Building the “what if” into your financial forecasts

Author: James Groot, Corporate Advisory Partner in Yorkshire


Being able to scenario plan and be ready to adapt if things change is essential for a successful business to assess and seize new opportunities and react to unforeseen changes.

An integrated financial model is a business tool that can support transactions, a turnaround or simply improve decision making by providing future visibility based on what is known or expected today and to make key assessments of what needs to happen next.  It gives you the ability to to explain concisely to your stakeholders (board, shareholders, funders, new investors, HMRC) what is forecast to happen and why.

But because most people only ever occasionally build a financial model, the potential for problems to arise is high.  At best these are irritating and time consuming to fix, but at worst they can jeopardise the very purpose the model is being developed for.

Too often, we see models that are not driven off the key commercial inputs of the business, that are hardcoded or so overly complex or detailed that the drivers of the forecast are lost.  Adjustments may have been shoe-horned into the workings or while the model technically works, it is too difficult to follow.  None of which provides users with confidence.

Understanding variances to actual results is also critically important to being able to prove whether certain actions taken have resulted in the desired outcome and if not, why not. 

In our experience, having a robust, tested and fully functional financial model not only helps management teams make the right decisions but also helps build confidence with stakeholders.

At Cortus Advisory Group we have lots of experience of supporting companies to build great financial models that give management teams and their stakeholders confidence and drive performance.

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