When planning your year ahead do you consider multiple possible futures for your organisation? Evaluating best-case, worst-case and most-likely scenarios can be a valuable tool in deciding what to do – to make the best-case happen and to avoid or mitigate the effects of the worst-case. Calxa has a number of tools to help you create your scenarios.
Scenario planning is useful for all organisations but especially for those with unpredictable cashflow. Most of us start our planning with a single budget – what we expect to happen for the year. This is a great start (and much better than doing nothing!) but your planning process can be greatly improved by considering other scenarios:
- How would the year look if revenue was 20% higher and what would you need to do to achieve this?
- What would happen if your business lost a major customer? What would need to change?
- If you’re a Not-for-Profit, what would happen if a grant wasn’t renewed?
By building and examining these alternative scenarios you increase your ability to react to changed circumstances. The change may not be exactly what you’ve put in your scenario but the act of thinking about 2 or 3 alternatives will put those options top of mind and you’ll react much quicker to change.
Calxa provides some useful tools to help you build your alternate scenarios:
- You can create new Budget Versions by copying existing budgets and then updating them;
- Use the Budget Factory to quickly update your new scenario, increasing or decreasing income, cost of sales and expenses;
- Monitor KPIs for early warning signs of problems so that you take action on your Plan B before you hit serious trouble. Your accountant or your Calxa Accredited Partners can advise you on which KPIs might be most suited to your organisation.
Planning is vital to the success of any organisation and forecasting alternate futures will make you better prepared for the inevitable changes that will happen in your world over the next 12 months.
You can find more information on how Calxa can help you with your business cash flow on our Cash Flow Forecasting solutions page.