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From The Business Ledger, October 30, 2006

What is the difference between a public accountant and a financial management consultant?

Or, to put it another way, a client might ask, “Since I have a public accountant, why do I need a financial management consultant?”

Maybe you don’t.

Is your business stable and achieving your profit expectations? Do you have thorough, accurate and timely financial and operational information that allows you to run your business effectively? Are you confident in your strategic plan? Do you, yourself, have a financial background, or have you already taken the steps to invest in an experienced and skilled financial manager/leader?

If the answer to these questions is yes, you probably do not need a financial management consultant. If not, you may want to consider one.

Before we look at the difference between a public accountant and a consultant, let’s establish their similarities. Both have an accounting education. Both make their living dealing primarily with company finances. Both may or may not be Certified Public Accountants (CPA).

The differences begin with what they have done since they received their accounting education. The public accountant may have worked as part of management in private industry, but his primary work experience should be in audit, tax, and the other services performed by public accountants.

The consultant may have worked as a public accountant, but his primary work experience should be in financial management in private industry.

The skill sets are related. They definitely overlap. But they are not identical.

Furthermore, the perspective is different. A consultant works most effectively as part of the client organization. A public accountant, at least with audit clients, must maintain a degree of independence from the client company’s management and management’s decisions.

Most people are familiar with the services public accountants perform. Here is a list of the most common ones. Not all public accounting firms perform each of these services, but they all perform some of them.

  • Audit company books and records
  • Provide advice on technical accounting issues
  • Prepare tax returns
  • Provide sophisticated tax planning and strategies
  • Prepare annual, quarterly, or monthly financial statements
  • Assess internal controls
  • Contribute to strategic planning
  • Participate in acquisition planning and due diligence
  • Perform special projects
  • Perform bookkeeping functions for client companies

A consultant may perform some of these services for his clients, but you would not hire him to perform your audit or provide you with sophisticated tax advice.

You might, however, hire a consultant to provide certain skills and knowledge that you do not currently have in your organization. This skill and knowledge can fill a short-term gap, or provide financial management/leadership over a longer period. An effective use of such a resource is as a part-time CFO or controller (depending on your company’s size), thus postponing the need to fill that position on a full-time basis.

A skilled financial management consultant will provide assistance and guidance in most, if not all, of these areas:

  • Assure accurate accounting and timely reporting
  • Modify/develop systems, policies and procedures
  • Develop strategic business plan
  • Identify your business success drivers
  • Develop system to measure results against success drivers
  • Develop growth plan
  • Identify and improve process efficiencies
  • Train existing staff
  • Assist with simple tax planning
  • Develop budgets and forecasts
  • Develop treasury plan and manage banking relationships
  • Assess/modify internal controls
  • Plan acquisitions, perform or direct due diligence, negotiation, assimilation

Just as the skill sets overlap, so do some of the services. Though the overlapping services may be the same, there will be differences in perspective.

For example, if your public accountant has the requisite experience and creativity to offer strategic planning as a service, he may be able to do so with more objectivity as an outsider. On the other hand, the consultant (who should have significant related experience as part of corporate management) should be in a position to approach strategic planning as more of an insider, bringing more familiarity with the company to the process.

If you decide to bring a consultant into your company, make your selection carefully. Each one has a unique set of skills, experiences, and capabilities. Your level of commitment is not as high as if you were hiring an employee, but this is a key position within your organization.

Though your consultant should come with a broad skill set, there will still be an investment on your part as he learns about your company. The more a consultant knows, the more insightful and helpful he will be. Facts and conditions that may seem disparate to you may help him connect dots that will lead to solutions and improvements. If your company is to receive the greatest benefit possible from this arrangement, it is important that you open your books, records, employees and thoughts to him.

That leads us to one more issue - trust. Of all the things you must consider before bringing in a financial management consultant, none rank higher than trust. But you would not be where you are without being a good judge of character. Go with your instincts. Get a non-disclosure agreement. Then trust your new consultant with the information he needs to help your business become bigger, more efficient, and more profitable.

Do you need a public accountant, a financial management consultant, neither, or both? Ultimately only you can decide.
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