Group 6 Report

ORGANIZATION AND MANAGEMENT OF MAS S PRACTICE

DEVELOPING MAS PRACTICE

•If one wishes to be a consultant:
- assess his or her own talent and expertise
- review his or her communication skills
- sales ability
- ability to maintain objectivity
- business and professional judgement

•To be successful:
- important to recognize the firm's background and expertise so that the scope of the consulting practice can be well
defines for proper communication to the potential clients.
- keeping the practitioners name in front of clients and contacts ( newsletters, aricles, seminars)

•Prior to entering into a consulting practice:

- prospective consultant should conduct market research to identify opportunities in the marketplace.
- most of the information concerning consulting practices may be obtained from word of mouth discussions w/ other
consultants and knowledge of the local market place.

•Get started:
- when his or her clients indicate that they would like to use his or her talents as a consultant.
- a practice development program needs to be initiate to target potential clients. Market research is important both to
new firms and established consulting practice.

•Having the necessary info, one needs to establish operating plan for practice. - set goals and objectives, including:
- desired income level
- potential clients
- strategies to obtain those clients

•Practitioner can now identify staffing requirements and financing needs.

•To develop a meaningful and worthwhile network:

- establish quality contacts
- educate the network as to the type of services he or she offers.

•If one has built a quality network, some contacts will continually refer work to the practitioner.
• these contacts develop and growbased on solid personal relationship and consultants commitment to provide
excellent service.
• need to be consistent and intermittent reminders to the network abot the consultancy firm and its services.
ORGANIZATION OF MAS DIVISION

• MAS of an accounting firm may be rendered by a man who is primarily an accountant or by a specialist.
• a consulting firm should periodically assess its need w/ respect to in-house knowledge and skill. Should deficiencies
exist, a consulting firm can:
- employ additional consultant w/ adequate knowledge and skills
- undertake a variety of staff development activities

STAFF PYRAMID AND FEE STRUCTURES

LEVEL 1 partners,principal, director 1 person, (10k-20k per hour)

- typically most experienced highly paid professional

- responsible for the successful completion of engagements, dealing directly w/ clients and for selling work.

LEVEL 2 senior managers, managers, supervisors 1-3 persons, (8k-10k per hour)

- perform week to week management of the engagements and are responsible for identifying new client prospects and
assisting in the sales process.

LEVEL 3 senior consultants, seniors 1-5 persons (5k-8k per hour)

- individuals typically have 2 or 3 yrs of consulting experience and capable of supervising the daily work of the younger
staff.
- possess right combination of experience and dedication to complete different projects w/ limited supervision.

LEVEL 4 associate consultant, staff 2-6 persons (2k-5k per hour)

- young or new staff

- usually have less than 2 yrs of consulting experience and may have been hired directly out of graduate or
undergraduate school.

DEFINING THE TARGET LEVEL OF COMPETENCE OF MANAGEMENT CONSULTANT

• Consulting competence - ability of a consultant to deliver specific agreed- upon consulting services to a client on
aprofitable time and fee basis observing proffesional standards.
Four major factors:
1.) Scope of practice area
- a consultant who desires to grow sholud take the ff steps:
~ review the economic regio in w/c consulting firm draws or expects to draw most of its clients.
~ inventory the services required by the existing client and in most cases, by the clients a consultant would like to add
~ select services from this inventory that will provide
~ acquire the competence needed to provide the selected services
~ notify clients and potential clients that the consulting firmis able and willing to perform the selected advisory and
consulting services. 2.) Service variety - planning, control and reporting systems - operational computer system analysis,
design, implementation and evaluation - specialized technical services and specific services. 3.) Client requirements - will
a fully umplemented service be turned over to the client ready for use? - will the service require changes or adaption? -
does the client belong to an industry w/ special characteristics or problems? - does the clienthave special financial or
growth problems? 4.) Service delivery capability • service delivery - application of consulting skill and w/out this, even
high levels of knowledge and understanding cannot be put to effective use for clients Phases: - setting objective,
identifying problems and needed services, predicting specific expected benefits from these services and gathering
essential facts pertaining to the problem and means of delivering the services - adapting and beginning the services that
are to be the pricipal deliverables from the engagement. - implementing these services to the clients satisfaction -
evaluating the results in operation in order to determine the extent to w/c the anticipated benefits were received from
the services.

