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How to Talk to Clients About Annual Planning

Mike Triantos
Posted by Mike Triantos on Nov 20, 2023 1:54:26 PM

The annual planning process is a prime opportunity for you to create value for your client. Any insight you provide helps foster a better understanding of their business, finances, and potential future.

But annual planning is also packed with jargon, technical work, and navigating difficult topics.

The difference between good and bad annual planning isn’t necessarily the end result, but the process of getting there.

How you talk about annual planning and each step in the journey will decide whether your client leaves with an accurate and effective plan for the year ahead. Here’s how you can do it right.

Setting the Table For the Conversation

Annual planning juggles many different factors, each of which needs to be clearly communicated to the client to have an effective conversation.

Before you actually do the annual planning with them, it’s important to set the scene with information that guides the dialogue.

Some things you should do with your client prior to annual planning:

  • Review the prior year’s financial reporting
  • List out any difficulties or stressors from the prior year
  • Talk about goals they’ve hit and missed in the past
  • Highlight any definitions or metrics that will support their understanding

Remember, to understand the future, you must first understand the past. By taking the time to understand your client’s history and ensuring they understand the terms you’ll be using, you’re positioning both of you to bring the most value to the conversation.

Asking Impactful Questions

A common mistake accountants make with annual planning is being overly prescriptive.

Your role as an accountant is to support your clients in their operations. Part of that process is understanding what they want to get from their business.

For some, their business is a means to an end. Their goal is to bring in more than what goes out so they can do the same thing next year.

Contrast a client who wants consistency with a client who has high growth expectations. The annual process looks a lot different.

Taking the time to ask questions gives you the information you need to guide the planning process. Ask questions like:

  • What are your goals for the next year?
  • What changes are you hoping to make in your business?
  • What parts of your business keep you up at night?
  • What new initiatives are you considering?
  • How do you expect your finances to be different this upcoming year?

Translating Ideas To Numbers (and Vice Versa)

Business owners live and die by their financial reporting. But that doesn’t necessarily mean they’re fluent with the concepts.

A vital part of your work is translating these number-based concepts into language they understand. Sometimes, you do the work in reverse, translating the things they say into concrete numbers.

To help with the translation process, put these tips into practice:

  • Leverage analogies: By comparing these concepts to something your clients understand, they’re more likely to grasp its meaning. A common subject used to explain concepts is sports.
  • Confirm their understanding: Once you’ve explained something, ask a simple follow-up question like “Can you explain how you understand this back to me?” Catching misunderstandings prevents you building work off of a miscommunication and starting from scratch.
  • Use smaller numbers: Let’s say your client is dealing with six-digit revenue and expense numbers. Any calculation starts to feel more complicated. Illustrate the concept with a simpler example first before using their actual numbers.

Walkthroughs of Assumptions

When you put together a model and start forecasting for the year, you’ll inevitably have to make assumptions about how things will turn out.

For example, you might see that your client, year over year, has experienced a roughly 5% growth in revenue. For this upcoming year, you assume the same.

Assumptions are a great way to simplify the modeling experience. Rather than working with the minutiae of every possible outcome, you keep the scope to the factors that are within your control.

But the conclusions of your model hinge on these assumptions being, and staying, valid.

Let’s say you set the assumption of 5% growth for that client. Because of that, they invested in their headcount to have enough staffing to cover demand. But when you review the first quarter, you see that their revenue is trending towards 10% growth.

Your client has made a decision based on an assumption that no longer appears true. Because of this, they need to adjust their headcount planning and their strategy.

Communicating the assumptions to your clients gives them the context of when they should reach out with changes that need to be made with the model. You’re effectively letting them be a canary in the coal mine that signals when something needs readjusting.

With the example we’ve outlined, your client will see more sales coming in and, knowing that your model was built on an assumption of a growth amount, reach out to let you know the model needs changing.

Employing Visual Aids

Visual aids do the heavy lifting in helping illustrate concepts. Someone might not know what exactly EBITDA is, but they will know that the line going up is a good thing, and down is bad 

Make use of charts, graphs, and tables with some visual flair to hammer home the point that you’re trying to make. These are a great way to run through different scenarios and how they impact outcomes. Consider showing multiple scenarios on the same graph to really show the impacts.

When using tables or reporting that’s a collection of numbers, make use of color to draw attention to the things that matter most. Everyone understands red and green are typically bad and good respectively. Employ these colors to bring focus to what are potential wins or risks as part of a forecast or model.

Leveraging Dynamic Reporting

The combination of financial reports and dashboards is essential storytelling for businesses trying to understand their current standing. Dynamic reports keep information up-to-date so as the story changes, everyone is kept in the loop.

Topics: Financial Advisory


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