Harnessing the Power of KPIs: A Guide for CPA Firm Owners

By Julie Smith and Glenn Dunlap.

As a CPA firm owner, you understand the importance of delivering high-value insights to your clients. One of the most effective ways to do this is by discussing Key Performance Indicators (KPIs) and industry benchmarks. This not only provides your clients with a clearer understanding of their business performance but also strengthens your advisory relationship with them.

The Role of KPIs in Business Advisory Services

KPIs serve as a compass, guiding businesses towards their goals. They provide a quantifiable measure of performance, allowing businesses to assess their progress and make informed decisions. For CPA firm owners, understanding and discussing these KPIs with clients is a crucial part of the advisory process.

For instance, consider a business owner who is unsure about their accounts receivable days. If their AR is at 70 days while their industry peers average 35, it could be a potential red flag. However, if their cost of goods sold or compensation is significantly higher than the industry average, the 70-day AR might be financially acceptable. Without benchmarking against industry data, it’s challenging to understand what these numbers truly mean.

Leverage Technology

Compiling benchmarks, analyzing KPIs, and building forecasts used to be extremely time consuming without the right technology. Now there are technology solutions that automate this process and turn your client’s financial data into actionable insights, so CPAs and advisors can focus on strategic planning and analysis with the client rather than number crunching.

Leveraging technology to build ‘what if’ scenarios in minutes gives your clients data and direction they would have a very difficult time ascertaining on their own. For example, imagine showing a client who needs to reduce material costs the effect of this change over time, and some ideas for how to accomplish some of the improvements they need to make.

There is tremendous value in helping clients proactively understand potential outcomes of different business decisions.

The Importance of Mid-Year and Fourth Quarter Meetings

Mid-year and fourth quarter meetings are ideal opportunities to review your clients’ KPIs and benchmark them against industry standards. These meetings are part of being proactive, allowing you to identify trends and gaps and discuss strategies for addressing them.

As a business advisor, part of your role is to help business owners stress test their businesses under potential future conditions. What if you reduce staff? What if raw material costs rise 10%? These are key conversations to have during planning meetings.

The Power of Insights

At the end of the day, benchmarking gives you insights that help you advise clients. And insights lead to better decisions.

As a CPA firm owner, your role extends beyond just providing accounting services. You are a business advisor, a guide who helps clients navigate the ever-changing world of business performance and decision-making. By harnessing the power of KPIs and utilizing technology for financial planning and analysis, you can deliver higher value to your clients, strengthen your advisory relationships, and ultimately, run a more successful and profitable CPA firm.

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Julie Smith is the practice manager for Harper & Company CPAs Plus, founder of EmpowerCPA™, and co-host of the Empowering Entrepreneurs podcast. Glenn Dunlap is the founder and CEO of Peerview Data, a SaaS technology company that turns data into actionable insights.