77 thoughts about client needs

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by ed mendlowitz

this list is a guide to jog additional thought about a client’s business. i have done all of these, and, at some point, i started making a list to help me remember. i also used it to help staff choose a few items each time they performed services for a client as a value-added benefit to the client.

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the listing can also be used a guide for a separate engagement. either way, the emphasis should be to provide information to the client about their business that the client does not already consider, focus in on or know about.

everything on this list has been successfully done by me. this listing has been used by me and my staff for many years and has gone through many iterations. this is the first time this list has had material added to it that could be described as practice aids. i believe it’s pretty comprehensive and presents fully usable information that can be immediately applied to your clients.

any reader is welcome to contact me with questions, suggestions, additions or comments. email me at emendlowitz@withum.com with a brief subject or question and please include your phone number so i can call to discuss.

the checklist of checklists: 77-item quick-start guide


1. does client receive timely financial statements?

  • “timely” is a subjective term. the important thing here is that the books are maintained and are kept current. many clients can receive financial statements in real time with two or three clicks by the bookkeeper.
    • but do they look at them and use them in any way to manage and control
      their business?
    • the client who cannot get any statements has a very serious problem in that their accounting records are not up to date and potentially neither is billing to customers and collections, or payments to their suppliers.
  • explanation of key performance indicators (kpis) and a schedule of the type of information an owner or manager should receive at various intervals including daily, weekly and monthly.
  • if the client does not have kpis, then help them develop some.

2. show the client how to really understand the financial statement. the accountant spending 15 or 20 minutes at a time with the client each over three or four months can provide a valuable lesson on how to read, understand and analyze their own financial statement.

3. how up to date is the bookkeeping and accounting?

  • this is like #1. timeliness is paramount. i know many business owners where the records are completely up to date, but they do not get any reports, statements or schedules.
  • reviewing an accounts receivable schedule is a minimum action for an owner.
  • the accountant can show the client how to review an aged schedule and what they can do with large past due balances.

4. review client’s financial controls and cash flow. this a broad a topic – and we need to break it down into parts, and spend some time on each one, such as:

  • controls over large checks
    • a. who signed them?
    • b. compare to documentation and “proof” of actual delivery or receipt of services or merchandise paid for.
    • c. spot reviews of smaller check items compared to backup.
  • authorization for bank transfers
  • bank reconciliation controls
    • is it done by someone other than the person writing the checks?
    • is bank statement received by someone other than the person issuing the checks?
      • this is old stuff – most statements are reviewed online and reconciled that way – without looking at actual checks, signatures and endorsements.
      • new ways to control this need to be developed – this should be discussed with client with suggestions on tightening controls, e.g., what is to stop a bookkeeper from paying personal credit card bills with a company epayment?
      • accompanying payment simplification is a lessening of built-in controls – new methods need to be considered and some might be more costly than the savings by eliminating checks.
      • however, the authorization process should still be the same.
  • cash flow controls
    • a. can be broken into segments for each source of income and disbursements – e.g., accounts receivable, accounts payable, discounts for early payment, “points” for credit card payment to suppliers, scheduling e-payment the last possible time before the due date.
    • b. big picture of cash flow won’t be solved with paying the phone bill later than usual, but by creative uses of accounts payable and insistence on customers paying according to the terms.
    • c. if a small business, has client been able to take their paycheck every time or do they hold them back?
      • a. if they cannot take their pay, do they hold their paycheck, or not write it?
      • b. holding it means the taxes are paid in “advance.” (tip on this: writing and holding it emphasizes the past due amount – by not writing it the arrearages can get lost in consideration of how the company is doing.)
    • d. what is the client’s biggest concern or threat re: cash flow?

5. what is the quality of the internal controls on the client’s business? another very broad category – break this down into segments: internal control over cash; inventory; payroll time keeping; billing or invoicing customers; returns and allowances, two distinctly separate areas; receipt of merchandise.

6. buy-sell agreements

  • this is a no-brainer – a buy-sell agreement is a will for a business.
  • if more than one owner, get a copy of the buy-sell agreement.
  • if no agreement, ask why.
  • what you should do if they give you a copy of an existing agreement:
    • review for value or calculation of value.
    • review that value is kept current.
    • payment terms – can the business or other owner afford to make payments?
    • does it cover death, disability, personal bankruptcy, someone wanting to leave?
  • is definition of disability clear and objective?
  • non-compete if someone leaves?
  • disability for someone getting sick for three of four months, re: salary payments.
    • remind owners that either one can be either the buyer or seller.
    • have them consider life insurance or disability buyout insurance.
  • each owner should be responsible for their own disability income policy.
  • if they do not have an agreement, discuss with them why they should.

risk management

7. review client’s insurance policies to determine if coverage is adequate.

