As businesses grow the mechanisms for planning and controlling the business need to develop. Equally, for businesses that are struggling and in turnaround phase, planning and control take on a higher degree of importance to ensure that the business does not breach its financing facilities.
At Secantor, we believe that planning and forecasting is at the heart of the service provided by a good FD and should be a recurring feature, based around continuous improvement. This ensures that the management information of which business planning and forecasting form a large part, becomes central to a business and makes a major contribution to the Board’s decision making process. This represents a major step change, with the finance function becoming relevant to the future, and connecting various parts of the organisation. Not only does it record the past but now starts to provide a radar screen, and risk reward model, for the future.
Many regard business planning as simply an exercise to providing a written document to secure funding. Increasingly, funders are moving to require businesses to provide rolling forecasts. This recognises that it is not really about a ‘one off’ set of forecasts to secure funding but more about what is happening to plan and control the business once the funding is in place. Rolling forecasts make management’s ability to plan and control the business transparent to stakeholders. It also helps management to constantly re-visit the assumptions that underpin the forecasts to ensure they are properly addressing ‘controllable factors’. All of this provides funds with comfort, particularly where the maybe looking to secure their funding against future cash flow generations.
Quite often we are asked to advise businesses who have little by way of forward information. We are often asked the question ‘what value is there in producing a budget’? The answer is of course is that budgets are worth nothing unless they are embraced by the people within the organisation. At a basic level individuals need to take responsibility for generating revenues and controlling costs.
For organisations that have never implemented a budgeting process we often recommend that they start with a concept of zero based budgeting where each element of cost is examined for it relevance in relation to the planned sales mix. Where businesses have been through change it is often possible to find costs that are no longer appropriate and therefore to make cost savings.
Business planning and forecasting is not solely about a sales forecast and profit and loss account, it also needs to forecast cash and balance sheets to ensure that a business has sufficient funding to execute its plans and to ensure that it remains within its financing facilities and covenants.
Client Case Study: Water Treatment Specialist
In the video, this multi-disciplined industrial water and waste treatment contractor, based in Berkshire, offers a national service providing clients with a portfolio of equipment and service solutions.
Quote: “It's true to say that Secantor has transformed a struggling company, but full of good people, into a very, very profitable company full of very, very motivated, happy, well rewarded people....”
