top of page
  • Juanita Schwartzkopf

What Techniques Will Help Companies Make The Best Use of a Financial Advisor?

Lenders often identify borrowers that could benefit from the use of a financial advisor or consultant to assist in the financial planning for the business, but have difficulty convincing borrowers that an outsider is able to provide real time valuable assistance to the business. In this article, ideas and techniques for explaining the benefit of a third-party expert in financial forecasting, working capital management, and financial management are developed for lender or borrower use.

As businesses continue to evolve and face more complex challenges, hiring an experienced financial advisor can be an effective way to gain new insights, develop innovative strategies, and increase efficiency. However, many companies make mistakes when hiring an advisor, which could have a significant impact on the value of the consultant’s services and the successful implementation of the strategies they recommend.

Here are some of the most common mistakes companies make when hiring a financial advisor:

Not Defining Goals and Expectations: Before hiring an advisor, it is essential to be clear about the goals and expectations for the project. The lender, the company and the consultant need to be on the same page in terms of project scope. For example, if the lender needs a weekly cash flow forecast, that needs to be in the scope. If the company wants assistance managing accounts payable, that should be in the scope. A financial advisor is able to provide a variety of expertise and advice, but without clear goals and expectations, all parties may not achieve their desired goals. The company should ask the financial advisors it interviews for a draft scope, and then redline the scope as needed. Once that redlining is done, the revised scope should be discussed with the lender to ensure all parties agree regarding scope of work, deliverables, and timing.

Not Allowing Enough Time to Interview Prospective Advisors: A financial advisor should become a trusted member of the company’s team. To ensure the right firm is selected, the company should spend at least an hour discussing the project with each potential advisory group. These discussions can be virtual, and should include:

  • Company Led Discussion

    • Introduction of the company and the issues it believes it has – financial, operating, cash flow management, financial reporting, etc.

    • Explanation of the current relationship between the lender and the company. Is the company in default under any loan agreements? Are the parties operating under a forbearance agreement with specific requirements? Are all interest and principal payments current? Is the company’s relationship with its lender being managed by the special assets department within the lender?

    • Discussion of goals and objectives for the project.

  • Financial Advisor Led Discussion

    • Introduction to the advisory firm.

    • Discussion of similar experiences.

    • Description of the team that would assist the company.

  • Deliverables at Conclusion

    • Delivery of the scope of work.

    • Delivery of an experience deck.

    • Explanation of timeline – start date, completion of deliverables.

Not Understanding the Timing for the Project: It is critical for both parties to have a clear understanding of the scope of the project, the deliverables, and the timeline for completion of each deliverable as well as the overall project. The timeline discussion should include how quickly the project can begin, and what issues with the lender might impact when information must be available. For example, if a company and its lender are operating under a forbearance agreement, there may be clearly established due dates for certain materials. If a company knows it will have a cash flow problem in six weeks, that will impact the timeline.

Not Clarifying Fees: Before signing a contract, the retainer, the fees, and the payment structure should be clearly identified. This will help to avoid any misunderstandings or conflicts down the line.

By avoiding these common mistakes, a company improves its likelihood of selecting the right match in a financial advisor, and all parties have a clear outline of the project and understand the deliverables and timing needs.

When a lender suggests that a company hire a financial advisor, it may be easier to encourage the engagement if the lender provides the guidance in this article. That may help the company feel more in control of the process and more involved in the deliverables. When initiating the conversation with the company, the lender should be ready to discuss its own bullet points for a scope and needs for a timeline for deliverables.

Contact us if you have any questions or would like to further discuss how to select a good financial advisor!


bottom of page