Forward-looking Financials: Risks, Opportunity, and Countermeasures

Accountants are extremely skilled at working with and understanding financial reporting. Their clients? Less so. A big part of providing accounting and financial services is bridging this gap. 

Financial storytelling is a simple act of weaving a narrative through your work to help your client understand the what and why’s of their reporting. That narrative is determined by your client’s goals, aspirations, and long-term plans. 

The purpose of financial storytelling is two-fold. You benefit by gaining direction on how to help your clients, which metrics to provide, and what advice you can provide. Your clients get a tailored service and confidence knowing their accountant is invested in their future. Everybody wins. 

Let’s go into detail on how you can craft a story and use risks, opportunities, and countermeasures to provide top-tier advisory.

Start with the story!

Having an openness to the story of your client helps you provide meaningful, valuable service. But what exactly is the story?

Let’s start with what the story is not. The story is not metrics like increasing revenue by 30% or cutting $1,000 in operating expenses. The actual story is that extra layer deeper, what those metrics actually accomplish for your client. 

While metrics are great for measuring success and tracking progress towards goals, missing the dimension of “why” will hold back the service you can provide. Let’s say your client wants to increase revenue by 30% because they want to have enough cash flow to hire employees and open up some free time. The increase in revenue is just one way to accomplish that goal. 

When you start with the story—opening up free time—you can plot multiple paths to achieve that goal and then choose the metrics that match that. These metrics are called drivers and forecasting to see what the drivers need to be in order to achieve the goal is called driver-based modeling. 

If you only talk about metrics, you’ll start to fill in the blanks with your own assumptions. These assumptions might not line up with your client’s real wants and needs. Starting with goals reverses this dynamic so the metrics are dictated by the story, not the other way around.

Real-world example

Let’s say you have three different clients, each saying they want $1M in revenue. 

The first wants to hit this number because they are looking to sell the company and want to impress potential buyers. The second is motivated by expansion and wants to add 50 more employees. The third is hoping to improve their long-term operating cash flow. Would you tailor your services the exact same way for the three clients? For each, you’d track the business’s revenue, but what are the additional metrics? 

You have the unique experience to close the gap between the what (the metrics) and the why (their goals). Even if the what is the same, the why is different and will shape the conversations, insights, and monthly financial reporting you provide. 

With each, it’s important to work backward from the end goal. For the client wanting to sell the company, you understand valuations and what buyers look for and can choose the metrics that line up with that. For the client looking to expand, you understand the challenges of growing a business and can help set benchmarks and checkpoints of progress. 

It’s important to remind yourself the stories inform the metrics, not the other way around. Digging deeper into a client’s metric goals

What keeps you up at night?

A lens to look through when uncovering your clients’ goals is what keeps them up at night. You can even explicitly ask this question. 

Digging into a client’s goals with this question shows that you care more about the human aspect of the service than simply providing numbers and reporting. Sure, a pretty report that tracks metrics is valuable, but what does it ultimately enable for the client? What’s the value they’re getting from it? 

When your work goes beyond financial reporting, you start becoming finance-as-a-service. 

Remember that many business owners are not finance whizzes. You understand the value of their reporting more than they do and it’s up to you to show them. Tying it back to what keeps them up at night, solving that problem of their anxieties and worries, that’s the ultimate value you can provide. 

Taking this approach builds trust. Your clients will realize you’re invested in their real-world problems and are there to provide solutions.

Risks, opportunities, and countermeasures

As your engagement with your client continues and you work with them on their own personal story, there are three things you should regularly cover with your financial modeling:

• Risks are the things that could potentially take the business off the projected path.
• Opportunities are the things that are worth breaking off the path for
• Countermeasures are the alternative approaches to get your client back on track. 

With each, you’re contextualizing the story with the factors that will influence it and minimizing surprises. The more you can forecast and put in place countermeasures, the more likely it is your client will achieve their goal. 

Always try to tie these three points back to the metrics and financial modeling you’re providing. You don’t want to leave the risks and opportunities as just things that could happen, but rather what their situation would look like if those things did happen. How would that influence their metrics? How does it affect timelines? And most importantly, what’s the plan of attack if it becomes a reality? 

The purpose is to provide a combination of storytelling and reporting to create informed decision-making for your clients. They’ll be able to make a choice with confidence, fully aware of the potential outcomes. 

By taking the time to understand your clients, their goals, and anxieties, you have the information needed to guide your services and provide the highest amount of value. 

Even when clients track the same metrics, it could be for completely different reasons. How you approach your regular touchpoints, the strategies you suggest, and the talking points that guide your conversation should always reflect the story. 

When you help your clients with the things that keep them up at night, you provide meaningful value that makes them long-term engagements. With financial storytelling, you commit to a model of providing that value to every client you have.