Clients Need Advisory Services More Than They Know

Man with head down on desk, sticky note with "HELP" writte on it on baseball capBe aware of your clients' fears.

By Sandi Leyva and Michelle Long

There’s a lot that falls into the revenue and cash flow improvement area. This can be any services that help the client increase or manage revenue as well as cash.

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Any of the marketing metrics are going to fall into this category as well and, honestly, this is one of the most underutilized consulting opportunities there is because a lot of accountants are scared of the revenue side of business. Please don’t be.

I want to tell you right now almost every single business could improve in this area. Of 26 million small businesses, almost all of them need to look at their revenue better. You’re the one who can help them change their chart of accounts and move it around for them.

Another category of advisory services is profit and there’s a lot in this category. This would be any service that would help the client understand how to increase profits. You can teach them what a profit margin is. How many clients do you have who don’t know what a profit margin is? I think this has to be my favorite area because it’s something I’ve done my entire career and it’s all about cost accounting.

So let’s go back to our college courses and remember the lessons we had on cost accounting. Remember how to do break-even analysis? How about the return on investment? You can actually help them with things like that: profit margin analysis, profit margin by class, profit margin by product.

One thing I want to get you thinking about is we focus too much on expenses. What really makes me crazy is the typical income statement has one or two lines for revenue and 30 lines for expenses. What’s that about? We need 30 lines for revenue and one line for expenses. I know I’m exaggerating but do you see what I mean?

We need to focus on having more analysis when it comes to the revenue and a lot less when it comes to expenses.

Risk management is another category: internal control improvements, compliance issues such as sales tax. One thing I think I’ve discovered – having been laid off and been a totally reluctant entrepreneur – is entrepreneurs are a lot more risk takers than accountants in many cases, especially accounting employees. So we need to honor that to some degree.

I know there are ethics issues in some cases and I’m not talking about that. I am talking about as an accountant we can present the financial numbers and then it is up to the owner to make the final decision on what they want to do. We just need to lay out the potential liabilities and we can do that easily as we’re number crunchers.

What are your clients' biggest mental blocks regarding their financial literacy? Do they get overwhelmed? Do they lack confidence? Are they afraid of appearing stupid? Are they afraid of not being able to afford it?

Do you think it’s because they don’t see the value of it? We have to communicate the value. Lack of time could be an "I don’t know what I don’t know," and so it’s up to us to educate on this. Clients also could be too busy working in their own business or have a fear of numbers.

You want to let them know what a potential outcome might be in terms of communicating the value. I think it will be really important that you let them know what the payoff will be for their time spent. We need to educate them about what the payoff will be and maybe that’s the part we’re not communicating. Think about that: What is the payoff to your client if they spent the time? They may just think you want to teach them an accounting lesson or may not realize that payoff is more profit and working less. We have to help them with that.

This one client I had had an employee vs. contractor issue and had an issue with the way revenue was being recorded, had an issue with an outdated system and so suddenly all at the same time we’re trying to put him on a new payroll system, we’re trying to move him to a new accounting system and we’re trying to let him know whether they collected sales tax right or not. They will blow up. They will faint and walk away and say, "Forget it, I’m not dealing with this."

I think some of the time we need to say, "You do have some compliance issues; let’s figure out what we want to prioritize and in three months let’s figure out what the next most important thing is because I don’t want to overwhelm you, but I do want you to address these risks. Let’s address the biggest risk first." You have to figure out the biggest one first and that way you can help the client. If you’re hitting the client with all this at the same time, then they will get overwhelmed.

Just moving the client to a new payroll system I will tell you is about a month’s worth of overwhelm on some of these, especially if they’re very right-brained and very afraid of financial stuff. So you have to go really easy with them and teach them over and over again and tell them to write it down.

Okay, so there's getting overwhelmed. The next one is fear of feeling stupid and look at all these fears, fear of not being able to afford it and then lack of confidence and then others.

Let’s talk about some of these blocks and how you can approach them. What is some of your best wording in terms of making sure a client doesn’t feel stupid? How do you do this? No one wants to feel stupid, so how do you help them with this? Maybe just introduce one figure at a time, one thing at a time, and just keep repeating it until they get it.

Try a phrase like, "Let me show you something that’s very cool."

Tackle one area at a time: "Let me show you how simple this is." I never talk down to my clients. Just tell them you’re going to break it down into small pieces. I always explain that I wouldn’t be able to do what they do. I explain that mistakes are the best teacher, it’s my job to help you with this, we’ll get through this and I’m here to help you.

I think the main solution to overwhelm is to pace yourself and to make sure you’re not throwing a whole bunch of stuff on them. People feel like they’re not good enough for this financial stuff: "Yeah, I run my own business but for some reason I’m not good enough for the numbers part." That’s crazy, but that’s the way some entrepreneurs think. So I think we have to be very sensitive and we have to be compassionate with ourselves as well because we may fall into this category as well.

This is something we need to work on. We need training sessions to help build our confidence, we need some successes under our belt, we need to ask for feedback and we need to hear feedback on a regular basis. So all of that will help us.