{"id":244,"date":"2021-06-06T16:32:22","date_gmt":"2021-06-06T16:32:22","guid":{"rendered":"https:\/\/www.forwardai.com\/blog\/?p=244"},"modified":"2022-12-21T08:46:28","modified_gmt":"2022-12-21T08:46:28","slug":"cash-flow-consulting-in-the-real-world","status":"publish","type":"post","link":"https:\/\/www.forwardai.com\/knowledge-center\/blog\/cash-flow-consulting-in-the-real-world\/","title":{"rendered":"Cash Flow Consulting in the Real World"},"content":{"rendered":"\r\n
\"Cash<\/figure>\r\n\r\n\r\n\r\n

Technology is transforming the landscape of small business accounting. Empowered by the automation and innovation fueled by artificial intelligence (AI), the cloud and blockchain \u2014\u00a0now, more than ever, accountants are expanding their roles as business advocates and advisors.<\/p>\r\n\r\n\r\n\r\n

It\u2019s a trend backed by a 2016 study by the International Federation of Accountants (IFAC), which found that\u00a041% of entrepreneurs believed accountants were their most trusted advisor<\/strong><\/em>\u00a0\u2014 nearly double that of the 21% for other business consultants.<\/p>\r\n\r\n\r\n\r\n

Many of the accountants advising the small to medium-sized businesses (SMEs) are small to medium-sized practices (SMPs) themselves. What kind of help do SMEs need?\u00a0One of the main areas driving demand for advisory services is\u00a0cash flow<\/a>\u00a0consulting.<\/strong><\/em><\/p>\r\n\r\n\r\n\r\n

Cash flow consulting in the real world<\/strong><\/h2>\r\n\r\n\r\n\r\n

Here\u2019s a real-world account of how SMP,\u00a0Lucid Advisory & Finance<\/strong><\/a>, helped SaaS help desk software provider\u00a0Groove<\/strong><\/a>\u00a0find its rhythm with\u00a0cash flow forecasting<\/strong><\/a>, budgeting and everything else.<\/p>\r\n\r\n\r\n\r\n

Lucid Advisory & Finance<\/strong><\/h2>\r\n\r\n\r\n\r\n

Lucid Advisory & Finance founding partner, Nick Bird, has discovered that helping businesses better understand the basics of cash flow and cash flow forecasting (through cash flow consulting) is having a huge impact on the startup, SaaS and crypto companies his firm serves.<\/p>\r\n\r\n\r\n\r\n

\u201cWhen we first meet with a client, we ask them, \u2018Where do you want to be in five years?\u201d he explains. It may seem like a broad question, but the answers are quite telling.<\/p>\r\n\r\n\r\n\r\n

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\u201cIf you don\u2019t know where you want to go, it\u2019s really hard to make a plan to get you there. Tracking your metrics, including cash flow, isn\u2019t just an abstract chore, it\u2019s a tool for better decision-making.\u201d<\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n

In fact, his favorite part of his job is seeing his clients flourish, make well-informed decisions and grow their business.<\/p>\r\n\r\n\r\n\r\n\r\n\r\n

According to Bird, once business businesses start looking at their cash flow and financial metrics more carefully, they also gain:<\/p>\r\n\r\n\r\n\r\n

    \r\n
  1. Confidence<\/strong>\u00a0\u2014\u00a0Through better, more informed decisions.<\/li>\r\n
  2. Accountability<\/strong>\u00a0\u2014 By comparing performance to projections.<\/li>\r\n
  3. Peace of mind<\/strong> \u2014 Knowing that they\u2019ve taken greater control of their financial health.<\/li>\r\n<\/ol>\r\n

    Read more:<\/strong> Cash flow 101 \u2014 the basics<\/a><\/strong><\/em><\/p>\r\n\r\n\r\n\r\n\r\n\r\n

    How cash flow consulting works<\/strong><\/h2>\r\n\r\n\r\n\r\n

    As part of the cash flow consulting process, financial professionals like the team at Lucid will review a business\u2019 cash flow statement on a routine basis. The time period, like holding monthly recaps, depends on the specific needs of each business.<\/p>\r\n\r\n\r\n\r\n

