Stop guessing if your decisions will add value and if you can afford them. Be certain.

THE SHOULD WE/CAN WE CEO MODEL

CFOs produce standard financial statements each quarter that detail profit and loss, assets and liabilities, and cash flow.

These traditional financial statement provide a standard business view of historical performance. But what these statements don’t answer are the following questions:

How well are inputs producing financial value?
What are the actual trends of our financial performance?
What is our business interest rate?
What is the quality of our revenue?
How well are we performing relative to our peers and competition, inside and outside our industry?

Another thing they don’t provide is the means to project, in real time, the financial impact of the hundreds of operational decisions a CEO must make throughout the month.

Many companies rely on the CEO and leadership teams’ experience and intuition when making key decisions that affect financial performance. While that’s important, there are more data they can access to confirm and quantify decisions.

Financial forecasting and scenario-building tools are immensely powerful in quantifying the impact of daily operational decisions. The best of these tools have the capacity to confirm or refute a CEO’s intuition. For example, when a supplier asks if she can take a 1% discount to pay 15 days earlier, would allowing this be a good decision? Many CEOs would think so, but for many companies, it would negatively impact their value.

Once your financial data has been entered, you’ll be able to answer these types of questions and run scenarios to determine:
1. If your business decisions will create or diminish value
2. What cash/funding will be required or generated from your decision

Our tools will allow you to model scenarios for:

Price changes
Changes in your volume
Operational changes that affect direct and indirect costs
Changes to your receivables, payables, and inventory
Changes to your fixed assets

For decisions in any of these areas, the tools will produce custom answers to two questions:

Should we do this?
Can we do this?

The Should We/Can We Steps

The Should We/Can We model is a combination of a numerical analysis, a tool set, and a philosophy. It requires input of two to six years of historical financial data, an understanding of the results, a commitment to use the tools for future decisions, and a commitment to continue inputting updated financial data into the model.

Produce six years of financial history

Accurate modeling requires historical results. Six years of standard financial data eliminates most of the ups and downs from any given year or business cycle, and provides the baseline for producing accurate Should We/Can We decisions moving forward.

Review and understand results

The model will reorganize some of your data to give you the ability to more accurately project the financial results of your decisions. Some of the terms will be new, but they’re intuitive and sometimes “blindingly obvious.”

Commit to using the model for decisions

Anything new requires behavioral changes and commitment. It’s important to understand when to use the tools, and to ensure that, prior to every relevant decision that impacts your true company value, you and your team use the tools and review the results prior to moving forward.

Commit to inputting future financial data into the model

Your numbers change as the year progresses. To keep the model accurate, input your new financial statements as you produce them. The system also allows for analysis of forecasts, which is handled in the 24 Month Rolling module.