  • this should be part of your review procedures, but you should sit down with client to discuss adequacy of coverage such as for liability or warranty claims, equipment damage or loss, personal liability for owners for defamation or discrimination claims, intellectual property claims.
  • while you are at it, why not discuss personal insurance for items such as:
    • uninsured motorist
    • umbrella coverage
    • workers compensation at home
  • suggest they meet with their insurance broker at least once every two years to discuss coverage and alternatives – for business and personal policies.

8. compare inventory insurance limit with actual inventory amount and compare to inventory at highest level during the year (particularly if business is seasonal). look at coverage amounts in the policy.

9. determine if there is coverage for “new” items, such as:

  • internet theft
  • electronic embezzlement
  • copyright and patent infringement
  • accusations of sex and other types of workplace harassment or discrimination

look at events covered and amount of coverage.

10. review with client the security of physical assets. ask client what security measures they have in place – if any.

11. does company have secure firewalls for computer spam or hacking? should ask this question, but we typically do not have the capabilities to evaluate this item.

12. is there secure offsite backup of servers and digital data?

  • how often are the client’s records backed up?
    • is it automatic?
    • how often is it tested to be working properly?
  • should ask, even though many clients do not do this adequately. but many never think about it.
  • recommend that client get an “audit” of this by an independent consultant.

13. is there a continuation plan if premises are destroyed, say by a fire?

  • will accounting records be available?
  • can sales be accepted, and products shipped?
  • what will employees do during the rebuilding or transition period?

14. are all software licenses in order and up to date? this is usually not in compliance with licenses.

15. given the nature of the business, has client considered potential for risks, i.e.:

  • things that could occur that will impact the functioning of the business, and devised plans to overcome them?
  • consider the premises:
    • clean or dirty?
    • old stacked or piled-up inventory
    • “sexy” photos on warehouse wall where women employees work or pass through
    • location of forklifts
    • empty skids not in out-of-way area
    • poor lighting and missing bulbs, especially in passageway or stairways
    • out-of-date fire extinguishers (usually these are maintained because of fire marshal inspections)

16. ratio analyses: use ratios as a tool to evaluate a company’s financial statements.

17. do a working capital analysis.

  • explain working capital definition to client. show how it is applicable to client.
  • compare working capital to cash in accounts and the relevance of working capital to the business. analyze where the “profits” for the period are if not in cash (compare the opening and closing balance sheets and relate to cash provided or consumed).
  • do additional balance sheet ratio analyses. and take the time to explain to client carefully relating to their business.
  • re-explain the next time you are there and discuss significance of these ratios and changes – in either direction.

18. review operational ratios.

  • relate to cash flow and stagnant cash items.
  • look for trends and discuss – good as well as bad.

19. review debt-to-equity ratio.

  • discuss adequacy with client.
  • explain vulnerability to large creditors and lenders.
  • discuss danger points of a high ratio.

20. discuss break-even analysis with client. when doing it, try to identify different major product lines and the gross margins for each one and incorporate this into the break-even analysis.

21. get copies of budget and long-range projection, if any.

  • ask client if you can assist them in a five-year projection.
  • there are two types of projections you can assist the clients with:
    • a formal projection or forecast with as much detail as possible with explanations
    • a “down-and-dirty” five-year p&l and cash flow projection
  • c. regardless of whether client expresses interest in it, i suggest preparing a “down-and-dirty” five-year p&l and cash flow projection.
    • the purpose of this will be to initiate a discussion with the client about where the company is going.
    • including a graph can also be very helpful when reviewing what you did with the client.
    • this will be much more meaningful if clear upward or downward trends are developing. however, a flat trendline can also be very revealing and provide insights.
    • note: cash flow will be worse with an upward trend in sales and profits.

22. get capital expenditures budget for next few years.

  • compare to bank loan covenants – and track it out two years to see if covenants are negatively affected during growth phase.
  • if substantial expenditures planned, discuss payback, financing and cash flow.

23. determine how client keeps track of cash receipts, disbursements and cash available balance. i suggest daily tracking. if necessary, give client a daily cash form to use.