    If a business doesn\u2019t have a cash flow statement, their advisors will either use\u00a0accounting software<\/strong><\/a>\u00a0to create a basic statement or take advantage of integrated solutions, like\u00a0ForwardAI<\/a><\/strong>\u00a0.\u00a0<\/p>\r\n\r\n\r\n\r\n

    By reviewing\u00a0cash flow statements<\/strong><\/a>\u00a0on a regular basis, companies are able to see how the cash flows in and out of their businesses in terms of\u00a0day-to-day<\/a><\/strong>\u00a0revenue and expenses, as well as capital investments and borrowing activities.<\/p>\r\n\r\n\r\n\r\n

    What businesses can learn\u00a0<\/strong><\/h2>\r\n\r\n\r\n\r\n

    Through this process, a business can pinpoint when most of their regular bills and responsibilities, like\u00a0payroll, hit the books \u2014 in comparison to when the bursts of revenue come in. For example, for an SaaS company, this would be when the subscription fees are processed.<\/p>\r\n\r\n\r\n\r\n

    Knowing this cadence helps a business be more precise in knowing when their cash reserves are highest and lowest. Over time, these patterns are used to create cash flow forecasts that serve as performance benchmarks.<\/p>\r\n\r\n\r\n\r\n\r\n\r\n

    How cash flow informs decision-making<\/strong><\/h2>\r\n\r\n\r\n\r\n

    As metrics change and there\u2019s a drop, the monitoring helps provide insight into where the problems may lie. Conversely, if things hold steady or improve, a business can take confidence in knowing they\u2019re on the right track.<\/p>\r\n\r\n\r\n\r\n

    They can also use this information to plan their next steps. Is it time to hire new staff? Develop a new product? Raise prices? All of these decisions are affected by cash flow, which means the more you know, the better decisions you make.<\/p>\r\n

    More tips:\u00a0<\/strong><\/em>How to read a cash flow statement\u00a0<\/a><\/strong><\/em><\/p>\r\n\r\n\r\n\r\n\r\n\r\n

    Case study: helping Groove chart an even course<\/strong><\/h2>\r\n\r\n\r\n\r\n

    When Bird first met,\u00a0Groove<\/strong><\/a>\u00a0founder and CEO, Alex Turnbull in 2016, Turnbull was like most startup CEOs. He was hyper-focused on his product. Yes, he checked the business\u2019 banking account. But, he didn\u2019t track any key performance indicators (KPIs) and he certainly hadn\u2019t been spending the few hours reserved for eating and sleeping for keeping the books.<\/p>\r\n\r\n\r\n\r\n

    It\u2019s a scenario that\u2019s all too normal. It\u2019s not a criticism of entrepreneurs. Starting your own business is HARD. Unless you\u2019ve been through it before \u2014 most businesses, even the high-tech ones, don\u2019t always realize how vitally important cash flow management and cash flow consulting really are.<\/p>\r\n\r\n\r\n\r\n

    A breakthrough in the form of a trusted advisor<\/strong><\/h2>\r\n\r\n\r\n\r\n

    Because they\u2019re busy getting their businesses off the ground, concepts like\u00a0working capital<\/a><\/strong>\u00a0or debt-to-equity ratio aren\u2019t always top of mind for business owners. While everyone wants to avoid a cash flow crisis, no one is building a damn or even watching the water to see if there\u2019s impending doom.<\/p>\r\n\r\n\r\n\r\n

    \u201cAlex is a bootstrapper. He\u2019d put a ton of sweat equity into his business. He\u2019s also an amazing marketer and the\u00a0Groove blog<\/strong><\/a>\u00a0is one of the best SaaS startup blogs I\u2019ve ever read. But, he wasn\u2019t an accountant and there\u2019s nothing wrong with that.\u201d says Bird.<\/p>\r\n\r\n\r\n\r\n\r\n\r\n

    Baby steps\u2026<\/strong><\/h2>\r\n\r\n\r\n\r\n

    Once Bird and Turnbull discussed Groove\u2019s needs and goals, Lucid got things rolling by creating a one-year budget and, in time, a three-year budget.<\/p>\r\n\r\n\r\n\r\n

    In conjunction with the long-term forecasts, Bird and Turnbull meet monthly to go over Groove\u2019s financials. A typical agenda, looks a little something like this, with reviews of:<\/p>\r\n\r\n\r\n\r\n