Academic journal article Journal of Accountancy

Accounting for Marketing Success

Academic journal article Journal of Accountancy

Accounting for Marketing Success

Article excerpt

Is marketing worth the money it costs? There are ways to find out.

As it already has in other business areas, accountability is fast becoming the watchword in CPA firm marketing. Partners or senior managers now demand cost-benefit analyses of their firms' marketing and media programs, just as they do for practice areas. And for the same good reasons: planning, future budget allocation and simply determining the most productive activities.

Professionals frequently become frustrated with marketing efforts because they believe marketing is or should be a science with guaranteed results. In fact, it's more of a practical art that succeeds best when firms are willing to take calculated risks. Careful tracking can enable a firm to get a better grasp of which marketing risks are most likely to pay off.

This article describes how our firm attempted to unravel the mystery of marketing accountability, showing the steps our firm used to budget, track and analyze marketing activities. As the firm's marketing director, I oversee a staff that includes two marketing coordinators, an information specialist and a database coordinator, but many of the firm's strategies can be adapted by other practitioners.

STEP ONE: FORMALIZING THE

MARKETING BUDGET

What percentage of revenues should be allocated to marketing?

Choose according to firm needs. AM&G (Altschuler, Melvoin and Glasser) allocates 2% to 2.5% of gross revenues. Suggested guidelines range anywhere from 2% to 6%, depending on the items included and the firm's marketing needs and priorities. Firms must decide if they want to finance expensive ad campaigns, marketing training for professionals and other possibilities or opt for more modest efforts.

In our budget, we include all the obvious marketing expenses such as brochures, newsletters, advertising, promotional seminars, market research, direct mail, public relations activities, etc., as well as meals, travel and entertainment for referral sources, prospects and clients; association involvement; and certain subscriptions. All marketing department personnel salaries are included. We do not include charitable gifts, even if they are client-related.

To determine each department's or industry's marketing budget, we review the area's revenue and allocate a percentage to marketing. Start-up areas and industries get a much bigger slice of the pie than do mature ones - in some cases, up to 10% of revenue. Others get from .25% to 1%, and we reserve a small amount for special opportunities. The remainder goes to firmwide marketing expenses.

We budget for various AM&G responsibility centers: divisions, departments, practice areas and industries.

How are reporting procedures developed and implemented?

Firms need a good financial software system capable of capturing and reporting on revenues and expenses for each practice area. We have a new practice management system that makes it possible for us to track and monitor our marketing expenses.

The software includes these modules:

* Time recording.

* Accounts receivable.

* Cash receipts front-end.

* Firm expenses front-end.

* Report distribution.

* On-line diary.

* On-line billing.

* Notes-reminder.

* Accounts payable.

* General ledger.

* Personnel administration.

* Marketing-mailing.

We identify marketing accounts and responsibility centers for all marketing expenses, and as an expense is incurred it is charged to the appropriate account and responsibility center. All expenses are coded by industry and type of service.

How is the budget created?

The process starts when each division, department or industry head completes a special form to budget marketing expenses. Marketing personnel meet with division directors to get their preliminary ideas and then with department heads and industry chairpeople to discuss their thoughts on what they want to do; offer advice; and give project cost estimates. …

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