Are You Ready to Start a Management Advisory Services Practice?

Starting a Management Advisory Services (MAS) Practice

Client Requirements:

• Consultant should assess if fully implemented services will be turned over to the client ready for use
• If the service requires changes or adaptation, the client must be explicitly told what to do to realize the service benefits
• The service must be designed to produce satisfaction in industries with special characteristics or problems
• The service should not aggravate the client's special financial or growth problems or be ineffective in their presence

Service Delivery Capability:

• Service delivery is the application of consulting skill
• The consultant undergoes phases in delivering services such as setting objectives and implementing services to the client's satisfaction
• Results are evaluated to determine the extent to which anticipated benefits were received from the services

Steps in Starting the MAS Practice:

• Determine and make a list of services one can offer with confidence of competence to perform
• Prepare a package tailored to the firm's competence and a particular type of clientele
• Prepare a lineup of MAS personnel from the firm's staff, experienced specialists from outside, and referrals by other CPAs
• Seek out advisory engagements

Sources of MAS Engagements:

• Primary source of MAS engagements is the audit client of the CPA
• Other possible sources are referrals from other CPAs, audit clients, businessmen, financial and government institutions, and legal and other professional firms

Determining Market Opportunities:

• Consider the consultant's specific skills, talents, and attributes and the market that is suited to these abilities
• The spectrum of opportunities to apply services in vertical and horizontal markets both in the public and private sector
• 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:

• Private sector includes individuals, small businesses, medium-sized businesses, and large companies
• Individuals hire consultants to seek advice on how to save money or how to make money
• Small businesses provide an excellent client base for new consultants
• Medium-sized businesses hire experts to assist them in identifying, analyzing, and finding solutions to their problems
• Large companies prefer dealing with large consulting firms or well-known consultants with considerable experience and contracts
• Government is one of the major users of consulting services

2. Public sector a. Government • One of the major users of consulting services is the government. • A consultant can submit a solicited or unsolicited proposal and attempt to get the contract directly.
3. Grant Consulting

• Attempts to obtain grants, loans, or subsidiaries for a client.
• IdentiHies the speciHic needs of an organization or company and advices them of the availability of government funds.
• Performs the analysis, collects all the necessary detail for documentation and prepares the application for signature by an authorized representative of the organization or company. Problem Areas in Rendering MAS by an Independent Accounting Firm

1. Questions as to the effect of the practice of MAS on the Hirm'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 Hirm. Financial Management of an MAS Practice
6. Working Capital Requirements

• This will be used to pay monthly operating expenses such as salaries of consultants, rent, supplies, utilities, secretarial services, etc.
• This will be needed to fund accounts receivable that represent time billing to client. • It is prudent to have working capital for at least three to four months' expenses.

2. OfHice facilities and equipment requirements

• Since consultancy is a business activity, this means that the consultant should establish a professional and businesslike image for the basic business operation through stationery utilized, telephone answering procedures employed, quality of typed material that is presented to client. A. Revenues and Expenses of Management Consultants • Net service fees - represent the peso value of what has been sold to the client or what will be received as revenue. • If the staff is fully utilized or there is 100% professional's time chargeable to a client engagement, it could mean a very proHitable operation. Net service fees are determined by subtracting from gross fees the allowance; fee adjustment or write off. • The allowance percentage is normally in the 12% to 16% range and would ultimately depend on effective use of the staff. B. Billings and Collection • Some consultants bill services on an hourly basis, while some on a daily, or per dim basis. • Some consultants add out-of-pocket expenses directly chargeable to the client to the bill while others absorb their expenses. o Staff billing rates are often a multiple of the salary paid to the employee. o Multiples of 2.5, 3 and 3.5, the actual hourly rate of pay, are very common. • Project Basis - another billing approach, the fee is determined for the project and the work is completed with a reasonable time. o No matter what the method of billing, time keeping is of prime importance. • Follow-up on unpaid invoices is important. Statements should be sent as a reminder of outstanding invoices. o Aggressive invoice collection is important to cash Hlow and survival of the practice