A large number of small businesses are discontinued each year because of poor planning. CPAs already perceived as important advisors can help their clients avoid problems and develop their own industry expertise by using the vast resources of the information industry.

The Journal of Small Business Management (October 1989) published a study by David H. Gobeli and Mary Alice Seville that discussed several ways for CPAs to improve client-related services. Concerned about "the alarming rate of small-business failures each year," Gobeli and Seville set out to examine the CPA small-business interface and the usefulness of everyday business information to the small-business owner. The researchers believe that the basic cause of business discontinuance has been ineffective planning--a "failure syndrome that is fueled by a critical, unmet need for usable accounting information." The study attempted to identify the "unmet needs of small business in the area of decision-making."

Gobeli and Seville wrote "there appears to be a gap between what is needed and what is available from firms." As a part of their study, they identified five services deemed valuable by the owners surveyed that CPAs could provide: 1) preparing business plans for established businesses; 2) preparing limited marketing plans; 3) providing general business consulting; 4) developing computer and management information systems; and 5) planning for business start-ups. All the services require in-depth knowledge of clients' businesses and the industries in which they operate.

In a small-business focus-group study conducted by my company, owners repeatedly said that one of the challenges they face in managing their businesses is knowing how to compete. They stressed the difference between "just plain competing"--for example, relying on low prices--and knowing how to compete effectively. Many of them said that one way they compete, regardless of industry, is by finding a distinctive niche in the market. Incidentally, one of the attributes they look for in a CPA is knowledge of their particular industry.

The know-how and experience of these owners offer some good ideas for CPAs. Becaue every industry has its peculiarities and eccentricities, learning the standards and practices of one industry (or a few) offers some obvious benefits to CPAs: improved productivity and efficiency of partners and staff, and attracting new clients through industry networking. Specific industry knowledge can also prove valuable in other aspects of practice. For example, during the course of an audit, a seemingly insignificant figure or piece of information may arouse an auditor's suspicion because it is inconsistent with the industry norm.

USING THE INFORMATION

EXPLOSION

The information explosion supports these new opportunities and related growth for CPA firms. CPAs can provide services that help clients access, interpret, and apply information to their businesses.

Today, everyone has access to enormous information bases through technological advances in the compilation, storage, and retrieval of data. Small and mid-size CPa firms need only a personal computer, a modem and a telephone line to access information sources that were once reserved for larger companies. Today's small businesses are having difficulty discriminating between nice-to-know and need-to-know facts about business, industry and technology, due to the enormous amount of available information. Business owners want counseling of what information is important to the running of their businesses and on how to use that information. They are simply too busy putting out daily business fires to be able to sift through the information and use it for planning purposes.

By investing some time and money to bring themselves up to speed with today's information souces, CPAs can use the resources now available to increase their understanding of their clients' industries, and position themselves and their firms to profit handsomely in the years ahead.

WHERE TO BEGIN

While small businesses are hungry for these services that accountants can provide, the question is, how do accountants develop the necessary expertise? A wide range of information resouces is available to bring you up to speed in developing industry expertise. Industry trade associations are the fast and easy way to learn about any specific industry. Their journals and commercially available trade publications provide topical articles; they often sponsor seminars and are the gateways to other sources of information. Trade associations are also an important source of statistical information for their industries and generally will share their data.

Another excellent source of information, often overlooked, is the press-clipping services. For a nominal fee, these services monitor the general and business press across the country (and often the international press as well), clip pertinent articles, and send them to you. Reading the clippings will help keep your firm current with industry happenings. Depending upon your contract with the service, you may be able to send copies to your clients, performing an additional service and letting them know that you are attuned to their concerns.

In addition to these basic beginnings, there are many services that provide the specialized information you need to serve your clients better and provide value-added consulting and other services.

INSTANT INFORMATION

Online information--information accessed electronically through your personal computer, supplied by information network services--is an excellent and efficient way to support new value-added consulting services. The world of online information provides a variety and depth of intelligence, no matter what your interest. The kind of information available ranges from commercially-published databases and information products to newspapers, periodicals, wire services, directories and even shopping services.

Once you decide that you'd like to tap into some of these specialized databases, all you need to do is connect you computer to a modem and subscribe to one or more online networks. The Cuadra Directory of Online Services, probably in your local library, will acquaint you with the information services available.

Because many of the databases offered by online networks are generally published by information providers or industry-related-entities, the quality of information is generally high. The network providers sustain their businesses by providing reliable information, and the database publishers themselves are quality-conscious and concerned about the integrity of their data.

COMMERCIAL SOURCES

You can develop your own capabilities to gather information from any of the publicly available sources (U.S. Department of Commerce, UCC filings, payment records, and trade information) or you can further consolidate your expertise-building efforts by using information from the commercial third-party information suppliers. The latter companies can help you conduct your industry and background research quickly and profitably because they have already done the homework for you. If you have any doubts about the cost-efficiency of purchasing information, you may find it reassuring to learn that even these companies sometimes find it more economical to obtain information from outside sources for inclusion in their files rather than develop it in-house.

For instance, if you're looking for industry ratios for comparison with your client's performance, you no longer have to rely on business ratios compiled from a local banker's perspective; you can get industry statistics from databases completed by financial information publishers that include some nine million U.S. companies. Information publishers have invested the bulk of their resources in data collection, and therefore, have significantly greater capabilities to collect, analyze, and produce the data. Non of this would have been possible just a few years ago, but recent innovations in information technology have made it possible for concerned information publishers to attain a previously unimaginable data quality. As the computer wizards continue to develop new capabilities, commercial information publishers will continue to intergrate these systems as part of their data-compilation methodology.

APPLYING INFORMATION

Industry-specific and financial information, available in many formats from public (government), private (trade associations), and commercial (third-party publishers) sources can support your business development efforts. These sources can help you learn more about clients' businesses and to serve them better when offering value-added CPA services.

Industry ratios can be ued to support your recommendations and identify areas of strength or weakness in which clients should consider reaction or change. Let us say that in the course of your engagement, you find that your client is converting inventory to cash only four times a year while available industry information shows that the industry standard is much higher. Your client's low performance could indicate that the right inventory is not being stocked, or that too much inventory is being stocked. Further investigation should reveal the cause and allow you to make a suitable recommendation to your client. Similar industry ratios can support your case when you advise your client that too much cash is being taken out of the business when compared to industry peers, or give you a better understanding of how your client's collection period compares to industry-wide experience. Perhaps your client must evaluate credit risks more carefully or institute a more effective credit policy. Whatever the specific problem, you can help your clients to understant the need for change by demonstrating your knowledge of their industries.

These examples represent only a few of the many possible applications of information available from third-party suppliers. As you become more familiar with available information resources, you will find many applications that can be useful in improving the efficiency and cost- effectiveness of day-to-day consulting.

TAKE FLIGHT

This artilce is only a brief overview of the information that is available and suggests just a few of the ways you can use today's resources to support and expand your practice. A key point to remember is that small businesses are hungry for sevices they want accountants to provide and you are perfectly position to leverage your knowledge to take advantage of the opportunities available. Because easy access to information has leveled the playing field for all involved--in order to provide value added services to your clients all that's needed is your own inspiration and a modest investment of resources.

John E. Partelow is Senior Vice President, Business Relations, with Dun & Bradstreet Information Services. Mr. Partelow currently works with advisors to small business, demonstrating the benefits of using D&B data in their management consulting practices with clients.