The Nature and Focus of Advisory Services (Part 1)

Joe Woodard
Posted by Joe Woodard on Jan 13, 2021 12:53:30 PM

I’m not a fan of the term “Trusted Advisor.” In my opinion the term is over-used within the accounting and bookkeeping professions and is also vague and open to a wide range of inferences.

The problem lies in the word “trusted.” In his book The Speed of Trust, Steven M.R. Covey states that there are two types of trust in personal and professional relationships: passive trust and active trust. With passive trust, your client is trusting your integrity, professionalism, ethics, and patterns of behavior. In other words, they are trusting you to be accurate and confidential in the services you provide for them. In contract, with active trust the client is trusting you to steer them toward the right business decisions, to guide them in their management of their businesses, and to develop them as business owners and leaders.

You measure passive trust based on the behavior of yourself and the other professionals in your practice. For example, are you and the others in your practice professional, ethical, and accurate?

You measure active trust based on the behavior of your clients and your clients’ employees. For example, are your clients enacting positive changes in their businesses as a result of your guidance where these changes have a transformative impact on the business?

The ultimate measurement of active trust is therefore transformation, and at Woodard we define transformation as an increase in wealth for the client. We further clarify that not all wealth is financial. “Transformation workers” will certainly increase their clients’ financial positions (e.g., through better management, better pricing strategies, more efficient processes, streamlining of expenses, etc.), but transformation workers should also focus on outcomes like business culture, work/life harmonization, adaptive capacity, peace of mind, etc.

So, over the last several years I have posed a question to hundreds of accounting and bookkeeping professionals, a question that I hypothetically present to them as their client: Don’t sell me accounting services, sell me ________. The answers: psychological health, knowledge, solutions, process, capacity, direction, opportunity, measurements/metrics, automation, standardization, leadership, coaching, profits, scalability, peace of mind, hope, work/life harmonization, security, vision, modernization, clarity, stability, accountability, and planning.

I noticed that patterns began to emerge in answers to this question. The first pattern is about visibility as evidenced by answers like: knowledge, direction, measurements/metrics, and clarity. The second pattern is operations as evidenced by answers like: process, standardization, stability, scalability, coaching and planning. The third pattern is technology as evidenced by answers like solutions, automation, modernization, and capacity.

Let’s drill down on each of these three focuses of transformative advisory:

Financial Advisory: Increasing Visibility

Visibility is a key area of transformation work, where you provide the direction, measurements, metrics, psychological health, financial security and knowledge that your clients need.

With financial analytics, you are analyzing the past - to document what happened so you can repeat the successes of the past and avoid (and learn from) the failures of the past. So, the transformative advisor is well versed in financial measurements of both financial position and performance. However, complete business visibility comes through a combination of financial (past) measurements and operational (present) measurements, the latter being “key performance indicators” (or KPIs). KPIs measure the operational performance of the business against the business plan and are informed by demographic studies, market trends, and industry benchmarks.

Finally, visibility comes through predictive analytics (future), where cash flow forecasting is the most common, and perhaps most essential, analysis offered by accountants and bookkeepers. Additional examples include the forecasting of market disruptions, technology advancements, and shifts in the competitive landscape as well as leading indicators that predict increases and decreases in sales.

Some of these measurements may seem foreign to accountants and bookkeepers but advances in GL-integrated reporting solutions have made this type of information surprisingly accessible. Tools like those developed by MAUS and Profit Beacon put this type of information at the fingertips of the transformative advisor, providing turnkey reporting tools, dashboards, modeling and even auto-generated PowerPoint decks for you and your clients.

Operational Advisory: Increasing Business Efficiencies

The second focus of transformation work is operational, focusing on processes, strategic planning, coaching, scalability, stability, and standardization.

Specialization is key for the operational advisor. By specializing you can hone very specific skills and acquire deep knowledge around the management of a specific type of business. For example, at Woodard Consulting we specialize in distribution and wholesale. Through extensive consulting experience and research, we have learned the best practices for supply chain management, warehouse management (e.g., shelving, picking/packing, receiving, and shipping), manufacturing, and order fulfillment. This specialized knowledge equips us to detect inefficiencies and deficiencies in the way our clients operate their businesses and to provide specific guidance to secure the best possible pricing from suppliers, increase shelving efficiencies, reduce shelf life, shorten inventory turn cycles, reduce obsolescence, reduce waste, and minimize theft.

Keep in mind that you don’t have to become an expert in the industry to begin providing operational advisory. To get started you just need to understand a few key areas of operational excellence for the industry around which you specialize. The rest you will pick up as you go.

Technology Advisory: Modernizing Business Operations

The third category is technology transformation work where the advisor provides automation, modernization, solutions and increased capacity through intentional adoption and use of technologies.

When embracing technology advisory, I encourage bookkeepers and accountants to being with back office automation with GL-integrated solutions like accounts payable automation, payroll outsourcing, sales tax outsourcing, e-filing of 1099’s, document fetching and data parsing (e.g., receipt capture). As a bookkeeper or accountant, you likely have most (or all) of the necessary technical knowledge and experience to provide technology advisory for your client’s back office operations, and there is a high level of wealth-generating impact on your clients.

To move beyond the back office, focus on technologies that enhance team collaboration and communications like Microsoft Teams, Microsoft SharePoint, and Microsoft OneNote. Guiding your client to use 100% cloud-based collaboration systems will increase efficiencies, organizational alignment, and accessibility to essential business information…all wealth-generating outcomes for the client.

When consulting with your clients on cloud-based collaboration, focus heavily on document and information management. Many small businesses have “imprisoned” their critical business information on local drives, paper and other silos that result in misalignments, information gaps and version control issues. Technology advisors can leverage solutions like Microsoft OneDrive and Google Drive to liberate this information for their clients.

Finally, technology advisory also focuses on operational systems like point of sale, inventory controls, e-commerce, field services, and project management, where the technology advisor either implements the solutions or partners with one or more certified implementers. Specializing in one or two operational solutions will increase your distinctive value, enhance your consulting services, and increase the effectiveness of your advisory work.

Summary

So, at Woodard we use, and prefer, the term “Transformative Advisory” rather than “Trusted Advisory.” It is more specific, insulated from preconceptions, delineated from passive trust, and inherently focused on the outcomes on the client.

Based on my definition above, are you able to call yourself a “Transformative Advisor?” Do your clients seek and heed your guidance in the way they steer their companies and lead their teams, and does your guidance result in an increase of wealth for the client?

If your answer is “no,” keep reading the articles in the Advisory category of The Woodard Report. If your answer is “yes,” but you want to hone your transformation work to become increasingly effective, keep reading the articles in the Advisory category of The Woodard Report. I and other authors will provide specific, practical guidance for developing these types of transformative client relationships in your practice.

Owner mentorship is about forging friendships and leveraging your own learnings as a business owner. The “School of Hard Knocks” comes with a diploma. Put that diploma to work, especially with millennial business owners, to guide your clients through the minefield that is business ownership. They will love you for it, and you do not have to be perfect at it for them to both benefit and to respect your advice.

Want to be even more intentional with Transformative Advisory? Explore Woodard’s Certified Transformative Advisor Program offered through Woodard Institute!

Click to continue to Part 2

Topics: Financial Advisory

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