11 August 2021
Table of contents
Table of contents
Business owners are busy, so finding time to actually review their business finances in enough detail to understand everything properly isn’t easy. They might think they’re on the right track, but things aren’t always as they seem. You know that. They might not.
In this article we’ll share some tips on how to explain why financial health checks are important for business owners.
As an accountant you probably send your clients some form of financial reporting already. Even if this takes the form of annual accounts, it will give them an overview of what’s happening to their business in financial terms.
Understanding what's really happening in your business will help you make more reliable decisions, and be more efficient.
A financial health review allows you, as their accountant, to find out what your clients’ future plans are for their business. This is about reframing the questions to show you’re helping them support their life and goals.
Maybe they plan to take on a new site or hire more employees, or maybe there are things going on in their personal life which need some financial stability.
A thorough financial health check can basically tell them whether they can afford it, and what needs to happen to get there. For you as a business yourself, it’s also a pretty good time to show them the role that you’ll play in their growth.
The whole point of a financial health check is that it not only shows your client where their business is now, but the direction it’s heading in. What will happen if they carry on as they are? Does it align with where they want to be? Your review might include:
The whole purpose of these reports and checks is for your client to get the benefit of what you’re telling them.
Do your clients understand what the numbers mean?
You know when someone gives you directions, but you’re so busy doing the “yes I am listening” face that you forget to do the listening so still don’t know where you’re going? Everyone does it, including clients who are supposed to be learning more about their finances.
Keep explanations as concise and clear as possible, without relying too heavily on jargon. For example, when referring to “financial liquidity” you might say something like “funds you can access quickly”.
“Turnover is vanity, profit is sanity…” Explain how the numbers relate to each other.
If their financial management hasn’t been brilliant for some time, they could well be overspending and have lots of unnecessary outgoings.
Financial health checks mean they’ll be able to see exactly where their money is going, and think properly about what’s essential or just habit.
If you’ve ever spent time with a small child, you’ll know they talk – a lot! Usually, it’s about all manner of subjects that aren’t of any real interest to you but that mean a lot to them.
But if you actually take the time to engage with the child and listen properly to what’s important in their world, you’d be surprised what you can learn and understand about them.
If the first thing to jump out at you is their diminishing bottom line, you’ll probably want to discuss cutting costs and becoming more efficient as a matter of priority.
But your client, however, wants to discuss their plans for hiring several new employees. To you, the idea of them taking on new staff seems crazy, especially if the client is already haemorrhaging money. But try to see it from your client’s point of view.
If your client expresses an interest in hiring more employees, don’t immediately shoot them down. Instead, try to find out why hiring is so important right now. Do they have a big contract coming up? Discuss their workflow and future plans – there might be important information they didn’t realise was useful to pass along.
See this as a chance to learn more about your client and their business. Even if you totally disagree with the path they’re thinking of taking, it’s important to listen to their reasoning – and clearly explain your own.
You know what you would do in their shoes. But short of wrestling their shoes off their feet, it’s probably better to explain what their options are, and what will happen in each scenario.
For example, by explaining what will happen if their sole trader business stays exactly the same versus incorporating a limited company.
It can be as cunning a plan as you like, but it needs to give your client a clear roadmap of what their options are, and how each of these will lead them towards their goals.
Learn more about using Pandle bookkeeping software with your clients.
A degree in Astrophysics means I have a head for numbers! Outside of Pandle HQ you'll find me writing music (and spending too much money on guitars).
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