cas is more than just the baseline. as a professional accountant, from all your work for the client, you need to deliver the outcomes that can contribute to enhancing the client’s business. you need to present outcomes in ways that the client can find actionable, i.e., the client should not have to do too much of thinking, “what exactly does this mean and what should i do?”

let me share a real-life example here to bring clarity about how cas outcomes are different than traditional accounting reports. one of my ex-clients, a cpa firm that specializes in restaurant accounting, not only established different cas processes that leveraged their niche expertise but it also turned those processes into cas reports that restaurant owners cannot live without. here is what the firm provides to clients:

traditional accounting reports

• profit and loss (income statement)
• balance sheet
• payroll report
• payables report
• sales report
• inventory movement and valuation
• bank, check and credit card reconciliation reports

cas reports

• profit and loss (income statement) – with monthly and year-to-date comparisons
• payroll report – with labor cost and kitchen labor cost as a percent of total payroll cost; cash, credit card and total tips as a percent of cash and credit card sales, respectively
• payables report – with multiple aging reports and vendor statements reconciliation
• sales report – daily, weekly and monthly sales reports that provide a detailed breakdown of food, liquor, beer, wine, non-alcoholic beverage sales, gift certificates sales, food tax, liquor cost and net sales
• inventory movement reports identifying the fastest and slowest moving inventory items and the percentage of each inventory item to the overall valuation (at cost) of total closing inventory
• weekly, one-pager restaurant financial performance report – giving sales data summary, labor cost and departmental distribution, tips reporting data, food cost, liquor cost and profit-&-loss data – and the “prime cost percentage,” which is the most crucial indicator of the bottom line of a restaurant business

now, take a look at the non-cas and cas reports mentioned above. all of the cas reports give restaurant owners an instant insight into the business trend of their restaurants, how much to pay to which vendor and when, keep control on labor cost, which items are selling more and what is their contribution to total sales, and the most important management control insight. this prime cost report shows all the key costs that constitute the majority of any restaurant’s core expenses. because these prime costs define a restaurant’s profitability, a restaurant owner cannot afford to wait for a month or more to know what the prime costs are. hence this firm provides a weekly report.

if you noticed, all these cas reports provide actionable intelligence to the restaurant owners. if need be, the restaurant owners can course-correct on the fly to control the factors that can easily hurt the restaurant’s viability. in other words, these cas reports provide the ability to restaurant owners to make data-backed business decisions, and also identify which of their immediate past decisions were good and which ones hurt them. all put together, this helps restaurant owners become better at managing and growing their restaurants. imagine what can happen if such cas reporting is not available to restaurant owners.

to be able to provide all such reports, insights and outcomes that help clients make critical business decisions, the firm has implemented appropriate internal processes to capture the relevant data elements at the time when the firm does the bookkeeping. “you control the books, you control the business,” and “start with the end in mind” are the mantras followed.

now you see how the outcomes that are important from the client perspective can, and should, define your firm’s cas processes.

creating cas process steps and timelines

but how do you create your firm’s cas specific processes? where should you begin? how would you know what to change and what to add to your processes?

it is both difficult and easy to create your firm’s cas processes. it will be difficult, not impossible, if you do not have reasonably deep insights into what your clients need and want. it will be easy if you have periodic interactions with your clients.

here are some guidelines to get you started on creating your firm’s cas processes:

• start with the end in mind: review your current set of accounting reports that you deliver to your clients. take a hard look and think through from the client’s perspective. if you were the client and your accountant gave those reports to you, what would you do? keep in mind – clients do not have the accounting expertise you have, so they look at the reports differently than you. what are the business decisions they can make using the reports your deliver? more importantly, what are the business decisions they cannot make because your reports do not provide the information/insights to support such decisions? if there any critical business decisions your clients should make, you need to identify those and create information that will help them make those decisions. now work backward to identify process steps that will ensure you have the data to develop such insights. take the example of my restaurant accounting cpa. the firm delivers food, wine, liquor, beer, supplies and labor costs reporting. other than labor, some vendors provide all other things. the bills issued by such vendors need to be broken down into such “category-wise” costs, and not data entered as one invoice, one payable entry. the end result changed the bills processing procedure at this firm.
• identify which common questions your clients are asking: another technique to create your firm’s cas processes is to identify the most common questions your clients ask – after they see the accounting reports your firm delivers. (if they are hardly asking any questions, they are most likely not cas-fit clients.) either the answers to those common questions are not there in your reports, or you have not coached your clients on how to understand the accounting reports, or both. when you identify that your reports do not contain some key elements, start working backward to the processes that produce your reports. add those steps that are missing and then regenerate the reports. make sure your reports now contain all those missing aspects.
• identify business decisions: review the accounting reports you are about to send to your clients. can you relate the most critical numbers in those reports to the business decisions your clients have made or not made? as a professional accountant with reasonable experience, you will have at least a gut feel about the impact of business decisions, or lack thereof, on the financial numbers of the clients. now identify what could have helped your clients make better and more timely business decisions to make those numbers better or avoid some pitfalls. which information/insights could have helped your clients have better business results? now work backward and identify at what point in time which information should be created from your processes. implement those changes and create more frequent (not just the end-of-the-month statements) “insights delivery” to your clients so that they can make better business decisions and avoid bad choices.
• tell the story of the client’s business: accounting is the language of business, and financial statements tell the story of how the company is doing. take the financial statements of your client and try to tell the story as a narrative of how the business did in the last month. don’t just describe the numbers in words, e.g.