MANAGEMENT OF MAS PRACTICE

Steps in Starting the MAS Practice

A CPA who would want to start the MAS practice formally may follow these suggested steps:
1. Determine and make a list of services that one can truly offer with a confidence of competence to
perform.
2. Review of a client list classified by industry, size, etc. and prepares a package tailored to fit the firm’s
competence and a particular type of clientele.
3. Prepare a line-up of MAS Personnel. In selection of the staff, the following sources may be considered:
A. Accounting firm’s own staff
B. Experienced specialists
C. Referral by other CPAs
4. Seek out advisory engagements

Sources of MAS Engagements

The primary source of MAS engagements is the audit client of the CPA
Other possible sources of MAS clients are:
a. Referrals from other CPAs
b. Referrals form audit clients
c. Referrals from businessmen
d. Referrals from financial and government institutions
e. Referrals from legal and other professional firms

Determining Market Opportunities

The professional consultant must be very certain of his/ her area(s) of specialization.
The following matters have to be considered carefully by the consultant:
1. The specific skills, talents, and attributes, and the market that is suited to these abilities
2. The spectrum of opportunities to apply to the services in vertical and horizontal markets both in the
public and private sector
3. Consulting opportunities can be created by political, economic and social changes affecting one’s area
of expertise and interest

Possibility of market opportunities in the private and public sector:

1. Private sector
 Individuals- Individuals hire consultants to seek advice on how to save or make money. Some examples
of consultants in this area are tax consultants, internal consultants and real estate consultants.
  Small Businesses- The failure rate of small businesses is very high which oftentimes is caused by the
small business owner/ operator’s lack of knowledge in important areas of small business management.
 Medium-sized Businesses- These companies often hire experts who can assist them in identifying,
analyzing, and finding solution to their problems, instead of hiring staff.
 Large Companies-large companies prefer dealing with large consulting firms or well-known consultants
with considerable experience and contracts.
2. Public Sector
 Government- a consultant can submit a solicited and unsolicited proposal and attempt the contract
directly.
3. Grant Consulting –a grants consultant attempts to obtain grants, loans, or subsidiaries for a client

Problem Areas in Rendering MAS by an Independent Accounting Firm

1. Questions as to the effect of the practice of MAS on the firm’s independence.
2. Development and maintenance of a high level of competence in MAS.
3. Questions of what fee to charge.
4. Question of AUDIT-MAS cooperation in obtaining engagements.
5. Question of regular communication between the MAS function and the rest of the firm.

Financial Management of an MAS Practice

A consulting Practice is a Business and, like all business must have financing. It can be provided by capital
invested by you or the initial groups of consultants.

The following are the initial and basic capital requirements

1. Working Capital Requirements – this will be used to pay monthly expenses such as salaries of consultants,
rent, supplies,utilities, secretarial service etc. this will be needed to fund accounts receivable that represent
time billings to client. It is prudent to have working capital for at least 3-4 months expenses. It should be
exercise and to avoid financial traps where funds are received and spent before the working capital is
actually performed.

2. Office facilities and equipment requirements

Since consultancy is a business activity, this means that the consultant should establish a
professional and business like image.
 Leasing an office in a professional suite that provide many facilities including secretarial
services
 Telephone answering procedures employed
 Quality of type of material that is presented to client

3. Revenues and expenses Management Consultants

Net service fee the peso value of what has been sold to the client or what will be received as revenue. If the
staff is fully utilized 100% professional time chargeable to a client management. Net services fees are
determined by subtracting the allowance 12% - 16% range but it depends on effectivity of the staff.
4. Billings and collections
 How professional fees are to be established on an hourly basis, daily, or per diem basis. Some
consultants add out pocket cost directly chargeable to the clients to the bill while others absorb their
expenses. And another billing stages is on project basis. Here the fee is determined for the project
and work is completed with a reasonable time.
 No matter what the method of billing the time keeping is importance.
 Illustrative Income Statement of a small consulting practice

AFC Consultancy Services

Income Statement
For the year ended 2014

Gross services Pxxx

Less: Allowance xxx
Net services Pxxx
Direct operating expenses( professional and office staff) (xxx)
Contribution to general overhead Pxxx
Less: General Overhead
Pensions xxx
Medical insurance xxx
Rent xxx
Depreciation and Amortization xxx
Stationary and office supplies xxx
Subscription and services xxx
Staff training xxx
Professional membership dues xxx
Interest xxx
Taxes xxx
Other administrative expenses xxx
Net Income Pxxx

Preparing a Business Plan for MAS Practice

Planning and management skills are vital to business success. Those who do not plan run a very high
risk of failure

Business plan – is a written summary of what the consultant hope to accomplish by being in
business and how to organize the resources to meet his/her goals.
o Having a clear goals
o Outside investment required when it is needed

Format

o the introduction
o the business concept
o the financial plan
o and the appendix