5 Key Traits to Look for in a Financial Advisor

Choosing the right financial advisor is a decision that carries significant weight. Many businesses have felt the strain of financial stress, whether due to unexpected slow-downs, supply chain disruptions, or rapid growth. If you find yourself in such a situation, you might be urged or required to seek professional help. But how do you know who to choose? By cost? By personality? What qualities should you prioritize? It’s challenging to make the right choice if you’ve never faced this situation before and the stakes are high.

 

The 5 Qualities


Core Values

A good financial advisor devises strategies to maximize the value of a company and communicates these strategies clearly to each stakeholder. This proactive approach minimizes unnecessary conflicts, saving time and money that can be better spent on value-creating activities. When evaluating potential advisors, inquire about their experience with and approach to various stakeholders, such as vendors, customers, employees, and lenders/investors. Ensure their values align with yours.

Experience

Navigating financial challenges involves more than just financial models and analysis. A reputable financial advisory firm should have a wide range of business competencies and a proven track record of successfully guiding businesses through challenges similar to yours. Ask potential advisors about their experience with situations like yours and request references. Additionally, a team with real-world experience can empathize with your challenges and develop the best path forward. Make sure to ask about the experience of the individuals who will be working on your project.

Capacity

Ensure your advisor has the capacity to support your business within your required timeframe. Clearly articulate your expectations and request a written scope of work and timeline. Ask how they would handle an accelerated timeline or an expanded scope and whether any additional resources would be brought in outside of the advisory firm’s normal staff. Confirm their approach to resource management and how they prioritize client needs to ensure you receive the attention and support necessary for success.

Ability to Listen and Understand

A financial advisor’s ability to listen and understand your needs is crucial. They should be willing to listen to the issues you are facing and then develop a comprehensive plan to address these issues. Do they ask probing questions and listen to your answers? Do they communicate in a way that is easy to understand and relatable? An advisor who listens well can tailor their strategies to your specific circumstances and simplify complex financial concepts, ensuring you are fully informed and confident in the decisions being made.

Seeing the Bigger Picture

You need a financial advisor who can frame issues within the broader context of your operations and mission. What other issues are present? What sub-issues exist? What are your goals? How will the issues impact other stakeholders? Your advisor should ask questions that demonstrate a focus on overall business success, not just immediate problem-solving. By seeing the bigger picture, an advisor can identify potential risks and opportunities that might otherwise be overlooked, providing a holistic approach to navigating financial challenges and driving sustainable growth.

 

Choosing the right financial advisor can be daunting, but remembering these five qualities can help you select an advisor who best represents your interests and aligns with your core values.

 

At DWH, we understand that every business faces performance challenges at some point. You are not alone. We’re here to help. Reach out to us for a conversation on how we can assist you in thriving, not just surviving.

 


This post is from the DWH archives
Original content written by Heather Gardner
hgardner@dwhcorp.com | LinkedIn
Edits made by Jordan Gunn

All companies experience change.
Plan for it with us.

 

 

If you found this topic interesting, our strategic partner, JACO Advisory Group published content you may find relevant as well: 4 Qualities to Look For When Selecting a Financial Advisor to Super Charge Your Business Results

The 2023 Outlook + Strengthening Your Business

Recession is on everyone’s mind these days. The current economic climate, characterized by the ongoing COVID-19 pandemic, inflationary pressures, supply chain disruptions, and general economic uncertainty, has raised concerns among business owners and individuals. As an advisor to numerous business owners, I am often approached to provide insight into the situation. However, given the scarcity of available data and the dynamic nature of the situation, making accurate predictions can be challenging. Rather than share our predictions, we would like to provide practical advice to help business owners prepare their companies for economic uncertainty and navigate any potential financial distress. Here are seven steps to build resiliency and weather any storm that may come your way:

1. Communicate with Your Stakeholders

In times of uncertainty, the quality of your relationships with key stakeholders can make all the difference. Do you know who your key stakeholders are?  What do you need from them?  What do they need from you?  Some examples are listed below with questions to ask:

