only a small percentage of audit leaders understand businessmindedness’s inward and outward components.
by alan anderson, cpa
transforming audit for the future
i talk to leaders of firms all around the country who think that if they get their fee realization right, that’s a sign that they’ve got great business minds. they ask me what the market fee realization is, so i tell them that’s a miserable measure.
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there is no perfect fee realization. as extreme examples, i’ve worked with firms with 10 percent and 200 percent fee realizations. which is better? neither. the firm with a 10 percent fee realization bills at $5,000 per hour, while the other bills at $20 an hour.
now, i’ve always been fascinated by business, and i went into accounting because i thought that cpas had to be business experts. unfortunately, business expertise isn’t really part of the curriculum to become a cpa. university coursework and required cpe tend to be heavy on debits and credits, accounting standards, and the latest tax law changes, as well as light on best practices for running a successful firm. unfortunately, only a small percentage of audit leaders understand the inward and outward components of businessmindedness.
the inward component means ensuring that the work the firm does makes sense from a business point of view. for many firms, the inward focus is preoccupied with growing the top line, which isn’t in itself a bad thing, but it’s far from the only factor in building a successful audit firm. the inward component means considering the types of work you take on and the kinds of clients you want to work with. those choices are part of a strategy to create the firm you envision. it also means thinking about your business model and whether it makes sense, especially considering the technological changes that will be here sooner than we think.
the outward component concerns our clients and how we can help them improve their businesses. we should go deep with clients to understand their business goals and what they are trying to accomplish by running this kind of company instead of another kind of business. this means actively seeking out ways to provide them with value. all too often, the outward focus is limited to doing just enough to get through peer review.