Despite being the single most important area to monitor for small businesses, many bookkeepers and accountants struggle with offering cash flow forecasting and cash management advisory services to their clients.
We see it a lot and it’s a reason why we have created the Definitive Guide to Cash Flow Advisory. Often, after creating and building the initial cash flow forecast professionals will find themselves asking one simple question: what’s next?
Start By Designing Your Cash Flow Advisory Service
The answer to “what’s next?” is quite literally the start of the cash flow advisory process. Having difficulty with it isn’t due to a lack of skills or knowledge, it is actually an issue of service design.
To know “what’s next” you need to first:
- Properly identify your client needs
- Scope cash flow forecasting or cash management services to those needs
Only then can you start implementing and offering the services you scoped.
So let’s take a look at cash flow service design more closely, and really nail down how to start offering cash flow advisory services.
Identify Client Cash Flow Needs
Cash flow advisory, at least in our opinion, is new frontier. To some reading this, that might be a lightening rod statement, so let’s explain that a bit.
- Cash flow analysis has been around since the beginning of time, but in the past it was limited to companies that had the resources (i.e. vast quantities of money) to put behind it.
- Technology, being the great equalizer that it is, now provides real time financial data to small businesses at a low cost. This has opened up the pandora’s box that is known as advisory, of which cash flow management is but only one subset.
So cash flow advisory is pretty new to most small businesses out there.
The social proof? Intuit recently estimated that cash flow issues affected 62% of all businesses. But have you ever had a new client come in the door asking “hey, can you run me a cash flow forecast?”.
This makes identifying client cash flow needs both paramount and tricky. How do you identify needs that the client might not even know they have?
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Ask Clients A Lot Of Cash Flow Related Questions
If you have a new client you should ask a lot of cash flow centric questions during your onboarding process. You won’t have a lot of detailed information at the outset, so the more you can glean up front, the better.
If you have existing clients and you don’t know contextual information around their business, a similar line of questioning would be great to spark conversation and build further rapport.
Questions that are related to cash flow could be any of the following:
- 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 6 to 12 months?
- Are you going to be looking for any financing in the next 6 to 12 months?
Always try to use some open ended questions when you are onboarding or dialoguing with clients. You might be surprised at the information you get back.
Example: “What are your business goals for the next year?”
Response: “Double our business in size.”
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
Review Client Historical Data
This will be easier for existing clients than new ones as you will likely have a much better grasp on the quality of the data you are reviewing with existing clients. And as they say, garbage in, garbage out.
Take some time and review client financial statements. Dig into key information like:
- Monthly profit and loss statements (ideally 12 month rolling statements to easily pick out trends and outliers)
- Accrual accounts like prepaid expenses and unearned revenues
- Accounts receivable and accounts payable trends (i.e. payment timing)
- Current debt structure
- Ongoing owners draws
Map Out Future Cash Flows
Using the information above, you should be able to get a great feel for the ebbs and flows of the business’ cash flow. Ask yourself:
- What are good estimates for future monthly cash inflows and outflows?
- Are there any customers or suppliers that should be estimated granularly? (i.e. rent is on the first day of the month not the last, so knowing that’s exactly when it comes out does matter)
- How are accounts receivable or accounts payable trends going to affect cash in the next 6 to 9 months?
- Does the above align with the business’ goals for the next 12 months?
You can then create a simple cash flow forecast to map out your client’s cash flow for the next year. And once you do so, you will most certainly be able to identify cash flow pain points (remember that Inuit stat?… 62% of ALL business have cash flow issues).
Of course, if the above sounds like a lot of work, it often is. Especially as the complexity of the business increases. This is the exact reason we built Helm as it:
- Automates a large portion of the historical review process for you
- Takes this data and estimates and visualizes it for you in an extremely intuitive way
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Identify All Cash Flow Pain Points
There will be some obvious cash flow issues that accountants and bookkeepers will run into with their initial cash plan. These would include:
- Cash inflows not being (collected) quick enough to support ongoing operations
- Spending being to too high relative to cash inflows
- General cash flow not bing enough to support debt payments
- General cash flow not being enough to support owner salaries or draws
- Current cash position not being enough to support future growth
Why do businesses fail? For all of the reasons above. And if you can identify these pain points for your clients you have won a customer for life.
But there are other pain points that professionals can identify that don’t lead to business failure. What about:
- Carrying too much cash on hand?
- Having too much accounts receivable relative to accounts payable?
- Not having enough cash buffer? (this is having enough cash on hand to absorb black swan events like COVID-19)
These are just as important for maximizing a small business owner’s return on investment (or perhaps more aptly put, return on effort), but are almost entirely ignored. Because of that they present amazing differentiating and planning opportunities.
This is exactly why we built out Helm’s cash flow health score. It automates the calculation of metrics like the above and creates immediate conversation pieces and action items for those interested in cash flow advisory.
And we won’t lie, having a “score” to present to clients also makes cash flow advisory a bit more fun everyone. 
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Scope Cash Flow Services To Those Needs
Once identified, scoping services to cash flow pain points is relatively straight forward. Let’s take the first of our five common examples we described earlier.
Pain Point:
- Cash inflows are not being (collected) quick enough to support ongoing operations
Potential Service Offerings:
- Scope out a sales process review that helps with collections (i.e. review invoice design, invoice terms and payment methods)
- Scope out new process designs that automate the sales process or accounts receivable collections going forward
- Scope out a collection service offering where your team assists
Just be very clear in any service proposal as to what your end solution is and what activities are required to carry it out. As a professional you need to provide enough detail so that there isn’t any confusion as to what you are doing. This avoids dreaded scope creep in the future (which is very easy to do in advisory!).
You should consider:
- How many resources your proposed solution will require (availability of you or your team, software, etc.)
- The frequency with which it will be delivered (weekly, bi-weekly, monthly, quarterly)
- How much involvement will be required of the client and their team (communication in advisory can take a lot of time!)
Implement Your Cash Flow Services
To this point you’ve collected client data, created a cash flow forecast or cash plan, identified client pain points and scoped out a solution that solves those needs.
There is the obvious question around pricing your newly defined services but we’ll save that for another post!
But presuming you can nail the proposal and the client accepts, you only need to implement the solution you outlined. From here it’s following that plan and never having to ask “what’s next?” again!