  • Customers and Vendors – Do you understand their pain points? Are you aware of how they build their schedules?  What their capacity is?  Do you have relationships with multiple decision-makers?  Do you understand their financial strength?  Do you regularly meet with them to touch base?
  • Employees – Do your employees understand the vision of your company and its goals? Are they aware of how their actions have an impact on those goals?  Do you have a rhythm of communication with employees?  Do you use key metrics to communicate performance?  Do you conduct regular employee surveys?
  • Bank – Do you meet regularly with your banker and their team? Are you proactive in telling them about any potential changes to the business?  Do you regularly update them on any changes to your financial forecast?  Remember, your bank is a partner, and you want to keep them informed.  You cannot over-communicate with them.  To read more about managing your relationship with your bank, see our post, How to Engage a Key Stakeholder: Your Bank.

2. Build a Strong Leadership Team

Having the right team in place is critical, especially during a challenging situation like a recession. Ensure that your leadership team understands their roles and responsibilities, is held accountable, and has bought into the company’s vision and goals. In one of our previous blogs, Effective Leadership In a Crisis, we discuss how your response in turbulent times will define you as a leader.

3. Utilize a Robust 13-Week Cash Flow Forecasting Model

Understanding your cash flow is crucial in times of economic uncertainty. In one of our previous blog posts, How to Preserve and Improve Liquidity, we discuss how a strong cash flow forecasting model (CFFM) will help you accomplish these primary objectives:

  • Predict cash flow and collateral week over week for at least the next 90 days.
  • Improve decision-making at the transaction level.
  • Improve communication with key internal and external stakeholders.

4. Incorporate Scenario Planning and a Rolling 24-Month Forecast

A rolling 24-month forecast model that includes a profit and loss statement, balance sheet, and statement of cash flows can help you run scenarios and see the impact of various factors on your business. By incorporating covenant calculations, you can forecast any potential compliance issues with your bank. The models should be constructed so you can run scenarios (lower sales, higher costs, extended terms, etc.) and see the impact. For more information, see our previous blog post, Business Resiliency Through Scenario Planning.

5. Understand Your Cost and Pricing Structures and Review Regularly

Many businesses do not have a process in place for regularly reviewing costing and pricing data, identifying opportunities for improvement, making those improvements, measuring the impact, and repeating. With all the disruption in the supply chain, increase in labor costs, and inflationary pressures it is critical that you truly understand the cost to produce goods or provide services and that you are regularly working to reduce these costs. Additionally, you must ensure that you are capturing cost increases and passing them on to customers when appropriate. Be sure to look at our blog about Understanding Your Cash Conversion Cycle for more info.

6. Look for Opportunities

Change creates opportunities. This may be in the form of the opportunity to acquire a competitor or supplier. It could be discounted equipment or employees that become available when another business is struggling. It could be increased volumes when another supplier can’t meet their obligations to a customer.  Whatever the opportunity, you want to make sure that you are correctly positioned with the staff and resources to pursue these opportunities.  For more information on distressed investing, view our webinar on Key Considerations for Purchasing Distressed Assets.

7. Don’t Wait to Ask for Help

Finally, make sure you’re not waiting to ask for help with any of the items above or other challenges you may have in your business. Lean on your advisors and business network for help preparing for the challenges that might lie ahead. It’s essential to remember that these steps are not just for preparing for a recession; they are sound business practices that can help your company to thrive in any economic climate. By focusing on strengthening your business fundamentals and taking a proactive approach to managing risk, you can set your business up for long-term success.

 

As a group of financial and business professionals, DWH offers expertise and support so companies can embrace change for the better. Built on a core philosophy that every stakeholder matters, we listen to those who shape a business and guide that business to its best value, outcomes, and opportunities.

