Why Financial Forecasting is the Best Advisory Service to Offer Clients


In 2020, small business owners and entrepreneurs simultaneously faced a public health, economic, and management crisis. But through it all, many persevered. They found solutions and adapted to not just survive, but thrive. Now they are looking ahead to the future of their business, and the help they need from strategic advisors.

In our 2021 State of Small Business Report, more than half of respondents said they want expert help forecasting and planning for the future. This is a hard transition from the focus on managing cash flow and budgets that was so prevalent at the start of the pandemic. 

For accountants, this presents an opportunity to provide value beyond crunching numbers and historical reporting. Now, more than ever, you can lean into forecasting and create a tool that lets you engage in meaningful conversations with your clients. A tool to track results against projections and deliver high-level advisory services.

Here's what small businesses are focused on in 2021

The difference between budgeting and forecasting

If you’re an accountant, you are probably familiar with budgeting, and may even use the budgeting feature within your accounting software. A question we get asked a lot by accountants who are beginning Strategic Advising services is, “I do budgeting already. What’s the difference between a budget and a financial forecast?”

The answer is fairly straightforward, but also intriguing, in that it has a lot to do with the real value of advisory services: helping your customers survive and thrive. By looking at the key differences between a budget and a forecast in this infographic, we can start to understand why financial forecasting is important to your advisory services. As well as how you can use one to build a roadmap for your small business clients.

What is the difference between budgeting and forecasting

That last distinction is perhaps the most important. Budgets are tactical and help manage expenses and set limits. Forecasts are strategic and help businesses grow through long-term decision-making and management.

If your clients are asking for help with budgeting, they may not appreciate the difference between an operational budget and a strategic forecast for long-term growth. Use that as an opportunity to flex your advisory muscles and teach them the difference.

Why Forecasting makes the best advisory service

When small business owners are stressed from financial uncertainty they need information from their accountant. Information that will help them avoid feeling blindsided by unknowns and enable them to forge a clear path forward.

A strong financial forecast is at the heart of any successful Strategic Advising relationship. Many people assume that reporting is the most important. But it’s the forecast that provides the roadmap, and is therefore the basis for advisory services.

By comparing the forecast to the accounting actuals, and understanding the variance, you can help your clients identify problems in their business, which is what productive advisory services and strategic forecasting are all about.

This type of work is perfect for a strategic advising practice. But even if you don’t offer advisory services now, you can get started with financial forecasting as a service for clients, especially during uncertain times.

Financial forecasting is critical to business success

It’s almost impossible for businesses to be consistently profitable or find growth opportunities without careful financial planning. However, it can be difficult to transition your clients to focus on financial forecasting. After all, their focus is likely on ensuring they have enough cash on hand right now and that sales are stable right now. 

However, the benefit that forecasting provides for small businesses, is the ability to take a proactive approach with their finances. This is where you as a CPA, can become a trusted advisor when it comes to navigating the future. In short, you can provide up-to-date information and projections to help:

  • Evaluate and review their current position
  • Assess risk
  • Make adjustments based on performance 
  • Identify opportunities and threats

Forecasting helps set clear targets and goals

A data-driven financial forecast helps your clients achieve their goals. When done correctly, it stands as a clear roadmap for their business that you help them navigate. With it in place, it presents an opportunity for you as the advisor, to listen and understand what the underlying factors are that drive your clients forward. It also gives you clear guidelines for how to direct your clients based on their answers.

The forecast you help them develop is based on data, historical information, and strategy. By having it in place, it allows you to ask open-ended questions that help you build rapport and trust as an advisor. You’re having a conversation that leads to a cohesive strategy, but for the client, it’s a journey where you’re taking the time to understand and grow their business.

Transform the way you price, market, sell and deliver your services

If you’re an accountant and/or an advisor, training and resources are available to guide your small business clients in more strategic ways. To help your clients understand their opportunities and limitations, to react quickly and with confidence. That’s why we built the LivePlan Method.

The LivePlan Method has transformed the way accountants and advisors think about small business advisory services. It’s a scalable system for delivering immense value in a profitable way, every month. You can learn the LivePlan Method for Strategic Advising in a couple of different ways. You can complete self-paced training and get everything you need to build a scalable, efficient, and profitable client advisory practice.

Editor’s note: A version of this article originally appeared on The Appy Hour Blog.

Jonathan Michael
Jonathan Michael
Jonathan is the Senior Channel Marketing Manager for Palo Alto Software.
Posted in Budgeting and Forecasting