What If Scenarios

Follow this video to understand and best utilize the What If scenario creator:

The What If feature in CFO Scoreboard lets you quickly forecast your financial results for the next 12 months. We make it easy to see how improvements in the way you operate the business end of your business will impact your profits and operating cash flow.

The What If section is divided into two main areas. The left half of the page contains the scenario inputs, and the right half of the page shows the forecasted results.

The Scenario inputs are divided into two sections: the income statement levers and the balance sheet levers.

When you start with a new scenario, the inputs are set to the same values that your business has achieved in the previous 12 months. As you change various inputs in the scenario, the forecasted results are updated to show you what the next 12 months could look like.

To edit the scenario inputs, simply mouse over them, and the inputs will become editable. Start by deciding how much your company will grow next year. You can enter a growth percentage or a total revenue monetary amount.

Next, you need to determine the business’ Cost of Goods Sold. You’ll see that there are three options in the trend drop-down list: Hold Steady will use the same common size percentage (not the same monetary amount…. The same common size percentage) that your business achieved in the most recent month. This is a “business as usual” forecast and assumes you’ll keep doing what you’ve been doing.

Best Ever will use the best common size percentage that your company has achieved in the past few years. Using the Best Ever option will forecast your business on the assumption that you are able to tighten things up and return to your best level of past performance.

The third option is a custom option which allows you to specify your own common size percentage or dollar amount.

The operating expenses behave the same way. In this example, let’s set them to Best Ever to see what kind of financial results we could produce if we tighten things up a bit by proactively managing the business end of the business.

The final set of inputs are the operating cash flow levers on the balance sheet. These can have a huge impact on your operating cash flow, and they function the same way as the inputs above. Receivable Days indicates how many days it takes you to collect money owed to you by your customers. A smaller number means that your customers are paying you faster, which is good for Operating Cash Flow.

Payable Days indicates how many days it takes you to pay your vendors and suppliers. A larger number means that you are holding onto more cash, which is good for Operating Cash Flow.

Inventory Days indicates how many days it takes you to sell your inventory. A smaller number means you have less money tied up in inventory, which is good for Operating Cash Flow.

Each time you edit one of the inputs, the “results” table and graph on the right hand side of the worksheet will update, showing the forecasted revenue, profit, and operating cash flow, and comparing the forecast to the previous 12 months.

You can save your scenario by clicking the save button, or save it with a new name by clicking Save As. To load a previously saved scenario, just select it from the drop-down. To create a new scenario, select “Create New Scenario” from the scenario drop down.

It’s important to know that if you revisit this scenario in a few months, the numbers will likely change. This is because we always base the scenario on the previous 12 months of performance, so the hold steady and best ever values might change based on how your company’s performance changed since the last time you loaded the scenario.