“your company’s profit declined from 16% last month to 14.5% this month.”

when you describe the numbers, you are leaving it to the client to draw the inference and conclusions from what you tell the client. instead, use the words that the client will think in his/her mind. make it conversational. you want to sound like an advisor or consultant, not an accountant. in the same example quoted here, you can say something like:

“your company’s profit declined from 16% last month to 14.5% this month, but your sales in the same period increased from 13% to 19%. your lower-cost products/services are selling more this month. the cost of goods sold for such products/services is higher than that of your other products – meaning profit margin is lower in your faster-selling products/services. you should focus on selling more quantities of other, more profitable products or take steps to reduce the cost of your fast-selling goods.”

the story you tell should be the narrative going on in the minds of your clients. that makes clients respect you as the most trusted advisor because they observe that “you get it.” now, to be able to tell the story like that, do the reports you produce give you enough insights? if not, identify the storyline-making insights, work backward and find out the process steps that need to be changed to produce such insights.

one simple formula to use to structure your “insights” is the what-why-what formula:

• • tell the “what” (your profit declined)
  • tell the “why” behind the what (you are selling more low-profit goods)
  • tell the “what” the client can do in the situation (take steps to reduce the cost of goods sold).

with this approach of “storytelling” through the what-why-what formula, work backward to find out where in your process steps you can identify these what-why-what insights. if needed, change/adjust the process/steps to be able to create such insights.

• cas processes and timeline: cas is not the typical end-of-the-month, after-the-fact reporting. cas, to be more valuable for the clients, needs to deliver more frequent insights and outcomes to your clients. how frequent? each of your client’s business type, industry, business life cycle stage, growth trend, etc. can help you determine how frequently you should deliver insights and outcomes from your cas processes. a rule of thumb applicable to clients from many different industries is weekly cas reporting. if any client’s business has a business model that creates a gap between payables and receivables, supply lead time, or seasonality of business volume across the year, such clients generally are well served by weekly cas reporting. that does not mean you should send critical alerts only on a weekly basis. for example, if you observe that the client is likely to miss some important payments unless some of the receivables are collected, don’t wait. reach out and send such alerts. accounting software with intelligent automation can actually send out such alerts without any manual intervention from you or your staff.

once you identify such insights that are valuable for your clients, work backward to review your process steps. add/adjust the steps to produce and relay such useful information as and when it emerges. be in your client’s shoes. if you are the client, would you not take steps to avoid such instances that lead to the failure of making required payments in time? don’t wait for the end-of-the-period reports to be compiled.

technology and your firm’s cas processes

we have discussed how you could evaluate your firm’s technology stack for your cas offering. if you assessed that your firm’s technology stack is not ideally suited for cas, it is critically important that you decide about your cas technology first before altering your firm’s current processes. this is because newer, more advanced, more mature and artificially intelligent technology solutions that make integrations and collaboration more possible can significantly reduce repetitive, duplicated process steps. once you identify such efficiency- and productivity-enhancing opportunities in such technology solutions and implement those at your firm, some of your processes will transform as a result. the remaining parts of your firm’s processes can be easier to analyze from the cas angle.

also, such solutions can give your firm new abilities to deliver newer, more useful, more relevant outcomes to your clients. you will need to take into consideration which processes/process steps your firm will need to provide such new outcomes to your clients.

posted on february 13, 2022