Business Advisory, and How to Tell If It Is Working

Here is what it should produce and how to check.

What advisory actually is

Using your numbers to change a decision.

Not producing reports. Not compliance. Not telling you what happened. Deciding what to do about it.

That is the whole definition, and it gives you the test.

The test

After each engagement, ask what you are doing differently.

If the answer is "we have a report", you bought a document. Advice that does not change what you do next was not advice.

This test is unfashionably blunt and it is the only one that matters.

When you are not ready for it

Three situations, and all three are common.

Your books are not reliable. Advice built on unreliable data is confident and wrong. Fix the bookkeeping first. It is cheaper and it has a higher return.

You do not have a specific question. "Help us grow" produces a generic answer. "Should we stop service line B" produces a real one.

You are not going to act. If the decision is already made and you want support for it, you are buying agreement. That is a legitimate purchase and it is not advisory.

What good advisory looks like

It starts with your actual numbers, not a framework.

It tells you things you do not want to hear. An advisor who consistently agrees with you is being paid to agree.

It produces a decision with a number attached, and a way to tell later whether it worked.

It ends. Engagements that continue indefinitely with no defined outcome usually continue because nobody defined one.

The questions advisory should be able to answer

Which customers make us money after the cost of serving them?
Which service lines are subsidising others?
What will this growth plan cost in cash before it produces any?
What is our runway if revenue stops?
What should we stop doing?

Each of these has a number behind it, available in your own ledger.

What it costs, and how it goes wrong

Advisory is the most expensive service by the hour and has the widest range of outcomes.

It goes wrong in two ways. The data was not reliable, so the advice was confident and misdirected. Or the client did not supply the information, so the engagement produced generic material.

Both are avoidable, and both are usually the client's side rather than the advisor's.

The order of spend

Bookkeeping first. It is cheapest, everything depends on it, and it prevents the expensive problems.

Compliance second.

Advisory third, once the numbers are trustworthy.

Businesses often buy in reverse, and the advisor spends the first three months discovering the data cannot be relied on.

Where we fit

We do bookkeeping, compliance and advisory, and we will tell you when the first is what you actually need. Send your management accounts and the question.