Traditionally, accounting firms have focused on providing assurance and taxation services for their small business clients. Discussions often center on historical results. While these are useful and an important base discussion to have, we also want our clients to be looking forward, actively planning and pursuing their future. This is the bridge that business advisory builds to take clients to the next level.

Budget Planning

You would never drive your car down the street only looking backwards through your rearview mirror - you’re bound to collide with something. So, drive your business like you drive your car. Spend most of your time looking forward and focus on what’s coming up ahead, only referencing your past to maintain a well-rounded perspective.

Before going on your drive, you generally know where you want to go and the route you are going to take. A budget is a great tool to do this “pre-trip” planning for your business. The budget doesn’t have to be a rigid, immoveable plan that restricts management’s creativity from generating profit. It can be a very fluid planning tool to set benchmarks which the future can be measured against. If a detour needs to be taken, the route should be adaptable to the necessary changes in expectations.

That seems simple but in initial discussions, clients often ask, “How can I create a budget when I don’t even know what’s going to happen next week?” My response is simple: it’s not about being right; it’s about getting your thoughts down on paper so you can measure actual results against your expectations. You will get some aspects of the budget wrong but by going through the process, you will be answering some important questions about how far off you are and more importantly…why. By laying down a future road map you can compare actual results to what you had expected, then use this knowledge to build future planning and budget development skills. 

Immediate Progress is Possible

Once a client’s perspective has shifted to include forward-looking decisions as well as past analysis, we often see them make immediate progress. For example, after transitioning to a forward-looking approach, one client told me it was the first time he had ever been able to take money out of his company. By planning and making profitable, cash-related decisions, he was able to reinvent his whole business. Another client went from breaking even to earning close to a million-dollar profit in one year, simply because they set milestones, made some basic changes, and monitored results against the benchmarks as the year went by. Both of these examples were a result of driving their businesses based on a strategic plan instead of blindly following the road ahead of them.

Ask the right questions

Accountants like to solve problems for clients but sometimes having the client find their own solutions provides the biggest reward. 

Business advisory is all about asking the right questions. By providing the client with directed questions about their business, we often find that they more clearly understand the point you are trying to make. A basic string of questions could start something like this… “What is your gross margin?”, “What revenues and expenses go into making your gross margin?”, “What revenues or expenses could you add to your gross margin to provide you with better information?”, “How would these changes help you make better decisions?” 

Greg Hemstad, CPA, CA, is a partner at Collins Barrow Red Deer LLP. He develops corporate strategies, both operationally and financially, for companies in a variety of industries. 

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