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3 way financial modelling helps you manage your business:
it allows you to predict the effects of your decisions
it helps you raise finance to grow the business
every plan is designed to meet your unique needs
No costs, no obligations, no nonsense
At the heart of the process is the question ‘what if?’
What if…?
For instance, imagine you are Red Red Wines Ltd. You are selling 5,000 bottles a month at an average price of £8 each.
What if… you change the business model and sell posher wines at £14 a bottle?
If you sell 2,500 bottles, it looks as if you will be making less money. Except your distribution costs are now lower. And your VAT.
Added to which, wine buyers seem to be moving upmarket. Maybe you should be moving with them? In which case, what if…you sell 3,000 bottles a month. Profits will be up but maybe you will need to hire more staff.
That is what financial modelling is. It’s working with us to formulate a coherent business strategy. And the partner assigned to you is like having a Finance Director on board, someone you can turn to for advice and who will give you monthly updates.
Have a clear understanding of how your decisions impact SALES & PROFIT.
Delve deeper into your income streams. This if often split by product / service / region.
Predict when there may be cashflow shortfalls; How the shortfall will be solved; Understand what is impacting cash.
Jeremy Leboff
“Do you ever look a the elements of your business and ask the question ‘What if?’ “
What does a 3-way forecast look like?
P&L forecast
We consider the profits you are likely to make over an extended period. This longer-term gives you greater clarity in making business decisions.
Cashflow forecast
This shows the effects on your bank position and when the peaks and troughs of available cash will occur, which could necessitate further finance requirements.
Balance Sheet forecast
This shows your future assets and liabilities based on the forecasts of your profit and loss and cashflow. The output shows the future financial wellbeing of your business.
clarity
Many small businesses often think this degree of analysis is not for them.
As proactive accountants, our advice to clients more often than not is to think of modelling as an investment in the future. All too frequently what holds a business back is not lack of ambition but lack of a plan.
What does a 3-way forecast look like?
P&L forecast
We consider the profits you are likely to make over an extended period. This longer-term view counterbalances the short-term needs of cashflow.
Cashflow forecast
Balance Sheet forecast
clarity
This sort of deep-dive analysis requires expertise which comes at a price. For that reason, small businesses often think it’s not for them.
As proactive accountants, our advice to clients more often than not is to think of modelling as an investment in the future. All too frequently what holds a business back is not lack of ambition but lack of a plan.
What other support can we offer?
Raising finance
If you’re looking for financing to enlarge the business or to buy a company, your loan provider will almost certainly want to see your 3-way forecast.
Ideally, the forecast should cover three years or so. It’s good business practice to continuously maintain your modelling rather than just commission a single review.
Saving you time and avoiding mistakes
Training
As you grow, you may want to take on more people – including in your finance team. Our trainers are used by other accountancy firms to instruct them in the use of the many different tools across the many different kinds of financial and operational forecasting models. We are pragmatists who know from running our own business that simplicity is a virtue.
No costs, no obligations, no nonsense