Patrick Financial Services, an accounting firm, specialises in providing accounting and taxation work for dentists and doctors. You have been provided with financial information relating to the firm in appendix 1. In appendix 2, you have been provided with non-financial information which is based on the balanced scorecard format. Notes Error rates measure the number of jobs with mistakes made by staff as a proportion of clients serviced. Core work is defined as being accountancy and taxation. On-core work is defined primarily as pension advice and business consultancy. On-core work is traditionally high margin work. Required: Using the information in appendix 1 only, comment on the financial performance of the business (briefly consider growth, profitability and credit management) Explain why non-financial information, such as the type shown in appendix 2, is likely to give a better indication of the likely future success of the business than the financial information given in appendix 1. Using the data given in appendix 2, comment on the performance of the business. Include comments on internal business processes, customer knowledge and learning/growth, and provide a concluding comment on the overall performance of the business.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter6: Cash And Internal Control

Section: Chapter Questions

Problem 6.1DC

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Patrick Financial Services, an accounting firm, specialises in providing accounting and taxation work for dentists and doctors. You have been provided with financial information relating to the firm in appendix 1. In appendix 2, you have been provided with non-financial information which is based on the balanced scorecard format.

Notes

Error rates measure the number of jobs with mistakes made by staff as a proportion of clients serviced.
Core work is defined as being accountancy and taxation. On-core work is defined primarily as pension advice and business consultancy. On-core work is traditionally high margin work.

Required:

Using the information in appendix 1 only, comment on the financial performance of the business (briefly consider growth, profitability and credit management)
Explain why non-financial information, such as the type shown in appendix 2, is likely to give a better indication of the likely future success of the business than the financial information given in appendix 1.
Using the data given in appendix 2, comment on the performance of the business. Include comments on internal business processes, customer knowledge and learning/growth, and provide a concluding comment on the overall performance of the business.

Patrick Financial Services, an accounting firm, specialises in providing accounting and taxation work
for dentists and doctors. You have been provided with financial information relating to the firm in
appendix 1. In appendix 2, you have been provided with non-financial information which is based on
the balanced scorecard format.
Appendix 1: Financial information
Current year
Previous year
Turnover (£000)
Net profit (£000)
Average cash balances (£000)
Average trade receivables days (industry average 30 days)
rate (%)
945
900
187
180
21
20
18 days
22 days Inflation
3
3
Appendix 2: Balanced Scorecard (extract)
Internal business Processes
Current year
Previous year
Error rates in jobs done
Average job completion time
16 %
10%
7 weeks
10 weeks
Customer knowledge
Current year
Previous year
Number of customers
1220
1500
Average fee levels (£)
775
600
Market share
14%
20%
Learning and Growth
Current year
Previous year
Percentage of revenue from non-core work
Industry average of the proportion of revenue from non-core work in
Accounting practices
4%
5%
30%
25%
Employee retention rate
60%
80%

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