Funding ready forecasts: a tailored approach
Background
A small and relatively young business was looking for the right funding to support their rapid growth plans. Based in Rotherham, South Yorkshire, this three person team looked to us for support after a referral from a finance broker.
The business imported goods which were sold to clients all over the UK. The import model meant that cash often flowed out earlier than flowing in so funding was critical in bridging that gap and allowing the growth to be supported. Without appropriate funding then the more they grew, the bigger this cash gap would become.
Our Approach
There was already a comprehensive and thorough business plan prepared, our job was to back that up with a robust financial forecast. A finance broker was working alongside us on a £100,000+ funding application and we needed to tailor the financial forecasts to the types of funding being considered.
Whichever funding facility was applied for, an integrated three-way financial forecast was required on a monthly basis for the next 3 years .
Actions Taken
Whilst we had a written business plan it’s always better to hear the plans from the source. We spoke to the client a few times and got to the bottom of how orders flow through, the fixed costs they incur and growth timescales. When you chat things over, more information is dropped into a conversation than you realise.
From the discussions we were able to set up a forecast model which considered how cash flows through the business, how that impacts how customer orders are processed and also where the cash dips to show where funding is required.
The model consisted of an integrated forecast with a profit and loss, a balance sheet and a cash flow. The data feeding these reports included a cash model pulling in estimated sales by month which was overlaid with lead, shipping and commissioning times to give a full picture of cash flow. We also had to consider the impact of customer and supplier deposits paid and received through the balance sheet.
It was a complex model with many movements to be included and because the business was growing through the period of the forecast we had to make sure that key information could be changed if necessary without causing any issues to the workings.
Full guidance was provided to the client in both a user guide and meetings to go over the information required in the model and how to use it effectively.
Outcomes
Having a model which enabled us to look at multiple scenarios and report those scenarios within all three financial statements allowed the client to explore different methods and amounts of funding to cover their needs. The business was successful in getting a funding facility in place which allowed them to put their ambitious plans into action.
The client also asked us to create other working models so they could keep track of the growth and how actual performance to compared to that expected.
Rewarding work in collaboration with others
We were referred in by a trusted corporate finance broker who we know well. Their knowledge of the funding market and our forecasting expertise blended successfully for the client who has gone on to grow in line with the forecasts – and pushing to be even better. We’re proud that our work has enabled this.
If you’re looking for support in producing a forecast for a funding application – contact us.
Words by Lindsey Owen
Tape Measure header photo by Diana Polekhina