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26 December 2023

Forecasting and financial modelling

Client overview

The company operates in the paving/patio and gardening sector with turnover exceeding £12million. Revenue is expected to grow considerably as the company expands its offering with new products to complement the existing portfolio. This is expected to enhance new and repeat business.
The current finance team is minimal with most work fulfilled by the finance assistant and director. The company’s head office is positioned outside of surrounding towns and cities, meaning that it is difficult to attract a seasoned head of finance.
As a solution to fill this role during the interim, the director regularly approaches us for assistance with high level work that is unable to be fulfilled in house. Examples include forecasting, modelling, management accounts and financial/tax planning.
Most notably, a long-term financial model was produced, enabling the client to obtain a competitive trade facility with one of the leading high street banks.

How we supported the client

Having been approached by the director to assist with the finance model requirement (from the bank), we took swift action, digesting the full requirements and structuring a timeline at short notice to meet the deadline. A personable, proactive, and adaptive approach was necessary, due to varying questions raised by all parties. This included:

  1. Management accounts preparation for Q1 of FY2024, with all balance sheet areas deemed financially compliant. Aggregating the data from these with the latest statutory year end accounts (FY2023) provided the building blocks.
  2. Business metrics and operating forecasts/assumptions obtained from the director.
  3. Fixed and variable costs carefully identified using historical data from the client’s accounting software and take aways mentioned above. A systematic approach was adopted to ensure estimates included over following next 18-month period were reliable.
  4. Key balance sheet areas identified, such as projected VAT (input and output), trade debtor/credit days calculated using historical and industry trend to capture monthly working capital requirements. The client holds a lot of stock, meaning that it was also important for us to identify project this amount and split that would be secured against the trade facility.
  5. Financial model prepared for the director’s review. We worked closely with the team in-house at this stage to enable us to utilise their industry expertise and finalise certain areas of the model.
  6. We liaised with the company’s bank business relationship manager, addressing any concerns from their side prior to final due diligence being completed.
  7. The model was passed to the bank for scrutiny by a third party of accountants. To our knowledge, the model satisfied all requirements.

The results

The client obtained a lucrative trade facility, providing substantial working capital that will enable growth log sought after over the next 12 months as the business product line and stock on hand increases.
The firm has won more regular work with the client due to the trust built and relationship that has been built up. This has generated significant revenue for the firm that would have otherwise been limited to compliance-based services, had we not taken on the financial model.

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