CPAs to the Rescue: Aiding Financially Distressed Clients

Source: CPA Trendlines

Following are excerpts from a May 10, 2010, blog post by Rick Telberg, reproduced with permission.

The economy may be at fault for many of the latest business failures. But blaming the economy won't turn around a company in trouble; recognizing the problems and taking swift action could. That's where CPAs can help.

According to turnaround specialist Katie S. Goodman, CPAs are in a unique position to aid troubled businesses, sometimes even before it becomes too late to save them. "Stepping back," she says, "CPAs can see the issues in a business," such as uncollectible accounts receivable, bloated inventories, stretched accounts payable and breaches in lending covenants. "It's an opportunity," she says, "to truly add value."

It's especially important for the CPA to dig behind the numbers of financially distressed clients for two reasons in particular:

• Financially distressed companies are more likely to produce fraudulent financial statements.
• If a client is in financial distress, or insolvent, the CPA is unlikely to be paid.

So what should CPAs be doing about it? "As always," Goodman says, "they should be stepping back from the data and be good advisers to companies and company owners. In a 'trusted adviser' role CPAs are invaluable in guiding companies to success. Who else has regular access to financial data and can make that objective assessment?"

To read the entire post, click here.

From CPA Trendlines, http://cpatrendlines.com, May 10, 2010, "Be a Hero, Not a Chump."