Interested in what else you can do to help your clients thrive?
Look no further.
Cash flow advisory services present an incredible opportunity to add value to your clients by helping them make important business decisions and eliminate the stress of not knowing if they’ll have enough cash.
For you, as their adviser, it’s an opportunity to introduce a new revenue stream that is high-fee, high-value, and can be scaled out quicker than ever thanks to short-term cash flow forecasting software that integrates directly with their cloud accounting system.
Here’s what we cover in this article:
- Step 1: Identify suitable clients
- Step 2: Design cash flow advisory services
- Step 3: Launch (create launch plan, set up cash flow conversations, deliver forecasts)
Why cash flow services?
When I founded Twenty Eighty Financial in 2014, I realised that while bigger clients could afford in-house controllers, smaller clients were left running their businesses blind.
Most small business owners aren’t financial experts – that’s why we’re hired.
Business owners need to spend their time ensuring the operational side of their company is running smoothly, so the financial side of things is often a point of stress and uncertainty.
We found that many clients were asking questions about their near-term financial position.
And what they really needed was to be able to know, with some certainty, how much cash they had for day-to-day operations.
That’s why we developed a Cash Flow Advisory/Outsourced Controller offering to help small businesses make better business decisions.
How to offer cash flow advisory services
Ready to get started with cash flow advisory services?
You can get started in just three steps using the roadmap we developed at Twenty Eighty Financial.
Step 1: Identify suitable clients
To set yourself up for success, it’s important to first identify clients best suited for cash flow services.
Even if you don’t have a large client base, identifying who is in need of cash flow advisory can be daunting, so start with industries.
Some industries, by nature, are more sensitive to cash flow. Remember, though, that industry isn’t the same as business.
You can have a very stable business in a cash flow-sensitive industry and vice versa. But industries are a great place to start because it allows you to narrow your list, saving you the tedious work of going through all your clients.
By looking at industries, what we are really trying to do is identify companies with commonalities that are tied to cash flow sensitivities.
So, what are some of these commonalities?
Companies that are project-based have chunky, lumpy payments coming down the road but have ongoing expenses such as salaries.
This mismatch makes project-based businesses – such as creatives, marketers and architects – great candidates for cash flow advisory.
Significant lead time on cost of goods sold
Companies involved in e-commerce, manufacturing and furniture tend to be sensitive to cash flow issues.
These companies take on cash flow risk by purchasing lots of inventory and selling it at a later date.
When we talk about seasonality, think hospitality, tourism and event planning, to name a few. These businesses face two issues:
- Having enough cash to get through slow periods
- Having enough cash to ramp back up
High growth rates
These companies generally have extremely low revenues but extremely high costs and expectations for growth. The classic example here is tech companies.
Industry commonalities provide a great starting point to narrow your client list.
But what about specific clients?
How do you really nail down who you want to bring up cash flow services with?
A great place to look is their balance sheet. It provides a great look into what has happened in the past and where pain points may be.
Some balance sheet signs of distress are:
- Relying on short term debt: Continually maxing out revolving loan facilities is essentially a term loan in disguise. While there are healthy uses of this debt, such as purchasing new equipment, they should not exist in perpetuity.
- Low working capital: There’s no magic ratio here, but a healthy benchmark is 2:1 (assets: liabilities). Keep an eye out for low working capital, as it’s an indication that a client is trying to deal with cash flow issues.
- Low cash reserves: Clients with lower cash reserves are at greater risk of cash flow issues, especially if their receivables are lumpy or seasonal, as we discussed earlier.
- High long-term debt: If a client is consistently going back and adding debt relative to their operations, again, this is a sign that they’re dealing with cash flow issues.
All these signs show that the client is taking on more risk through debt. Anytime that’s the case, they may be dealing with cash flow-related problems.
Step 2: Design cash flow advisory services
Own the bookkeeping process
A key piece of successfully offering cash flow advisory services is what we call “owning the bookkeeping process”.
No, that’s not a corporate-friendly way of saying ‘micro-manage’.
What owning the bookkeeping process does mean is fully understanding your client’s bookkeeping process and the steps to carry it out properly.
