Developing the Financial Plan
Business Advisory Services Update
Most businesses operate 52 weeks of the year. As accountants, it is therefore important to gear up to offer a broader range of Business Advisory Services that a complete Financial Plan is prepared to enable the prompt preparation of financial/management reports.
Where do we start?
Review the current Chart of Accounts. Make sure that the information to be disclosed is clear to the people for whom the reports are being designed. In many cases, firms need to supply additional dissection of sales and direct purchases for manufacture.
The Predictive Accounting Reports – budgets, cash flow forecasts and projected balance sheets should be prepared so that information is available on an individual business unit basis. This will enable KPIs to be prepared for each business unit, which will facilitate the review of actual performance against the budget estimates.
What happens in a week is very important. We suggest preparing a weekly performance report for each business unit including a profitability report and the associated KPIs. For example:
- Gross profit percentage for individual products
- Number of customers
- Average sale
- Wages to sales percentage
The firm may have other KPIs that they would like to see accounted for in the weekly reports.
This will bring the manager responsible for a business unit and the leadership team. A weekly report that includes KPI data, as well as an estimate of the profitability for that week. Any remedial activity that the reports have highlighted can then be in implemented.
Profit and Loss accounts should be prepared for each business unit on a monthly basis and should include KPIs that apply to that business unit’s operations.
The individual business unit’s performance should then be compared to the budget and a variation report prepared.
The Balance Sheet should be reviewed and KPIs prepared for various items.
Also to be reviewed are debtors days outstanding and creditors days outstanding.
Bank balance compared to the cash flow forecast estimate and the limit negotiated with the bank.
This process will develop an outstanding financial plan for your client and offer your team interesting and challenging work.
ESS BIZTOOLS presented a webinar on Wednesday 22 March - Offer Services over 52 Weeks. Click here to watch the recording.
