Predictive accounting creates storytellers

Predictive Accounting enables the ‘Financial Interpretation’ of the Business Plan to be prepared by Accountants.

This process has the significant benefit of ‘bringing the business plan to life’.

Within the Business Plan, various assumptions and visions have been documented. But what does these all mean in dollars and cents?

The Predictive Accounting Reports answer that question:

Budgets for each individual business activity

Key Driver accounts - team manning targets, manufacturing production targets, energy utilisation, raw material inventory, completed products inventory, debtors, capital expenditure, R&D, creditors, loans, projected taxation payments.

Cash Flow Forecast - reflects the estimates that have been made in the Key Driver Accounts relating to inventory levels, debtors level, creditors level, capital expenditure, and research and development  all have a bearing on the amount of cash or lack of cash that will occur in the future.

There may be forecasts of not sufficient cash flow. What can be done about this?

Could debtors days outstanding be reduced?

Inventory levels reduced?

Capital expenditure deferred?

Or, should consideration be given to borrowing money? In this case, does the business have sufficient assets to offer as security to the lender?

Is raising capital direct from the public an option? SME companies have at least three options to raise capital by utilising:

Section 708 of the Corporations Act – potential capital raising 12 months of up to $2M.

If the company is a young company that is undertaking innovative activities, the company could consider the Early-Stage Innovation Company Status, which enables investors to obtain taxation benefits.

If the company’s turnover is under $25M annually, Crowd Sourced Funding Equity Raising could be considered for raising up to $5M in 12 months.

All of this information will be factored into the ‘Projected Balance Sheet’, which is produced as part of the Predictive Accounting Process. This will enable the Accountant to present to the Leadership Team the results of the business activities as forecast in the budget process will be in the future, thus enabling you to be the STORYTELLER who identifies the results of the endeavours of the total team.

Predictive Accounting Processes should be implemented for all SME businesses, thus creating a greater awareness of FISCAL MANAGEMENT by the Leadership Team.

ESS BIZTOOLS has developed Product Packages to allow Accountants and Bookkeepers to provide these types of services to SMEs. We will present a webinar showcasing one of these packages – ‘ADVISORY INTRO’, on Tuesday 19 March at 11am AEST. CLICK HERE to register, free of charge.