24. review large accounts receivable customer balances. alert client to be alert to any unexpected changes in customer buying or payment patterns.

  • unusually large purchases
  • purchases of not typical items
  • a slowdown in payment. a change can be danger sign – consider a client that always pays in two weeks (even though terms are 30 days) and now switches to 30 days – not late but a change. client should find out why.

25. trend analysis: show client how to do a trend analysis when they review their financial statements.


26. prepare a five-year graph tracking sales and project it out five years based on pattern and trend. occasionally this reveals interesting trends and is a door opener for a strategic discussion with the client.

27. review the client’s five or 10 largest customers and their buying and payments patterns. discuss changes over the last few years and the financial strength of the customers.

28. perform an 80/20 review of the client’s customers.

  • where or which group of customers does the client’s profits come from?
  • try to identify any particularly unprofitable group of customers.
  • what are largest selling items and what percentage of total sales do they represent in dollars, units and invoice total (e.g., some large-selling items can be ordered very frequently in small quantities while lower-selling items can be ordered in larger quantities reducing handling, shipping and invoicing costs)?

29. review sales returns, allowances, markdowns and debits to determine if there is a pattern from any customer, or any salesperson’s customers. occasionally, near year end a salesperson wanting a “bonus” can have a customer load up with merchandise only to have part of it returned in the next month or two.

30. determine the amount of time from shipment that a sale is returned by customer. this can indicate an overselling or shipment by a salesman to get a larger commission sooner.

31. get a sense of pricing policies, strategies, methods and formulas.

  • test some prices against various customers and against the previous couple of years.
  • test against prices paid or cost of item or cost to produce.

32. determine how often and when client increases their prices.

  • if not done, initiate a discussion with the client on why, when and how to raise prices.
  • prices of three or four of the largest-selling items can be checked for the last three years to determine pricing policies.

33. identify the different types or groups of customers:

  • nfp, oem, end users, distributors, international, national, regional or very local, cod customers, pickup or retail customers.
  • does client maintain inventory in warehouses in other parts of the country?
  • to what extent is drop shipping done – from supplier directly to customer?

34. how does the client distinguish between types or groups of customers?

  • have client describe types of clients and see if this corresponds to accounts in the general ledger.
  • identify if there are different pricing patterns or structures for customer groups or type.

35. estimate the average invoice size this year compared to prior years. this can be revealing. for example: during bad economic periods customers could cut the size of their orders and receive more frequent shipments, causing greater work in the shipping and bookkeeping departments at a period when the company’s total sales have dropped.

36. track some of the largest-selling items over the last five years. has the product mix changed?


37. how does the client dispose of stale inventory? how is it valued?

38. what is the order backlog situation? is it increasing or declining?

39. identify production bottlenecks. ask client to describe the production process and see if it is evident that there are bottlenecks in the factory floor.

40. when was the last time the client took a walk through the factory, shipping area and other essential areas? how often is it done? ask to go with the client – observe the cleanliness, activity and whether it appears that people are busy, and find out why.

41. does client use cameras in production and inventory areas? if yes, how often are media reviewed? if no, suggest the client considers it.

42. are there a small number of essential suppliers, or a wide range? review a list of five largest vendors to determine dependence on an individual supplier.

43. how important to the business are the top five suppliers? is there a single supplier for one essential item or part? what would happen to client’s production or sales if this supplier went out of business?

44. has the client recently compared the prices it pays for raw materials with competitive suppliers’ prices? if a commodity, are prices shopped periodically?

45. review prices paid for consistency with the supplier. how often do the prices change? if a precious metal such as gold, perhaps changes with each shipment.

46. review some production reports.

  • determine if production reports are filled out completely and are being used as they are intended to be used.
  • trace to inventory or invoices.

47. how does client value inventory for interim financial reports? how is cost calculated?

  • raw materials – usually variable and a good measure
  • labor – in many businesses labor is “fixed” and should not be calculated in the interim inventory valuation
  • overhead – same comment as for labor
  • valuing labor and overhead in interim inventory draws fixed costs out of a low sales month and puts them in a higher sales month, completely distorting the income for each month because in most circumstances with fixed labor and overhead, production is usually the same each month with inventory increasing or decreasing based on that month’s sales.

48. identify salient product lines – e.g., u.s. vs. metric sizes.

  • how do these compare?
  • what is the growth of metric?
  • is u.s. losing ground more rapidly than sales dollars indicate?
  • how many metric-sized products does the client deliver in u.s.?

