Predictive Accounting – an important tool

If you have not yet developed budgets and cash flow forecast for the new financial year, it’s not too late to do so.

The preparation of “Predictive Accounting Reports “ will assist in the implementation of the strategies that you have included in your business plan, or strategic review, or what you would like to achieve in  2023/24.

The “Predictive Accounting Process” assists business people to plan their future. I believe this is the most important work that an accountant can perform for a business.

The Predictive Accounting Process incorporates four (4) key components:

1. Key Drivers Within Your Business – this is the “engine of the budgeting process” where the detailed working figures are contained.

2. Budgets – preferably should be prepared for each operating activity conducted by the business. This way, the individual manager can receive his/her own budget. This will assist the manager to gain a better understanding of how the operation that he/she is responsible for performs.

3. Cash Flow Forecasts – information will be transferred from budgets, some of the key driver items and balance sheet accounts to the cash flow forecasts. Problems in maintaining an adequate amount of cash in the bank will be able to be identified well in advance, which could lead to the business borrowing additional funds or the business could seek to raise capital direct from the public.

4. Projected Balance Sheet – this is what the overall financial picture will be in future years, if the strategies contained within the business plan or strategic review as reflected within the budgets and cash flow forecasts are implemented.

The CEO/Owner then has the opportunity to analyse the projected financial picture of the business    and decide whether that end result is acceptable. If the CEO/owner would prefer a different result, financial projections can then be prepared to identify the changes that will have to be made, to achieve a different financial position.

Towers Business Development assists in the development of “Future Strategies” for businesses, by the preparation of Predictive Accounting Reports.

Visit www.towersbusiness.com.au to find out more. Alternatively, contact us on 1800 232 088 or for a discussion.