7 Mistakes Accounting Firms Make With Annual Planning

The annual planning process is a prime time to deliver value to your clients. It’s one of the best opportunities to provide some level of clarity where a business needs it most. 

An annual plan is the foundation that a business builds its strategy from. But just like a building, that foundation needs to be solid for the building to be a success.  

To help guide you through the process, we’ve compiled seven common mistakes accounting firms make as part of the annual planning process and solutions to avoid them.

1) Not asking enough questions 

Annual planning is a dialogue between two different types of experts.  

You are an accounting expert who has prior experience with a wide range of businesses and expertise in modeling, forecasting, and financial reporting.  

Your client is an expert in their business. They know their goals, what drives them, and what their day-to-day operations look like.  

Together, you’re going to bridge your expertise to create the ideal plan for the year. But to do that, you need to be just as inquisitive of what they know as they are about your knowledge.  

Conduct a deep discovery conversation before you do any concrete work on an annual plan. This is your time to get the information you need to do your work to the best of your abilities.  

Some questions you should always ask are: 

• What are your goals for the upcoming year? 
• What were some of your challenges from the past year? 
• What are some changes to your operations you’re considering making? 
• What part of your business do you feel most/least sure about? 

Once you’ve done the discovery process, you’ll know what the client is aspiring to do and how they are hoping to accomplish it. 

2) Playing the role of cheerleader 

Your responsibility to your client is to support them in their success. But if you lean too much into being supportive, you might be reinforcing bad decision-making.  

Being a cheerleader means blindly supporting everything your client is trying to do, even if the numbers say otherwise.  

Having to be a critical perspective isn’t easy. Remember that you don’t need to express an opinion and can rely on the models and forecasts you build out. Rather than telling a client that growing their operations isn’t the best idea, show them the predicted result of that change.  

At the end of the day, your clients’ decisions are exactly that: their decisions. However, you can influence their decisions by providing valuable information and reports that guide them down the best paths. 

3) Not confirming the client’s understanding 

Financial planning is packed with a ton of financial jargon and concepts. For most of your clients, this is going to be foreign for them.   

As you introduce new concepts, always give a brief overview and confirm they understand. While you’re explaining things, ask questions that give them a chance to finish your thought or come to the conclusion themselves.  

You want your client to be engaged in the conversation; for them to be engaged, they need to know what you’re talking about. This means they’ll be deferring to you on key decisions, and you’ll start guiding their business more than you may feel equipped for. 

4) Using prescriptive language 

Just as you shouldn’t be a cheerleader, you also shouldn’t be a leader in the annual planning process. Don’t think of yourself as the architect, but rather as a consultant or specialist who maybe knows a thing or two about building code.  

To avoid becoming a leader in the conversation, be mindful of the language you’re using and understand how your client views you.  

As a financial professional, your clients see you as an authority and your words carry weight. Prescriptive language like “you should do this” will be treated as gospel.  

Instead, rely on the numbers and use visuals to explain results and potential outcomes. Present various options and let your clients decide what’s best for them.  

Prescriptive language can drive a wedge between you and your client. If they do something because you said so and it has a negative result, in frustration, they could look to put the blame on you.  

If things are starting to get into an uncomfortable territory, there’s nothing wrong with resetting boundaries. All you need to do is reassert that you are an accountant who is there to support the decision-making process and that business decisions should ultimately come from the business. 

5) Underutilizing reports and models 

Visuals are a highly effective way of communicating complex information. Whoever said a picture is worth a thousand words clearly had a knack for graphs and tables.  

A great way to do this is to start with a simple model. Start with identifying key drivers of the business and identifying some of the relationships between them.   

For example, a marketing budget has an effect on the marketing efficiency ratio (MER), which in turn dictates the return on the marketing spend. Creating a model with this information helps illustrate what level of marketing spend is most profitable.  

A solid rule of thumb is to never assume your client won’t understand a report. Their understanding of the reports is an essential part of the process and can strengthen their understanding of the correlations in their finances. 

6) Not establishing clear, measurable goals 

An early step in the annual planning process is identifying goals. These goals might sound like “increasing revenue” or “being more profitable.”  

These goals are common, but when is “more” considered “more” enough?  

Humans have a pitfall called the hedonistic treadmill. The hedonistic treadmill states that when we experience a change, we readjust and it feels normal. Business owners experience this all the time with growth, and it creates a drive for more on top of the more they already have.  

Key performance indicators (KPIs) help with this dynamic. KPIs are measurable metrics that determine whether the business succeeded with its plans. So, if the goal is “increasing revenue,” the KPI could be “adding $100,000 in sales.”  

With KPIs, you also have something to check in on throughout the year to measure whether a business is trending toward success. This becomes your way of knowing when it’s time to ring alarm bells and pivot the strategy. 

7) Treating it like a “one-and-done” process 

Annual planning is like spring cleaning. Spring cleaning is a time to get rid of the old and start fresh, but have you ever heard of someone cleaning only once a year?  

This doesn’t mean you need to do an annual plan every week or month (then it isn’t really an annual plan, is it). But it does mean you should be regularly using and referring back to the annual plan in your conversations with your client.  

Have regular check-ins with your clients throughout the year that are dedicated to understanding their progress on their goals. Review any KPIs you set, track their progress against them, discuss variance reports, and discuss whether the strategy from the start of the year is still the best course of action.  

Nobody is expecting picture-perfect forecasts and predictions. Even when you nail every detail down, something unpredictable can happen that changes the state of the business.   

Instead of focusing on delivering perfection, deliver adaptability. Have regular check-ins and help your clients get back on track if they fall off. 

Iterate on a plan with real-time data 

You need to keep checking in on how your clients are progressing on their annual plans. This means updating data, making variance reports, and keeping tabs on KPIs.  

Spend less time updating the data and more time interpreting it with automated financial reporting tools. These solutions feature dashboards and reports that update with real-time data so you can stay up to date without lifting a finger.