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Balance forecast – see the company's financial position ahead

The balance forecast of Revise EPM helps to see how equity, solvency ratio, working capital, liquidity, financing needs, and key financial ratios will develop in the future – and how this development may affect the company's ability to maintain normal business operations.



Book a Revise EPM presentation

 

5 Questions of Management

1

SOLVENCY

Can the company's financial structure withstand future developments?

Equity, solvency ratio, and indebtedness.

2

WORKING CAPITAL

How much money is tied up in the business?

Accounts receivable, inventory, and accounts payable.

3

LIQUIDITY

Are the funds sufficient for future obligations?

Cash reserves, upcoming payments and available financing.

4

FINANCE & COVENANTS

Are the funds sufficient for future obligations?

Cash reserves, upcoming payments and available financing.

5

DELIVERY RELIABILITY

Are the working capital and financing sufficient to maintain the business?

Purchases, inventory, suppliers and the ability to meet customer promises.




Working capital affects whether the company can serve its customers.

If too much money is committed to inventory, liquidity may weaken. Conversely, if inventory is

reduced too much or the company does not have enough financing for purchases, it may result in a decline in delivery capability.

Therefore, the company must find a balance:

as little committed capital as possible while still having sufficient ability to respond to customer demand.

A financial forecast also helps secure delivery capability.

A company's ability to deliver to the customer depends not only on production or inventory management.

It also depends on whether the company can:

Finance the necessary purchases
Maintain sufficient inventory
Pay suppliers on time
Finance production
Manage demand growth
Prepare for changes in demand and delivery times.

Finance, working capital and operational activities are therefore directly related to each other.

Covenant risk is not just a problem of financing agreements.


It can affect:

The availability of financing
↓
Liquidity
↓
Financing of purchases and investments
↓
Business capability

This makes covenants a matter of business management, not just the finance director's

key performance indicator.

The balance sheet forecast ultimately indicates the company's ability to continue planned operations

Solvency, liquidity, working capital and financing are not separate indicators. 

They together determine how well the company can: 

meet its obligations 
finance its growth
make investments
acquire the necessary products and materials
maintain its delivery capability
cope with unexpected changes 

↓

 FINANCIAL CAPABILITY


SALES FORECAST

What will we be selling?
➔

Profit forecast

How will profitability develop?
➔

Balance sheet forecast

How will the financial position develop?
➔

Cash flow forecast

Will the funds be sufficient?
➔

Business
capability

Solvency • Liquidity • Financing • Delivery capability