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Accountants Make Sense of Financials With Mixed Bag of Offerings

Just what are those accounting and consulting firms doing? More than inspecting receipts and wielding red pencils, they are applying what they’ve learned from years of studying numbers to the day-to-day operations of businesses.

Though tax studies remain in high demand, they are just the beginning of what accounting firms are doing. Accounting firms’ consultants help with employee benefits programs, with funding and lines of credit, with risk management and forensic accounting, and even advise businesses on how to streamline their operations and hire the right people.

With the constriction of the bad economy, financial and human resources staff positions were eliminated but businesses still need the work they once did.

“Many companies have downsized accounting and back-office staff and often controls were eliminated with the staff,” said Gregg Landers, managing director of consulting with CBIZ-MHM LLC. “They need us to design good fraud controls for a smaller office.”

Companies also discovered that they had grown in ways that no longer work for them in a recession and they’re preparing to go into the recovery with smarter plans. To do that, they’re turning to accounting firms that have increasingly positioned themselves to serve as business auditors and advisers, well beyond the traditional definitions of accounting — but always with a financial edge.

“Companies need to find ways to streamline their operations to generate better operating margins and operating profits,” said Scott Sachs, regional managing partner of J.H. Cohn LLP. “We study their processes and books and maybe there’s a way to reduce the amount of inefficiency.”

After years of growth, driven by demand and implemented quickly when cost wasn’t an issue, a lot of companies have things set up with needless redundancy.

“There are manufacturing facilities that expanded haphazardly, adding warehouse and space and staff without examining how things were done,” Sachs explained. “We found ways to reduce repeat trips and the number of times human hands have to handle the same item.”

Managing Money Matters

Businesses are also turning to consulting groups that specialize in funding to help make sure that the way they handle their money and books will result in balance sheets that inspire lenders’ confidence. Some, including CEA LLP, can connect clients with capital as well as deal with banks to maintain or increase lines of credit.

“A lot of companies, even if they are performing adequately, are having trouble securing credit or keeping the credit they have,” said Mark Stepka, partner with the Carlsbad firm CEA LLP. “We work with them and their existing bank or their new bank to help keep cash flowing.”

Stepka says his team brings the bank’s perspective to the business’s table and uses it to structure the business to make it more appealing to recalcitrant lenders — of which there are many.

“So many clients are being squeezed by their lenders right now,” Stepka says. “Banks are pulling back, cutting off or not expanding lines of credit.”

Stepka, who considers himself an entrepreneur whose business is accounting, said the downturn has changed the way business owners are thinking about growth and funding.

“More business owners are reaching into their own savings to self-fund,” he says. “They’ve had a decent year, but the banks won’t communicate with them.”

Long-Term Planning Assistance

Landers says that baby boomer business owners are talking to his firm about long-term planning that includes an exit strategy.

“The recession has led boomers to want out, to not see another recession in 10 or 12 years,” he said. “There are things they can do to increase the value of their business, besides increasing revenues, and we are getting calls from clients who want to plan ahead.”

Businesses are also finding that they need better payment processes, Sachs says.

“We look at the purchase, billing and collection functions, for example, and analyze the process to reduce the amount of time from when you spend cash to when you collect cash,” he said. “We have a lot of years of business acumen and we can almost always help clients make improvements.”

And they’re relying on consulting firms for forensic and dispute services as well as setting up internal controls to eliminate fraud, says Theresa Drew, managing partner of the San Diego office of Deloitte.

“Employees find themselves in personally difficult financial situations and don’t behave normally with the company’s financial resources — perhaps doing something inappropriate with the books and records,” she said. “We help resolve those problems and show clients how to maintain a high level of internal controls with their current resources.”

Extreme Measures

Some businesses are calling consultants for help when they’re falling apart.

“When companies are extremely troubled, we provide reorganization advisory services, before the Chapter 11 filing,” said Theresa Drew, the regional managing partner of Deloitte. “We can actually assist with the process.”

CBIZ-MHM is seeing demand for tax studies — more than preparation, accountants study how businesses work and advise on research and development costs, foreign tax, and sales and use taxes, for example.

“We have a client company in the low-tech medical device business that was on a path to pay significant sales and use tax that they didn’t need to,” Landers said. “We were able to help implement strategies that will help them keep their earnings.”

And they are increasingly being included in recruiting new employees and analyzing if the existing staff is right for the business.

“Most people hire so poorly,” Landers said. “We have unique methods that avoid things like the halo effect, where in the first few seconds of meeting someone new they decide you remind us of someone they liked or didn’t like.”

Marty Graham is a freelance writer for the Business Journal.

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