Financial data isn’t enough – 3 Reasons why
When your vehicle’s gas tank is nearing empty, you generally have a multitude of gas stations to choose from. They all have similar offerings, so your choice is largely dictated by your location at the time and maybe the reward card you have for a certain chain. And while the price may be slightly different station to station, the discrepancy often isn’t enough to justify searching out the low-cost provider. Gasoline is a true commodity.
Typically, accountants are providers of data, and they perform that role very well. Financial statements are prepared accurately and in a timely manner, for example, year after year. But presenting clients with this good financial data is not usually enough to become an indispensable advisor to that business, and accountants will struggle to engage clients beyond required tax work. Without providing more value, a firm might seem, from a business owner’s perspective, to be “just another gas station” with a commodity product.
Why is financial data alone insufficient?
1) Financial statements can be confusing
Business owners may be intimidated by data and financial ratios, and financial statements can seem indecipherable. Usually, business owners can successfully speak the language of their business and of their customers, but financial jargon can seem like another language entirely.
2) Financial statements are historic
Financial statements are historically oriented, but business owners are largely focused on the future of their company. “Old” data may not seem incredibly useful to them at first glance.
3) Understanding financials requires time
Business owners may also see financial analysis as a distraction from the day-to-day operations of their company. They have to make ends meet and don’t have time to devote solely to financials unless there is an obvious return (and they may not recognize the return due to point #1).
To become a trusted business advisor, financial professionals must couple the delivery of data with interpretation and sound business advice. Your end goal should be helping clients understand financial statements rather than review them.