5 Essential Cash Flow Accounting Services

If the past few years have proven anything, it’s that all businesses need cash flow accounting services. The economic uncertainty has been a difficult burden to bear for all, made worse by the changing landscape of government loans, lockdown regulations, and staff shortages.

If cash flow accounting services haven't been a priority in the past, or if you don’t offer advisory at all, you can still make a difference for your clients and your firm by providing them now. 

Here are five of the most impactful services to start with:

1. Budgeting and Cash Flow Forecasting

Budgeting is a fantastic service to offer clients. For them, it’s a chance to have some help in clarifying their goals and expectations for the year ahead. For you, it’s a firm way to form an understanding of their needs, their trajectory, and have a hand in their immediate future. You could also offer regular sessions to track progress, or a one-off session to tweak the original budget if the situation calls for it. 

But far more powerful is to add cash flow forecasting into the mix. This is a service that lends itself nicely to regular monthly sessions, ad-hoc meetings, and deepening the client relationship as a trusted advisor. Tracking budget to actual variances will only go so far; using actuals to forecast cash flow position for the immediate future is a must-have, especially during times of economic difficulty.

Cash flow forecasting provides clients with a clear understanding of money coming in, money going out, and when this will happen. Knowing this is key to charting the way forward, whether it involves government aid, a private loan, or eliminating unnecessary costs. Whether a business has enough money in the bank to last for a few months, a few weeks, or a few days, having the data in hand will help provide a clear path to the next actionable step.

In essence: if you’re not providing your clients with a cash flow forecast, you’re doing them a disservice.

2. Scenario Planning 

​​The scenario planning functionality in tools like Spotlight Forecasting can allow you to easily create multiple scenarios from your initial budget. The power of this functionality is that you can test various theories or ‘what if?’ business opportunities for your clients, without having to create multiple forecasts from scratch. 

As an advisor, you and your clients will face many forks in the road, including opportunities or obstacles to consider, plan for, or mitigate. With a budget and cash flow forecast locked in, plugging in some scenarios—pricing changes, new revenue lines, margin improvements, OPEX control—is easy and illuminating.

You can lock in an ‘expected’ scenario of a likely future, but also look at what could be achieved in an ‘aspirational’ scenario, with some of the key drivers of the business tweaked. This can be powerful stuff, especially if your advice and recommendations can drive some of these aspirational outcomes.

Scenario Planning in Action

When the pandemic first began in 2020, US-based advisory firm Connected Accounting began liaising with their clients on business strategy. Cloud software adoption meant that Connected Accounting had all the data on hand, and could create a forecast immediately.

"You can do it dirty, by hand, with Excel, but that takes so much time,” says Founder and CEO Marie Phillips. “When everything's already in the cloud and you have it in Xero, it's so easy to link it to tools like Spotlight. And once you're in Spotlight you can do multiple versions: let's keep business running as usual, let's look at a best case scenario, and let's look at the worst case scenario."

One of their clients, a PR firm, found that their worst-case scenario was that partners would receive no distribution whatsoever. However, Connected Accounting managed to chart a different path for the company, by carefully considering outgoing costs and prioritising spending. Based on their input, the company ultimately decided that what mattered most was:

  1. 401(k) matching, and 
  2. Retaining all their employees. 

With these two goals in mind, they cut employee pay by 20%, paused all commission, and cut partner distribution by 50%. Although this was a difficult decision to make, it meant that there were no layoffs, and no furloughs.

Ready to see more? Learn how one firm used scenario planning to help their clients stay viable throughout the pandemic.

3. Cash Flow Management

Cash flow management is an obvious solution to the issue of financial uncertainty. Even before the pandemic, one of the main issues business owners faced was the fear of the unknown. Uncertainty is a breeding ground for worst-case thinking and poor decision making, which is why cash flow management is so vital.

Creating a 90-day view of inflows and outflows can give the client some ability to micro-manage for cash flow positivity. In general, you’d want this oversight to be handled internally, by a trusted bookkeeper, or perhaps in regular collaboration with you.

This is the really low-hanging fruit, helping clients have a short-term, “how am I going to pay the bills?” understanding, and overview of their business cash flows. It’s also a relatively easy service to provide, using one of the various cash flow monitoring software options available. You can even fall back on that accounting staple Excel (if you must).

But cash flow management advisory should not be a marginal, on-demand proposition. Helping clients look ahead with confidence and putting in place basic cash flow maximisation strategies are core, essential, and high-value activities for accountants.

4. Pricing and Debtor Reviews 

An often overlooked opportunity to deploy accounting and business experience is to work with clients on their pricing model and terms and conditions. These two areas—encompassing what and how they charge, what margins are achievable, how they bundle and promote, what expectations they set with their customers—are fruitful areas to explore, advise and take action on.

This review work is best done on an annual basis (at a minimum), so is a great service option to lock in to your workflow—and your own fee projections.

Additionally, pricing and debtor process review work will flow elegantly into the creation of accurate budgets, cash flow forecasts and some “what if?” scenario planning.

5. Debt and Capital Review

Most businesses carry debt, have capital requirements, and/or have material Balance Sheet items that impact on cash flow now and into the future. These can be forgotten if there is too much focus purely on trading cash inflows and outflows.

Questions to ask around capital include: what needs does the business have? Is investment—either from existing shareholders, or new investors—required for the business to reach its potential?

You should also be planning for unexpected shareholder drawings—as all accountants and bookkeepers know, this is an area to keep an eye on!

Finally, “right-sizing” existing loans—reviewing terms, rates, and the overall debt profile of the business—can significantly improve future cash flow. If you aren’t already, you can make a real difference simply by conducting periodic debt reviews.

Take the Plunge

Although it may not seem like the most glamorous job in the world, the work accountants do has a real impact on small businesses and their communities. But the services that were once all-important are no longer enough on their own. Business owners need the expertise accountants can provide to help them navigate the stormy waters of rising competition, volatile markets, and economic uncertainty.

These services should be the springboard to deeper client relationships; higher fees for you, and better outcomes for them. You can offer any and/or all of these services as part of an annual, quarterly, or monthly package, or you can offer them on an ad hoc basis. But the fact of the matter is, these are vital services that could prove the difference between success and failure. It’s a well-known fact that cash is king—and this is one way you can ensure that your clients stay solvent. 

Want to learn more about cash flow accounting services? Check out our whitepaper, "Cash is King".

Cash is King Whitepaper
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