The importance companies place on the financial professional to deliver a value-adding strategic plan is significant. The financial model must not only forecast the client company’s future financial performance in an accurate light, but it must also “market” its future financial benefits to lenders or investors. All this must be delivered in a time-effective manner. The frenzy and emotive atmosphere surrounding the strategic planning and forecasting process, often partly overlooks or neglects the sense-checking or due diligence process.
Apart from colleagues and the client, a financial professional has other avenues to help sense-check the financial plan of the Company
External Professional Advisors of the Company
A less obvious, but logical sounding board is the professional advisor. It will very much depend on their relationship with the company, as to whether you can approach such people. Evidently the Company must firstly authorise you to approach the accountant or lawyer, and there needs to be no risk of jeopardising their position; i.e. unlikely you will be able to show your strategic plan to the Company’s external auditors.
Often these advisors have a longer, more intimate and acute knowledge of the financial situation of the Company. A seasoned financial analyst/modeller should always welcome fresh ideas or ways to sharpen their financial analysis of a client’s Plan. Given the comprehensive nature of a strategic plan, any friendly input from accountants, lawyers or tax professionals will always improve the commercial and financial edge of a strategic plan.
Equity Investors or Bank Lenders
Clearly these stakeholders will always be a good, objective sounding board on the strategic plan. If you think external advisors will run a fine-tooth comb through the numbers, well these guys will be even more thorough in analysing the forecasted and computed numbers.
Given they plan to invest or lend money to the company; they want to be fully confident in the financial numbers disclosed in the strategic plan. If one of these stakeholders focuses in on an area of the Plan, such as assumed revenue growth projections, then it is likely other potential capital providers will do the same.
Customised Executive Summary or “Marketing” Schedule
Even a mere high-level, cosmetically more appealing report can often assist or improve the analysis of financial information in a strategic plan. Often presenting the income statement, balance sheet, cash flow and financial ratios on one page can be easier for stakeholders to “digest” the financial information – compared to pages of detailed financial statements.
Liaise extensively with the client and external stakeholders; a mere enhancement to the cosmetic presentation of the strategic plan, or the mere harmonisation of corporate colours and fonts, can be viewed as a contributing improvement to the Plan.
Remember with financial analysis of a strategic plan, stakeholders can value the “less is more” approach with the presentation of financial information. Do not underestimate the value of a graph, such as a waterfall chart, to help summarise and depict the drivers of a company’s financial performance.
The crafting of a Strategic Plan is an iterative process. During the sense check or due diligence process of a Plan, there are some other angles to consider in reconfirming the accuracy of the financial numbers reported. Seek the input of the client’s external professional advisors such as accountants, lawyers etc.; as they can often have a more in-depth idea of the company’s financial performance.
External capital providers will often provide a more thorough sense check of all aspects of the Plan, given they will be risking their own capital in the client. Finally a high-level executive summary can improve the clarity of the projected financials via a cosmetic, more marketable one page snapshot.