Predictive Accounting Helps Understand Impact of Decisions
Accountant's Minute 255
Knowing the financial impact of decisions before a client implements them is very important for financial stability. This process is generally known as “Predictive Accounting”.
The process commences with an examination of the key drivers relative to the physical number of units to be produced and the calculation of the direct costs that will be involved in that process. The calculation of stock holdings can be made, based on manufacturing/purchase estimates and the unit sales based on estimates from salespeople.
These estimates should be checked to determine the level of investment in stock to determine whether that level of stock is going to be required.
“Predictive Accounting” encourages business operators to discuss all aspects of their vision and then to commit that vision into Budgets, Cashflow Forecasts and the Predicted Balance Sheet to determine the investment required in stock, debtors, capital expenditure items and what effect there will be on the business’ bank position, level of loans required or capital to be raised direct from the public by utilising Crowd Sourced Funding Equity Raising, Section 708 Capital Raising or Early Stage Innovation Company Capital Raising.
In this process, accountants can give real advice to clients before any money is spent or commitments entered into. As part of this process the accountant can conduct a pre-lending assessment to determine whether the client is going to meet the bank’s requirements and whether the client has sufficient security to be offered as security for a loan and whether the client has a willingness to issue personal guarantees. A due diligence review should also be undertaken on the other documentation that the client will have to submit to the bank, including Business Plan, Market Position Report, Vision for the business.
In the Business Advisory Services Update Webinar/Conversation on Wednesday 16th December 2020 at 12-noon AEDT (11.00am AEST), Peter Towers, Managing Director, ESS BIZTOOLS will have a discussion with Paul Barnaby, Australasian Representative of PlanGuru and Managing Director, Beyond Accounting Technologies, relative to the very important role that accountants can play utilising “Predictive Accounting” skills to develop a summary of the financial effect that a business will have from major business decisions before any implementation has occurred.
This will give you an appreciation of the implementation of Chief Financial Officer Services to small businesses and medium-sized enterprises. In the recent Accountants Business Expo, accountants were urged to be proactive in the development of Virtual Chief Financial Officer Services for SMEs.
(Click here) to register for the free webinar or go to the Home Page of ESS BIZTOOLS and scroll down to “Upcoming Webinars”.
In the Business Advisory Services Update Webinar/Conversation last week “Planning Activities for 2021” Peter Towers discussed a number of key issues with Mark Holton, Director, Smithink Pty Ltd relative to:
- Undertaking strategic planning to assist SME clients to have a clear understanding of the challenges confronting them.
- Encouraging accountants to analyse a client’s sales lines to understand the contribution that the top 5 sales lines are making, as well as the bottom 5 sales lines of sales and the expected gross profit from the mark-ups applicable to each sales category.
- Understanding stock, in particular the classification of stock – Stars – Cash Cows – Problem Lines – Dogs.
- Ensuring that commercial rent on commercial salaries are being incorporated into management accounting figures so that realistic costs are utilised in business benchmarking and pricing calculations.
- Ensuring Balance Sheet correctness by calculating and recording the current liabilities on bank loans and hire purchase commitments.
The ESS BIZTOOLS’ Product Packages include templates, forms, papers and videos to assist accountants to implement each of these items.
You can view a recording of the presentation by Mark Holton and Peter Towers by clicking here.
If you’re interested in obtaining a free, no obligation overview of the Business Advisory Services’ Product Packages, developed by ESS BIZTOOLS, which are suitable for your clients please “Book a Demo” on the ESS BIZTOOLS homepage – https://www.essbiztools.com.au/ or contact Peter Towers:
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We look forward to you joining us for the fifth presentation of Business Advisory Services Update Webinar/Conversation on Wednesday 16th December 2020 at 12-noon AEDT (11.00am AEST).
This will be our final webinar presentation for 2020. The team at ESS BIZTOOLS and our Affiliates, who have participated in a series of weekly webinar presentations for accountants over the last 10 months, would all like to take this opportunity of wishing you a Very Merry Christmas and we sincerely trust that 2021 will be a great year for everyone.
Stay safe!
Have a great day.
