The reports that predict the future: Make your financial reporting count.

Noone wants to be compelled to make pressured, last minute decisions on staffing levels, pricing, locations or where/how to invest excess funds.

We work with clients of all sizes, from start ups to multinationals, and the one consistent game-changer with it comes to financial reporting is actually when a report is provided - giving them visibility of what the future looks like.

This report is usually one of two types – A 'cashflow forecast' (showing the closing cash balance for up to the next 12 months) or a 'projections report' (showing where the organisations P/L will finish up at year-end), based on what is known at that point in time.

Our clients, like you (we imagine) almost always ask for the same two things....

1. Make understanding my financials simple, with actionable insights

   
   

2. Give me as much forward visibility as possible to allow me to make planned decisions.

What they're really asking is, 'Let me sleep at night.'

The first step is to set up a budget. This is the basis of both the P/L and Cashflow forecasts.

A budget is basically the best estimate of future expenses and revenue that you can produce in advance. There are many ways to make this accurate, from increasing current run rates by a % to using drivers such as volumes of product multiplied by a known cost. Or, you could use actual salaries for each staff member you anticipate will be employed. You can go deep on this stuff, but there is a cost benefit consideration, as a budget is simply a plan.

When the budget is complete for the twelve months in advance, then a cashflow forecast can be developed from it. Keep in mind that a P/L budget will need to be adjusted for GST along with working capital impacts (timing of debtors and creditors and inventory movements / purchases which probably won’t match the P/L timing), and Capex (purchases of physical assets which aren’t inventory.)

Once the cashflow is complete, it can be split into weeks or even days. In this way you can predict the daily cash balance based on your set of assumptions. As time progresses, update your assumptions to give you more confidence.

Finally, the projections report – simply the P/L budget updated with actuals for past months, and with future months updated for current run rates (e.g. if you are achieving revenue of 90% year to date, then perhaps it is wise to use 90% of the future months revenue budget as the revenue figure in your projection.)

In this way, you get a predicted end point for the year, in revenue, each expense line, and profit.

Don't be satisfied with ineffective reports arriving with no time to consider the findings.

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