 


This post was written by Ben Borisch
bborisch@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

 

 

Create a Turnaround
Plan in 4 Steps

No company is without its challenges. In moments of distress, however, the need for serious change can be vital. This is where a turnaround plan can be pivotal. It’s a process of renewal – one that not only identifies key underlying issues within the company but actively implements change at the deepest levels in order to restore health to an organization.

Making decisions that involve change can vary depending on the types of difficulties a company is facing. The turnaround plan should start with the goal of maximizing the value of a company for all stakeholders while transforming it from an underperforming company to a performing company. There are numerous ways to accomplish this which include doing an out-of-court workout, acting as the chief restructuring officer, being a court-appointed receiver, and/or filing for bankruptcy. No matter what option you choose to accomplish your plan, every plan contains these four core steps:

 

1. Identify the underlying issues affecting the company

  • Assemble a team of advisors/advocates for the company. This may include a financial advisor, a CPA, a debtor rights counsel, an appraiser, and/or customers.
  • Assess the Situation. This includes leadership, finance, operations, sales, and marketing. Talk to key stakeholders. Implement a rolling 13-week cash flow model to provide further insights into the company’s financials.
  • Communicate findings with leadership and stakeholders so they can understand, commit, and support the discoveries.

2. Develop a clear, realistic plan that creditors will support

  • Identify ways to raise cash. Options include A/R collections; new sales; vendor payment plans; expense reductions; reduced inventory – sell and don’t replenish; ownership cash infusion; and sale/leaseback of property.
  • Evaluate the company’s lending situation and options such as a forbearance agreement; over formula on the line of credit; and other financing.
  • Stabilize the company – utilize customer communication and relationships; key employee retention plans; maintain employee relationships; communicate with the bank; leadership changes (if appropriate); operational issues addressed – safety, equipment, process improvements, etc.; and financial issues addressed – current financials, inventory costing, etc.
  • Considerations – take into consideration the long-term stress the company has been under; customer frustration; vendor frustration; that COD/Prepays are most likely in place; and an over recognition of the environment in which the company is operating.

3. Validate the plan by ensuring buy-in from stakeholders

  • Stakeholders – revisit who key stakeholders are; present the plan to stakeholders and explain how they will benefit; articulate what the company needs from stakeholders and determine what stakeholders need from the company.
  • Communication – develop a communication rhythm that may include a weekly call with the bank, a weekly review of cash flow, daily/weekly check-in with the leadership team, daily/weekly call with key customers to discuss quality, delivery, and/or funding needs as applicable or daily/weekly call with key vendors.

4. Execute the plan with a sense of urgency

  • Assign responsibility and accountability with due dates
  • Conduct daily/weekly meetings with leadership on plan status
  • Weekly review of rolling 13-week cash flow to drive decisions and actions
  • Measure progress and make adjustments as needed

 

All companies experience performance challenges at some point. If your business finds itself facing some immense challenges, just know that you’re not alone. We work with clients who have questions about what this all means for them, what options and conditions for support or exemptions apply, what implications are for team members, how to mitigate business value erosion, how to manage communications with banks/creditors/vendors/customers, etc. All that to say, we’ve seen businesses make successful turnarounds when they choose to implement a plan.

At DWH, we’re here for you. Feel free to reach out for a conversation on how we can be of assistance as you focus on thriving and not just surviving.

 


This post was written by Heather Gardner
hgardner@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

Understanding Your Cash Conversion Cycle

Group of financial analysts

CCC: What Is It?

The Cash Conversion Cycle (“CCC”) is an important metric used to determine the number of days it takes a company to convert cash outflows (purchase of inventory, manufacturing expenses, etc.) into cash inflows (collections of receivables).  The longer a company’s CCC, the more working capital it will need to fund operations.  This metric is especially important when a company is evaluating the working capital needed to fund expansions, new projects, or growth.

How Is It Measured?

