Using Analytical Tools

Source: Practical Accountant

Business analysis software can be used for value-added services in many applications such as:

• Risk-based auditing—relies on analyzing financial information—helps develop and compare expectations to actual performance.
• Analyzing financial statements and projecting the impact of various changes on the business. For example, assessing the impact of growth on capital needs, margins, cash flow, etc.
• Analyzing customer profitability—using data about returns, order size, emergency order fulfillment, sales costs, etc.
• Break-even analysis.
• Ratio analysis.
• Capacity utilization.
• Regression analysis.
• Benchmarking against internal and external data.
• Managing accounts payable—measuring cash flow impact of slightly extended trade credit.
• Improving collections—measuring cash flow impact of faster collections.
• Analyzing inventory turnover.
• Executing profit improvement plans.
• Providing data on key performance indicators.
• Determining and analyzing profit centers.
• Presenting to prospects—using a prospect’s financial information in a presentation is infinitely more impressive than simply explaining the service.

Using analytical software can facilitate fixed-price value billing for services—fees can be set for different aspects of the service. For example, one fixed fee can be charged for a goal-setting project and another set for a diagnostic project. Rates can often be set at 150 percent to 200 percent of standard hourly rates.

These vendors provide business analysis software systems:

From Practical Accountant, March 2007, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809. For the complete article, click on the following link: http://www.webcpa.com/current_issue.cfm?pub=prc, then select March 2007, then select Business Analytics in High Gear.