10 Reasons Accountants Should Offer Cash Flow Consulting

ccountant offering cash flow consulting

If you’re an accountant who serves small to medium-sized enterprises (SMEs), why should you consider providing cash flow consulting as part of your value-added services?

If like us, you’re dedicated to giving businesses the tools they need to forecast cash flow and strengthen their long-term financial health, here are 10 reasons why you should offer cash flow consulting:

  1. Most businesses are small businesses

Globally, there are more small businesses than any other kind of business. Consider these numbers: 99.9% of all US businesses, 97.9% of Canadian businesses and 99% of all businesses in the world are small businesses.

Most accounting firms are also small businesses. For example, 90% of all accounting firms in the United States have less than 10 partners or owners.

Case Study: Cash Flow Consulting in the Real World 

  1. Accountants are trusted advisors

Like attracts like. If you’re a small business looking for a professional accountant, are you going to go knocking at the door of a major accounting firm with retainer fees as high as the skyscrapers that house their employees?

Or, are you going to look for a small to medium-sized accounting practice (SMP) that’s more reasonably priced and more likely to understand your needs?

The answer is obvious. It is also why most small businesses consider their accountant their most trusted advisor.

  • A majority (92.2%) of accountants provide basic accounting and bookkeeping services.
  • Only 77.7% offer business consulting services, like cash flow analysis and forecasting.

Offering cash flow consulting will give you an edge on the competition. At the same time, it will also help you forge stronger bonds with your clients.

cash flow consulting opportunity

  1. Cash flow is a small business killer

More than half of small businesses never make it past the first five years. The main culprit is cash flow.

  • Studies of the U.S. market conducted by Wasp Barcode have found that 33% of small businesses said cash flow was a top business challenge and 44% found cash flow a top accounting challenge.
  • A similar SCORE study indicated that 22% of small businesses said that cash flow was their main concern.

It’s not that these businesses don’t understand that they need to have the right amount of money to meet their financial obligations. Instead, they just don’t have the correct tools, technologies and processes in place.

By helping your clients master cash flow management, you’ll be teaching them vital survival skills. You’ll also be building mutually respectful long-term relationships.

Forbes Article: How SMEs Can Win the Battle for Positive Cash Flow 

  1. There are intuitive forecasting tools

You don’t have to go and design proprietary systems to create a powerful and meaningful cash flow analysis. Automated tools, like our free cash flow forecasting, make it simple to create an informative, intuitive report filled with key ratios, charts and graphs.

All you have to do is connect the business’ QuickBooks Online account with their free PayPie account, then run the report. The forecast is built using the near real-time data from the company’s QBO account. (Integrations with other accounting software and platforms are coming soon.)

You may run a free cash flow forecast on a monthly, weekly or even daily basis.

PayPie Cash Flow Forecast Example

  1. Technology is changing everything

“CPAs with technology: You have the power to change your customers’ lives.”

Jody Padar, CPA, MST, Accounting Today

With the rise of cloud-based technology, these three trends are changing how small business accountants are interacting with their clients:

  • Digitalization— As more small business data is available digitally, through the use of accounting software and applications, it’s also easier for accountants and bookkeepers to access this information.
  • Virtualization — Because cloud-based technologies can be accessed from any device with an internet connection, it’s no longer necessary for accountants to physically visit clients. Accountants and businesses can work together from virtually anywhere.
  • Transformation — With the greater availability of near-real-time data, accountants are moving from generalized to specialized services.

Read More: How Cash Flow Consulting Helps Businesses 

  1. Cash flow consulting builds value

“The ability to provide business intelligence from a quick analysis of data is a miracle.”

— Geoffrey Moore, technology author and business consultant

Complying with regulations and paying taxes are services that business owners see as have-to-dos. Accountants who take the creation of financial statements one step further by producing cash flow forecasts are transforming routine tasks into recurring, value-added services.

Rather than merely reporting results, cash flow consulting is a key component in business growth. Some advisors even set up monthly consultation calls or video conferences with their clients to discuss goals and objectives — literally becoming voices in the business decision-making process.