There are three components of the CCC. They include Days Inventory Outstanding (DIO), Days Sales Outstanding (DSO), and Days Payable Outstanding (DPO). The formulas for determining these are below:

  • DIO = (Average Inventory on Hand / Cost of Goods Sold) X Days in the Period
  • DSO = (Average Accounts Receivable / Revenue) X Days in the Period
  • DPO = (Average Accounts Payable / Cost of Goods Sold) X Days in the Period

Days in the Period are determined by what information you are using to do your calculation. For example, if you were measuring your CCC using numbers that reflected an entire year, the period would be 365 days. If you were measuring just a month, the period would be 30 days. Once you have determined your DIO, DSO, and DPO, the formula for your CCC is:

CCC = DIO + DSO – DPO

How Can I Improve My CCC?

It all starts with understanding your current state. What is the first thing you do when you are about to embark on a new journey? You look at a map and figure out where you are relative to where you want to be. You will never be able to measure progress if you do not know your starting point. Calculate the CCC for your company using the most recent financial data and the formulas provided earlier. This is your, “You Are Here,” marker.

Can you recall a time in your company’s history when cash was NOT tight?  What was the CCC leading up to and during that period? How does that compare to your current CCC? How does your CCC compare to the standards within your industry? Use the answers to these questions to guide the goal-setting process. Taking steps to improve your CCC leads to improved efficiencies for the company by converting inputs into cash. The goal is to free up working capital, and with the CCC method, you’ll be able to ensure your business has enough cash for when you need it most.

Identify & Quantify Cash Levers

As you begin to establish cash conversion goals, you will discover a variety of “levers” that can influence cash flow. Some common levers are listed below. After reviewing this list, decide which levers are most relevant to your business. Quantify the impact of each lever to determine the potential impact on cash conversion.

Sales & Marketing Levers:

  • Early Payments – Will any of your customers offer accelerated payment terms? Offer early payment discounts, as necessary.
  • Demand Planning – Can you engage with your customers planning and purchasing departments to ensure you have access to the most reliable product demand information? Structure your agreements in ways that allow you to level load your operations.
  • Discounts & Promotions – Do you have opportunities to offer discounts or promotions on slow-moving or obsolete inventory? Are there brokers available to provide immediate cash for this inventory?  Can any of this inventory be re-purposed for other sales channels or product lines?
  • Selling Excess Capacity – What areas of the business have excess capacity? Use this information to offer discounted pricing as needed to fill this capacity.

Supply Chain Levers:

  • Extended Payment Terms – Request extended payment terms from your key vendors. Remove any early-pay discount programs as applicable.
  • Material Lead Times – Evaluate long-lead material items, seeking alternate sources with shorter lead times, or assist your vendors in reducing these lead times.
  • Optimize Order Sizes – Review your planning and ordering process to ensure you are ordering in the most economical batch sizes.
  • Optimize Order Triggers – Establish parameters around raw material on-hand quantities to prevent excessive buildup of inventory. Set up replenishment systems, or vendor-managed inventory systems that allow you to reduce your liabilities.

Production Levers:

  • Production Lead Times – What are your internal production lead times for your highest-cost items? Look for bottlenecks in the process and find ways to eliminate this buildup of inventory.
  • Minimize Finished Goods Inventory – Establish parameters around finished goods inventory, highlighting areas where completed product is sitting on your shelf for more than a few days.
  • Increase Throughout – Are there bottlenecks in your production process? Use this to determine where you might need to add more capacity (human or capital resources).  Find equipment that is under-utilized, working with the sales team to bring in work that can fill this capacity.

Financing Levers:

  • Asset Management – What assets are available that can be used as collateral?
  • Negotiate Advance Rates – Negotiate with your bank to find the best inventory and receivable advance rates.
  • Micromanage Collection Process – Maintain proper oversight over your AR collection process to limit past due invoices that might become ineligible.

Make a Plan

Decide on a goal and create a path that moves you toward that goal. As with any good plan, make sure you have identified key milestones and assigned appropriate ownership to key elements of the plan. Each element should relate to the identified levers. Work through all the levers you previously identified, adjusting your plan as more information is gathered and as progress is made. Maintain clear and consistent communication within your team ensuring all opportunities are fully explored and executed.  Document and measure your progress along the way. As movement is made, priorities will change and new levers will come into play. Re-establish your current state, set new goals, and repeat the process.

