Predictive Accounting - Being A Forecaster Instead Of A Historian!
Accountant's Minute 249
Business people are looking for more accurate financial information as to what the effect of their decisions will be on their future operations by utilising 'predictive accounting' which incorporates 'key driver budgeting' to prepare Budgets, Cashflow Forecasts and Predicted Balance Sheets relating to their future operations.
In the next COVID-19 Survival Panel webinar will be presented on Friday, 23rd October 2020 with the theme relating to “Predictive Accounting”.
The keynote presenters are Paul Barnaby, Regional Integration Consultant, Asia-Pacific PlanGuru, CEO Beyond Accounting Pty Ltd, a Predictive Accounting consultancy firm and Peter Towers, Managing Director, ESS BIZTOOLS.
Paul Barnaby openly acknowledges that he is passionate about Predictive Accounting and is urging the accountancy profession to embrace the concept that an accountant’s key role at this time should be assisting clients to accurately project what their future operations will look like so as to ensure business leaders that the correct decisions are being made, prior to commitments being made.
"Through my training and mentoring of accountants I help accountants and CFOs look like superstars” Paul Barnaby said.
Predictive Accounting relates to the prediction of future Revenue Statements, Balance Sheets and Cashflows to enable faster strategic decisions to be made, which will unlock greater profits, improve cashflow and achieve shareholders'/owner's goals and targets. This is achieved by using key drivers of revenue, costs and capital items and translating these to the predicted financial statements.
The 'Predictive Accounting' concept relies on 'Key Driver Budgeting'” which requires a line by line analysis e.g. of sales quantities, investment in inventory, debtors' terms, debtors' days outstanding and creditors' payment terms, rather than the traditional method of budgeting whereby last year’s figures were entered, plus a percentage increase. 'Key Driver Budgeting' requires some thought being given as to the reason that certain figures are going to appear in Budgets, Cashflow Forecasts and Predicted Balance Sheets.
Peter Towers will be presenting a complimentary summary relating to 'Key Components of Cashflow Management'.
The 'Key Components of Cashflow Management' relate to decisions which need to be made, relative to subsidiary operations within the business which have a direct bearing on the business' cashflow performance including:
- Terms of Trade with customers – have these been clearly articulated?
- Are customers' invoices being sent to customers promptly after a transaction has been concluded? This will aid in the early collection of the debt, thus improving cashflow.
- Are debtors' statements being prepared and dispatched to debtors within 48-hours of the end of the month so that there is no hold-up with debtors claiming that they are waiting to receive their monthly statement?
- Does the business have a system in place to ensure that outstanding debtors are being followed up?
- Has the business negotiated terms of payment with key suppliers that are in the best possible interests for the business?
- Is the investment in inventory being closely monitored to ensure that cash is not going to be tied up in excessive inventory?
- Is the work in progress system being monitored to ensure that work, being conducted, is being finished as soon as possible and that progress claim invoices are being raised
- If capital expenditure is being contemplated (especially relative to the Federal government’s 100% right off inducement) has proper consideration been given as to how that acquisition is going to be financed?
- Has the business negotiated with creditors to get the best possible terms relative to payments?
- When the Budgets and Cashflow Forecasts have been prepared in accordance with the concept of 'Predictive Accounting' and there is an indication that there is going to be a shortfall in available finance, have funding strategies been immediately discussed and decisions made as to whether the business is going to try to borrow funds and, in that case, does the business have sufficient “unencumbered assets” that can be offered as security for loans?
- If the business is running into obstacles with the concept of loans, has consideration been given to the business raising capital utilising Crowd Sourced Funding Equity Raising?
These issues are part of the overall framework for the development of realistic predictive accounting forecasts as to what the business’ future financial position is going to look like.
You can register now to participate in the free webinar being presented on Friday, 23rd October 2020 at 12-noon AEST (1.00pm AEDT). To register (click here).
In our previous COVID-19 Survival Panel webinar presented on 9th October 2020, the keynote speakers were Mark Holton, Director, Smithink Pty Ltd and Matthew Karakoulakis, Founder and Principal Solicitor, AMK Law.
Mark Holton gave an interesting overview “Business Advisory Software – What The Industry Is Using In 2020”
Matthew Karakoulakis discussed “Key Intellectual Property Law Principles”.
(Click here) to access the video recording of this webinar.
If you're interested in obtaining a free, no obligation overview of the Business Advisory Services product packages suitable for your clients that have been developed by ESS BIZTOOLS, please “Book a Demo” on the ESS BIZTOOLS homepage – https://www.essbiztools.com.au/, or contact Peter Towers:
If you have a friend or colleague who you think might find this article interesting, please feel free to pass it on to them.
