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Deeper Weekend 2014

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REFM -  Adrian Photo Square - CATOBGreat things can be accomplished by teams. And the best teams are made up of players who have unique roles that mesh and multiply their teammates.

 

What is the unique role of the CPA? The thing we bring to the table of business?

 

I propose that CPAs should own the “profit equation” – that it be our domain.

 

*****

 

Revenues – Expenses = Profit.

 

It’s a pretty simple formula really. You wouldn’t think there’d be a whole lot to it. Though we see again and again how it is misunderstood, mis-tracked, not planned for, not re-evaluated, and not evolved.

 

When I think about the profit equation, I think about its different dimensions:

 

—Design: The entrepreneur has the spark, the drive, the conviction. But the CPA can take that energy and channel it into a profit equation that works — taking the raw material of the entrepreneur and giving it form in a viable economic design, including identifying the assumptions and risks that need to be true for it to work.

 

—Populate: As a business enters into the day-to-day, it needs to capture and populate its systems with transaction data. This could come thru write-up and bookkeeping, automated entry, interfacing financial systems, and more. The point, though, is that the profit equation design has to be populated with real data.

 

—Monitor: Raw data is being accumulated constantly, but eventually it needs to be interpreted and understood. What is it telling us? Is our design working? Are our design assumptions proving true? Are there unexpected phenomena arising?

 

—Update: The step beyond monitoring is design updates. If the assumptions aren’t working out, design changes need to be made. And if the assumptions are working out, the principles of entropy eventually take hold: every business will need to adapt and evolve over its life. Revisiting and re-thinking will always be a part of every healthy business.

 

—Report: Both internal and external parties want to know, and sometimes they want assurances about what they’re seeing too. Presenting the equation to others in a way they understand enables decision makers. And the more complex the system, either in number of components or in degrees of separation of data from decision maker, the more integrity must be added to the equation presentation.

 

****

 

So there it is. The profit equation from start to finish. CPAs play a role in each step, sometimes more than one, but there’s always the common theme. It’s easy to get hazy as lines are blurred by modern developments, but the core remains.
And the core is ready to move to the next level in the coming years, under your hands.

 

Adrian G. Simmons is a CPA innovating ways to put money in its place. After working as an auditor out of college for KPMG, he joined his father in public practice in 2002, and now acts as the Chief Creative Designer there. With the team, he looks for ways to help their customers become financially strong, so that they can focus on what truly matters in life. Adrian likes tech, uses a fountain pen, successfully attempted a half-marathon (and may try another), and prefers dark over milk chocolate.

Category:
CPA firm
Comments:
5
  • On 10-06-2014 at 3:27 pm, Michael Wall said:

    Elegantly written Adrian.

    Reply
    • On 10-06-2014 at 3:43 pm, Adrian G. Simmons said:

      Thanks Michael! 🙂

      Reply
  • On 10-08-2014 at 12:42 pm, James Johnson said:

    I agree that the CPA should own the profit equation, but I also see a challenge here. It seems to me that organization managers and business owners see the value in monitoring, updating, and reporting. So unless I, as a CPA, can sell the value in the populate piece it either never happens or it happens poorly.

    Since the last three dimensions build on the second dimension we enter a situation where unless we do a good job of selling the value of populating the data accurately, the equation we own diminishes in value.

    Reply
    • On 10-14-2014 at 3:48 pm, Adrian G. Simmons said:

      Hi James! I think you’re right: our ability to help customers “monitor” and “update/adapt”, are based on having info to begin with. And customers typically have a hard time getting excited about the “populate” part.

      A way I’m finding that addresses this gap, is to go one step further back: the “design”. When I’ve been able to bring my customers into the design stage, they see its potential, and then they’re ready to make sure the “populate” happens, so we can do the “monitor” and “update/adapt” to head them towards their goals.

      The other way I’ve been able to illuminate the importance of populate, is when customers ask “professional opinion” questions, and I’m unable to give an adequate reply, because there’s not good numbers to make those decisions from. I point out that with the context of where we stand and how we’re doing, we can make much better judgments about what makes sense, and what to do next. This has hit home for a number of folks, and given them the impetus to go thru the design stage on forward.

      Hope that helps, and thanks again!

      Reply
      • On 10-14-2014 at 3:55 pm, James Johnson said:

        Thanks Adrian!

        If it’s OK, I’d love to keep this conversation going because I think I and maybe others can learn a thing or two.

        When you say design the profit equation, I assume you’re talking about more than just setting up an accurate charge of accounts. What exactly do you mean?

        Reply

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