What essential planning & advisory techniques do accountants need to master for their clients?
Many accountants are increasingly taking on more strategic advisory and planning roles with their clients to help them plan their growth strategies and forecasts.
So what does this mean in an increasingly turbulent year for trading conditions?
What do they need to know to help steer them through persistent inflation, supply chain fragility, geopolitical tensions, new taxes and tariffs and increasingly rapid technological shifts?
This guide outlines five key areas where accountants can bring their expertise and talents to serve their clients short and medium term goals.
- Cash Flow Visibility
Cash flow is a paramount concern for every business, especially in unpredictable times.
Providing a clear, forward-looking view of cash flow is a fundamental service accountants can deliver for their clients.
- Action: Implementing and managing a rolling 13-week cash flow forecast based on realistic inflow/outflow projections, not just budgets. This can be crucial for identifying potential shortfalls and ensuring liquidity.
- Advisory Focus: Advising clients on optimising the cash conversion cycle. This includes tightening accounts receivable processes (accelerating collections, reviewing credit terms, seeking deposits) and managing inventory efficiently (e.g. strategies for shifting old stock etc).
- Monitoring: Establish and rigorously monitor key cash-related KPIs such as operating cash flow, working capital ratios, debtor/creditor days etc. These metrics will provide both early warnings and time to trigger interventions.
- Implement Scenario Planning
Given the scale of recent UK and international announcements and policy shifts, scenario planning moves beyond simple forecasting to exploring strategic responses to plausible disruptions to business through gaming out potential scenarios.
- Methodology: Measuring scenarios using tools like a SWOT analysis (internal strengths and weaknesses, external opportunities and threats) along with developing distinct and plausible strategic medium to long-term scenarios (such as prolonged high inflation, specific supply chain stress and collapse, rapid adoption of disruptive technologies etc).
- Facilitation: The accountants role in this planning process will be to ensure that they are underpinned by sound financial data and realistic assumptions. The goal isn’t prediction but to enhance strategic agility and prevent collective groupthink and failure of imagination.
- Outcome Focus: Stakeholders can be guided to identify potential “no-regret” actions – strategic moves which are beneficial across multiple scenarios to futureproof the business. Make sure scenarios are regularly reviewed and adjusted based on evolving economic intelligence and assumptions or be prepared to quickly work on new scenarios based on emerging information.
- Build resilience utilising Reverse Stress Testing (RST)
Standard stress tests assess the impact of adverse conditions on a business but Reverse Stress Testing (RST) starts from a defined failure point (breaching loan covenants or running out of cash) and works backwards to identify the scenarios that could cause them.
- Application: Conduct RST to pinpoint critical vulnerabilities that can often be missed by conventional analysis. Identify specific combinations of events (loss of a key customer plus an input cost spike plus an interest rate rise) that could render the current business plan unviable
- Quantification & Mitigation: Quantify the financial impact of the severity of these scenarios – assess their likelihood (even if low) and use the insights to develop targeted mitigation strategies (diversifying revenue streams, hedging specific risks, securing contingent funding sources). RST forces business owners and accountants to think and plan for the unthinkable while the threat remains theoretical, not when it is on their doorstep.
- Develop Actionable Contingencies
Plans are insufficient by themselves; they must be practical, tested and ready for activation. Accountants play a key role in ensuring the readiness and financial reality of the necessary contingency plans.
Financial Readiness: Ensure contingency plans including clear financial triggers and pre-approved actions for scenarios such as sudden cost increases or revenue drops. Model the cash flow impact of activating different contingency measures.
Crisis Management: Be prepared to advise on or participate in cross-functional crisis management teams. Ensure financial representation is embedded in the response structure. Review plans to address known current risks (cyber attacks impacting finance systems, sudden regulatory cost imposition).
Governance: Ensure board-level contingency plans include financial resilience measures and mechanisms for rapid, informed decision-making during crises.
- Leverage Cross Sector Insights
Good ideas for planning to overcome financial uncertainty aren’t confined to one industry. Accountants should be actively looking externally for best practices and innovative approaches.
Active Learning: Analyse how other sectors known for volatility (technology, finance) or resilience (adaptable charities, agile SMEs) manage uncertainty. Consider their approaches and plans to cash forecasting, technology, investment and operational flexibility.
Application: Look to identify and adapt relevant strategies from others. Could the short-term, high-frequency cash forecasting used by some charities enhance your client’s liquidity management? Can lessons from tech sector agility inform scalable business models?
Strategic Advantage: Using insights from sectors facing similar challenges can help inform innovative advice on supplier negotiations, market diversification or hedging strategies.
Proficiency in planning under uncertainty is not optional for accountants any more, it’s central in their increasingly expanded roles as trusted advisors and strategic partners.
By mastering and actively deploying advanced cash flow management techniques, robust scenario planning, reverse stress testing, actionable contingencies and pro-active cross-sector learning, they can provide the critical financial leadership needed to steer their clients successfully through unpredictable times and help them see around corners.