Pro Tips: Cash Flow Forecasting — What You Need to Know 

  1. Business financing goes hand-in-hand with cash flow consulting

As you help businesses better understand when, why and how the cash flows in and out of their companies, your clients may also rely on your advice for short-term and alternative lending solutions.

In addition to standard options, like term loans, lines of credit and credit cards, you can also introduce the businesses you serve to innovative financing solutions, like invoice factoring, powered by blockchain technology.

  1. Better cash flow lowers risk

The cash flow forecasts created using PayPie’s insights and analysis also contains a risk score that summarizes and reflects several key variables linked to cash flow. This indicator shows how a business is viewed by lenders, vendors and other third parties wishing to do business with them.

Helping a business improve their cash flow also improves their risk score. With a better risk profile, businesses can access funding more easily and set more favorable terms with vendors.

Cash Flow Basics: How to Read a Cash Flow Statement 

  1. Better cash flow builds confidence

As you work with your clients reviewing cash flow, setting goals, controlling costs and planning for future investments and opportunities —you’re not only improving the business’ financial health, you’re also bolstering the owner’s confidence.

As you go through a cash flow forecast, especially the day-to-day costs involved in operational cash flow, you get a better sense of where the client’s priorities lie, which concepts they understand the most and the areas that need the most improvement.

In a nutshell, you’re able to ask the hard questions and offer informed solutions that truly benefit the bottom line.

  1. Cash flow consulting makes you a better advocate

“Running a small business is about the grind, the day-to-day operations and finding a way to keep your head above water. Like the shock of cold water in the ice-bucket challenge, reality can hit you hard and all of those hours picking paint colors for the office suddenly seem wasted. Small businesses inherently overlook the technology platforms that help them manage their day to day — and that’s exactly how cash flow begins to erode.”

— Stacy Gentile, Forbes Communication Council

Managing finances isn’t always the most alluring part of owning a business, but it’s fundamental for success. Cash flow consulting takes the implementation of best practices and better tools to a new level by delivering tangible results in the form of more cash. And no one can dispute the value of money in the bank.

Be a cash flow advocate — try our free cash flow forecasting for QBO users today.

PayPie currently integrates with QuickBooks Online. Additional integrations are coming soon.

This article is informational only. It does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.

Image via Shutterstock

New Beta Sneak Peek: Cash Flow Forecasting

PayPie Beta Sneak Peek Binoculars

PayPie is extremely excited to announce that we’ll be releasing a substantial update to our beta in the coming weeks. One of the main focal points of the update is our beautiful and cutting-edge cash flow forecasting tool.

Sneak peek: Spectacular cash flow forecasting

Cash flow is the lifeblood of any small to medium-sized enterprise (SME). At PayPie, we want to give these businesses the tools they need to thrive. Our cash flow forecasting fulfills this promise brilliantly.

It gives business owners and/or the financial professional advising them a better way to visualize the financial indicators affecting the company’s cash flow. (Our proprietary risk score contained within the cash flow forecast is an extension of these metrics.)

In the long-term, the cash flow forecasting and risk score will be tied to our business financing capabilities. However, for the moment we’re focusing on the overall significance of cash flow forecasting in terms of best practices for business financial health and value-added services for the financial professionals serving these businesses.

PayPie Cash Flow Forecast Example

How SMEs can use cash flow forecasting

Through our QuickBooks Online integration, all that small to medium-sized businesses (SMEs) or the professionals representing them have to do to use the cash flow forecasting tool is sign up for PayPie and connect the company’s QBO account.* No tedious data or customization entry required.

Better yet, the cash flow forecasting tool is free! Businesses may also use it as often as they’d like to turn basic financial data into highly visual and informative reports.

Side note: We plan to begin formally reaching out to a range of QBO audiences this summer.

See the recently refreshed the PayPie website. 

Why data visualization matters

Have you ever tried to draw conclusions from simply reading spreadsheet or string of numbers? It can be done, but it’s not always the easiest or most intuitive way to go about it. The indicators, charts and graphs in our cash flow forecast bring this information to life — making it even more valuable for “connecting the dots.”

A company’s quick ratio, cash flow ratio, current ratio and debt-to-equity ratio are at the top, with the risk score taking center stage. A cash flow graph quickly shows the relationship between the money flowing in and out of the business. Plus, useful tabs let users drill down even further into receivables, payables and other areas.

