Validating the Plan and Creating Improved Budget & Liquidity Forecast Models
The Situation
A leading educational technology & services provider was in urgent need of enhanced line-of-sight into forecasted monthly financial results and the drivers of their variances to plan. The Company was in technical breach of a covenant under its credit facility, and management was unable to provide accurate insights into near-term financial expectations of the business. The PE sponsor and management engaged Accordion to quickly validate the current forecast model and provide sensitivity analyses for key business and covenant drivers in preparation for a meeting with the Company’s lenders. Accordion was also asked to help build more robust and automated business and cash flow forecasting tools for the finance team.
Services
Budgeting & Forecasting Process Improvement
Stakeholder Reporting & KPI Development
13-Week Cash Flow Forecasting
The Execution
Forecast Validation for Lender discussions:
- Analyzed key drivers vs. historical patterns and results to understand near-term range of expected financial outcomes.
- Instilled confidence in the Board and Management team around a tight range of near-term results that were to be presented to the Company’s lenders.
13-Week Cash Flow Forecast:
- Created new and improved methodologies to capture historical results and project future cash flows.
- Automated the weekly update process of the cash flow model.
- Created output schedules for better visibility into trends and insight into performance vs. forecast.
Budget Process and Model Build-Out – Monthly Forecast Process:
- Identified a detailed list of key business drivers and sensitives which would be incorporated in both the new budget model and all future reporting.
- Rebuilt the budget and rolling forecast model using a more granular, bottoms-up methodology in greater detail.
- Provided senior management and business unit leaders with insightful historical trends and business process dependencies.
- Revised and automated the monthly re-forecast process.
- Supplied management with a detailed early outlook on quarterly covenant compliance.
The Results
Accordion created the Company’s new financial and cash flow models, which provided management and the Board with the visibility needed to manage both lender requirements and liquidity in an accurate and timely manner. The improved automation of both models reduced the amount of time the finance team spent creating reports – allowing more time to assess and analyze business results in ways previously unavailable. As a result of our work, the management team is now able to make strategic decisions with the support of historically informed analyses and data-driven insights.