How to unlock value with Ignition: Part 1. Cash flow forecasting

Welcome to this three-part series. You’ll come away knowing how to use Ignition and the data insights it provides to offer game-changing strategic advice for your clients in professional services. 

As an accounting and tax professional, you’re uniquely positioned to offer this advice. When you interpret data for your clients, you’re able to fortify their decision-making with critical information that drives their businesses forward.

When you translate this raw data into actionable strategies through Ignition, you’re not just solidifying your role as a trusted advisor. You’re also creating consistent, year-round revenue for your firm.

In this series, you’ll delve into how to use the diverse features and functionality that Ignition offers to advise your clients on cash flow forecasting (Part 1), pricing and selling their services (Part 2), and monitoring key performance indicators in their business (Part 3).

In Part 1, learn how to:

• Hone revenue projections. Understand the intricacies of predicting revenue for your professional services clients using Ignition.

• Forecast expenses accurately. Distinguish between fixed and variable costs and determine how these shape the financial outlook.

• Monitor and update cash flow: Use Ignition to keep forecasts accurate, addressing potential revenue and expenditure changes.

• Elevate your services: Transform standard financial reporting into actionable advice, guiding clients on capacity planning, tax readiness, and more.

Simplifying revenue projections

When you’re forecasting your client cash flow, especially for professional service businesses, it’s often the income that’s the hardest to get right. 

Unlike product sales, which often have fixed prices and inventory levels, service offerings can vary greatly based on service type and complexity, contract lengths, deliverable timeframes and billing models. 

Add to this the longer sales cycle that often exists in professional services, and it can become difficult to predict revenue for these types of businesses. 

This is where Ignition changes the game. By helping your clients get all of their revenue correctly engaged and contracted, you’ll be able to obtain correct and up-to-date forecasted sales data in real time. 

Getting the revenue correct

As your clients send out contracts in Ignition and start to get their revenue locked in, you will be able to see the predicted income in each month straight from the dashboard. 

Whether your clients invoice upfront, on completion or on a regular recurring basis, so long as this information is entered into the contract details you will be able to use Ignition to accurately predict cash inflows. The accuracy of this information is even stronger when your clients use Ignition to get their invoices paid. 

To obtain the revenue data for your forecast, you can either use the data straight on the dashboard or get more detailed information from a service export: 

Dashboard data

Revenue: When hovering over a month in the revenue graph, you will be presented with a total amount and a split between recurring and project work.

Payments: When hovering over a month in the payments graph, you will be presented with a total amount of money that Ignition will be collecting on your clients behalf, split out by payment method.

Service export

If you want to go more granular with the data, you can export your clients predicted revenue by using the service export feature, found on the bottom of the dashboard. Using this you can export total service revenue by client for any period in the future. This export will allow you to see what revenue is expected when, and if the invoicing is automatic or the invoice needs to be created manually.

Once you have the data you need from the Ignition service above, you can either enter the total expected revenue for each month, and you can then split the revenue between planned revenue with payments and planned revenue without payment. You can find the monthly totals for invoicing with payments attached by hovering over the monthly payments in the 'Payments' section of the dashboard. This will give you and your client a better understanding of the guaranteed cash flow versus the total revenue.

You can take this a step further and add in expected revenue from proposals that have not yet been accepted to help understand the ‘what if’ scenario if the engagement goes ahead. By navigating to Pipeline in the left hand menu in Ignition you can click on ‘awaiting acceptance’ and export the details of your clients potential revenue pipeline.

See videos of these processes

Example cash inflow forecast

What about the expenses?

After you have revenue locked in, it’s time to build out the outflow portion of your cash flow forecast. How you obtain that data will vary depending on your client circumstances, but you will need to understand both their variable and fixed costs.

Work with your client to understand their cost of service delivery and when (or if) these costs will need to be incurred. 

Once you have your forecasted outgoings, you can add this to your incoming data to finalise your client’s monthly cash flow forecast.

Creating an ongoing service – monitor and update

Now that you've done the hard work and created a cash flow forecast for your client, don't stop there. 

Using Ignition, you can create an ongoing cash flow service to continuously keep your forecast current and correct, and provide advice to your clients each month by:  

• Regularly updating the cash in detail. Using the steps above, quickly update your client’s forecast on a month-by-month basis to include any changes to predicted revenue and cash inflows from either newly accepted proposals or any contracts that have ended early. 

• Keeping track of manual invoicing and ensure it’s not forgotten. Help your clients increase their recoverability by monitoring and checking in on their manual invoicing. You can also update uninvoiced items and correctly reschedule the expected collection date to keep your forecast current and correct. This information is easily accessible by navigating to clients on the left hand side of Ignition, then clicking on the overdue manual billing tab. 

• Monitoring their cash gap. Keeping the cash flow forecast up to date will help you identify gaps in your client’s cash flow where their outgoings will exceed their incomings. They may need to address their expenses to manage the cash gap or protect and increase revenue. You can help your client narrow their cash gap by:

  • Encouraging them to invoice regularly and to stay on top of manual invoicing.

  • Setting clear payment terms in their contracts.

  • Implementing a robust payments process by turning on payments in Ignition and ensuring they get paid. 

More than reporting – provide the advice

With regularly updated forecasting you can do more than just provide reports. You can help your clients make decisions in their business. You can work with them on:

• Capacity planning: Based on their revenue is there too much capacity in the team or not enough? Does your client need to hire, fire or find more work? When does this need to happen? The forecast will have those answers.

• Hustle time: By understanding when your client’s contracts will end and work will ‘dry up’ you can proactively advise your clients when they need to hustle for new work. You can take this further by using the data in the conversion table on the Ignition dashboard to provide your client information about average conversion rates and the time it takes their customers to accept the proposals. This can make them better aware of their lead times. 

• Savings goal: Is there something they want to save or plan for, even to build a buffer for a rainy day. You can incorporate a regular savings amount into the cash flow to make it a priority.

• Funding needs: Knowing your expected revenue is essential for determining your financing needs. By forecasting, you can advise your client well in advance of cash gaps and work with them to decide if they need to secure additional funding to smooth out cash flow fluctuations.

• Tax planning: No one likes a surprise tax bill. With accurate forecasting you can plan tax liabilities for your clients to ensure they have the money available when their obligations are due. 

• Lender and investor confidence: If your client is seeking loans or investments, a well prepared forecast shows the business has a solid grasp of their financial position.

Elevating client success with precise cash flow forecasting

When you empower your clients with precise cash flow forecasting using Ignition, you’re providing more than just a service – it's a strategic partnership. 

By harnessing the data and insights the platform provides, you’re giving them clarity and helping to shape their business success. 

In the next instalment on How to unlock value with Ignition: Part 2. Pricing and selling services, find out how to use Ignition to help your clients price and sell their services. 

Are you an accounting and tax professional but not an Ignition customer? Watch an instant demo now and see how Ignition can improve efficiency, optimise revenue and deliver seamless client experiences in your accounting business.