Goal-based budgeting deepens CPA-client relationship

Editor's note: The following article originally appeared in the Summer 2004 edition of the Pennsylvania CPA Journal, a publication of the Pennsylvania Institute of CPAs. It is reprinted here with permission.

By Laurie M. Peer, CPA, CFP

CPAs who want to solidify their relationship with their clients and successfully tie together all aspects of their clients' planning must take the time and energy to work with their clients on cash-flow planning and budgeting. Financial planning assumptions and projections could be off base without going through this process. If "budgeting" sounds hard to sell, try approaching your clients with "goal-based budgeting."

The concept is similar to traditional budgeting, but the twist is that the client becomes involved. The plan is based on their current living expenses and need to save for the future as well as their goals, values and priorities. The goal-based budgeting process employs techniques used in life planning, enabling clients to envision change and enhance their life immediately.

CPAs have a unique perspective on this part of the financial planning process. Specifically, we understand the importance of cash flow and budgeting and are well-equipped to work with clients in this area of their financial lives.

CPAs have varying insights and skills to help determine a suitable budget for any particular entity or individual, but there are several blockades that keep us from being as successful as we could be when it comes to budgeting. The process can seem to be a long and painstaking road: The clients that could best use assistance are often the least enthusiastic about starting. There is a need for ongoing monitoring of progress, and clients have to be willing to pay for the time it takes to do this.

In short, both client and advisor have to be willing to commit to a process that may be difficult and time-consuming. For this to happen, the client and advisor have to see the rewards to keep them motivated and on track, similar to the commitment we make with our clients each time they decide to do financial planning.

The following are some areas of focus in goal-based budgeting:

Gather historical data on the client's cash flow. Clients will need to provide their income and spending activity. A full year of history is optimal, but even several months of data can be revealing. Some clients will easily handle this step on their own through the use of financial software packages; some may wish to have the CPA compile the information for them.
Review the pattern of income and spending with the client with an eye open for the possibility of changes. For example, which expenses can be reduced or cut? How can the clients earn more or keep more of what they earn?
Encourage the client to review cash flow on a broader perspective. How are the client's values and priorities reflected in their financial life? How could they change or rearrange their financial habits to better reflect what they want to do, how they want to live and who they want to be?
Revisit the client's goals with them. How does saving for the future balance with the enjoyment of today? Work together on a budget that provides a rewarding lifestyle now and incorporates their savings goals for the future. Listen for clues to what is important to them, help them expand those ideas into plans, and help them take action and make changes in their lives.
Continue to be a presence in the process. The CPA financial planner can be a coach, a problem solver, an idea generator, or just a sounding board as the client begins to work and rework a financial budget and life plan.

The reward at the end is a more organized, well-informed, educated and motivated client. The CPA's relationship with his or her client will surely be enhanced as they journey through this process, and the bond that forms will increase the likelihood that the planning will stay on track.

The ability to be in control of one's cash flow can be highly empowering for clients. Beyond our simple fees, one of the greatest rewards you will achieve is the success in helping your clients make a positive change for themselves and watching their assets grow.

Laurie M. Peer, CPA, CFP, is a manager with Reinsel Kuntz Lesher LLP. She can be reached at lpeer@reinsel.com.

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