Learn more about reading a cash flow statement, how cash flow forecasting works and basic cash flow concepts.

The benefits of cash flow forecasting

A cash flow forecast shows how money flows in and out of a business over a specific period of time by:

  • Comparing the overall flow of cash into the company against the flow of cash out of the company.
  • Identifying the times when the cash reserves are at their highest and lowest.
  • Pinpointing opportunities, like which invoices are overdue in terms of cash value and days past due date.

If a business has a lot of historical data in their QBO account, our algorithm uses this information to create a forecast. For new businesses (or businesses that have just started using accounting software), the insights from their forecasts will grow as their data grows. For all businesses, cash flow forecasting offers the information needed for strategic, data-backed decisions.

An opportunity for financial pros 

“Every annual financial cycle is an opportunity to sit down and set goals and project numbers forward with your significant clients. Looking forward is not only important, but often essential to identify and avoid any looming business issues or, more positively, for identifying new opportunities too.” — Richard Francis, Spotlight Reporting Founder, AccountingWeb

As artificial intelligence eliminates data entry, there’s more time for value-added services, such as cash flow forecasting. This also opens the doors to scenario planning, debt reviews and other related services.

Build long-term relationships with PayPie

We recognize the critical role that accountants and bookkeepers play as advocates to their SME clients. This is why PayPie is developing a suite of tools for start-to-finish cash flow forecasting and management. We’ve started with the cash flow forecasting tool, which includes risk scoring.

Once we bring our invoice factoring services online in the near future, we’ll be able to help financial professionals identify and solve cash flow problems — all in one platform.

In order to deepen our relationships with financial professionals, we’re also committed to creating strong partnership programs.

Accountants and bookkeepers can get started the same way an SME would, all you have to do is sign up.

*PayPie currently integrates with QuickBooks Online. Additional integrations are coming soon. 

This article is for informational purposes only. To receive monthly email updates, click on “Get Newsletter” in the upper right-hand corner of the blog page.  

Image via Pexels.

Reporting, Cash Flow and Your Business’ Financial Health

business owner reviewing financial statements on a computer

While you know that financial health of your business is important, it’s actually a pretty difficult topic to discuss. Business financial health involves all sorts of accounting and financial terms, which don’t always roll off the tips of everyone’s tongues. But, more than that, most business simply have no idea where to start.

Rather than waiting until you have a cash flow crisis, using insights and analysis can help you better understand the financial health of your business.

What is business financial health and how do you measure it? 

Like 64.4% of businesses, you use accounting software to help track financial health by systematically recording your income and expenses and other crucial data. In turn, this information becomes the foundation for key financial statements, like your balance sheet, profit and loss statement and cash flow statement.

Learn how to read a cash flow statement and what cash flow forecasting can tell you about your business’ financial health. 

Why should you routinely review your business’ financial statements?

According to Mike Kappel, CEO of Patriot Software, the best way to measure success and overall financial health is to look at your financial statements.

“Measuring business performance means checking out the money flow (cash flow) of your business. If you want to see how profitable your business is, check out the financial statements.”

The challenge with financial statements and financial health

While most business owners recognize the significance of reviewing their financials, business coach Adam Sonnhalter notes that he and his business partner have seen:

“Grown, husky men cry when we ask them to tell us what they see on their financial statements and tell us what the numbers mean.”

The difference between financial statements and financial reports

In truth, the terms are often used interchangeably. However, in the world of business accounting and determining financial health, there are inferred differences.

  • Financial statements are often considered internal documents intended for stakeholders within the business itself.
  • Building upon, summarizing and visualizing the data from within the business statements, a financial report (business assessment) is most often used to quantify or substantiate the business’ performers to external stakeholders, like lenders.

Financial assessments and analysis, like cash flow forecasting, bridge the gap between having the numbers in hand and actually having a handle on what they really mean. When financial insights are presented in a clear, concise report, it’s easier for business owners to see what these numbers are telling them about the financial health of their company.

Although in a textbook sense, reports have traditionally been used to provide information to third-parties, the financial analysis and insights within the reports are also highly valuable to the businesses themselves. After all, you can’t make informed decisions if you don’t have the right information in the first place.

