Conserving Client Momentum
This short guide, written by Mark Lee FCA, was sponsored by Venture Finance. Its purpose is to encourage practitioners to take a holistic view of client operations and develop opportunities for better stability and profitability – both for the business client and the practitioner serving them.
You either have an established accountancy practice with plenty of clients or you are looking for ways to win new clients. Or maybe both.
And yet we know it takes longer to build trust and to generate good fees from strangers (new clients) than to do the same with existing clients. This means ensuring that they feel you consider them important and that they have no reason to complain about lack of care, unexpected fees or any other aspect of your service. So it must make sense to devote time to helping existing clients to become more successful. They can then afford to pay higher fees as they grow and receive more advice from you.
The easiest topic on which you can advise
Many accountants focus on preparing accounts and tax returns but business clients generally want more than this. They expect to receive advice on how to legally minimise their tax bills and they expect to receive business advice from their accountant. At least those clients who are serious about growing their business want such advice. In this regard it’s safest to focus on providing advice that is directly referable to your experience, skills and knowledge.
Helping clients manage and improve their business cashflows to ensure they have sufficient working capital is sometimes overlooked as being too obvious. And yet anyone who isn’t interested in budgeting for the tax on their business profits is likely to struggle when the tax falls due. They may also be less impressed with you as their accountant if you don’t volunteer the information in good time.
It’s a simple step from here to helping clients monitor and manage their business cashflows. After all we know how important this is and how many clients confuse cashflow planning with simply keeping track of how much cash they have in the bank.
Projections
Do you know which of your clients have formal business plans? These will invariably include cash flow projections that reveal the level of working capital that needs to be maintained. Other clients who are less ambitious may not need a formal plan, but they will invariably benefit from the production of cash-flow projections. You may already work with clients on these or review those of clients who have the skills to produce them themselves.
Taking the initiative
Whilst plenty of people will talk about detailed business plans, you need to ensure that due focus is placed on working capital requirements and cashflow projections alongside the projected trading accounts and balance sheets.
Depending on the complexity of the client’s business you may need to review and challenge the assumptions inherent in the projections and, most importantly, ensure that the figures are consistent. For example: Increased sales means more direct costs and possibly more indirect costs too. At what stage do additional staff need to be recruited? Have recruitment costs been budgeted over and above the additional salaries and related employment costs? When will cash be tight?
You can also help clients consider how projections might be enhanced and then monitored. Beyond this you could offer specific advice on working capital management such as:
• Implement rigorous credit management procedures - which can be outsourced if need be, but allow for problems when preparing projections
• Obtain credit references for every new customer and ensure any variations on standard terms and conditions are agreed early
• Ensure invoices are sent to the right person with the right information so they have no excuse not to pay
• Offer an incentive to pay early
• Do not tie up too much money in stock and consider obtaining finance by reference to unpaid invoices
• Safeguard yourself against customer insolvency with Bad Debt Protection
This should all be welcome advice for clients and help them with day to day working capital management. Can you go even further though and advise as to ways in which they could gain extra headroom for growth, expansion and even acquisition? This may necessitate some research as to how this can be achieved. As well as unlocking working capital from their ledger book – invoice and asset based lending can be a valuable tool to leverage further headroom.
The way forward
These are the seven steps I would recommend you take. I suggest you aim to complete one a week over a seven week period:
1. Identify a couple of clients who may benefit from your offer to help them REVIEW their cashflow projections;
2. Unless you are very comfortable with the production of complex spreadsheets, identify a cashflow planning package that you will be comfortable using when you work with clients;
3. Get familiar with the package by testing it with your own firm’s cashflow projections and those first two clients’ projections you reviewed at the start of this process;
4. Identify a couple of clients who may benefit from you offering to help them PREPARE cash flow projections as part of a business planning exercise;
5. Build up your knowledge of mainstream funding options remembering that such research will often qualify as CPD
6. Promote your focus on cashflow planning for business clients either by way of your newsletter, an email alert or by arranging a short cashflow planning seminar, over breakfast or drinks.
7. Build the emphasis on cashflow management into your promotional materials, your website and your networking messages.
Mark Lee is Consultant Practice Editor of
AccountingWeb and Chairman of the
Tax Advice Network of independent tax specialists. His personal website and blog for ambitious accountants are at:
www.BookMarkLee.co.uk