Conclusion

Monitoring your cash flow can often be a daunting and nebulous task. You can use the Cash Conversion Cycle measurement as a tool to objectively monitor your company’s effectiveness in managing cash. Using the tools and steps above can help to significantly improve the liquidity of your business and reduce future risk.

 


Originally posted on June 1, 2021, by Jeremy Cosby
jcosby@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

Stories from a Financial Advisor

Image of a couch at home

For many people, the idea of hiring an advisor can feel intrusive, threatening, costly, or even downright unnecessary at times. As long-time advisors at DWH, we’ve heard things like…

“I’ve been in this business for 40 years. No one can tell me anything I don’t already know.”
“I don’t want someone I just met telling me how to run MY business.”
“My business is unique, and no one else does things the way we do, so your ‘standard solutions’ won’t work here.”

Although these are common sentiments, we’ve discovered that sometimes the best way to articulate the value of a good advisor is not with clever arguments, but with a story.

First Story: The Couch Maneuver 

I recently went over to a friend’s house to help him move his couch. The house was a bi-level with a small flight of stairs leading to the front door. We transported the couch down the stairs and were trying to maneuver it through the doorway; it wouldn’t budge.  We then stopped for a minute, evaluated the situation, and tried harder.  Still stuck.  After 2-3 minutes, we noticed his neighbor standing just outside the house, entertained by our efforts.  Without hesitation, he said, “move it back up one step, rotate it about 30 degrees and come back down.”  With no better options but to swallow a little bit of pride and take his suggestion, we did as he instructed.  Sure enough, within seconds, we were out of the house, and the couch was in the truck.

This wasn’t his couch, nor was this his house; in fact, I don’t think he’s ever even been inside the house.  He had a perspective we didn’t have that he could use to identify problems we couldn’t see and suggest a quick, simple solution.

Second Story: The Golf Swing

I’ve always been terrible at golf, but for some reason, I’ve noticed this year that I’m getting worse the more I play instead of better.  I was reading articles on how to improve my swing, spending more time at the range, even shopping for new clubs.  None of it mattered.  Still no improvement, in fact, the opposite.  Finally, I decided it was time for me to seek some professional help, so I signed up for an evaluation with a local professional golf coach.

After some brief discussion about the challenges I was experiencing and what I hoped to accomplish, I was directed to a special room with several cameras, four tv screens, and a giant net to hit into.  I was instructed to swing “like I normally do” and hit a few balls into the net.  Cameras from multiple angles recorded my swing so the instructor could then replay the video, dissecting my swing frame by frame.  Every element of my swing, from the setup to the backswing, contact, and follow-through, was compared to a database of “baseline” measurements generated by compiling the average swing of the top 100 professional golfers in the world.  As painful as it was to watch, it allowed me to see how my swing compares to a professional.

I’ve never actually seen my golf swing before, which makes sense as there aren’t exactly a lot of mirrors on golf courses.  Within those 90 minutes, I was able to SEE what was causing that awful slice and begin to make a plan to correct some unhealthy habits.  There was not one magical fix (unfortunately), but a couple of fundamentals that I need to practice, which will start pushing me towards a path of improvement.

Hopefully, by now you can see where I’m going with these stories…

We need trusted advisors in our business (and frankly, in all areas of our life) because a good advisor can provide a perspective only an outsider can give.  They can see things from multiple vantage points (the forest AND the trees) and make comparisons to what the best companies in the world do (a.k.a. “Best Practices”).  A good advisor will leverage the decades of experience you have in your business, or within your industry, to help you see things from a new perspective. And seeing things in a new way is the first step to breaking old habits and creating meaningful change.

When you’re ready, we’re here for you — and for the life of your business.

