Risk is a great motivator for business on making the best decisions. It’s always present in every businesses, even in accounting firms which is no stranger to this, since CPA professionals also take risks in solving a certain problem. Here are 5 known risks that most CPA firms are facing in today’s accounting world.
1. Unwanted Phenomenon
One of the things that is being considered by firms is to make sure that assets, from properties to manpower are fully operational. But sometimes, there are unwanted calamities that may affect the way the business is running.
A heavy storm might cut off electric supply and the telephone lines, causing the firm on taking chances if they want to open or not. As scenarios like this might happen, the firm should also focus on protecting their files and peripherals by making sure that units, as well as the files are not damaged, and that there should be extra computer units or backup of the firm’s files.
2. Employee Shortage
Imagine an accounting firm which operates in a 1:1 ratio, where each accounting staff has their own client to accommodate with. Problems occur when one of the brightest accountants decides to resign and leave the company for good.
One of the solutions that the firm might suggest is to have another person handle the account:
So the firm tried to hire new people that can replace the employee, but none of them passed, which leads to one of the pioneer accountants doing multi-tasking and handling two clients at the same time.
Once the appointed accountant handles the client’s financials, you might assume that the client might still stay with the firm because of the accountant’s service, but you could also expect that the client might decide to severe his ties with the firm, since he/she doesn’t want everybody handling the account.
3. Protection of Data
Aside from personal property, firms must do their best to protect their files from hackers who wants to invade the firm’s system, and breach thousands of personal data. All of those confidential client information like tax info, SSN and other private data should be kept in a proper place or if it’s stored in a computer or laptop, then the one who is assigned with the files must put passwords in it.
4. M&A RIsks
Merger and Acquisitions (M&A) is also one of the biggest risks that most CPA firms undergo.This involves two firms, combining as one entity with a new name and branding. It seems to look positive as two CPA firms, merging together as one would bring good effects to each entity. But try to look in a different perspective: Both of these companies will both be responsible with the decision making within the newly merged company. This might sometimes lead to competition or rift between the two.
There might also be an instance that bankruptcy could become a reason for both firms to merge, as a way of cleaning up bad reputation and client mistrust.
5. Fraud Detection and Performance
Fraud is one of the biggest enemies of accounting firms. Every year, as more fraudulent documents are received in firms, the more CPA firms are highly expected to detect them, and failure to detect these kinds of fraud may sometimes lead to serious liability for the firm.
Aside from that, CPA professionals are also expected to deliver the best accounting services, since they master this craft. A wrong calculation or even a simple overlook might cost penalties which is a big no-no for accounting firms.