Please see the attachments for the discussion questions for week 9 & 10. Please include the references, please use CoreLogic as the company for both discussion questions. If you have any questions please let me know.

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Home >Business & Finance homework help >Management homework help >Please see the attachments for the discussion questions for week 9 & 10. Please include the references, please use CoreLogic as the company for both discussion questions. If you have any questions please let me know.

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THE MOST POWERFUL TOOLS IN BUSINESS FOR IMPROVING YOUR PROFITABILITY AND

CASH FLOW

A Reliable Financial Forecast: One of the Most Powerful Tools in Business for Improving Your Pro�tability and Cash Flow JANUARY 27, 2016 BY PHILIP CAMPBELL — LEAVE A COMMENT

Imagine this. You walk out to your car �rst thing in the morning to drive to the

o�ce. You open the door… get in… put your seat belt on… and start the car.

You wrap a blindfold across your eyes and tie it around the back of your head so

you can’t see anything. Then you put the car in reverse and begin your journey!

How far do you think you will go before you hit something? Not far, right?

But That’s What’s Happening in Many Businesses Today

What’s interesting is that the same entrepreneur or business owner that would

never put a blindfold on while driving their car is essentially doing the same thing

every day when it comes to running their company.

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They are hurting their pro�tability and cash �ow (and creating stress and

frustration in the process) because they are cruising along on the highway of

business with a blindfold wrapped across their eyes. The question isn’t whether

there will be an accident. The question is how bad will the crash be… and will the

business survive it.

A Reliable Financial Forecast to the Rescue

The cure for this problem is to implement one of the most powerful tools in

business – a reliable �nancial forecast.

Creating the forward looking view of �nancial performance is a surprisingly

e�ective way to transform the �nancial future of your company. It will:

Help you drive growth, pro�tability and cash �ow higher

Create con�dence and clarity about where your business is going �nancially

Provide the roadmap for turning your vision and strategy for your business

into a crystal clear view of what success should look like �nancially

Enhance con�dence and credibility with lenders and investors so they

provide the capital and support you need to grow your business

Help you make more con�dent, pro�table �nancial decisions

In short, a reliable �nancial forecast will help you win �nancially in business.

Now Try This…

Stand up and cover your eyes with both hands so you can’t see anything in the

room. Now walk to the other side of the room without uncovering your eyes.

That was uncomfortable wasn’t it? Even in a room you are very familiar with, it is

uncomfortable trying to do a simple thing like walk to the other side of the room

when you can’t see anything in front of you.

Now let’s try that same experiment again, but with a twist. This time separate

your �ngers just a wee bit so you can peek through your �ngers. Now walk

across the room.

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Much more comfortable isn’t it? That little bit of visibility is enough to prevent

you from running into something.

That’s what a reliable �nancial forecast (a �nancial projection) is all about.

Not providing complete visibility or certainty. Just providing a glimpse of what lies

ahead so you can get where you are going safely.

De�ning a Reliable Financial Forecast

By “reliable,” I’m referring to unbiased, reality-based expectation of �nancial

results that is designed for decision-making (not precision).

By “�nancial forecast,” I’m referring to a full set of forward-looking �nancial

statements (income statement, balance sheet, and cash �ows) that includes a 2-

minute summary.

Too many entrepreneurs and CEOs today are feeling more like

passengers than drivers in their business. They’re staring at

their rearview mirror as they bounce along in the passenger

seat. Their company is careening along on the highway of

business as they wonder and worry about where their

business might end up �nancially.

A reliable �nancial forecast solves this problem by providing a clear view through

the �nancial windshield of your business. It creates the visibility and clarity you

need to drive your company toward a bigger and brighter �nancial future. Put

yourself in the driver’s seat of your business by tapping into the unique and

exciting bene�ts that �nancial forecasting can unlock for you.

A Quick Start Guide to Financial Forecasting, will help you create the view

through the �nancial windshield of your business. Learn more here.

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The Monthly Financial Rhythm

Let’s take a look at how �nancial forecasting �ts into the monthly �nancial

rhythm of business.

Business moves in a rhythm, a cycle. So does �nancial management.

I call it the TARGET, MONITOR, ADJUST cycle. It’s about setting �nancial goals and

targets, monitoring forecasts and actual �nancial results, and making

adjustments in strategy and execution inside the business when �nancial results

di�er from the target or expectation.

The cycle continues every month by making any necessary changes to the

�nancial goals and targets and the resulting forecast/expectations. It’s a Monthly

Financial Rhythm designed to help you focus on what matters most. It’s the key

to turning �nancial information into insight… and improved pro�tability and cash

�ow.

