Analyzing Financial Statements: How CPAs Can Deliver Value

by Dr. Sean Stein Smith, CPA, Lehman College – November 8, 2017
Analyzing Financial Statements: How CPAs Can Deliver Value

Financial statements may not seem like the most exciting topic or concept in the business landscape, but these financial documents contain critical information about a business or organization. Whether a CPA’s daily work includes preparing audited financial statements for external users or delivering information and data to senior management professionals, there are several core principles that remain consistent. Business decisions are driven by quanti­tative information, and the fundamental information that drives the conversations of management involves the financial perfor­mance of the organization.

As the accounting profession and, more specifically, the tasks performed by CPAs continue to be disrupted, interrupted and otherwise upended by technology, artificial intelligence and analytical tools, it is more important than ever for CPAs to differentiate themselves. The CPA credential and, increasingly, the CGMA designation, are well known and estab­lished as standards of excellence in the accounting field. Even with such excellent support and standards, it is imperative for accounting professionals to contin­uously think of new ways in which they can deliver value. As the shift continues from record keeper to business advisor and partner, it is becoming increasingly important for accountants to not only produce accurate deliverables, but to also provide action-oriented information based on this data. While the following points are not meant to be all encompassing, hopefully they serve as a foundation upon which CPAs can deliver increased value from reviewing financial statements.

Understand The Trends

All too often, financial statements are backward-looking documents that focus on information and events that have already occurred. The ability to analyze financial statements is embedded in every CPA, but the capability to discuss and analyze trends impacting the corporation can set you apart from the competition. Even better, if accountants are able to cover and explain these trends, this opens the door to higher-level decision-making opportunities.

Explain the Business Case

With all of the technical education and training CPAs receive, it is easy to rely on technical definitions and terminology to explain certain issues. That said, it should be relatively easy to understand how such technical terminology and explanations might result in the accounting function being relegated strictly to a back-burner role. Focusing on the business case, understanding what the end users want, and delivering this information in formats that are useful to end users are fundamental ways that CPAs can increase the value of accounting information.

Make Technology Work for You

There are virtually endless articles being written on the importance of technology, analytics, artificial intelligence and the implications that these factors will have on the accounting profession. While there may be some segments of the accounting population that treat these changes and development as threats, they really do add a lot of potential to the financial statement analysis process. Whether a firm or individual uses a plug-and-play analytics package or makes use of functionality in a larger enterprise resource planning (ERP) program, the implications are similar. Drilling deep into the data, comparing and projecting current performance versus a host of factors, and updating said reports in a real-time manner are great tools and options.

Analyzing financial statements, and the creation of reports based off of these analyses, form a large chunk of what many CPAs do on a day-to-day basis. Instead of treating this activity as simply another reporting function, accounting professionals should also focus on the value of extracting and reporting better information. Establishing such a mindset can assist CPAs in not only performing existing roles well, but also allow them to participate in higher-level decision making. 

This article appeared in the November/December 2017 issue of New Jersey CPA magazine. Read the full issue.