More firms seek strategic financial advisors

Organizations of all sizes are increasingly turning to strategic financial advisors and consultants to supplement their internal financial capabilities.

Companies are using experienced consultants and specialized firms to help them handle a number of financial functions, according to Protiviti’s 2020 Finance Trends Survey of CFOs and similar executives. For example, the study found that while 59 percent of companies used full-time staff to handle financial reporting, 28 percent used consultants and freelancers to augment employees; 21percent relied on managed services vendors; and 9 percent fully outsourced financial reporting. Similar trends were seen in such functions as financial planning and analysis, strategic finance (M&A), treasury, and accounting operations.

How does a business executive or owner know it is time to hire a consulting firm?

“When they're unhappy with the profitability of their business,” replied Alan Chaffee, CEO and founder of Turning Point.

Turning Point is a strategic financial and business advisory firm with 28 consultants in the Seattle area. Its offerings include CFO consulting and cash flow improvement; talent sourcing; and capital advisory services. The company uses its own set of tools and technologies to identify and address issues with cash flow, profitability, and reporting.

Chaffee said the size of Turning Point’s clients has risen in recent years. The average client has $30 million in sales, with revenues ranging from $5 million to as much as $400 million. Most referrals come from banks whose clients are struggling with cash flow and profitability.

“Our niche in the marketplace is producing financial statements and handing them over to the client,” Chaffee said. “Our message to the marketplace is that we're going to improve your cash flow. We're going to improve your practice; we’re going to improve your enterprise value. That's how we compete.”

He added every client is assigned a team with the specific skills the client needs. His group includes such specialists as analysts who only do data analytics, Excel spreadsheets, budgeting, and forecasting. There are also controllers who are CPAs that do reconciled trial balance; consulting CFOs; and a range of other financial experts.

“Most of the CFO consulting practices in the Seattle area are basically marketing arms for independent contractors,” Chaffee said. “All our employees are W-2. We don't transfer financial reporting to someone else; we own the outcome. When people hire us, I guarantee that outcome – as opposed to guaranteeing the ability to do debits and credits. Our job is to improve your cash flow and your financial situation.”

When clients outsource projects to Turning Point, about 80 percent of the work is with financials, Chaffee said. However, the other 20 percent is related to providing ideas to help companies improve their business, such as increasing cash flow and enterprise value. He suggested organizations considering hiring a CFO consulting firm should request ideas and case studies that show how the firm will help the client make better decisions.

Chaffee said his firm uses a combination of the three common approaches to providing business value – asset approach, income approach, and market approach. Areas to review include revenue sources, expenses, and optimizing assets and liabilities to manage cash flow.

“Short term, we want to improve cash flow. I go straight to the balance sheet and look at the income statement. I look at accounts receivable and what deals we can make to get paid faster, as well as delinquent accounts we could pursue aggressively. If there is inventory, we look at how it is generated and paid. Then we address accounts payable, such as cutting deals with the vendors to delay payments. Next we go to short-term lending and lines of credit.”

Once the short-term cash flow factors are addressed, Turning Point turns its attention to long-term profitability. Those measures include removing businesses with lower or negative margins; negotiating changes with customers; and aggressively addressing expenses, beginning with higher paid executives.

“Honestly, what we do is not magic,” he said. “What we do is not hard. How you go about it is hard.”

Chaffee added, “I spend most of my day when I'm talking to clients giving away the gold. I tell them exactly what I would do if they hired us. They may know what needs to be done, but we don't tell them how we’re going to do it. I'm a firm believer that knowing ‘how’ is the secret sauce.”

As the economy rebounds in 2021, Chaffee said, the company expects more growth from its recruiting division which sources employee talent for clients. He said the company placed eight candidates during the first two months of the year, versus two in all of 2020.

“Our clients are looking for financial professionals, operations staff, controllers, CFOs, COOs, and CEOs,” he added, “Many of them ended up out of work last year. Everybody's looking ahead towards the economy kicking back off. I think the big opportunity for Turning Point in 2021 and 2022 is helping our clients bring in the right talent because there is still a shortage of financial expertise.”

Turning Point also offers capital advisory services. Chaffee said some clients need additional cash, but cannot generate enough funds by squeezing the balance sheet in the short run, or through existing debt and equity capital source. He said the firm has a group of investors and lenders who will tackle distressed situations and provide additional cash flow.

For more information on Turning Point, visit turning-point.com