PayPie Cash Flow Forecast Example

Putting all the pieces together for better financial health 

In order to get the information you need to measure your company’s financial health, you need to know what you’re looking for, where to find it and what it all means.

The four main indicators of a business’ financial health

In an article written for Investopedia, contributor J.B. Maverick writes that liquidity, solvency, profitability and operating efficiencies are the four main areas that should be examined to determine a business’ overall and long-term financial health.

  • Liquidity — The amount of cash or assets easily convertible into cash that a company has available in order to meet short-term obligations.
  • Solvency — A company’s ability to meet long-term payment responsibilities.
  • Operating efficiency — A measure of how much profit the company makes with each transaction, once the cost of production or providing the services is accounted for.
  • Profitability — Put simply, this is whether or not the company is making money.
Discover which businesses have the best cash flow and why.

Your financial statements — what they are and what they tell you

There are three financial statements that a business should produce and review on a regular basis for the data needed to measure financial health and inform better decision making in relation to your financial health.

A balance sheet (statement of financial worth or statement of net worth) compares a company’s assets to its debts detailing what it owns versus what it owes. Assets are listed in order of liquidity (how quickly they can be converted to cash) while liabilities are listed in the order in which they’ll be paid.

A balance sheet is often described as a “snapshot” of one particular point in time in a company’s financial health. The date at the top of the balance sheet tells you the period of time (year, quarter or month) for which the information applies.

A business’ working capital ratio (assets divided by liabilities) is derived from the information provided in the balance sheet.

balance sheet

While a balance sheet shows how well a business is managing its liabilities, a profit and loss statement (P&L statement, income statement or statement of operations) tracks revenues, costs and expenses over a quarter or fiscal year, providing measures of profitability.

Answering the question, “Is this business profitable?” — a P&L statement starts with top-line revenue items from which the costs of doing business, such as costs of goods and services (COGS), taxes and other operating expenses are deducted. The resulting amount is the famous “bottom line.”

Gross profit margin (gross profit divided by revenues), operating profit margin (operating earnings divided by revenue), net profit margin (net profit divided by revenue) and operating ratio (operating expenses divided by net sales) are generated from a business’ P&L statement.

Learn why you should always keep your business and personal finances separate. 

profit and loss statement

A cash flow statement (statement of cash flow) is the third document in this trifecta. By comparing metrics from a business’ operations, purchasing and borrowing activities (merging the balance sheet and P&L statement) it shows where a company’s money comes from and where it’s going (or has gone).

A company’s cash flow ratio (operational cash flow or free cash flow) represented as the operating cash flow divided by current liabilities is considered a measure of operational efficiency and solvency.

The difference between cash flow and profitability

Cash flow and profit are not the same things, especially in relation to financial health. Unlike a balance sheet or P&L statement which are static — a cash flow statement shows movement by accounting for funds coming in or out of the business as credit, such as paid or unpaid invoices.

It’s entirely possible for a profitable business to have limited cash flow, especially if a business’ inventory, accounts receivable or fixed assets are growing rapidly. Unlike Fortune 500 companies with large cash reserves, independently owned businesses are more likely to reinvest their funds into their business — as a result, they are also more likely to be cash poor.

What financial reporting can tell you about your business’s financial health

A financial report takes the information in a business’ financial statements and translates them into analysis and insights. A cash flow forecast, like the one generated by PayPie, puts your cash flow, debts, assets and other factors related to financial health front and center.

The assessments we generate are a visual way to help you understand the metrics that matter most to your business’ financial health. In your report (pictured earlier in this post), you’ll find charts, graphs and other breakdowns that help give you the big picture of what you need to know in order to make the right decisions for your business.

How does it work? Simply sign up for PayPie, connect your accounting software to use your current financial information and you’re ready to go.* You may also run cash flow forecast as often as you like — free of charge — to help you start building a history of your progress.

Ready to improve your business’ financial health? Then click here and get started now!

*PayPie currently integrates with QuickBooks Online. Additional integrations are coming soon.

This article is intended to be informational only and does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.

 

Stock photo from Pexels.