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.
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:
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.
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:
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:
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.
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.
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.