Posted by Stephen Hambling on 20/09/17 11:05

High growth has its own challenges.

Debt structures, covenant limits and cash flow need to be continually corrected and adjusted and be reliable, under the onslaught of constantly changing factors. Yearly or even Quarterly plans will not cut the mustard. Assessing, projecting and managing the financial robustness of a business requires monthly rolling forecasts.

In its day Excel seemed to have it all, but now it’s fast becoming old school.  The volume of information and speed of change is gaining momentum, so you need the right kit to model, forecast and manage cashflow accurately.

An intelligent forecast needs to take account of what is affecting growth, and where true drivers of costs are moving. Blindly increasing all cost lines will not provide an accurate picture. It’s the causes of the variances which hold the holy grail of information, not the numbers themselves.

Drivers – what’s it all about

Driver is the variable that really makes a number go up or down. For example a driver will allocate travel costs based on the number of trips which is more relevant than the component cost of travel. An order processing department’s costs will alter based on number of orders not in direct correlation to revenue growth.

The power lies in assessing the variables you need your drivers to calculate; those which can reflect change most accurately.  With these in place, modern day planning using rolling forecasts and applying multiple scenarios to analyse accurately becomes really achievable.

Rolling forecasts

Using drivers, you can now forecast month by month or even more frequently, by using the pre-defined variables and actuals fed from your GL to assess real performance against goals. No more layer cakes of sheets with alterations and lines added which grow into monsters. You are working with the here and now, so historical information becomes less relevant except for comparison. 

Rolling forecasts provides fast prevention and cure. Waiting for results at the end of year is no longer the cliff hanger it used to be – because you can already predict the future.




Inquiring minds ask ‘what if’

‘What if’ analysis is the aspiration of many a CFO. Spreadsheets prevented this reality, creating multiple scenarios in Excel is a headache and can lead to some nasty inaccuracies.

Planning on a cloud based system allows for so much more flexibility. Notes, adjustments, shared sheets and collaboration all support the ability to adapt and change information on a whim, which let’s face it is the way of the world these days.

If FP&A departments aren’t empowered to ask questions because their tool kit can’t do it, then the right questions never get asked. ‘What if’ is what drives good decision making, and without it, the risk is the answer might be way off reality. The 2016 CFO Indicator report for that just 1 in 4 CFO’s met their sales forecasts.

Correct your course

All the above leads to the need for businesses to identify causes and prevent disappointing outcomes far earlier, so reducing the risks. Finance is fast becoming the driver of decision making, and it needs the kit to make them more informed.   It is the hub of the company with vison across functions and operations.

Cloud based active planning solutions allows for collaboration, sharing and integration of information across the company to provide a fuller picture, without the havoc gaps create, with the ability to ask the right questions and get accurate answers.

So if you are in the business of assessing risk; either in your own businesses or those you invest in and manage; then the days of spreadsheets to forecast and plan are a thing of the past.

Find out more

Intelligent elegant modelling comes from people who understand finance, accountancy and business. Software is just half the story, Find out more about how high growth, investment led organisations like ARM, Immunocore and Northzone plan their future in the cloud. 

Get in touch

Tags: Forecasting faster, Better Budgeting, Adaptive Insights, Gartner

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