IMGCAP(1)]There are currently 29 million small businesses in the U.S., and 500,000 more are launched each month. Unfortunately, most of those new companies will fail within five years.
If a minor percentage of the vast number of small businesses in the U.S. can last just a few years longer, our entire economy would improve dramatically. But how can business owners who don’t have a plethora of financial resources extend their company’s lifespan? Accounting.
Most small business owners, especially new entrepreneurs, have not mastered the ability to effectively manage finances and use budgeting and forecasting to plan, track and pivot. As a result, they miss opportunities to make fundamental changes to their business strategy that could save them, and their company, in the long run.
Accountants usually understand the financial aspect of a business better than the business owner, who is often scared by financial statements and accounting terminology, and are the most qualified people to provide proactive advice for financial planning and financial management. But in order to provide these services, accountants need to get comfortable providing CFO-like services, and getting their clients acclimated to value-based billing instead of hourly billing.
Here are some ways accounting technology can help accountants become strategic advisors for small businesses and truly make a difference in the economy:
Embrace the Future
Many accounting firms are still providing only traditional services like bookkeeping, taxes and audit support. As more tools become available at cheaper prices to more small businesses, accounting tasks like bookkeeping and even taxes are become commoditized. If you want to grow your firm and keep existing clients, you’re going to have to move to proactive services and provide more strategic value to small businesses.
As an accountant, you are well-positioned to offer these high-value services as you already have the complete trust of the small business owner. No one would hire an accountant to do their books and file their taxes if they did not trust them. Not only does the small business owner already trust you, he or she is looking to you for advice on how to run their business better. Your clients are not comfortable (for the most part) with reading financial statements and don’t always understand financial terminology. So, embrace new technology to give yourself the ability to offer strategic services to your clients, and ultimately move you accounting practice to the future.
Strategically Plan
Accountants often tell me that they can’t help clients with strategic planning, forecasting and budgeting because they don’t have MBAs. They tell me “I'm not the business expert, I’m just the accountant.” This is a missed opportunity. As an accountant, you are likely the person most comfortable with the small business clients’ numbers and financial statements. You have the knowledge that, when applied correctly, becomes a powerful tool to help your clients get beyond “surviving” and toward “thriving”
The first step is to use a tool to help you client put together a forecast. It’s easier than you think. Use 12 months of history as a starting point, and then help your client think through their financial goals for the next 12 to 24 months to put a forecast together. Talk with them and help them through the process.
Here are some great questions you can ask to help get them started:
- Do they think they can raise sales by 5 percent?
- What is their track record over the past few years of increasing sales?
- Do they have a financial goal in mind such as hiring a manager, or buying that expensive piece of equipment?
- Can they lower costs by finding better, lower priced vendors?
- When was the last time they raised prices? Maybe it is time to do a small price hike to account for inflation?
- How can they improve their cash flow by focusing on procedures that will help collect money owed to them faster?
- Are their expenses on their books that aren’t driving sales and should maybe be cut?
- Have they looked at industry benchmarks for their key performance indicators to see whether they match their competition, or where there is room for improvement?
Once you have started the process of strategic planning with your clients and have them thinking with key questions, the end goal will be to help them produce a full financial forecast. That forecast includes a projected P&L, balance sheet, and, most critical, a projected cash flow statement. There are plenty of great online tools to help you help your client, so don’t get mired in cumbersome Excel spreadsheets. Use an online business planning tool that includes a full financial forecast in order to streamline the process and better collaborate with your clients.
Once you have helped you clients put together strategic financial plans, you can make sure that your clients have included key financial goals and business objectives within that plan. This will ensure that your client uses their business plan to guide them throughout the year, and keeps them focused on what they are trying to accomplish. A good strategic business plan with a forecast and budget is an essential tool to help your small business clients make the right decisions as they grow their business.
Track & Pivot
While entrepreneurs are financially conscious, they are by no means financial experts. This is where you can play the role of broader financial advisors. Small business owners are usually focused on the everyday tasks that need to happen to keep their business running, and so they often manage their business finances by looking at their bank account balance. As an accountant, you know that this can be a deadly way for a small business to be managed.
Your clients need to use their strategic financial plan and manage their business numbers weekly, monthly and quarterly by comparing the actual results to:
- Planned results
- Previous period results
- Same period previous year results
The best way to help your clients manage their numbers on a regular basis is to find a great online dashboard that automates their financials into easy to read KPI’s and easily helps them look at these numbers and compares them automatically to all the right time periods and against planned numbers. As the year goes on, you will be able to help your client see where their financial goals are on track, and where they may be off what they wanted and expected.
With your ease of understanding financial statements and information, you will be able to help a client understand if their missed assumptions will have a positive or negative impact on their business, and if they will need to make adjustments in order to keep their business fiscally sound. For instance, they may be collecting money slower than they thought in their forecast, and have less cash in the bank. This is where you can jump in, and help them put together AR policies that will help them collect money faster, and get their cash back on track.
Empowering your client with easy-to-use financial tracking tools can help you assert your relevance year-round and steer them down the path to success. Financial planning is never easy for small business owners, but with your help and the right technology, they can beat the odds.
Sabrina Parsons is the CEO of
