CHAPTER 6

ORGANIZATION AND
MANAGEMENT OF MAS PRACTICE
DEVELOPING MAS PRACTICE
Assess own
talents and
expertise
To be a
CONSULTANT Review abilities

Evaluate business
and professional
judgment
 DEVELOPING MAS PRACTICE
The scope of consulting practice is defined by the
expertise and experience of consultant within the
practice. This can be technical consulting in:
1. Engineering,
2. Industrial management,
3. Marketing,
4. Business management, or
5. Financial areas
 DEVELOPING MAS PRACTICE
OPPORTUNITIES IN THE MARKETPLACE
• Study of the listings of management consultants.
• Survey of local CPA forms to determine which are
offering consulting services
• Determination of possible oversaturation of
consultants in one’s specialty area.
• Identification of new services that may provide
competitive edge.
 DEVELOPING MAS PRACTICE
Goals and Objectives to establish an Operating Plan for
the practice:
• A desired income level
• Potential clients
• Strategies to obtain those clients

To develop a meaningful and worthwhile network, the

practitioner must:
• Establish quality contracts
• Educate the network as to the type of services
he/she offers
 DEVELOPING MAS PRACTICE

Building a SUCCESSFUL NETWORK

• Client newsletter
• Articles
• Seminars
• Entertainment
• Phonecalls
ORGANIZATION OF MAS DIVISION
STAFF PYRAMID & FEE STRUCTURES
 ORGANIZATION OF MAS DIVISION
Partners Principal Directors
• The top of the pyramid
• Typically the most experienced highly paid
professionals
• Normally responsible for the:
Successful completion of engagement
Dealing directly with clients
For selling work
 ORGANIZATION OF MAS DIVISION
Partners, Principal, Directors
• Principal activities include:
Performing practice planning
Administering in developing practice
Consulting with top-client managers
Approving engagements report, and
Managing client crises
 ORGANIZATION OF MAS DIVISION
Senior Managers, Managers, Supervisors
• The next tier of the pyramid is made up of them
• They perform week-to-week management of
engagements and are responsible for:
Identifying new client prospects
Assisting in the sales process
 ORGANIZATION OF MAS DIVISION
Principal Activities include:
• Planning engagement
• Evaluating consultant
• Supervising consultants
• Writing proposals
• Reviewing working papers and reports
• Consulting with client managers
• Serves as experts in one or more applied knowledge
areas
 ORGANIZATION OF MAS DIVISION
Senior Consultants, Seniors
• The third tier of the pyramid includes these
individuals
• They typically have 2 or 3 years of consulting
• They are capable of supervising the daily work of the
younger staff
• They possess the right combination of experience
and dedication of complete different projects with
limited supervision
• Normally, seniors are short in supply in most firms
 ORGANIZATION OF MAS DIVISION
Associate Consultants, Staff
• The final layer of the pyramid consists of the young
or new staff
• Depending upon the firms, these individuals usually
have less than 2 years of consulting experience and
may have been hired directly out of graduate or
undergraduate school
• Some firms require prior business experience, while
others prefer to train their own personnel and hire
some undergraduate studets
 ORGANIZATION OF MAS DIVISION
• Typical range of the billing rates of the
engagement team members in a medium-
sized consultancy firm:

LEVEL 1 P10,000 to P20,000 per hour

LEVEL 2 P8,000 to P10,000 per hour
LEVEL 3 P5,000 to P8,000 per hour
LEVEL 4 P2000 to P5000 per hour
DEFINING THE TARGET LEVEL OF COMPETENCE
OF MANAGEMENT CONSULTANTS

CONSULTING COMPETENCE
• The ability of consultant to deliver specific
agreed-upon consulting services to a client on
a profitable time-and-fee basis observing
professional standards
DEFINING THE TARGET LEVEL OF COMPETENCE
OF MANAGEMENT CONSULTANTS
Major factors to be consider
• Scope of Practice Area
• Service Variety
• Client Requirements
• Service Delivery Capability
 MANAGEMENT OF MAS PRACTICE
STEPS IN STARTING THE MAS PRACTICE
• Determine and make a list of services that one truly
offer with a confidence of competence to perform.
• Review a client list classified by industry, size, etc.
and prepare a package tailored to fit the firm’s
competence and a particular type of clientele.
• Prepare a line up of MAS personnel.
• Seek out advisory engagements
 MANAGEMENT OF MAS PRACTICE
Sources of MAS Engagements
• AUDIT CLIENT is the primary source of MAS
engagements
• In the course of his examination of a client’s financial
statements, the CPA reviews many aspects of the
organization’s activities and procedures and thereby
obtains first hand knowledge of the problems
confronting management.
 MANAGEMENT OF MAS PRACTICE
Other possible sources of MAS clients are:
• Referrals from other CPAs.
• Referrals from audit clients
• Referrals from businessmen.
• Referrals from financial and government institutions.
• Referrals from legal and other professional firms.
 MANAGEMENT OF MAS PRACTICE
Possibility of Market Opportunity
• Private Sector
Individual
Small Business
Medium-sized Business
Large Companies
 MANAGEMENT OF MAS PRACTICE
Possibility of Market Opportunity
• Public Sector
Government

• Grant Consulting
 MANAGEMENT OF MAS PRACTICE
Problem Areas in Rendering MAS by an Independent
Accounting Firm
• Question as to the effect of the practice of MAS on the
firm’s independence.
• Development and maintenance of a high level of
competence in MAS.
• Questions of what fee to charge.
• Questions of AUDIT-MAS cooperation in obtaining
engagement.
• Questions of regular communication between MAS
function in the rest of the firm.
MANAGEMENT OF MAS PRACTICE
Financial Management of a MAS Practice
• A consulting practice is a business and, like all
businesses, must have financing.
• Financing can be provided by capital invested by you
or initial group of consultant or by funds borrowed
from banks.
MANAGEMENT OF MAS PRACTICE
WORKING CAPITAL REQUIREMENTS
• This will be use to pay and fund for monthly
operating expenses and accounts receivable that
represent time billings to client.
OFFICE FACILITIES AND EQUIPMENT REQUIREMENTS
• The consultant should establish a professional and
businesslike image for the basic business operation
through a stationery utilized, telephone answering
procedures employed, quality of typed material that
is presented to the client.
 MANAGEMENT OF MAS PRACTICE
REVENUE AND EXPENSE OF MANAGEMENT
CONSULTANT
• Net service fees represent the peso value of what
has been sold to the client or what will be received
as revenue
BILLINGS AND COLLECTION
• Some consultants bill services on an hourly basis, on
a daily or per diem basis. Some consultants add out-
of-pocket expenses directly chargeable to the client’s
bill while others absorb there expenses.
MANAGEMENT OF MAS PRACTICE
Why prepare a Business Plan?
• Planning and Good Management Skills are vital to
business success.
• Those who do not plan usually fail.
What is Business plan?
• It is a written summary of what the consultant hopes
to accomplish by being in business and how to
organize the resources to meet his/her goals.