Financial Forecasts You Can Take To The Bank

By Patricia Fusco | Posted April 06, 2004

If you've ever had to apply for a small businesses loan or make a presentation to a venture capital group, you know securing the funds depends on how accurate your financial forecast is. How many times have you had to go back to the drawing board and revise your financial forecast in order gain access to working capital? There is a faster, easier and more accurate way to make your financial modeling foolproof.

Whitebirch Software designs and develops applications that help its customers create sophisticated financial models and long-term forecasts that go beyond the scope of traditional spreadsheets and standard budgeting software. The company recently released a major upgrade to its flagship financial modeling program, Projected Financials.

The program prepares financial modeling and scenario analysis in a fraction of the time that traditional spreadsheets can provide. In addition to building comprehensive financial models, Projected Financials simplifies creating, comparing, and documenting "what-if" scenarios. Michael Hoffmann, Whitebirch Software president and chief executive officer, said Projected Financials is a way for small- and mid-sized businesses to avoid the trappings of using Excel for financial modeling.

"The big guys have a staff of MBAs to do financial modeling and forecasts, or they use a high-end business performance package from companies like Hyperion," Hoffmann said. "Typically, a smaller business would have to clue something together in Excel, which is extraordinarily error prone for managing such complex business rules. Small businesses can't do this type of financial forecasting alone, they have to hire a CPA and spend $3,000 to $10,000 to prepare a long-term forecast. Projected Financials is a way for small businesses to level the playing field with large corporations when it comes to financial modeling."

Model financial Statements
Projected Financials is available as a Web-based desktop application. The program generates projections and financial models with real-time flexibility to provide small businesses with better forecasts, so small business owners can make critical business decisions based on an accurate financial outlook.

Hoffmann said the software's built-in business rules prevent logic and calculation errors, giving small businesses confidence they can take to the bank, because they know that the projections are complete and the model is correctly structured.

"A lot of accounting packages are great for history, but don't look forward very well. Projected Financials actually deals with financial objects rather than rows, columns and cells," Hoffmann said. "Users work with a library of financial objects, such as prepaid and accrued expenses and asset-based revolving lines of credit. Each object is configurable using a set of parameters that automatically creates line items for three basic financial statements — income statement, balance sheet, and cash flow statement."

The standard business rules built into Projected Financials dictates how and where to report such things as the gain or loss on the sale of an asset or the difference between the current portion and long-term portion of a debt instrument. Version 3.0 of Projected Financials brings significant enhancements, including a Scenario Editor for creating and managing alternative scenarios. The software's built-in business rules prevent logic and calculation errors, giving users confidence that the projections are complete, the model is correctly structured, and that the integrated set of financial statements tie out every time.

With the power to quickly roll up reports as monthly, quarterly, and annual statements, Projected Financials is ideal for companies seeking financing, particularly if the process requires many documented changes to the model. Reports are easily shared online as HTML pages or as Excel spreadsheets. By using Projected Financials, small business can enhance their cash flow forecasting, business analysis, and strategic planning. Hoffmann said that when small businesses have access to improved financial projections, they can make better business decisions.

"Some businesses use Projected Financials to secure bank loans. One client signed onto the system while at the bank, adjusted the elements that the loan officer questioned, and presented the revised forecast on the spot. He got the loan," Hoffman said. "An entrepreneur wanted to see if buying a golf course was a good business deal. During due diligence, he forecast the business would be worth $12 million in three years. He bought the place. But that's not always how things work out. Another customer entered the data for a company they were thinking about acquiring and nixed the deal when he saw it would not be a profitable venture."

Big and Small Business Rules
With conventional software, developing and comparing multiple "what-if" scenarios often requires more than one spreadsheet — making multiple copies and overwriting assumptions — a deceptively simple option, but one that adds time and complexity exponentially. With Projected Financials, multiple scenarios reside inside a single model with assumptions or events that can be layered to analyze virtually any business condition.

Hoffmann said Projected Financials gives small businesses the peace of mind knowing that the balance sheet balances, everything ties out, projections are complete and comprehensive, and assumptions are easily understood.

"The program might appear to be awfully sophisticated, but people have a misconception that small businesses aren't complicated," Hoffman said. "A large business with multiple product lines could have huge sales numbers. But a small business is just as complicated even if it only sells a few products. Early on in our development someone suggested that we offer different tires of this product. We came to the conclusion that accurate financial forecasting doesn't scale down just because the business is considered to be small — the business rules don't change because of the size of a business."

Projected Financials is already in use in a range of industries, including financial services, retail, manufacturing, pharmaceuticals, legal services, semiconductor, and accounting. Even for the most complex models, Projected Financials is capable of delivering an accurate set of financial reports.

Projected Financials 3.0 is now available. For a single-user, a one-year subscription to the desktop program is priced at $1,500, which includes automatic downloads of program updates. Monthly online subscriptions are available for $250 a month — particularly handy when preparing due diligence for a proposed acquisition. Training is included when users build their first financial model with the desktop unit, although Hoffman said it's important that all users have a good experience with Projected Financials.

"The program is really self-validating," Hoffman said. "Users can enter the actuals as they are available and compare actual sales versus their forecasts. When users validate their forecasts with actual data, they see of sophisticated financial modeling can really impact their businesses."

Nowadays there are various accounting applications and financial services available to small business. While many of these programs and providers are adept at totaling column after column of hard data, few are capable of taking the next step toward forecasting financials two or three or even 10 years down the road. If you want a clear picture of your company's financial future, take a look at Projected Financials.

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