Business leaders of many privately owned companies often face an overwhelming volume of accounting and financial data. This flood of information can obscure a clear understanding of their organization’s full financial profile, leaving them flying financially blind.

Common challenges include:

• Information overload: Leaders struggle to interpret big-picture financial results from excessive data.
• Too much detail: Financial and accounting reports often dive into considerable details, bogging leaders down in “financial weeds.”
• Decision-making effect: Without a clear financial profile, leaders lack the foundation to best evaluate results and to make the most informed decisions possible.

This gap presents a significant opportunity for CPAs to step in and deliver clarity through what I call “Financial Fundamentals” — concise, relevant insights that enhance decision-making.
The difficulty, time and cost of procuring third-party capital leaves many privately owned companies thinly capitalized, making the need to understand and monitor their full financial profile essential.

They are susceptible to both the positive and negative effects of fluctuations in operating earnings and cash flow, as well as their related impact on capital components, including liquidity.

The opportunity for CPAs

CPAs are uniquely positioned to address this critical need. By leveraging their expertise, CPAs can condense complex financial data into meaningful FF that:

• Simplify critical insights.
• Strengthens client relationships.
• Differentiates their services in an evolving and competitive market.
• Adds value to their firms.

CPAs who want to deliver Financial Fundamentals should consider the following framework: 

1. Define FF: Identify the most critical financial insights, such as cash flow, operating earnings, and capital components.
2. Calculate FF: Extract these insights from existing, readily available data.
3. Summarize FF: Present insights clearly and concisely, using formats that are easy for clients to understand.
4. Report FF: Communicate findings effectively, ensuring clients can act on the information provided.

In complex situations, keeping things simple often leads to the best outcomes. A timeless principle to remember: Simplicity is the ultimate sophistication.

By mastering Financial Fundamentals, CPAs can position themselves as indispensable advisors.

The value of FF

For business leaders, here are the values of FF:

• Clarity and confidence: Business leaders gain a simplified yet comprehensive view of key financial elements, including their trends and drivers, fostering informed decision-making and peace of mind.
• Enhanced Tools: FF strengthens existing KPIs, dashboards, and operational reports for a well-rounded financial framework.

For CPAs, the value of FF includes:

• Market differentiation: They position CPAs as innovative, client-focused advisors.
• Consultative services: They increase opportunities for consulting engagements.
• Professional growth: They expand expertise and deepen client engagement.
• Business success: They help CPAs strengthen relationships by providing insights that are often overlooked or underreported.

In short, Financial Fundamentals play a pivotal role in monitoring performance, evaluating business health, and facilitating communication with stakeholders.
A winning analogy: Football fundamentals

Success in football hinges on mastering fundamentals like blocking and tackling. Similarly, business success depends on strong Financial Fundamentals. 

Football coaches who emphasize these basics enhance their teams’ performance and their own careers. Similarly, CPAs can further empower business leaders by providing and teaching FF.

Like a football team, a business might succeed without strong fundamentals, but their ability to thrive is significantly reduced. Without fundamentals, the likelihood of undesirable outcomes increases.

CPAs have the expertise and cross-professional relationships to deliver this critical guidance. If you don’t provide Financial Fundamentals, who will? Your competitors?

Call to action: Delivering Financial Fundamentals

Every aspect of life and business improves when fundamentals are prioritized.

Business Financial Fundamentals are essential across all stages of a company’s lifecycle, whether it is a startup, in survival mode, experiencing growth, or planning an exit.  

As the name suggests, Financial Fundamentals are just that: fundamental. They form the bedrock of succinct and understandable financial comprehension.

Despite significant investments in accounting and financial reporting, many organizations lack succinct and understandable FF. This gap creates a prime opportunity for CPAs.

Key actions for CPAs to take include:

1. Simplify reports: Use plain language, reduce jargon, and focus on what truly matters.
2. Collaborate with stakeholders: Engage with bankers, clients, and other business leaders to gather diverse insights and build advocacy.
3. Focus on core financial concepts: Highlight critical areas such as cash flow, operating earnings, and capital components like financial health, value, and borrowing capacity.
4. Condense insights: Summarize FF into a single, digestible report.
5. Host workshops: Share expertise through case studies and training sessions, reinforcing the value of Financial Fundamentals.

Why now?

Financial Fundamentals is a relatively new concept, meaning there is currently minimal competition in this space. CPAs who embrace it now can:

• Dominate their market.
• Build a reputation as innovative, indispensable advisors.

By prioritizing Financial Fundamentals, CPAs further empower clients while elevating their professional standing. 
With FF, CPAs can drive client success while cementing their role as indispensable advisors. Mastering Financial Fundamentals is not just an opportunity for CPAs — it’s a necessity for staying ahead in an ever-evolving and competitive landscape. 

The question isn’t whether to embrace Financial Fundamentals, but rather: When will you start?