Many firms understand the importance of using a value-add approach to improving client service and for developing new business. But an often overlooked area is providing financial analysis to small business clients.

Most small businesses lack resources to support a financial analysis expert, relying on their CPA, accountant or financial advisor to inform them of problems in managing their businesses’ finances.

Although we provide services such as tax, write-up, assurance or payroll services, in most cases our clients assume that we also keep an eye on all finances. This often leads to an expectation gap in client service, which most advisors would like to fill by providing business advisory services. The key to leveraging business advisory services is linking the financial performance of the client’s company to its operations.

Normally this means not only gaining an understanding of the client’s business and controls but also periodically monitoring and preparing financial statement analysis to link the two. This is often where the expectation gap grows. We may have gained an understanding of our clients’ operations but we never find the time to monitor and analyze the performance.

Business analytics and financial analysis software provides can reduce the time needed to monitor and analyze the performance, using a combination of expert system technology, industry data and analysis, and financial dashboards to perform a financial analysis of the client’s financial statements. The advisor can combine that information with knowledge of clients’ operations and provide them with valuable information, which can be used to prevent or detect problems as well as improve processes and procedures. Business analytics software also segues into advisory services and consulting engagements. In analyzing financial statements, it may detect that receivables aging and collection rates are skyrocketing, giving the advisor the chance to engage the client to reengineer the receivables function and related controls. These tools can also perform what-if analyses to evaluate the impact of such recommendations.

The typical value-add approach (see fig. 1) begins once an audit has been finished or a tax return has been prepared, and the client’s financial statements analyzed. This provides the benchmark for monitoring performance. This first step is where many firms hit a roadblock. It may not be clear at this point how the time spent on developing the financial analysis will correspond to future fees and revenue streams. One technique that can be applied is using sample analysis provided to a wide range of clients to gauge interest. If we have identified the appropriate clients, we can create custom financial analysis.

Next, establish a program of regular performance monitoring reviews. This can be done monthly or quarterly and ideally will correspond with clients’ procedures and will provide a structured recurring monitoring service. Then, you can create a formalized engagement with proposed fees or included in an engagement letter for existing services. Right now, you might be thinking to yourself, “but my client doesn’t even have a budget, much less regular budget reviews to schedule performance reviews around”. Voila! You have just uncovered the next service you can provide.
This is a great example of how the value-add approach transforms performance monitoring to an advisory service. You can uncover new services by analyzing clients’ financial statements and discussing the results, a process that drives additional client value and ultimately more firm revenue. To get the most from this process, the person presenting the analysis to clients should review the results of the analysis before meeting with them. Problem areas and recommendations should be identified before a client meeting so that the advice can be delivered with performance review rather than as a follow up. This represents an initial up front time investment but this is time spent that your client will gladly pay for.
The value-add approach bridges the expectation gap and with the use of business analytics and financial analysis software can be done in a matter of minutes rather than hours. By letting software do the analysis the advisor can focus on linking that analysis to operations and providing meaningful recommendations. Once you have accomplished that you have created a business advisory service that your client will truly value and appreciate.