Business people are looking for more accurate financial information as to what the effect of their decisions will be on their future operations by utilising 'predictive accounting' which incorporates 'key driver budgeting' to prepare Budgets, Cashflow Forecasts and Predicted Balance Sheets relating to their future operations.
In the next COVID-19 Survival Panel webinar will be presented on Friday, 23rd October 2020 with the theme relating to “Predictive Accounting”.
The keynote presenters are Paul Barnaby, Regional Integration Consultant, Asia-Pacific PlanGuru, CEO Beyond Accounting Pty Ltd, a Predictive Accounting consultancy firm and Peter Towers, Managing Director, ESS BIZTOOLS.
Paul Barnaby openly acknowledges that he is passionate about Predictive Accounting and is urging the accountancy profession to embrace the concept that an accountant’s key role at this time should be assisting clients to accurately project what their future operations will look like so as to ensure business leaders that the correct decisions are being made, prior to commitments being made.
"Through my training and mentoring of accountants I help accountants and CFOs look like superstars” Paul Barnaby said.
Predictive Accounting relates to the prediction of future Revenue Statements, Balance Sheets and Cashflows to enable faster strategic decisions to be made, which will unlock greater profits, improve cashflow and achieve shareholders'/owner's goals and targets. This is achieved by using key drivers of revenue, costs and capital items and translating these to the predicted financial statements.
The 'Predictive Accounting' concept relies on 'Key Driver Budgeting'” which requires a line by line analysis e.g. of sales quantities, investment in inventory, debtors' terms, debtors' days outstanding and creditors' payment terms, rather than the traditional method of budgeting whereby last year’s figures were entered, plus a percentage increase. 'Key Driver Budgeting' requires some thought being given as to the reason that certain figures are going to appear in Budgets, Cashflow Forecasts and Predicted Balance Sheets.
Peter Towers will be presenting a complimentary summary relating to 'Key Components of Cashflow Management'.
The 'Key Components of Cashflow Management' relate to decisions which need to be made, relative to subsidiary operations within the business which have a direct bearing on the business' cashflow performance including:
- Terms of Trade with customers – have these been clearly articulated?
- Are customers' invoices being sent to customers promptly after a transaction has been concluded? This will aid in the early collection of the debt, thus improving cashflow.
- Are debtors' statements being prepared and dispatched to debtors within 48-hours of the end of the month so that there is no hold-up with debtors claiming that they are waiting to receive their monthly statement?
- Does the business have a system in place to ensure that outstanding debtors are being followed up?
- Has the business negotiated terms of payment with key suppliers that are in the best possible interests for the business?
- Is the investment in inventory being closely monitored to ensure that cash is not going to be tied up in excessive inventory?
- Is the work in progress system being monitored to ensure that work, being conducted, is being finished as soon as possible and that progress claim invoices are being raised
- If capital expenditure is being contemplated (especially relative to the Federal government’s 100% right off inducement) has proper consideration been given as to how that acquisition is going to be financed?
- Has the business negotiated with creditors to get the best possible terms relative to payments?
- When the Budgets and Cashflow Forecasts have been prepared in accordance with the concept of 'Predictive Accounting' and there is an indication that there is going to be a shortfall in available finance, have funding strategies been immediately discussed and decisions made as to whether the business is going to try to borrow funds and, in that case, does the business have sufficient “unencumbered assets” that can be offered as security for loans?
- If the business is running into obstacles with the concept of loans, has consideration been given to the business raising capital utilising Crowd Sourced Funding Equity Raising?
These issues are part of the overall framework for the development of realistic predictive accounting forecasts as to what the business’ future financial position is going to look like.
You can register now to participate in the free webinar being presented on Friday, 23rd October 2020 at 12-noon AEST (1.00pm AEDT). To register (click here).
In our previous COVID-19 Survival Panel webinar presented on 9th October 2020, the keynote speakers were Mark Holton, Director, Smithink Pty Ltd and Matthew Karakoulakis, Founder and Principal Solicitor, AMK Law.
Mark Holton gave an interesting overview “Business Advisory Software – What The Industry Is Using In 2020”
Matthew Karakoulakis discussed “Key Intellectual Property Law Principles”.
(Click here) to access the video recording of this webinar.
If you're interested in obtaining a free, no obligation overview of the Business Advisory Services product packages suitable for your clients that have been developed by ESS BIZTOOLS, please “Book a Demo” on the ESS BIZTOOLS homepage – https://www.essbiztools.com.au/, or contact Peter Towers:
If you have a friend or colleague who you think might find this article interesting, please feel free to pass it on to them.
