Financial Scenarios Planning

Real Time Scenarios Planning

Every day you and your team are faced with business decisions that impact the value of your company. They’re the decisions such as:

• If we increase our prices, will our revenue go up or down? What about our profits? Or, what happens if we lower prices?
• What happens to our company value if we enter this new market?
• Should we take a discount and pay early? Should we offer one?

Most mid-market CEOs and their leadership teams use intuition to answer these questions. Often their intuition is correct.

But sometimes, complexities in business, such as slopes of supply and demand curves, cash flow velocity, quality of revenue, and profitability ratings can foil good intuition. Or, in many instances, you and your management team’s intuition might be correct, but a lower-level manager without the same degree of gut instinct might be handling the decision.

Quantifying the Financial Impact

Even if your intuition or gut feel is always correct, how do you quantify the numerical impact of these decisions on your top line? On your bottom line? On your true company value?

As strong as your intuition may be, it’s important to support it with a mathematical framework. The management teams of Fortune 500 companies understand this and leverage their financial teams to create powerful financial modeling tools.

These tools empower management to better understand the results of their daily business decisions—to confirm or refute their intuition. This is commonplace in big companies, but rare in mid-market companies.

Scenarios for Everyday Decisions

Financial modeling delivers the real time information you need for daily operational decisions. To determine what type of modeling to create, decide what type of decisions you’d like to confirm. Good scenario planning tools can deliver the actual financial impact of changes in:

• Price
• Volume
• Fixed costs
• Variable costs
• Inventory
• Accounts receivable
• Accounts payable
• Capital deployment

The enterprise software packages commonly used by the Fortune 500 contain these types of sophisticated scenarios planning modeling tools. Advances in data mining software and business intelligence software in the last 5 to 10 years have conditioned top managers in big companies to consult diverse financial modeling results before making key decisions affecting their numerical performance.

This software is expensive, but we have an affordable model built for mid-market CEOs, called Should We? / Can We?