As pointed out in many of my previous posts, the “financial models” that I receive when working with many private clients, are anything but that.
What I oftentimes receive is a strange mix between income statement and cash flow, whereby invoiced items are recorded on the date of the issuance of the invoice, whereas all other remaining items are presented as in a proper income statement. (Reminder: I am not talking about the actual financial statements of clients here, which are indeed properly presented – I am merely referring to the financial projections that I receive, which technically don’t have to comply with any standards.)
There is a chance of course, that sloppy work of this kind may end up producing a reasonable result and one could also claim that for most private businesses this would be enough. Especially because past a certain point in their lives, these companies tend to “manage themselves.”
Yet here we are, living in a time where sloppy work is nowhere near enough and those who had made the conscious brave choice of assigning to a professional the development of a proper financial model for their business, are reaping more benefits than they ever could have dreamed of.
At a time of extreme ambiguity and uncertainty, these businesses have already at their disposal the machete that will allow them to cut through the jungle in front of them: They can explore (and store for a revisit if needed) multiple future scenarios, they can build flexibility into their planning and forecasting cycles, efficiently reallocate resources, accelerate decision making and quickly gain key stakeholder buy-in of their proposed scenario, arising from the already proven, robust structure of their professionally developed financial model.
Meanwhile, those who do not own such a tool, remain bogged down, running in circles in the jungle and praying to be rescued.
If this crisis found you unprepared, there is no reason for the next one to find you in the same position. Get in touch and we will build together a model that will be suit your business (and not the other way around as often happens with non-professional modellers).