What does “proactive planning” mean?
Studies show the number-one complaint small businesses have about their accountant is: the accountant doesn’t provide proactive advice.
The problem is, there’s no advice for accountants on what “proactive advice” means and how accountants are supposed to implement this in the real world with typical small business clients.
WHAT IS PROACTIVE PLANNING?
One way of looking at proactive planning is to say it means helping business owners identify trends and problems before the fact rather than after the fact.
I try to do this. And I think most reputable accountants do, too.
But here’s the reality: providing proactive advice is not nearly as simple as articles like the one I linked to above make it sound like.
PROACTIVE PLANNING PROCESS
When I’m helping a client with proactive planning, I ask questions such as:
- Who are your biggest customers and what are you doing for them?
- How can you generate more revenue from the middle-of-the-pack customers?
- How profitable are your product lines or service areas?
- What about your internal procedures? Are you running your business as efficiently as you could be?
- What’s your cash flow look like? What sorts of big purchases are on the horizon?
- If there’s excess cash sitting around, we should look at investing it. Would you like to talk with an investment advisor?
This is work for me … and for the business owner.
Articles such as the one linked to above make it sound like accountants are supposed to be an omniscient Yoda, dispensing proactive advice out of the sky.
This is unfair to accountants, and it leaves out the fact that it’s a two way street: the business owner has to be an active participant in the process.
It’s also tone-deaf to the realities the typical main-street business faces.
IMPLEMENTING PROACTIVE PLANNING IS HARD
Most of the business owners I work with share a close kinship with Joe the Window Washer.
Things such as bookkeeping, accounting, taxes — and yes, proactive planning — are understandably low on Joe’s list of priorities after things such as serving customers and making payroll and keeping the lights on.
I understand this because I am a Joe the Window Washer myself.
Sure, Joe might say on a survey that he’d like proactive advice, but what he really wants from me is for the work to get done — generally that means getting the tax return filed.
If I can help find an extra deduction here or there, Joe is happy.
Joe also expects that I’ll review his information and let him know about major problems I see, such as compliance issues that could get him busted by the government.
But Joe never mentions that he’d like “proactive advice.”
If I bring up the subject of proactive planning, Joe says he’s not interested, or he’ll punt and defer the discussion til later (and “later” never comes).
LIMITED TIME, LIMITED RESOURCES … AND JOE JUST WANTS TO RUN HIS BUSINESS
Meetings take time. Proactive planning takes time.
Joe doesn’t have time. He has a business to run!
There might be a need to spend money in order to carry out a proactive plan.
Joe is doing the best he can with limited cash. He doesn’t have extra money to spend on changes to the way he operates.
The saying of “you have to spend money to make money” is hard to fathom for people like Joe because Joe legitimately has no extra money to spend on changes. I know because this describes my own business.
Plus, taking action on proactive planning almost certainly involves change to the way the business operates.
Joe doesn’t want change. He just wants to run his business and be left alone.
And here’s where the “experts” and practice-management gurus are tone-deaf on this topic:
For the typical main-street/Joe-the-Window-Washer business that the average accountant deals with most of the time, there’s not much advice I can give Joe on how to run his business other than “keep serving your customers and fighting the good fight. Talk to me first before you make major purchases or major changes.”
These are factors I see that make it hard for accountants to engage in as much proactive planning as the “experts” say we should.
I don’t think accountants are to blame, nor do I think business owners are to blame. It’s not a matter of “blame.”
We’re all doing the best we can with limited time and limited resources.
More to come in future posts.
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”