My client was reasonably successful in his home city but wanted to expand across the state and was also considering going national with some partners,
When I started working with him we had developed a business plan and it was now time to improve monthly management reporting. Until now a printout from the accounting package was the only monthly reporting, although there were more frequent operational reports. There was no documented business forecasting although again there were operational meetings that looked ahead.
I developed some simple spreadsheets with sales and gross margin analyses, P&L, Balance Sheet, overheads and some extra people information which reflected the specifics of the business. We used a 12 month format which enabled us to report actuals and forecasts on the same sheet. It was straightforward to add a cash flow sheet, fed from the other sheets, but it took a while to determine the right formulae that produced reasonably accurate cash forecasts.
When we updated the business plan to take account of expansion plans it was straightforward to produce ‘what if’ forecasts based on new office sales and overhead costs together with sales projections. Because of the lag between opening offices and sales build-up the cash flow forecast quickly pointed to the need to finance the short-term gap in funds that was inevitable.
Based on our forecasts my client had no trouble securing bank facilities and when the new offices opened the business used these facilties, rising to close to the maximum until the sales growth was secured and borrowings reduced back down again.
Accounting information is not enough for business management, some basic additional reporting enables the owners to be proactive and manage their business through change programs.
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