Regular AccountingWEB.co.uk contributor Nigel Harris, in practice himself, offers an overview of financial benchmarking services currently available.
As accountancy firms seek to offer new, added value services to clients to help them weather the recession (and of course to generate new income streams for themselves), one service that you hear seminar speakers recommend time and time again is benchmarking.
In fact, practice development experts such as AVN’s Steve Pipe and Chris Frederiksen at 2020 Group have been talking about benchmarking for years; the trouble is, the average practitioner has no idea how to go about doing it.
ProfitCents
First, the bad news: Users of Kevin Salter’s Online Business Benchmarking (OBBM) will now be aware that the site closed at the end of February 2009. It had been supported by 2020 Group but failed to achieve critical mass.
However, in its place 2020 Group is promoting , an online benchmarking tool that boasts 9500 user firms in the USA and a strong presence in Canada. The initial US service started in 2004 with a database from RMA (their equivalent of Companies House) which was rapidly phased out completely. Users of the service add their data anonymously and in real time to the ProftCents database as they run a report, and the service attracted sufficient users to abandon published accounting data altogether very quickly so that users benchmark only against SME data. Last year, 350,000 sets of account were added to the database in the USA. The UK launch will initially use a data derived from Companies House but it is hoped that this will be replaced by user data very quickly. UK users will also have the option of benchmarking against the American or Canadian databases. The output is an impressive Word document combining graphs, simple scoring and automatically generated textual commentary. This standard text is constantly kept under review and updated daily to reflect economic changes, so you won’t produce the same report each year (or even each quarter) for a client. Summary accounting data can easily be entered manually on screen, or imported from Excel, QuickBooks, Sage or MYOB. Subscribers typically use admin and support staff to produce the initial reports, which are output to Word, for the fee earner to tailor as required. Subscribers also get access to an analytical review report which can be used on audit files and a detailed cashflow and accounts forecasting tool which is widely used in the USA by banks to assess loan applications. Unlike the other SME benchmarking services currently on offer, ProfitCents works on an unlimited use annual subscription based on the number of accounting staff in a firm. Prices start from £795 pa for a sole practitioner, and include training and marketing support to help users get the best from the service. This means that the cost per report can be extremely low, and there is no disincentive to re-running a report multiple times against different industry codes or company sizes. You could also run reports on, say, a quarterly basis for a client as the database is being updated daily by other users. BenchMark BenchMark works as a downloadable desktop application that uploads your data to the Internet and then receives back the benchmarking results to produce a detailed report in a number of formats: long, short, or a brief taster version. The data used for benchmarking is gathered anonymously from AVN BenchMark and IRIS users as they use the service and doesn’t use Companies House data. Companies can be compared with others in the same SIC code or at a more detailed sub-code level, and you can then refine the comparison further by turnover range, accounting date and region. The cost is currently very competitive. Normally AVN charges £600 per annum for 20 reports, but currently they are offering 80 for the same price to encourage firms into benchmarking as a service to their clients. To try the service out, accountants can sign up for a free trial and produce five free reports for their clients. The pricing does mean that you have very limited scope for experimenting, foe example with SIC codes and ranges, unless you are prepared to use several credits for the same client. Winning measures The service allow you to create a tailored comparator group by defining comparison criteria with your client. Comparator groups can be defined by company size, geographic location and/or sector as appropriate to ensure your client is compared against their peers. The highly professional-looking PDF output combines graphs and automatically generated commentary on the key statistics. Winning Measures managed the DTI’s Benchmark Index until the end of 2007 and has many years experience of gathering SME (not quoted company) financial data through organisations such as Experian, Business Links, RDAs and the DTI. Until recently, the service was priced on an unlimited use annual subscription based on the number of accounts clients a firm had. However, they have now moved to a pre-payment pricing system from £99 for five reports. The price per report reduces as you buy more – for example, a block of 20 reports can be purchased for £300. As with AVN, you will use up your pre-paid credits if you want to run several benchmarking reports using different selection criteria. Companies House A detailed company search report from companies such as (an AccountingWEB.co.uk partner) will typically include an analysis of up to five years published accounting data (balance sheet only, of course, if a small company has filed abbreviated accounts), some sort of credit rating and possibly some benchmarking statistics based on the SIC code on file at Companies House. In the past this has often been the only source of such data available to the average practicing accountant, who will have been aware that his small company was probably being benchmarked against PLCs and multinationals! However, they do (at a price) offer the unique possibility of benchmarking your client against specific companies rather than against the average for a whole SIC group. This may well be of interest to firms with larger clients.
Over at they have developed their own UK and SME-specific benchmark tool. IRIS Accounts Pro users can produce BenchMark reports directly through the accounts production section of the software or import IRIS data into BenchMark to allow extra control over the numbers. Non-IRIS users can simply type in the summary accounting data directly into the software.
Some time ago Sage launched it’s own benchmarking service to users of Sage Accounts Production and Sage Accounts Production Advanced software, and this is now being marketed independently by . It integrates neatly into the Sage software and creates a web link where data is uploaded anonymously and the detailed report generated. If several years data exists in SAP/SAPA a trend analysis is automatically produced too. However, data can be input manually if you use other accounts software.
The most well known source of benchmarking data in the UK has historically been Companies House, and there are a number of well-known providers of credit referencing and company data who collate and analyse accounts filed at Companies House.