How CPAs Can Deliver Value Via Non-Financial Reporting
by Dr. Sean Stein Smith, CPA, Lehman College –
June 11, 2018
Tax reform, and the ripple effect of changes that are bound to be generated from the passing of this legislation, are already causing numerous questions, challenges and opportunities for individuals and business owners. As if that was not enough, the twin forces of blockchain and artificial intelligence (AI) are headline topics at virtually every accounting conference, show and exposition. Both technology platforms, independent of each other, have the potential to generate tremendous amounts of disruption for CPAs and their businesses. Clearly, blockchain and AI are in the early stages of adoption, but these are trends that CPAs should keep an eye on in 2018.
Technology changes aside, there is also increased interest in attracting new talent to businesses, and the growing importance of sustainability information to different stakeholder groups. These converging trends represent both an opportunity and challenge for accounting professionals. Many of the skills and competencies CPAs bring to bear, namely the quantifying, reporting and explaining of data, are in demand due to the increased availability of information. The challenge of this exact situation is that, while financial reporting and data attract most of the attention, non-financial and operational information are what create and drive those financial results.
Let’s take a look at a few of the things CPAs should keep in mind when reporting non-financial data:
- Figure out what matters to your stakeholders. Every business is different, and is driven by a unique set of operational information, so making sure to understand what stakeholders need is an important first step. Whether it is consumer information, compliance reporting, environmental issues or the return on business development projects, figuring out this first step is critical for making non-financial information understandable.
- Make it part of the conversation. Non-financial information is obviously important to every business, but it’s easy to lose focus when dealing with both the day-to-day operations and financial pressures of running a business. It is up to the CPA to keep this conversation going. Operations drive financial results, and if you help your company’s management team better run the business, that both helps the business and increases the value you deliver.
- Establish metrics and targets. One of the biggest challenges for non-financial reporting is a lack of metrics and standards, which make it more difficult to set a baseline or goals moving forward. Working with your colleagues to set goals means that everyone is more likely to stick to them and find ways to integrate them into financial decision making. While it may seem difficult to find a place to start this process, there are resources at your disposal. Don’t be afraid to use external sources at the AICPA or NJCPA level, and information at institutions like the Sustainability Accounting Standards Board (SASB).
- Communicate these findings to stakeholders. Non-financial reporting, and the findings that you are able to generate, can be used to differentiate your business in the marketplace. CPAs can leverage their background and expertise in creating non-financial reports to be a valuable member of the company’s management team.
Non-financial reporting is an area that may have not caught your attention in the past, but can differentiate you moving forward.
Sean D. Stein Smith
Dr. Sean Stein Smith, CPA, DBA, M.S., M.B.A., CMA, CGMA, is an assistant professor at Lehman College. He is a member of the NJCPA Content Advisory Board, Student Programs & Scholarship Committee, Emerging Leaders Council, Nonprofit Interest Group and Accounting & Auditing Standards Interest Group.
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This article appeared in the May/June 2018 issue of New Jersey CPA magazine. Read the full issue.