49. is inventory primarily current items? measure inventory turnover by product line.

50. how much inventory is very slow-moving items? in dollars and in volume.

51. indicate to client the possible cost of retaining old inventory. this is a simple calculation and should consider all additional costs, such as financial, space, handling, storage costs.


52. how stable is the labor force?

  • is there much turnover?
  • what is average retention period of personnel?

53. get a listing of five highest paid employees.

  • discuss each person’s function, ability, longevity and mentorship with client.
  • discuss strength of each person’s managerial ability.

54. what type of people is the client hiring now compared to five years ago? has there been a turnover in skills needed?

55. if there is a labor union how are relations with the union?

  • review contract renewal dates.
  • if the client is not unionized, what is the client doing to keep it that way?
  • if this is a factor, discuss with client.

56. what is the actual cost per employee hour worked?

  • review client’s calculation.
  • if client does not have a calculation, prepare one and discuss with client.

57. how has production per employee changed over the last five years?

  • measure production and sales per employee.
  • calculate cost per hour of each production employee and actual number of production hours per employee.

58. what is the age range for key employees?

  • what is average age of key employees?
  • is there effective back up for older people, and is there a plan to transfer knowledge to younger staff?

59. help client prepare an organization chart to give a perspective on their personnel and support structure.

value of the business

60. does the company have a recent valuation? if not, then consider preparing an estimate for the client.

61. what is client’s estimate of the value? ask client what they believe their business’ value is.

62. is that estimate greater or lower than five years ago? has the value grown and by how much?

63. what is client’s estimate of value five years from now?

  • can client provide this estimate and compare to current estimate and the estimate for five years ago?
  • what is client doing to make this happen?

64. how would you value the business?

  • discuss value drivers with the client.
  • the soft spots in the business.
  • the strong “franchises” the client owns.

65. explain to client why it is important to have a current valuation, including:

  • insurance
  • financing
  • exit planning
  • measure growth in value.
  • determine trend and viability of business.
  • identify value drivers.
  • isolate intangible value.
  • look at market position and brand value.

discuss cost of valuation with the client.

66. identify with client the circumstances that caused – or can cause – value to change. examples to consider:

  • types of customers, i.e., oems, distributors, retail or web-based
  • order size
  • just-in-time orders
  • customer complaints or service issues

67. factor in value of business to owners’ individual financial plans. review client’s personal financial goals and illustrate how a sale of business would factor into his achieving his goals.

68. a valuation creates a big-picture perspective and moves thinking away from daily activities. when a client is shown a model of the value created by the business and annual changes, it gives the client a big picture to assess the effects of what they do on a regular basis and the effect of changes in the way the business operates on the company value.

client’s future

69. what are the long-term prospects for the client’s industry?

  • is there a disruptive model in the client’s future? examples are airbnb, uber, monster and amazon.
  • b. find out how well the client is adapting to change.
  • c. try to determine with client the changes they faced in the last five years and what they think the changes will be during the next five years.

70. how is the client preparing for their future?

  • does client have a projection for the next five years if things continue as they are? and also one that contemplates changes?
  • if not, suggest this as part of the input for a going-forward strategy.
  • if the client recognizes the business cannot stand still, then it must recognize that it must go forward, or it will retreat backward. discuss this with the client to gain recognition and then discuss a forward-thinking strategy

71. is the client making investments in equipment and technology? this is significant and can indicate client’s expectation of economic future of their business, the country and worldwide.

72. discuss with the client what their goals are, why they are in business. it would be helpful to write this down and to do this periodically.

73. discuss the client’s transition plans and/or exit strategy. a client without an effective exit strategy may not be organized as well as they should be.

74. discuss with the client what would happen to the business if they or their partner got sick or died.

  • how dependent is viability of business on that one person?
  • if very dependent, is there life insurance on that person’s life?
  • what about disability buyout insurance?

75. has client had a business retreat? this refers to an out-of-office meeting to discuss the big issues confronting the business and future plans.

76. are the client’s management techniques still applicable? many older clients developed their management techniques decades ago. what they do should be evaluated in line with the present employee base, modes of selling and use of technology and their applicability in today’s world.

77. determine if the client’s emphasis is for them to lead or manage.

  • “lead” indicates the client has a strategy and that the client wants the right things done.
  • “manage” indicates they want things done the way things are supposed to be done but doesn’t necessarily mean the right things are being done.

either way, the client should be able to explain what is important to them and howthey are involved in the daily functioning of the business.

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