 

This post was originally written on August 11, 2021, by:
Jeremy Cosby, DWH Partner
jcosby@dwhcorp.com | LinkedIn

How to Preserve
and Improve Liquidity

Image of businessman doing financial planning

When it comes to maximizing the value of your business, it’s best to focus resources and energy on improving cash flows and managing risks. The last two years have brought a number of unique challenges to business leaders and liquidity has become a significant topic. Companies are having to make major decisions that will potentially impact cash flows. So how can leaders address this?

Step 1: Develop a Cash Flow Forecasting Tool

When it comes to best practices around preserving and improving liquidity, we like to suggest one approach that has proven to be effective among many of our clients – and that is to develop a robust 13-Week Cash Flow Forecasting Tool. This financial tool helps businesses accomplish three primary objectives:

    1. It predicts cash flow and collateral, week over week, for the next 90 days.
    2. It improves decision-making at the transaction level.
    3. It improves communication with key internal and external stakeholders.

An effective 13-Week Cash Flow Forecasting Model also shows the details of anticipated cash receipts, cash disbursements, and changes in bank collateral through the forecast period. Specifically:

    • Cash Receipts – your company should forecast cash receipts from:
        • When current Accounts Receivable (AR) will be received.
        • When future revenues will convert to cash receipts.
        • Other non-operating cash receipts (e.g., interest income, proceeds from the disposition of assets, draws on a line of credit, etc.).
    • Cash Disbursements – your company should forecast cash disbursements from:
        • Current accounts payable (AP).
        • Future planned expenses*.
        • Other non-operating cash disbursements (e.g., debt service, un-funded capital expenditures, distributions, etc.).*Future projected expenses can be derived from budgets and recent experience, but should also consider anticipated changes to your business (e.g., new program launches, wage increases, new hires, etc.).
    • Bank Collateral – the collateral component is often missed in cash flow forecasting models and can lead to unanticipated liquidity challenges. Cash receipts, cash disbursements, and other business activities can have an impact on the bank’s collateral and, therefore, the company’s liquidity. A good 13-week cash flow forecasting model should take into consideration how changes in AR and inventory impact the bank’s collateral and, therefore, the line of credit (LOC) availability.
    • Cash on Hand – Cash on Hand is calculated using the following formula: Beginning Balance + Cash Received – Cash Disbursed +/- Changes in LOC
    • Miscellaneous – Here are a few other things that you should keep in mind as you build your model:
        • The cash flow should be rolled at least weekly. In times of crisis, you may want to roll it daily.
        • As a result, the model should be easy to create and update.
        • The model should be linked to your accounting system or allow for direct imports of data from the accounting system.
        • Have a weekly clean cut-off, so you are working with the most relevant and timely data.
        • The model should be reviewed at least weekly by the leadership team.

Step 2: Use the Model to Identify Levers

Once you have a functioning model, it is time to use it to find ways to preserve or improve your cash position. We call this process “pulling levers”. Reviewing your income statement will allow you to find opportunities that will improve revenue or reduce expenses. After, you’ll want to look at your balance sheet. The accounts on the balance sheet represent opportunities to accelerate cash receipts or slow cash disbursements. The balance sheet accounts also represent multiple market relationships, every one of which represents an opportunity to renegotiate to improve cash position. Consider what other sources of capital may exist for your business in your network. Examples of levers can include:

  • Cash Receipts
      • Reducing payment terms with customers.
      • Require deposits for new customer orders.
      • The additional cash infusion from owners or investors.
      • Sale of unused or under-utilized assets and equipment.
      • SBA lending or other government assistance.
      • Negotiate increases in collateral advance rates or LOC limits.
  • Cash Disbursements
      • Negotiate new payment terms with vendors or negotiate payment plans.
      • Reduce direct material order quantities or push deliveries.
      • Reduction of labor (headcount or hours).
      • Renegotiation of contracts or agreements.
      • Deferral or reduction of rent and lease payments.
      • Negotiate deferral of principal or interest payments with the bank.