This is particularly important with clients who have their own established in-house process. Don’t be afraid to make suggestions – after all, your expertise is part of why you were hired.
Open a dialogue and ask questions. Whether it’s a new client or a long-term one, here are some examples of questions we’ve found that help to open up a conversation around cash flow planning:
- Do you offer customers credit on their purchases?
- Are you looking to hire any new employees during the next year?
- Do you have any expansion plans for the next 12 months?
- Do you have any large equipment or inventory purchases coming up in the next six to 12 months?
- Are you going to be looking for any financing in the next six to 12 months?
Open-ended questions such as these get at potential cash flow-centric issues and help you gain insights into their business and build a rapport.
By asking seemingly simple questions, you show your client your care about their business and gather the information that you can use to help them reach their goals.
Example: “What are your business goals for the next year?”
Response: “We want to double the size of our business.”
Issue: That’s going to require a lot of capital or reinvestment of ongoing profits.
Translation: This will require some serious cash flow forecasting and/or cash management.
Building and pricing your service offering
So far we’ve seen how you can identify clients for cash flow service and open a dialogue with them.
But what about, you know, actually building and pricing your service?
The good news is you likely already know how.
We rarely see technical skills holding back accountants and bookkeepers from providing additional services.
If you’re reading this, you likely know how to make a budget and a forecast. Where there are more often issues is in the approach and mindset.
The real problem is that professionals in accounting are continually trained to look at past data and provide hard, quantifiable deliverables to our clients.
To become a future-focused manager, you need to understand what is truly valuable to your client. Something much more intangible.
When it comes to what is truly valuable, we often see two mindset issues with professionals:
The first mindset issue is that we professionals focus too much on static deliverables.
Q: What’s a static deliverable?
A: A process or service offering that is being carried out to simply satisfy a client’s request.
Because that’s super vague, how about an example:
Based on a client request, you create a simplified cash flow forecast from the past 12 months of accounting data and provide this as a spreadsheet to the client for feedback or review.
This process is straightforward to carry out and satisfies a client’s need in a general sense – job ‘done’.
This is what we like to call the “static deliverable trap”.
The real question we need to be asking ourselves is:
What did the client want from the cash flow forecast?
The job is ‘done’, but if we haven’t addressed the core problem, we haven’t actually delivered anything of value.
So even though we have carried out the service, the job isn’t actually done from the clients’ perspective – which is why it’s a ‘trap’.
So how do we avoid this trap?
First, take a step back and appreciate what your client is facing every day. What’s going on in their business and what’s changing?
What would be useful information for them?
Secondly, you need to remember to spend your time on what matters. You can spend a lot of time modelling out information, or you can spend more time collaborating with your clients to figure out their needs.
The latter is much more valuable to your client and extremely important for you in helping to run their business better.
To progress into a controller role you need to be providing the opposite of static deliverables. You need to be operating in a dynamic, collaborative, iterative process.
The second mindset issue we see professionals run into is a focus on reactive deliverables.
At first glance ‘reactive’ sounds good because, well, reactive is dynamic, right?
However, we could be effectively collaborating and interacting with our clients, providing a dynamic deliverable, but still a very reactive one. One that still requires too much client input to complete.
Bill payment services are a great example here, where you and your team handle your client’s aged creditors, all the way to actual payment processing.
This process could be fully interactive and collaborative.
But, if you’re still asking questions like “when would you like to pay this bill?” you’re offering that dynamic process in a reactive state.
Put it another way, you can’t fully ‘own and manage’ the accounting function of your client because you still need too much of their input in the decision-making process in some way, shape or form.
To eliminate reactive deliverables, you need solid systems and processes in place, as well as an in-depth understanding of your client’s business.
In our bill payment example, you need to advance your knowledge of the client to a point where you are providing suggestions to them:
- Which vendors are a priority?
- What are each vendor’s terms?
- Who is the squeaky wheel?
The more information you have, the more decisions you can make, the less your client has to think about and assist with, and the less reactive, and more dynamic your service offering is.
Understanding where the value lies in cash flow advisory is crucial to pricing your advisory services. It’s also essential to acknowledge the work involved.
While automation tools will help to save a lot of time in the bookkeeping and forecasting process, once you start delivering the value of advisory, the work that comes from that increases.