10 Rules for Creating a Forecast You Can Trust

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Creating a reliable �nancial forecast does not have to be a di�cult process. It is

really a matter of using a few basic principles together with your intuition and

knowledge about the business. Here is a summarized version of the 10 rules for

creating a forecast you can trust.

Forecasting Rule No. 1: Think Decision-Making, Not Precision. One thing

stopping you from creating a forecast is thinking that you don’t know exactly

what the future holds and what will happen if your forecast is wrong.

Transaction processing and creating historical �nancial statements is about being

right. (Here, precision is your friend.) On the other hand, forecasting is about

improving the company’s ability to make better business decisions. (Here,

precision is your enemy.)

As you create and use forecasts and projections, think decision-making, not

precision.

Forecasting Rule No. 2: Think Top-Down, not Bottom-Up. Forecasting uses

big-picture drivers and assumptions to create a model of what the �nancial

statements may look like based on existing trends and plans. You have to take

yourself up to the 30,000-foot level and look down on the business �nancially as

you forecast.

It’s about painting a picture of what the �nancial results will likely be based on

your knowledge and intuition rather than actual transactions. Your forecast looks

at the strategic view and direction of where the company is going—not the nitty-

gritty bottom-up details.

Forecasting Rule No. 3: Model a Full Set of Financial Statements. A reliable

�nancial forecast is a living, breathing tool that is updated monthly. The basic

format should track with your existing �nancial statements (income statement,

balance sheet, and statement of cash �ows in the same format you use for

monthly �nancial reporting) for at least the next six to eighteen months.

Forecasting Rule No. 4: First Look Back, Then Look Forward. One of the

biggest mistakes entrepreneurs (and CFOs) make in creating a forecast is to start

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with a clean slate. They pull up a blank spreadsheet and begin thinking about

what the �rst month in the forecast will look like. The problem is you unhook

your forecast from reality when you do that.

The �rst step should be to drop in actual results for the last six to eighteen

months (or more). Have the revenues and expenses been coming in the way you

expected them to? Can you see a trend developing? Are you surprised by any of

the numbers now that you are looking at the last six to eighteen months of actual

results next to each other?

Once you have a good view of what the �nancial results have been over the last

six to eighteen months, you want to look at some of the factors that can make

the next six to eighteen months vary from the historical results. That could

include things like seasonality, a change in service or product mix, whether you

will be expanding geographically, etc.

Forecasting Rule No. 5: Understand the High-Level Company Strategy and

Expectations. One of the bene�ts of forecasting is that it forces you to think

about your company’s vision and strategy more deeply. For example, what are

the three most critical goals or initiatives for the coming year? Is the company

planning to grow slowly or aggressively? Are there plans to move into new

markets or attempt to attract new customer segments?

Answering these types of strategic questions forces you to step back and think

about the big picture. If you have a CFO it helps him or her “get out of the ledger”

and talk to management about their division’s goals or their department’s

strategies. It requires you to talk to your board and trusted advisors to get their

input and perspective.

Forecasting Rule No. 6: Simplify, Simplify, Simplify. One of my favorite quotes,

known as Meyer’s Law, says: “It’s a simple matter to make things complex, but a

complex matter to make things simple.”

You will be surprised how di�cult this advice is to implement once you begin

creating, and regularly updating, your �nancial forecast. The number of potential

rabbit holes you can dive into while forecasting is huge. With all the assumptions

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you have to make in creating your forecast, it is very important to think about

one of the more counterintuitive facts about forecasting: The more detail you

bring into the forecasting process, the more error you will create.

The key to success in forecasting is to be always thinking about how to simplify,

simplify, simplify…and simplify some more. Simplify the key drivers, critical

assumptions, and how you interpret and present the results of the forecast.

Forecasting Rule No. 7: Create a Repeatable Process. Because your forecast

will be updated with actual results and the forecast adjusted every month based

on current information, repeatability is very important to the forecasting process.

The software tool you choose will impact the success of your forecasting process.

The tool must include the underlying logic for forecasting (modeling) a full set of

�nancial statements and perform a number of additional functions. (Chapter 6 in

my book A Quick Start Guide to Financial Forecasting is titled Choosing Your

Software Tool–Spreadsheets vs. Forecasting Software. This chapter helps you

evaluate the pluses and minuses of spreadsheets vs. software tools).

Forecasting Rule No. 8: Be Conservative. Because we know a forecast will not

be perfectly accurate, the challenge is keeping it in the “ballpark” as a wildly

inaccurate forecast will hurt your credibility. You do that by being conservative in

your key assumptions.

It’s like meeting someone for lunch. You agree to meet a good friend at a

restaurant at noon. You set noon as the time to meet so you will both be there at

about the same time. But despite the precise time you set, you know that both of

you will not show up at exactly noon. The only question is whether you will be

there a little before noon or a little after noon. Will you be early or will you be

late?

