Building the foundation for advisory services
When comparing conventional accounting and advisory, it’s usually on the assumption that the former is focused on compliance, while the latter aims at measuring and reporting on company performance.
However, in reality, drawing a distinct line between the two is questionable as they are closely interconnected and advisory never is a stand-alone activity.
What’s undisputed though is the evidently growing demand for business advisory. Particularly in financial service outsourcing, small and medium organisations no longer focus solely on simply keeping the business alive but actually strive to continuously measure and improve performance.
What is fundamentally different about advisory?
On the one hand, financial advisory is the logical next step from accounting and bookkeeping as it feeds on the data they provide. On the other hand, from the operational and delivery perspectives – the difference really is substantial.
First of all, there is a change in customer. The scope of conventional outsourced bookkeeping and accounting services has always been dictated by government/regulatory bodies as the primary consumer/recipient of compliance and taxation data. The business was the secondary customer with the core intent of being fully compliant with the regulations and not paying excessive taxes. Advisory services, however, consider the business to be their main client. They focus on understanding the organisation’s financial health to figure out ways how to move the business forward.
Secondly, unlike basic compliance services – which have been fully commodified, i.e. they are well structured, required on a scheduled basis and discrete by nature – advisory is a continuous service that evolves together with the client’s business.
And thirdly, a principal differentiator is the much deeper involvement in the operational side of the business that advisory must have for being able to provide the management with financial insights; in stark contrast to compliance, which needs only fairly basic accounting activities to fulfil reporting requirements.
Key building blocks for advisory services
Defining advisory as a continuously evolving set of services that are unique to each business and depend on its current growth stage and business objectives, we can still think of a common framework of capabilities – the foundation – that needs to be in place for successfully providing advisory services.
Those capabilities revolve around the information delivered to business customers, the format of collaboration with them as well as the tools and processes that enable delivery of advisory services.
Data shapes the basis for any kind of advisory. So first and foremost, effective financial advisory really does need accounting data to be enriched with business context to make it actionable.
In practical terms this implies extending GL codes – e.g. government-defined and country-specific ones – with business-oriented coding such as Xero tracking categories so that accounts payable and accounts receivable information can be translated into company performance indicators.
It’s essential that such business-oriented coding is, firstly, specified together with the business and, secondly, continuously validated by its decision makers via timely reviews and approvals. This is particularly true for company spending. Only adequate validations ensure another critical aspect of actionable data: it must always be both up to date and available for advisory services.
Financial controls are a system of procedures and processes that have been agreed with the business and aim at establishing leverages, primarily over company spending. They should include a detailed specification of spend authorisation levels, authorisation criteria, rules for approval delegation and fraud prevention.
In conventional in-house accounting, financial controls are often only minimal and the ultimate responsibility lies with the CEO.
In outsourced accounting, especially if enhanced with advisory services and the vCFO role, financial controls become the cornerstone of shared accountability with the client. This observes the predefined authorisation flow and provides a clear record of approval decisions in order to safely proceed with payments on behalf of the client, and being audit-ready at any given time.
Another difference between advisory and basic compliance services stands out in the ways of client communication and collaboration. When you deliver advisory as a continuous service, you need to stay in touch with your clients at all times. You just cannot parachute in, do something fancy and then wander off.
On the operational level, you must be involved in every transaction – and have a clear understanding of its meaning and impact on the business.
That means your communications – same as your services – need to be continuous with the ability to interact with your clients and for your clients to interact with you almost real-time.
Safeguarding data quality, executing financial controls and sustaining continuous client collaboration while providing affordable and profitable advisory services – this is where operations automation with minimal error-prone and time-consuming manual interventions comes into its own.
Advisory services benefit from various types of automated operations, for example the automation of integrations, data capture, reporting, expense management, approvals and authorisations, payments, multi-currency consolidation and many more.
They all share the same objective: minimising manual handling and human error for every single task before joining as many co-dependent tasks as possible in an uninterrupted end-to-end flow and running all as a seamless process.
Excellence in software and partner support
When implementing a reliable foundation for the delivery of complex business-oriented services, you’ll need the best technology at hand. That’s why Xero and Xero-connected apps have become the solution of choice: the leading accounting platform extended with specialised digitisation, automation, reporting and other capabilities has all aspects covered.
However, state-of-the-art technology alone is not enough. Building a custom solution for a client and providing services tailored to their particular business requires a unique understanding of both the product capabilities and the use cases it supports.
At ApprovalMax, we are committed to delivering best-in-class software with the key value proposition of establishing robust financial controls and approval automation. Our unique product features – such as multi-step and multi-role approval workflows, review and coding by approvers, bill to PO matching, collaboration, audit logs and reporting – make us the game-changer when it comes to truly real-time and actionable data, efficient and fully automated workflows and, last but not least, higher client satisfaction.
We ensure that our clients are fully equipped for high value advisory service delivery: our Partner Programme with a free partner edition of ApprovalMax and extended partner support services includes consulting and implementation services, on-site client trainings, on-demand product demos and dedicated support.
Building blocks in action
Let’s check out some real-life examples of how ApprovalMax enables high value advisory in the context of accounts payable and accounts receivable operations.
Let’s start with a basic one: for cash flow forecasting it is vital to have precise and up-to-date information about all pending business expenses, including authorised purchase orders and supplier invoices that have not yet been paid. Only then you get a clear and reliable picture of the organisation’s financial health.
Moving on to financial analytics as a service, which ensures that all business expenses are enriched by proper business coding (or tracking categories) and confirmed first-hand by the responsible business decision makers. Now, we have actionable data and this makes financial spending reports much more valuable to the management, who can now clearly track spending and timely act on it.
With regard to project accounting and budget control services, again, there are two critical requirements for assigning expenses correctly to specific projects: actionable data and constant collaboration with business decision makers and project leaders.
The same goes for day-to-day financial admin services that focus on managing the supplier and customer relationships as well as sales invoicing and receivables collection. But apart from high data quality, efficient and convenient client collaboration is key. Which means businesses need a straightforward and user-friendly channel driving discussions of any kind regarding accounting or business-related questions. Preferably with the option of flexibly including other people and preserving the full context and history of each conversation for easier member onboarding.
Needless to say that internal process advisory relies heavily on the ability to implement and effectively maintain financial controls. Establishing financial controls in a broader sense implies setting up proper review and authorisations processes for both spending and revenue management. This requires getting together with the client to assign the appropriate decision makers and set spending limits based on both the organisation’s structure and the nature of expenses.
Finally, the automation of internal operations is a necessity for any kind of advisory activity. As the main productivity enabler, it ensures you have enough of one of your most valuable resources – time – to help your clients move their business forward.