5 MORE Reasons Your Clients Need a Monthly Prediction

Mar 18, 2024 by Roger Scherping





I’ve spent most of my career helping my clients or employers see their financial future because I’ve seen what happens when small companies don’t know what their next 12 months look like, or when they don’t understand the financial impact of their business decisions.

So, for all of you trusted financial advisors, last week I explained my first 5 reasons why your clients need a monthly prediction. In case you missed them, here they are. Now here are the NEXT 5 reasons, and next week I’ll explain the 5 reasons why helping your clients do a monthly prediction will benefit YOU!

Here are reasons 6-10 of why your clients need a monthly prediction:


6. Understand what drives cash flow
One unexpected benefit of doing a prediction is that your clients will get a better understanding of what drives their cash flow. Once you have their prediction done, they can make adjustments and watch the results. What happens to cash if they collect your receivables 5 days fast? if they reduce inventory by 10%? if they renegotiate their debt payments?

They might be surprised by the results, which might drive them to make changes in their operations that improve their cash management. And when they need to talk to their banker, the banker will be impressed with the extent to which they really understand their business and what drives their cash flow.


7. See your financial future!
My dad once told me that decision making isn’t difficult. What’s difficult is information gathering. For example, he said, how difficult would it be to pick the right stock to purchase if you had a copy of next year’s Wall Street Journal?

Imagine how much easier your clients’ decision making would be if they could look into the future. They’d be able to anticipate problems and deal with them now, when they’re small, instead of later when they are much bigger and more difficult to fix. They could see well ahead of time whether they need to increase their bank line of credit this year. They’d know if they can take money out of the business later this year for that home remodel they want to do.

When I was president of a $20M company and had my own CFO, I still did my own predictions. I just had to look ahead and see our financial future!
 

8. Understand the financial impact of business decisions
Seeing the financial future also allows your cleints to better understand the financial impact of their business decisions. Start with a baseline projection, maybe assuming a 2% increase in sales. Then modify that to include a 10% increase. What impact does that have on their bottom line and on their cash flow?

Or maybe they’re considering adding a new product line or purchasing some new equipment. Revise their prediction and compare the results to the baseline projection.

I knew a guy once who bought three franchises. After he opened the first one, I asked him when he’d know it was the right time to open the next one. He just shrugged his shoulders. He had no way of understanding the financial impact of a big decision like this.  What he needed was a prediction that allowed him to model his decision and see the financial impact so that he was no longer in the dark.


9. Project future cash balance
Is there any financial metric that’s more important than your cash balance? I think it’s more important than sales or even profit.

Without cash, vendors don’t get paid or a payroll is missed, and then the business stops. A prediction will tell your clients their expected cash balance each month. They’ll see the lowest it will get during the year, and if it might go negative they can make changes now, like reduce inventory or spending, or accelerate collections.

Many small business owners’ understanding of their cash situation is limited to their current bank balance! Teach them to look ahead to keep their cash balance positive!


10. No more managing by the seat of your pants!
This one might also be called, “Are you controlling your business, or is your business controlling you?” Do your clients feel as though they are always reacting to the things that happen in their business? Do their days never go as planned because they’re always dealing with one unexpected crisis after another? This can be very stressful. It’s no way to run a business, feeling as though you’re always being dragged behind a car.

Your clients need to get out in front of things and take control of their business, and a prediction is a great place to start. A prediction by definition puts them out in front. From that vantage point they can start making decision proactively! No more just reacting! Look at where they want to be, and then make decisions that will get them there.

Most small businesses are focused on just one thing: They are heads-down trying to get their orders out by Friday. A prediction is a chance to stop, pick your head up, and look around to see where you’re going. This big picture view will ensure that where they ended up is where they intended to go.


Those were the second 5 reasons why your clients need a monthly prediction. Here’s last week’s blog with the first 5 reasons, in case you missed it. Next week I’ll give you the 5 reasons why helping your clients do a monthly prediction will benefit you! Stay tuned.


Do a Prediction
                   
How do you help your clients see their financial future? I believe there is not a better service a trusted financial advisor can provide to their clients.
                           
If you’ve ever created a spreadsheet financial model to do a prediction, you know what is involved in capturing history, creating a budget, and determining what other plans the company has and then creating a multi-tab spreadsheet that creates an income statement, balance sheet and cash flow statement. You worry about whether there is a formula error somewhere or a bad assumption that drives an erroneous result.
                                                         
The good news is that at ProjectionSmart we’ve eliminated the spreadsheet for you and put it in a quick and simple-to-use online tool! Instead of concentrating on cells and formulas, you just concentrate on your inputs and the results. So ditch your spreadsheet!
                                                           
When you use ProjectionSmart every month with your clients, maybe you are able to bill for an additional hour to create their prediction, or maybe you bill them an additional fee for their prediction. It’s up to you.
                                                
With a monthly prediction, your clients will be more successful and more comfortable with their numbers. They will be anticipate and avoid problems, leverage resources more effectively, make more quantitative business decisions, and feel much better about their business’s future – all because of you!
                                                            
On your side, you will increase your monthly revenue, have happier and longer-term clients, help your clients be more successful, and differentiate your practice.
                                         
After all, who doesn’t want happier and more successful clients and more revenue? Let us help.

Here’s a video to show you how easy ProjectionSmart is to use.                                                                               
                                                                                                                       
Try out ProjectionSmart here.


 
 

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