If you were the first in your market to introduce a new service that could make your clients’ lives easier and is cost-effective, then you would have a tremendous competitive advantage. And that’s exactly the position that CPAs in smaller firms are in today, now that the AICPA has unveiled the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs), a streamlined financial reporting option designed especially for private companies that do not require GAAP financial statements. FRF for SMEs represents a new opportunity to set you apart and become the local market leader in this new option for Main Street America. And it’s perfectly suited to the clients you serve every day.
What’s It All About?
This framework reinforces CPAs’ role as the trusted business adviser who uses the most up-to-date accounting tools and practices to provide information that is tailored to clients’ needs. It’s also market driven as small businesses and the CPAs who serve them have long been seeking more relevant, useful and less complicated information than they now receive. It offers clients exactly what they’ve been asking for: a cost effective, reliable, and simple method of accounting that quickly portrays what their business owns, what it owes and its cash flow. In addition, the framework has great credibility as it was issued by the AICPA and developed by a working group of experts from the CPA profession who have years of experience serving small and medium sized private entities and have a solid understanding of what users of private company financial statements need. It has undergone public comment and professional scrutiny, and incorporates significant feedback from CPAs, bankers and other relevant stakeholders.
How can you take advantage of this opportunity?
- Educate your staff. Start by preparing internally and using the plain English guide and other educational resources in the PCPS FRF for SMEs Toolkit to educate your staff. The toolkit includes comparisons of the FRF for SMEs framework to US GAAP and tax basis OCBOA to help staff understand the differences. Make sure that they are ready for any client questions that come their way and that they can appropriately articulate the value of this new framework.
- Review your client list. Identify owner-managed companies that have few or no external stockholders and don’t require GAAP financial. Also make note of those clients where you have experienced large writedowns. Consider how to mitigate these writedowns in the future by converting these clients to the framework, eliminating those items that don’t make sense to them and directly increasing your bottom line.
- Have the conversation. Prepare for client discussions by using the resources available to AICPA members on the AICPA dedicated FRF for SMEs site, including the PCPS FRF for SMEs Toolkit.
- Use the PowerPoint and short video to introduce the framework to clients in meetings and at events.
- Illustrative financial statements show how the new framework can simplify the financial information that informs their business decision making.
- Spread the word on your website, social media and newsletter with already prepared articles and letters informing clients of the availability of your new reporting service.
- Offer clients the special toolkit designed for financial statement users for them to pass on to their bankers, sureties and other users. (Your clients and their financial statement users have access to a variety of other tools, as well.)
- Spread the word. Join the AICPA in introducing FRF for SMEs to your local community bankers, insurers and others. As we work together to inform the marketplace, we can foster greater acceptance of the framework. Position yourself as an expert by including framework details in speeches you give to bankers, the Rotary or the local Chamber of Commerce. Be sure you let the audience know what’s in it for them and that the framework could mean great value for small and medium sized companies. Use these talking points in your conversations:
- Small businesses asked for change and we listened. Clients have struggled for years with the costs and complexities of financial statements that don’t satisfy their business needs. The framework was designed to address these concerns and frustrations.
- This is a plain English solution for your financial reporting needs if GAAP financial statements are not required. It will provide clients with easy to understand information that will be useful to them in their decision making.
- It will help clients avoid future sharp fee increases for pending changes in standards (such as the pending changes to accounting for leases and revenue recognition). They will not have to wrestle with expensive fair value valuations or lengthy footnote disclosures.
- The framework has undergone professional scrutiny and public comment is based on traditional accounting principles blended with accrual income tax methods, making it reliable and easy to apply consistently.
FRF for SMEs is yet another way to show clients that you’re on their side and that you’re looking out for them. As you work to make financial reporting more relevant, you’ll be able to not only attract new clients, but deepen your relationship with those whom you currently serve. And if you have a question, concern, or need more information, please contact me directly at firstname.lastname@example.org or 212/596-6039.
James C. Metzler, CPA.CITP, CGMA, is AICPA vice president, small firm interests.