Step 3: Communicate with Stakeholders

Key Stakeholders

Once you’ve built useful forecasts and identified levers, it’s time to communicate the plan to your stakeholders (think customers, vendors, employees, owners, investors, and community members as needed. Remember, your stakeholders are an essential part of your business and share in its success. When communicating your plan to your bank, describe the following:

  • How you developed your cash flow forecast
  • What your forecast shows
  • What steps you’re taking to improve your liquidity and capital position
  • What your current needs are and how might the bank be able to help

It’s better to bring a plan to your bank than to expect them to give you one. This holds for all your stakeholders. Make sure you are clear and considerate in your communication, looking for win-win solutions. You’ll gain confidence from your banking institution by showing exactly how you’ve determined your needs through management tools and decision-making.

This tool is also beneficial for the purpose of discovering the expectations of your customers as well. For instance, if a customer asks to revise payment terms, you can make the modifications in the forecast to determine the impact on your liquidity before agreeing to the change.

Step 4: Start Pulling Levers

Once you have your cash flow model in place and have communicated it to your company’s stakeholders, it is time to start pulling levers. Make sure that you develop an action list for the levers you are going to pull, including a point person for each action and a due date. Review this action list on a weekly basis. It is also essential to ensure you are updating your model as you pull the levers. If you request a customer pay in 15 days and they agree to 25 days, make sure the cash flow forecast reflects that change correctly.

Step 5: Review the Model Weekly and Continue Communication with Stakeholders

Once you have created the forecast, identified levers, communicated the plan to stakeholders, and started pulling levers, it is crucial to maintain this rhythm. Update the forecast weekly and consistently review as a team. Look for changes in the forecast and review the weekly variance report. This will help you improve the accuracy of the model. Additionally, your team should be looking for new levers on a weekly basis. It’s also important to note that in times of distress, the amount of communication with key customers, vendors, employees, financial institutions, and ownership should increase. Continue to update your stakeholders on your plan and your progress.

 

If you found this topic interesting, our strategic partner, JACO Advisory Group published content you may find relevant as well: Navigating Unexpected Business Disruptions by Preserving Liquidity

If you’re wanting to learn more about our cash flow forecasting model or would simply like to talk, please reach out. At DWH, we’re here for you — even remotely.

 

5 Qualities to Look for When Choosing a Financial Advisor

Over the past 18 months, many businesses have experienced financial stress.  This may be due to COVID-related slow-downs or shut-downs, supply chain disruptions, or even from tremendous growth.  If you have found yourself in this position, you may have been urged to or required to get some help and may have been provided a list of names to call.  But how will you know who to choose? By cost? By personality? What qualities do you look for? It can be difficult to know what you need if you have never been in this situation before and the stakes are high.

 

The 5 Qualities


Core Values

A good financial advisor devises strategies to maximize the value of a company and proactively communicates a clear strategy and its benefits to each stakeholder. This will minimize unnecessary conflicts, which erode value through the consumption of time and money that could otherwise be allocated to value-creating activities. Ask potential advisors how they work with other stakeholders such as vendors, customers, employees, and lenders/investors.  Try to determine the advisor’s experience and likely credibility with each of these stakeholders.  See if their approach aligns with your values.

Experience
Navigating financial challenges involves more than financial models and analysis. A financial advisory firm should possess a breadth of business competencies and experience successfully guiding the business through the specific challenges you are experiencing.  Ask potential advisors about their experience with situations such as your own.  Ask for references.  Also, a financial advisor who has a team with real-world experience allows them to empathize with your challenges as they assist in developing and executing the best path forward.  So, make sure you ask about the experience of the people who will work on your project.

Capacity
Speaking of team, it is important to make sure your advisor has the capacity to support your business in the time frame you need them to. Make sure you clearly articulate what your expectations are and ask them to provide you a scope of work and timeline in writing.  Ask the potential advisor how they would support you if the timeline needed to be accelerated or the scope expanded.  Ask them if any additional resources would be brought in that were not part of the advisory firm’s normal staff.

