How Financial Modelling Can Ensure a Business’s Success and Profitability

 

A trusted Financial Model is a vital tool to forecast a business’s financial performance and involves building a mathematical model of a real-world financial situation. It is designed to represent a simplified version of your business portfolio and, using a set of hypotheses about the market, to translate them into numerical predictions about your business’s future earnings performance.

Capital Raising

Capital raising is a vital part of a business’s capacity to grow, with banks, non-bank lenders and equity providers requiring more than just the profit/loss statements, they require more details. At Advivo we live and breathe numbers, which put us in the best position to help you create trusted financial models that you can use to take you and your business to the next level, whether it is debt or equity that will help accelerate your business growth.

Financial Modelling Advantages

Advantages of using financial modelling include:

  1. Full view of the company – Integrated financial models provide a real-time, bird’s eye view of the business that is continually updated and provides accurate insights at any time.
  2. Assist with capital raising – Investors and banks are more likely to give you a loan if you have a financial model. This is because you can prove that you will not breach any debt covenants.
  3. Minimise financial risk – Financial models capture the future operating, investing and financing activities that determine future profitability, financial position, and risk. This allows owners to ‘try before they buy’ and can prove how a decision can impact an overall business.
  4. Monitors change -Financial models are designed to be flexible and will always produce actual vs forecast results analysis. This data is critical for the key stakeholders to manage the business and calculate ROI.
  5. Time-saving – Developing a financial model is time-consuming in the beginning stage. However, once the hard work is done, the savings in time quickly outstrip the time spent.

3-Way Financial Modelling Method

Advivo uses the 3-way modelling method of financial modelling and it consists of projected Cash Flow, Profit & Loss and Balance Sheet. By implementing the 3-way modelling correctly, all three reports would be in sync, giving you a clear picture of your anticipated profit, the amount that should be in your bank and even your business’ overall net worth.

Several members of our team have many years of experience producing financial models for different scenarios such as:

  • Making acquisitions (businesses and/or assets)
  • Growing the business organically (i.e. opening new stores, entering new markets, etc.)
  • Selling or divesting assets and business units
  • Budgeting and forecasting (planning for the years ahead)
  • Capital allocation (priority of which projects to invest in)
  • Valuing a business
  • Capital raising (debt or equity finance) – banks increasingly require businesses to supply 3-way financial forecasts (profit or loss, balance sheet and cash flow statement) to support loan applications.

We understand that financial modelling can seem complex to business owners, but with our expert team of accountants and business advisors, we are committed to making the process as seamless as possible. Contact us on 07 3226 1800 or email to take advantage of this service and let us help your business grow today!

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