Summary of Management Consultancy

CHAPTER 1: OVERVIEW OF MANAGEMENT CONSULTANCY SERVICES BY CPAs Introduction to the World of Consulting * Consultants are not all CPAs. Anyone can be a consultant. However, to prosper in consultancy, one has to have the expertise. The most compelling nonmonetary reasons people enter the consulting field are: 1. Sharing their knowledge to help their clients. 2. Building business network and take a step up in one’s corporate career. 3. Having no boss, being independent and making their own decisions. 4. No fear of being laid off. 5. Having a flexible source of income. 6. A means of giving back to the community by providing expertise and assistance in community-based projects. Evolution of MAS The primary factors that contributed to the emergence and growth of management consultancy are: 1. Growth in size and complexity of business. 2. Difficulty in conducting and managing a business. 3. Greater competition among businesses so that new management techniques will have to be applied. 4. Recognition of the importance of accurate and timely information in decision-making. 5. Inability to have a complete line-up of professional management. Developing Trends Management consultancy now specializes in information systems, automated offices, financial analysis and modeling budgeting and cost controls, organization structures, personnel compensation, strategic planning and a host of other areas. * Another trend has been the improvement of business education. * The quality undergraduate and graduate programs in business are producing better-trained entrants into the ranks of management consulting profession. As a result of this infusion, management consulting is becoming a catalyst for advancement of better management concepts and techniques. Technological developments have occurred at a breathtaking pace in such areas as information sciences and decision sciences. * Computer hardware and software, together with data communication and robotics represent powerful tools for business management. Future Prospects A veteran management consultant makes the following predictions: 1. Management consulting will become even more specialized. 2. The consultant’s orientation will be towards being an insight-provider, creator and sharer of information. 3. Management consulting firms will tend either to remain small or to become quite large. Small firma will prosper by focusing upon narrow areas of specialization while large firms will have to develop and offer a wide range of services to sustain their high costs of operations. 4. As consultants grow in number, they will develop more sophisticated means of marketing their services. 5. Bright graduates of accounting, management and business schools will continue to be attracted to careers in management consulting. The Consulting Industry Most definitions of consultancy would include: . Information technology 2. Consulting and system integration 3. Corporate strategy 4. Operations management 5. Human resources management 6. Outsourcing The Main Types of Consultant Firms 1. IT Firms (for example, IBM’s purchase of PwC Consulting) – to increase revenue 2. Accounting firms offering consultancy 3. Major Consulting Only Firms 4. Independents Professional bodies such as PICPA off er professional training and accreditation and provide a forum for all-important networking. Career in Consulting Firms (in ascending order of seniority) 1. Analyst – responsible for gathering information and processing it for the consulting team. 2. Consultants – undertake the evaluation of the client business and make recommendations on its behalf. 3. Senior Consultant or Managers – more experienced consultants that have the responsibility of leading a consulting team. – would typically have 3-5 years of consulting experience. – would be more involved in dealing with members of the client team. 4. Business Development Managers – are responsible for developing the firm’s products and building its relationship with clients. would be involved in some large, complex consulting projects at a strategic level. – most would have 5-10 years of consulting experience. 5. Directors (or Partners) – are the most experienced consultants, who take on responsibility for the development of the organization as a whole and who lead its strategic development. – would maintain contacts wi th senior personnel in the client companies and would have overall responsibility for projects. – would have 10+ years of consulting experience. Nature of MAS by Independent Accounting Firms Management Advisory Services (MAS) by independent accounting firms can be described as the function of providing professional advisory (consulting) services, the primary purpose of which is to improve the client’s use of its capabilities and resources to achieve the objectives of the organization. Management Consultancy can also be described as an independent and objective advisory service provided by qualified persons to clients in order to help them identify and analyze management problems and opportunities. 2 types of encounters with clients: . Consultation- providing advice and information during a short time frame. The advice will be definitive when the consultant is fully aware of the situation and possesses sufficient expertise to require more intensive study or investigation. 2. Engagement- consists of that form of management advisory or consulting service in which an analytical approach and process is applied in a study or project. This approach typically involves: a. Ascertaining the pertinent facts and circumstances b. Seeking and identifying objectives c. Defining the problem or opportunity for improvement d. Evaluating and determining the possible solutions e. Present findings and recommendations f. Implementing the solution, if appropriate And following the client’s decisions to proceed, the independent accounting firm may also be involved in: a. Planning and scheduling actions to achieve the desired results, and b. Advising and providing technical assistance in implementing In combination with knowledge and experience in such areas as: a. Organization and management methods b. Office and management functions c. Systems and procedures d. Data processing methods e. Quantitative methods f. Financial management To produce solutions such as: * A management information system * A sales reporting system * A cost accounting system * A work measurement program * Improved production control * An organization plan with statements of duties and responsibilities, or * An electronic data processing system Rationale of Using Management Consultants A management consultant is hired for at least four valuable reasons: 1. Independent Viewpoint This enables him to see the true nature of the problems and distinguish between feasible and infeasible solutions. Since, he is not involved in the internal policies of his clients, his suggestions are considered unbiased. 2. Professional Advisor and Counselor Business firms generally prefer CPA consultants because of their academic training and examination requirement for the CPA certificate. 3. Temporary Professional Service The use of consultants will be probably less expensive to the company than hiring new managers or employees to provide professional advisory services. . Agent of Change In providing solutions to the client’s problem, changes may have to be made to the organizational structures, to procedures and to job responsibilities. Independent Accounting Firm’s Role in MAS â€Å"To provide advice and technical assistance which should provide for client participation in the analytical approach and process. Specifying this as the proper role recognizes both th e appropriate place of MAS and the realities of practice. This is the only basis on which the work should permit it to be done. * The accounting firm should avoid making management decisions or taking positions that might impair the firm’s objectivity. CPA’s Objective in Engaging in MAS â€Å"To utilize the essential qualifications it has available to provide advice and technical assistance which will enable client management to conduct its affairs more effectively. † Essential Qualifications: 1. Technical competence 2. Familiarity with the client’s finance and control systems and his business problems. 3. Analytical ability and experience in problem solving. 4. Professional independence, objectivity and integrity.