All oganisations have a common planning and reporting issue and that is “how to produce reliable actual to budget and forecast, profit & loss, balance sheet and cash flow information quickly and accurately”. This issue exists simply because none of the commonly available ledger systems include any forward calculation and reporting capability. For many small organisations a simple spreadsheet solves this issue perfectly but for the medium to larger organisations with director, bank and investor reporting requirements, building and maintaining a customised spread sheet model quickly becomes a mission especially when making lots of scenario and structural changes. Perhaps this is why only the very expensive ledger and CRM systems attempt to provide this functionality.
Dedicated driver-based forecasting systems solve this issue and take business planning and reporting to a new level. By incorporating driver assumptions for all variable revenues and direct expenses, managements focus changes from just plugging numbers to considering the actual level and timing of their planned activities. This makes the re forecast and update process simpler. With regular tuning and adjustments beyond the year end the driver based rolling forecast process eliminates the need for annual budget.
So let’s look at some examples of a driver based system in a number of industry scenarios to see how the complexity and effort required is reduced and why Cash Focus is recommended by many of the leading ledger providers as the driver based budgeting and rolling forecast add-on to their systems.