It’s the same for your forecast. Your estimates will not be perfectly accurate. You

want to err on the side of being conservative. That way the surprises are pleasant

rather than unpleasant.

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Forecasting Rule No. 9: Condense the Results to a 2-Minute Summary.

Creating a reliable forecast and e�ectively communicating it to your audience

starts with making the forecast results simple and easy to understand. Here is a

helpful exercise that works especially well when implementing a forecast process

for the �rst time.

Imagine you will sit down with your board tomorrow morning. In that meeting,

you will have two minutes to convey the essence of the forecast (key insights,

implications, and assumptions) to him or her. That person will then step into

another meeting with the company’s key shareholders and lenders to share his

or her insight about where the company is going �nancially. Your mission: Ensure

they can share the insights from the forecast with con�dence and clarity.

This exercise will force you to distill the insights and implications of the forecast

down to what matters most so that you can clearly identify and communicate the

most important high-level drivers and assumptions.

Forecasting Rule No. 10: Start for Your Eyes Only. As you make progress in

creating your forecast, it’s natural to want to begin sharing it immediately.

However, keep it “for your eyes only”—at least to start.

That means don’t sell your leadership team on the value of having a forecast,

don’t talk to them about the assumptions or speci�cs as you create the forecast,

and don’t send the results of the forecast to them—yet.

Instead, spend a few months “beta testing” your forecast to learn from and

experiment with the process before rolling it out to the management team or the

board. Create assumptions at the highest level possible to prove to yourself that

you don’t need to forecast at the detail level. Create the forecast for the next

three months, then com- pare the actual results each month. What worked out

well? Are you surprised at the di�erence between your forecast and the actual

results?

After running the forecast process for three months, you will become more

con�dent and knowledgeable about the bene�ts of forecasting and how best to

create and present the results. You will learn �rsthand where the landmines are

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to avoid. You will develop a better sense of the kinds of monthly and strategic

decisions that the forecast can help you answer and in�uence.

Creating a Brighter Future for Your Business

A reliable �nancial forecast can play a huge role in your journey to �nancial

success in business. It will help you:

De�ne where your company is going �nancially (and where you want it to

go)

Expose the danger and opportunities that lie ahead

Create a road map to get you there safely and on time

Monitor the pace and progress on the journey to �nancial success

Best of all, it is a surprisingly e�ective tool in helping you increase pro�tability

and improve your cash �ow.

And it all starts with a reliable �nancial forecast. 🙂

Philip Campbell is a CPA, �nancial consultant, and author of the book A Quick

Start Guide to Financial Forecasting: Discover the Secret to Driving Growth,

Pro�tability, and Cash Flow and the book Never Run Out of Cash: The 10 Cash Flow

Rules You Can’t A�ord to Ignore. He is also the author of a number of online

courses including Understanding Your Cash Flow – In Less Than 10 Minutes. His

books, articles, blog and online courses provide an easy-to-understand, step-by-

step guide for entrepreneurs and business owners who want to create �nancial

health, wealth, and freedom in business.

Philip’s 30 year career includes the acquisition or sale of 33 companies (and

counting) and an IPO on the New York Stock Exchange.

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This book provides a straightforward, easy-to-understand guide to one of the

most powerful �nancial tools in business: a reliable �nancial forecast. It will

transform the �nancial future of your company and help you make better, faster,

smarter �nancial decisions.

Too many entrepreneurs and CEOs today are feeling more like passengers than

drivers in their business. They’re staring at their rearview mirror as they bounce

along in the passenger seat. Their company is careening along on the highway of

business as they wonder and worry about where their business might end up

�nancially.

A reliable �nancial forecast solves this problem by providing a clear view through

the �nancial windshield of your business. It creates the visibility and clarity you

need to drive your company toward a bigger and brighter �nancial future.

http://amzn.to/2rqQEiy

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What if you had answers to questions like:

What’s about to happen to my pro�tability and cash �ow?

How much cash can we distribute to the owners of the business?

How long will it take to pay o� our debt?

What will our taxable income be this year?

A reliable �nancial forecast puts the answers to these questions at your

�ngertips. It helps you take control of your pro�tability and cash �ow because it

gives you answers to the most important �nancial questions you have to deal

with every day.

Put yourself in the driver’s seat of your business by tapping into the unique and

exciting bene�ts that �nancial forecasting can unlock for you.

Buy the hardcover at Amazon.

Buy the Kindle version at Amazon.

Buy the book at Barnes & Noble.

Buy the book at Bookmasters.

Buy the book at Google Play.

If you already own the book, the free tools and downloads are waiting for

you. Click here to access the �nancial spreadsheets, examples, rapid learning

guides, and more.

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