Ability to Listen and Understand
Your financial advisor’s ability to listen and understand rather than talk over you with a lot of material is important. Their ego should be left at the door. They should be willing to listen to the issues you are facing and then develop a comprehensive plan to address these issues.  Does the financial advisor ask probing questions and listen to your answers?  Does the advisor speak in a language that is easy to understand and relate to?

Seeing the Bigger Picture
You need a financial advisor who can understand and frame the issues within your broader operations and mission. What other issues are there? What sub-issues exist? What are the goals? How will issues impact other stakeholders? Are the recommended solutions an approach that is sensitive to all stakeholders? Don’t win the battle – win the war. Make sure your advisor is asking questions that show they are focused on the overall business success and not just solving the immediate issue.

 

Choosing the right financial advisor can be intimidating and overwhelming but remember the five topics described in this article when you meet with potential advisors.  This can help you select an advisor who will best represent your interests in a way that is aligned with your core values.

 

All leaders experience performance challenges at some point over the life of their business. You are not alone. We can help. At DWH, we’re here for you. Feel free to reach out for a conversation on how we can be of assistance as you focus on thriving and not just surviving.

 


This post was written by Heather Gardner
hgardner@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

 

If you found this topic interesting, our strategic partner, JACO Advisory Group published content you may find relevant as well: 4 Qualities to Look For When Selecting a Financial Advisor to Super Charge Your Business Results

Recognizing the Need for a Chief Financial Officer

Knowing the role of a Controller vs. a CFO

Controllers primarily focus on reporting and compliance in the finance and accounting areas. They manage and maintain accounting controls and related systems (the debits and the credits).  Controllers also manage and/or produce monthly financial reports, year-end reports, and other financial reporting. Their responsibilities often extend to handling tax compliance for federal, state, and local income taxes, as well as payroll, state sales, and property taxes. These are essential components to strong financial controls, which are critical for the growth and success of a business.

A Chief Financial Officer, on the other hand, is primarily focused on the future of the company. They’ll use financial, operational, and sales information to plan and forecast, allowing them to provide the company leadership with the information necessary to make decisions around direction and strategy. Additionally, the CFO should be spending a lot of time ensuring that the business has excellent financial controls in place so the information that is created is timely, relevant, and accurate. Because of this focus on the business at a high level, the CFO becomes a powerful strategic partner to the owner and other business leaders.

Another important role for a CFO is to spend significant time on external relationships in an effort to provide the business with the best information and resources available. These can be relationships with professional service providers like the company’s Certified Public Accounting (CPA) firm, banks, legal advisors, and risk/insurance providers. These could also be relationships with specialty providers like outsourced IT firms, software programmers, HR management firms, or consultants. CFOs are also often asked to develop relationships with key community partners.

Knowing when to bring on a CFO

“When should we consider a Chief Financial Officer for our business?” is a question we are frequently asked by clients. For every company, it can be different, and our firm does a very thorough analysis of a company before making a recommendation, but here are some scenarios where adding a CFO can be incredibly advantageous.

Scenario #1 – When leverage is increasing
Having just a controller makes sense when a company has a strong balance sheet and low leverage.  As the leverage increases, more care needs to be given to the balance sheet, forecasting, cash management, and external relationship management. This is where a CFO can help.

Scenario #2 – When business complexity or risk is growing
Perhaps your company is looking to acquire a business, implement a new ERP system, take on an equity partner.  All of these events create complexity and risk for the business and require someone with strong financial and analytical skills to properly plan for the events, forecast the impact of the event, solicit the appropriate outside advice, and support the business. This is the role of a CFO.

Scenario #3 – When financial information is lacking
Often, as a business grows, the financial information does not keep up. Larger businesses often need very specific information or forecasts in order to make strategic decisions. Sometimes the business doesn’t even know what information it needs! Having a qualified CFO to anticipate and create timely, accurate, and relevant information to support decision-making is critical for businesses to grow.


 

If you still have questions and would like to talk, please feel free to contact us.