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What are Financial Advisory Services?

Financial Advisory Services (FAS) address the financial health of the business. CFOs and financial coaches work toward achieving this goal, but operate slightly differently.

While a CFO can be very clinical with precise methods for financial improvement, a financial coach takes into consideration the unique personality of the business owner and the fundamental character of the business itself. Both CFOs and financial coaches seek to increase the health of the business and facilitate its continued success.

Financial advisors make recommendations and motivate with enthusiasm to create goals. Start small. Accountants sometimes struggle with how to start offering FAS, but (SBO) Small Business Owner’s have even further confusion, due to their lack of understanding of income, profits, and cash flow statements. We don’t have to have all the answers … just the confidence in offering guidance and insights to the story that the numbers tell. We are expected to be experts in our craft. The key is being poised in the delivery.

Most SBOs do not have a financial background, and the numbers on reports mean nothing to them. On their own, it’s difficult for them to create forecasts, budgets, and cash flow plans. A paramount concern to SBOs is, “Where did all the money go?” Another primary concern they also want answered is, “How do I make more of it?” Because most SBOs have a lack of time and comprehension, the question is, should they hire a financial advisor to assist them?

To the SBOs who already have a grasp on their numbers, the accounting professional can offer an unbiased, fresh perspective by creating a team and coach relationship. This will help facilitate guidance and drive introspective thoughts that foster results. Most SBOs already employ an accountant. This accountant is expected to have financial expertise and, by extension, should have the confidence and capacity to perform Financial Advisory Services.

Expected outcome of Financial Advisory Services

First, more confidence in decision making can be accomplished by applying your strength as an accountant to your clients’ unique financial situations. By having conversations about their books, you can start with the most significant issues, then gain insights into their needs. Set a realistic timeline for improvements, including incorporating strategy and recommendations. These strategies can restore a business to financial health and provide enlightenment to the business owner, which could lead to growth if that is the desired outcome.

Forecasting, budgets, and cash flow planning

Once you have a firm grasp on revenue and profits, you can start to explore forecasts, budgets, and cash flow planning. Historical numbers outline how you performed previously. The historical numbers are concrete, but planning has the possibility to create a forward-thinking roadmap.

Forecasts. Forecasts are financial models – living plans to be reevaluated, expanded upon, and change course. As Spencer McKenzie, M.D., says, it’s “when the cheese moves.” Forecasts eliminate being adrift and surprised financially. Forecasts differ from financial statements because they help set revenue goals and manage profits.

Budgets. Budgets are a tool to manage your cash. Personal and business budgets can be made to achieve revenue goals. They also work to help you plan for lean months by evaluating where you can reduce expenses. By reviewing budgets against actuals quarterly, you can keep your finger on the pulse of the business’ health and be positioned to address issues as they arise.

Cash flow planning. Managing cash flow has become more complicated with the use of electronic funds. Previously, cash was the only way to make purchases, but now, revenue and expenses are more difficult to manage. During months when less cash was on hand, less cash was expended. Now, it’s not so cut and dry. Expenses paid electronically can make cash flow tracking difficult, too, especially if electronic bill payments are not recorded in the bookkeeping until after they clear. Customer payments can be tricky, as well, because customers have various payment methods that can take days to clear the bank. In addition, customers can have late payments and default payments, making cash flow management difficult.

Start simple with cash flow management. Teaching SBOs to enter bills to manage payment dates allows them to plan for immediate needs, including payroll. Some businesses have more cash flow risk. SBOs with greater individual invoice values create cash flow dependencies, as do slow payment intervals. Industries, such as manufacturing plants with inventory and warehouse expenses, have more cash flow risk than service-based businesses with little overhead, such as accounting firms.