The Office of Daniel P. Allen, CPA

Not just "data entry" Tax Preparers or Financial Statement Preparers. Making Your Business or Personal Tax or Accounting Situation Better: Those of you have seen the movie 'Office Space' undoubtedly remember the two consultants (both named Bob) who came in and interviewed everyone at the company to keep their current jobs as part of an project to improve efficiency. “The Bobs” ended up recommending firing the competent workers and suggested promoting the main character in the movie after he told “the Bobs” (as a result of a therapy session gone terribly wrong) that he purposefully came in late daily, spent quite a bit of time staring at his desk, did barely enough to keep from getting fired, and admitted he did only fifteen actual minutes of work a week. This movie (a must-see for anyone who has ever been employed), of course, is a satire about corporate life in general as well as “consultants.” Recently, this author explained to someone that this Firm provides Management Advisory Services. Basically, this is consulting. Some claim that people who can't obtain “real” employment call themselves consultants. Certainly, there are individuals who hold themselves out to be consultants who add little value, or worse, take value away, from their clients. However, who knows your business better than your CPA? As a CPA, this author may know more about his clients' business and financial situation than the owner or CFO does. How can this be? First, many business owners, especially small businesses, start out with an owner who possesses a skill or talent that he (for simplicity, I will use “he” although this applies equally to women as well) thinks others will pay for. Let's take the example of a plumber. The plumber finds himself working for a plumbing company and notices that the company charges its clients an hourly rate much more than he is paid per hour. So the plumber decides he will go into business for himself. His reasoning appears sound; he can cut out the middleman (the plumbing company) charge the same price as his former employer and keep the additional revenue. However, our plumber soon finds himself broke. How can this be? He is bringing in more revenue than before and, presumably, his personal spending habits have not changed. Although our plumber is great at what he does, he is not necessarily great at running a business. He forgot to consider startup costs (a van or truck, licenses and permits, insurance, tools, etc.). Moreover, he knows virtually nothing about keeping accounting records or analyzing key performance indicators (various measurements of a business' “health”). Next, this Firm has many clients. Although the Firm's client roster consists of a diverse base of clients in many industries, we likely have more than one client in any particular industry (at a minimum the CPA Code of Professional Conduct requires the CPA to fully understand a client's business or profession before performing any work for the client). Thus, we have the ability to see what works and what doesn't in many fields. Finally, a good CPA knows that numbers can tell a story. This author can look at a complete and accurately prepared set of financial statements and ascertain whether the business has customer service problems, collections problems, pricing problems, and even potential problems with employee morale. A good CPA will ask “Why?”. If the “refunds” account is particularly high compared to revenue for the industry, it may be indicative of customer service problems. However if we add to that the fact that payroll is low compared to revenue, we may consider that customers are generally happy, but are often issued refunds because the plumber has too much work to handle timely and thoroughly and needs to hire more help. This is merely one very simple example of how a CPA can highlight potential “non-accounting” problems. Sometimes a business seems to be doing well, but it isn't making any money. Small businesses are disproportionally affected by fraud. Suppose you sell a product for $1.00. The product costs the business $0.75. If an employee steals one product you must sell four products (the gross profit on each product is $0.25) to make up for the stolen merchandise. This doesn't even take into account your business' overhead. Suppose the product sells for $1.00 and costs the business $0.95. In the example above, the business must sell twenty products to cover the loss (not including overhead). A good CPA (and incidentally one who has been trained by, and is a member of the Association of Certified Fraud Examiners, as is this author) can often detect potential fraud by looking at the numbers. Of course any good CPA will conduct a “walkthrough” of the business at the beginning of the engagement to determine how the particular business operates. Finally, many businesses (although tempting to say small businesses, this applies to many large businesses as well) do not have adequate backup of records. What if the box the business owner keeps receipts in is ruined in a flood? What if the hard drive on his computer crashes? What if he forgets to save his spreadsheet after entering a few week's worth of data? A CPA who has experience and has been trained as a forensic accountant (as has this author) can help a business reconstruct accounting records from third party records and other data recovery methods. Is your business maximizing its potential? Is your current CPA or accountant simply providing data entry services to prepare your tax returns and possibly generate financial statements? Does your CPA or accountant ask “Why?” This author is very good at what he does. However, he is not knowledgeable about cars. There are many service stations that provide oil changes. Some will simply change the oil inexpensively and send the author in his way. However, this author patronizes an establishment that, while changing the oil, explains (in terms this author can understand) any other problems apparent with the car and provides advice as to whether the problem requires immediate attention or is something that can be safely fixed at a later date. Sure, the latter establishment charges a few dollars more, but in the long run is is cheaper than an accident on the highway due to a “bubble” in the side of a tire, or replacing the engine because of an oil leak. If you are not an accounting expert, don't let your personal or business situation “blow a tire on the highway” or “seize up due to a slow oil leak.” Contact The Office of Daniel P. Allen CPA. The Office is a Registered CPA Firm, but we can be so much more. If acting as your accountants, (or in conjunction with your current accountants) we can seamlessly provide consulting services. If your employees see us coming, tell them not to worry. We're not “the Bobs.”