Most accounting firms are familiar with – and typically offer – client advisory services (CAS). But as businesses become more advanced, and the business environment becomes more competitive, clients will likely start to expect more from their accountants’ CAS offerings.
That’s why CPA.com has introduced the concept of CAS 2.0—a more holistic approach to business transformation and change management that firms need in order to efficiently provide next-level advisory services. Firms that adopt CAS 2.0 will stand out against competitors, as they provide the more strategic, insightful, and transformative services that their clients are – or will be – looking for.
However, this shift from traditional, transaction-processing financial statement preparation to business insights-driven, high advisory-value CAS has some firms experiencing the discomfort that accompanies imposter syndrome. When a client comes to you looking for the answers as to how to grow their business, what do you say? What advice do you give when you couldn’t possibly know their business better than they do?
The secret: the client already knows all the answers. Or at least, they will, when provided the right insights and a path to arrive at the answers. As Adam Hale from Summit CPA Group puts it, your firm is simply taking a financial perspective into what the client is doing and how they’re doing it, and then “poking” at them with the right questions. The key is to pull the answers out of the client through your questions and discussions.
The journey to next-level advisory services
As your firm begins to offer next-level advisory services, it can still feel overwhelming, and you may not know where to start. According to Hale, you don’t need to have everything figured out from the beginning—just get started. You’ll evolve with your clients.
For Summit CPA Group, once they realized that financial forecasting was their main deliverable, they knew they needed to find a way to productize their advisory services. Their starting point was making sure their financial planning and analysis (FP&A) reports, methodologies, and even the client meetings and cadences were organized in a routine, systemized way so everyone involved knew what to expect out of each interaction. With a standardized process, they turned their forecasting advisory services into a product and found they could scale their FP&A practice from there.
A step-by-step process to financial forecasting
Having a process in place can take the pressure off of those initial meetings—especially if you approach each meeting and advisory discussion with clear, formulated steps. For example, let’s say your client comes to you with a specific question: What is my cash situation going to look like in two years?
Regardless of the question, Hale says each advisory session starts with the same step: talk, listen, and learn. Here, you’ll dig into the motivations of the client, figuring out where they want to go, and how they want to get there. Your firm will effectively “diagnose” the client’s problem or question before “prescribing” your advice. Again, the client is driving the business—advisors help them understand the steps they’re currently taking, as well as the steps they need to take and how they’ll affect the business. Keep in mind that this first step may take one or two meetings at an hour or more a piece to work through. The output of this first step is a blueprint of the model you’ll build in the next step for the client.
You might be thinking, to answer the “cash” question, why wouldn’t we just do a cash analysis? In short, it’s not that simple. In order to get to a cash analysis, you need to know what happened historically. Once you have historical information, you can build the model(s), and see how those could impact budget and expenditures, plus generate scenarios that will show if you’re going in the right direction. Once you have your budget and forecast you essentially have your annual operating plan (AOP), and can start to forecast what cash will look like in X years (cash analysis).
As part of the modeling process, you’ll need a forecasting tool that can integrate your client’s balance sheet with the income statement in order to build a working, dynamic model. You’ll want to be able to look at non-financial drivers that affect revenue as well, so be sure to include those in your model.
At this point, we’ve covered the first three steps of Hale’s five-step process, as outlined here:
Step 1: Talk, listen learn (diagnosing before we prescribe)
- Learn where the client is at and where they want to go
- Determine revenue drivers
- Understand related costs
- Map out how the business operates
- Create the blueprint for your model
Step 2: Build the model
- Use your findings to build a working, dynamic model
- Include key revenue and cost drivers
- Enter assumptions as stated by the client
- Build the model to reflect picture as the client sees it
Step 3: Test against history
- Review costs
- Discuss all historical expenditures
- Explore past revenue performance
- Compare the clients view of the business with reality
For the full, step-by-step process, we put together a downloadable asset you can reference as your firm scales its advisory services. Click the button below to download the guide.