As it’s no secret that accountants and bookkeeping professionals often undervalue themselves, we want to acknowledge the emotional biases that often come into play when setting prices.
When professionals are used to pricing hourly and are cognisant of their client’s financial situation, they often fall into thinking their clients won’t pay a higher fee.
It’s vital to recognise that clients will pay for the peace of mind knowing that their businesses will survive and thrive once they start forecasting their cash flow and can make better decisions.
When pricing your services, you need to consider the scope and the value from the clients’ perspective and without your own bias.
Pick a starting point, say a monthly recurring fee or subscription of €600 for small to medium-sized businesses. Ask someone else on your team, or a peer, for their thoughts.
Explain the value you’re providing.
If the price makes them queasy, you’re likely on the right track to pricing your services appropriately. If they would take it in a second, you have priced too low.
Cash flow advisory is a high value, high-demand service, so be prepared to take the time properly pricing your new services. If you don’t, you’ll risk commoditising your services and getting stuck overworking.
Step 3: Launch (create launch plan, set up cash flow conversations, deliver forecasts)
Here’s our tried and tested launch process:
Choose your cash flow advisory framework. Having reviewed your internal bookkeeping process, you’ll want to think through how to deliver your cash flow advisory services in conjunction with the bookkeeping process.
Whether you’re doing the bookkeeping or someone else is, you’ll want a framework that sits on top of the bookkeeping and can be delivered at your preferred frequency.
What advisory services do you offer:
- Forecasting (What to consider: Data Preparation, Client Interaction, Advisory)
- Cash management (What to consider: Approval, Execution of Aged Creditors, Execution of Aged Debtors, Execution of Other Activities, Iteration)
Select the client you’re going to create a forecast for. And decide the purpose of the forecast. What problem are you trying to solve? Are they trying to grow? Are they trying to maintain profitability or survive?
Knowing the forecast’s purpose sets the forecast’s direction and how you’re going to deliver advisory services.
Create your forecast. Using an app such as Helm, a spreadsheet or a different short-term forecasting app, you want to create a forecast that you can use.
You’ll want an accurate, relevant and easily maintained forecast to operate and communicate with your client.
Talk to your client. The stronger your relationship with your client, the easier it will be to maintain your forecast and keep it up to date. Before you can advise your client, you’ll need to ask them questions that can’t be answered by looking at data.
For example, what’s coming up for the business in the next year, what are they hoping to achieve, what are they concerned about, what needs to be considered?
Forecasts are forward-looking, and ongoing conversations with your client will give you the required information to use the forecast you created.
Repeat the process. The forecast isn’t the end result. Advisory is the ongoing process of collaborating with your client to make better financial decisions.
The forecast is the tool you’ll use to communicate with your client about what needs to be considered.
So now you’ve seen how you can start building and implementing cash flow advisory services.
But it can’t all be smooth sailing right?
If you’re like most bookkeepers and accountants who provide cash flow forecasts or are looking to your tool of choice is likely to be spreadsheets.
Spreadsheets get the job done – however, they’re also time-consuming, manually intensive, and they don’t make intuitive sense to your clients.
Remember we don’t only want to provide a forecast, we want to be able to scale our services for our sake as well.
This is a pain point we felt at Twenty Eighty Financial. We wanted a tool that would help us deliver informative and easy to understand forecasts for our clients while also allowing us to easily scale our services.
Ultimately this is why I co-founded Helm. Whatever your tool of choice, make sure it helps you achieve your goals.
Cash flow advisory services present a great opportunity for you to deliver greater value for your clients.
While these services could benefit all your clients, some are better suited than others.
Before jumping in, remember to use industry communalities and signs on the balance to identify these clients. When designing your service offering, owing the bookkeeping process and adjusting your mindset are key.
For accountants and bookkeepers, the technical skills are there.
The hang up we often see is in spending the time to understand their client’s situation and a solid plan for transitioning services.
Lastly, be sure to pick tools that allow you to scale and enhance your relationship with your clients.
Cash flow advisory services can be incredibly rewarding for you and your clients.
We hope this helped show the benefits and how you could start transitioning your services today.
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