Case Study: How MGO Helped a Financial Advisory Firm Better Manage Cash Flow

Background: 

Cash flow is the lifeblood of any business. It enables an organization to meet its financial obligations, such as paying bills and processing payroll, while also planning for future expenses and investments.  

Effective cash flow management is even more critical for financial advisory firms, which often deal with fluctuating income tied to market performance and client transactions.  

MGO offers comprehensive cash flow management services to give businesses a clear view of their financial status and future projections, helping them make informed decisions and maintain financial stability. 

Challenge: 

A financial advisory firm with $10-$15 million in annual revenue faced significant challenges due to a lack of visibility into its cash flow. The primary issues included: 

• Unpredictable income — The firm's income was inconsistent and linked to market performance, net asset value (NAV), and insurance commissions. This unpredictability made it difficult to align revenues with expenses. 

• Vendor payments — Vendors naturally want to be paid as fast as possible. Without proper cash flow management, the company sometimes rushed payments rather than taking advantage of a net 30- or 60-day payment terms, reducing cash flow flexibility. 

• Expense management — The firm's limited ability to plan for future expenses or manage unexpected costs added financial strain and uncertainty. 

• Tax planning — Without a forward-looking perspective, the firm could only react to tax liabilities after the fiscal year closed, missing opportunities for proactive tax planning and efficiency. 

• Partner draws — Partners were unsure about the amount they could safely draw from the business, which added personal financial stress and impacted overall business planning. 

These challenges resulted in a reactive approach to financial management, with the firm often scrambling to cover expenses and make payroll, leading to sleepless nights for the management team. 

Approach: 

MGO thoroughly analyzed the firm's cash flow, identifying key inflows and outflows. This included understanding vendor payment schedules, client payment patterns, and the firm’s unique business aspects. 

We developed a detailed cash flow model that projected future cash flows and enabled the firm to plan for upcoming expenses. This model could handle various "what-if" scenarios, such as the impact of a delayed payment from a major client or unexpected expenses. 

We also helped the company leverage net 30 or 60 payment terms with vendors to improve its cash flow flexibility. This approach allowed payments to be made strategically rather than reactively. 

With improved visibility into future cash flows, the firm could accelerate expenses or defer income as needed to optimize tax liabilities and enhance tax efficiency. 

Value to Client: 

MGO’s cash flow management services gave the firm a clear and accurate view of its cash flow, enabling better financial planning and critical decision-making. 

The management team no longer faced sleepless nights worrying about cash flow issues. They knew exactly how much cash was available, when additional funds might be needed, and how to plan for future financial needs. 

With clear insights into cash flow, partners could make informed decisions about draws, and personal financial planning, reducing uncertainty and stress. 

They could also proactively plan for taxes to reduce liabilities, enhance overall tax efficiency, and free up cash flow. 

Your Trusted Cash Flow Management Advisor 

MGO’s Client Accounting Solutions professionals have decades of experience helping clients' lower costs, make more informed decisions, and boost performance.  

Contact MGO today to learn how we can transform your approach to cash flow management and tax planning from reactive to proactive and help you achieve greater financial stability, strategic flexibility, and peace of mind.