Using Financial Analysis to Focus Firm Strategy

Source: CPA Practice Management Forum

Using real-life examples, Gale Crosley demonstrates how analyzing a firm's numbers by service line or industry can help it identify opportunities or weaknesses. For example:

One firm's analysis showed a 20-percent spread in realization rates between two client groups using its employee benefit plan audit (EBPA) services. Although the firm knew that EBPA services were used as a loss leader for financial statement audit clients, it was unaware of how extreme the discounting had become.

Financial analysis by a leading provider of services to technology companies revealed that most of its revenue was coming from social-media-based clients. It used this information to redefine its market and focus its efforts on this important new sub-niche.

A firm's analysis of its audit practice indicated that its realization rate was 10 percent lower than that of its peers. Upon closer scrutiny, it uncovered audit inefficiencies and inconsistent methods in certain industries. Application of Lean/Six Sigma techniques improved realization rates for those industries.

For the complete article, read “Financial Analysis – Just the Facts.”

From CPA Practice Management Forum, Vol. 8, No. 10, January 2013, p. 10.