How to Leverage FP&A for a Stronger Client Advisory Service

Firms everywhere are adapting to the needs of their clients by offering client advisory services (CAS). For businesses that don’t have a strong financial background, this is an invaluable service that helps them plan for the future and for accounting firms, it’s a big revenue opportunity. 

Expanding financial planning and analysis services (FP&A) into your client advisory offering is the key to a top-tier service. Here’s how to do it.

What is FP&A?

Financial planning and analysis (FP&A) is focused on providing reports and building models for planning for the future. It often includes the following:

• Budgeting
• Forecasting
• Financial reporting
• Financial modeling
• Annual planning

 A strong set of FP&A reporting deliverables help businesses monitor their performance against predictions and support them in adapting to the actual outcome. 

You can think of FP&A as providing all the information a business needs to feel confident in their understanding of their finances. The reporting paints the picture of what has happened and any budgeting or planning gives them a north star for any future decision-making.

What do FP&A services look like?

There are four components of an FP&A service you should provide:

• Descriptive analytics: Explaining what happened using historical data. Included: financial statements (income statement, balance sheet, cash flow statement) and reports.
• Diagnostic analytics: Explaining why it happened by pointing to decisions or trends that occurred. Included: an executive summary that expands on the reporting with a story.
• Predictive analytics: Expanding on what will happen in the future based on the decisions the business makes. Included: cash flow forecasts.
• Prescriptive analytics: Working backward from a goal and explaining how to get there. Included: scenario simulations and margin analysis.

If you manage to provide each, you are providing a full suite of FP&A services. But how does this tie into your advisory services?

How does FP&A differ from client advisory services?

Ideally, your FP&A services expand on the typical advisory services. You go from providing the usual accounting services like bookkeeping and accounting to a more extensive FP&A service. 

Accounting Today defines advisory from two different perspectives. For accountants, it’s providing a full suite of financial services and data that have value. For clients, it’s having that information turned into a language they can understand so they can act on those insights. 

FP&A services both describe the past and predict the future. You are working with the business to give them all their financial information in a clear and intuitive package. They use this information to make their own business decisions. 

You can expand on FP&A reporting deliverables by bridging the gap between the data and the insights that can be found. It means working with real-time and future forecasting data, often powered by the cloud, and turning it into a language the business understands. 

When providing insights, try to go beyond the reporting. Look to your experiences to provide additional context to why something is forecasted to be a certain way. Being able to pinpoint a reason as to why is invaluable to your client and helps them change paths.

Incorporating FP&A into advisory services

Let’s go through the four components of FP&A and how you can work these into your client advisory services.

Descriptive analytics

What it is: Using historical data to describe what happened 

How to tie into advisory services: Through your explanations of what happened, explore alternate scenarios using a “what if” framework. Use budget variance and actuals versus forecasts to paint a picture of where things did or didn’t go as expected.

 Examples:

• Pinpointing a reason why the business was cash-strapped despite what was forecasted
• Noticing that incoming payments had a longer turnaround time than usual
• Identifying that spending was higher than what was budgeted and pinpointing what expenses were behind it

Diagnostic analytics

What it is: Explaining the why behind what happened

 How to tie into advisory services: After going through the descriptive analytics, start providing possible explanations. Tie outcomes to business decisions that were made and the logic behind them. What logic was correct and provided the right outcome? What wasn’t?

 Examples:

• Answering why the business had more or less revenue than what was expected
• Connecting any variance in cash flow to recent changes in the business
• Getting critical about whether the strategy still fits their current operating plan and goals

Predictive analytics

What it is: Looking into the future to determine what will happen 

How to tie into advisory services: Using forecasts and financial models, show what the potential future will be if their decision-making framework remains the same. This is your opportunity to provide tips on what to change if something is causing a hitch. 

Examples:

• Answering what the future looks like if the business maintains the status quo
• Highlight the impacts of an increase or decrease in spend
• Simulate scenarios of higher or lower revenue

Prescriptive analytics

What it is: Providing steps to take to meet a future goal 

How to tie into advisory services: It’s time to flex your knowledge and provide tips on how your clients can achieve their goals. Perform scenario simulations to illustrate how changes in their operations can help them get there. 

Examples:

• Determine the needed cash flow before taking on new debt
• Identify whether headcount needs to increase to meet a goal
• Provide a timeframe on when there’ll be enough capital for a big purchase

Providing the best of FP&A and CAS together

When you provide both FP&A and CAS services together, you’re giving the business both the framework to make decisions and starting points for decisions to be made. This delivers the ultimate value to your clients who struggle with a lack of financial reporting and insights from prior experiences. 

Providing both FP&A and CAS to clients is a big revenue generator for accounting firms. In order to be successful with FP&A Advisory you need to commit yourself and the firm to a long-term strategy. 

Having a full suite of FP&A tools purpose-built for bookkeeping, accounting, and CFO firms is a game-changer for firms offering these services. Using automation and integration, it’s easy to update monthly models, and pre-built reports and dashboards can standardize and scale the outputs across your firm.