Why Your Business Should Engage a Financial Consultant

When it comes to operating your small business, understanding your financial position is key to growth, operations, and achieving your unique goals. Clearly, having the right advisor in place to do this is necessary, but who is the right advisor? Should you be relying on your CPA for more than managing your tax burden? Reaching out to a financial planner? A financial advisor? Or should you be employing a financial consultant or fractional CFO? Which of these professionals can help you understand where you’ve been and where your finances are taking your business?

What Is a Financial Consultant?

Before explaining why a financial consultant is a necessary part of your team, it’s helpful to understand what a financial consultant is (and isn’t).

A financial consultant helps businesses manage their finances by providing advice on investments, insurance, retirement plans, and other financial matters. They also offer guidance on how to improve cash flow and increase profits. In addition, they help clients plan and implement strategies to achieve their goals and are experts at analyzing data and creating reports that give a business owner the real-time tools needed to understand what is going on in their organization.

Small businesses often hire financial consultants because they offer the expertise that is lacking within the company. In addition, they can help small businesses save time and money by reducing administrative costs.

Financial consultants aren’t replacements for your bookkeeper or CPA; they can work with these other professionals collaboratively, aiding your CPA in mitigating your tax burden during the course of the year.

What does a financial consultant do?

In short, financial consultants look at the whole picture of a client organization’s financial life, including debts, assets, expenses, income, etc., to help clients determine what their goals should be. 

How is this done? A financial consultant can prepare your monthly financial statements like your profit and loss statement, your balance sheet, and your statement of cash flows. This statement is frequently overlooked but is arguably one of the essential tools in running your business. Everyone knows cash is king and the statement of cash flows marries your balance sheet and your profit and loss together to get a complete picture of what’s going on with your organization; you get a clear understanding of your business’s financial situation. 

This leads to profit and financial planning for an organization. What can your business do? What moves can you make? Where will your sales be in the near future? What is your expected future cash flow? The answers to these questions should inform your financial decisions. A statement of cash flows helps to provide those answers. That’s what makes it an invaluable tool in your business’s financial planning process.   

Does my business need a financial consultant?

While these professionals are integral to many small businesses across industries, they aren’t needed by all small businesses. So, how do you know if your organization should be working with one?

 Ask yourself if you’re experiencing any of the following:

1. Are you growing rapidly?
2. Are you planning to purchase another business (as a means of growth)? 
3. Is your customer base changing? 

If the answer to any of those questions was yes, you should be working with a financial consultant.

Rapid growth requires a tremendous amount of cash. Purchasing a business is a double whammy for your cash flow. In addition, breaking into a new market with a different customer base may mean changing payment terms or structure, again affecting cash flow.  When you start to experience these changes or want to begin making these changes, that is when you need somebody to come in and help you navigate that. You need an expert to work with you and your business, determine a strategy, and get you to a point where you can absorb the challenges of each of those operational changes while continuing to meet your obligations (your payroll, your accounts payable, etc.). Those obligations and operations are the lifeblood of your company; maintaining them is crucial.

What is the difference between a financial consultant and a financial advisor? When Do You Need a Financial Consultant or a Financial Advisor?

In many instances, these words are used interchangeably (particularly within larger investment firms); however, there is a distinction to be made when it comes to small business operations. Simply put, from the perspective of our operations at Margin Authority, a financial consultant works with a business, and a financial advisor works with a person. You’ll want a financial advisor if you’re looking at your finances and wealth management (retirement planning, tax planning, etc.). On the other hand, suppose you’re looking for help in determining a financial plan (like identifying and achieving specific financial goals) for your organizeation, company, or business. In that case, you’re going to want a financial consultant.

Bottom Line: Why is Paying for Financial Advice Valuable?

The proper financial guidance and advice will never genuinely cost you. If you have the right consultant working with you, they will find ways to save you money. In addition, they will always find ways to help their clients build value for the organization. 

Why Margin Authority?

At Margin Authority, our extensive experience and wide range of knowledge let us look at our clients’ financials through the windshield, not the rearview mirror. Let us help you make better, faster, more effective financial decisions for your business. So, reach out to our team to start driving your business toward your unique goals today.