Get Started with Financial Modelling

Financial modelling is a way to map out a 'what if' for business decisions you are thinking of making. It's also a useful way of making sure you consider all aspects of the business that might be affected by those decisions.

You can use a simple financial model to see what happens to your profit and loss account if you increase sales or cut spending, or use it to map out changes to your cash flow if you start to build up your cash reserves.

 Here are a few tips for getting started: 

1. Don’t reinvent the wheel, there are lots of simple templates you can use that already exist where some of the thinking has already been done for you. Talk to your adviser. 
   
   
2. Financial models are based on assumptions that need to be reality checked regularly. What will the future look like if a planned 5 percent increase in sales doesn’t materialise but you’ve added an extra staff member and the business still needs to meet that cost?
   
   
3. Use financial modelling to map out best and worst case scenarios and make business decisions based on risk.
   
   
4. Your number one financial model is still your budget and your cash flow forecast. Have multiple versions that model different scenarios to help with decision making. 

Financial modelling is a useful tool for supporting business decision making, and it doesn’t need to be complex. Talk to Wilson Teis today about how we can help you put together some simple financial models to help your business planning.