Case Study—A Unique Consulting Engagement

Source: Journal of Accountancy

We selected this article because it describes one kind of client relationship necessary for future success as technology and globalization diminish the CPA’s traditional functions.

Lacher MacDonald & Co. in Seminole, Florida, fired a client for nonpayment. Two years later the client came back to ask for help with a colossal new opportunity. The company had been selected as a provider to a “big box” store. The revenue from this business would increase its volume by a multiple of 10.

Lacher MacDonald accepted the engagement and here is what they did:

• Met four times a week to help prioritize and control activities.
• Negotiated with the major supplier who would not provide credit unless the accounting firm collected the receivables and made disbursements directly to the supplier.
• Helped prepare a quarterly narrative and financial report to a group of local investors who provided capital for the project.
• Helped negotiate a lease for more warehouse and office space.
• Recommended hiring an accounts receivable person to deal with and resolve problems in collections from the big box customer.
• Recruited a controller.
• Visited the supplier several times to alleviate its fears. It helped the supplier realize it had to make a risk/reward evaluation, and assured the supplier the transactions were handled in a straightforward and businesslike manner.

Lessons learned:

• Communicating with financers, suppliers, and others on behalf of clients is an important CPA firm service.
• Good controls and reporting are best achieved by helping clients find the right people.
• CPA firms can act in a fiduciary capacity to collect and disburse funds (a proper legal agreement is needed to protect the CPA firm).

From Journal of Accountancy, March 2007. For the complete article, click on the following link: http://www.aicpa.org/pubs/jofa/mar2007/index.htm and select Economies of Scale in the March 2007 issue.