Case Study


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CASE STUDY
Benchmarking at Moss Adams

Neal Wests firm, Moss Adams LLP, began doing benchmarking engagements some 10 years ago, with a pick up in frequency over the last few. West, the firms director of business assurance, is a member of the performance measurement task force of the AICPA assurance services committee, and hes ready to help other firms understand what these engagements are about and how to perform them. He told the Journal about some of his firms experiences.

The original and still popular service starts with a cost of doing business survey for a trade association (for example, an association of marinas or fencing contractors). The association is the client, and its members, the subject of the survey, are the users of the information. The survey allows Moss Adams to create a set of "common size financial statements" based on financial data from all the surveyed members. Association members can compare their performances to the industrywide performance. The engagement sometimes calls for stratifying the collective data by size of the surveyed entities into three or so sets of financial statements. Association members can compare their performances to the average for the industry or to the group they are closest to within the industry.

Sometimes the survey is used to gather nonfinancial performance data—typically, market, process or workforce data. But the purpose, again, is benchmarking. Another variation is to measure the performance of the top-performing segment of the industry. The data set a standard for association members: they know what is possible and can set targets. Associations can distribute the performance measures to members or provide them for a fee.

The intended use of the data by the associations is always clear when the engagement terms are settled. Many clients know what they want, but Moss Adams always considers what is best for the clients members and will work with clients during engagement negotiations to arrive at what will be of most help. In those cases, Moss Adams is designing the engagements with clients by exploring their needs with them.

Moss Adams is doing a growing percentage of its benchmarking for individual firms. Why? Because not all firms fit neatly in an industry category. They may be uncommon in size or have unique geographic characteristics, for example. Moss Adamss Xemplar process, now under development, is designed to set a standard that individual firms or associations can use in such circumstances. Xemplar does not produce an average or an ideal, but an exceptional example, created in part from experts views, against which a company can measure its operations.

West believes CPAs have the basic competencies to do this kind of work. They are skilled in financial analysis and use these techniques regularly on audits. What they need to do is use those analytical skills to create measurements clients can understand and to follow this up with assistance in helping clients improve their operations. Follow-on consulting services of this sort are a very important part of the assurance package, both in terms of benefits to the client and in terms of fees.

West give this example: Suppose benchmarking shows that personnel turnover is adversely affecting sales and customer retention. Moss Adams would analyze the causes and help the client improve. As West puts it: "Were asking, Where are they? Where should they be? And why arent they there? Then we help them get there."

CPAs need to have a rich understanding of their clients businesses and industries in order to do this work, but that is not a new type of demand on them. Basic analytical tools are taught in staff training at Moss Adams, and a synergy exists between analytical reviews that strengthen the audit and the analytical work needed to deliver benchmarking.

"Its a service that meets clients needs and fits well with our skills base," West concludes.

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