Who should develop the financial model?
Posted: Sun Dec 22, 2024 10:53 am
The term depends on the task that the management sets for the financial model. To forecast liquidity, a year is enough. If it is necessary to demonstrate the attractiveness of an investment project to a potential sponsor, the financial model is built for the entire life of the project or the functioning of the asset created during its implementation. If the exact date of the last event is not provided, it is formed until the moment of receiving stable revenue, that is, until the time when the program leaves the stage of accelerated growth and begins to exist at the level of the economy as a whole.
The unit of the forecast period is philippine country code selected in such a way that it is commensurate with the production cycle.
Let's say you need to spend a week from the moment of paying for advertising until closing deals, every 7 days the company's turnover increases by 1.5-2 times. In this case, it is worth dividing the forecast period into weeks. In most cases, the most convenient modeling period is one month. If you calculate indicators by quarters, the complexity of construction increases, because it is necessary to correctly transfer the carry-over parts of salaries and other regular payments between quarters. This turns out to be most labor-intensive when payments depend on the season.
If it is necessary to build a financial model for a very long period, after 2-3 years of monthly breakdown, switch to an annual breakdown, provided that the indicators should change at a slower rate.
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The Impact of Inflation and Exchange Rates on the Financial Model
Experts cannot come to a consensus on how to build a financial model: in constant prices or taking inflation into account. The latter is important to consider when it is at a high level, and the company has a significant loan or installment plan - here we need to remember the example with an annual subscription. In all other cases, it is more rational to calculate the financial model in constant prices.
If the company's expenses increase against the backdrop of inflation, it is always possible to raise the price. Other market representatives use a similar method, because the depreciation of money for business cannot be avoided. It should also be taken into account that a small entrepreneur does not have the opportunity to forecast macroeconomic indicators on his own. Of course, you can use information from experts, but there is no point in this, since it is unknown how accurate this assessment is.
The Impact of Inflation and Exchange Rates on the Financial Model
If your financial model takes into account a large credit load, replace the nominal loan rate with the real one, remembering to subtract current inflation.
Do not try to forecast and include different exchange rates in the model taking into account time, since it is easier to play off their changes due to price dynamics. If your revenue is calculated in rubles, you do not need to take a foreign currency loan in order to reduce the interest rate - such a move is fraught with serious financial risk. It is recommended to openly include the exchange rate you are basing your calculations on in your assumptions and use it for scenario analysis. This will allow you to assess how the indicators will be affected by an increase in the dollar exchange rate, say, by 10 rubles. In addition, you will be able to plan activities to level out such growth.
If it is impossible to avoid taking into account the dynamics of the exchange rate, use as a reference the cost of futures contracts on the exchange for this currency in the period of time you need.
The unit of the forecast period is philippine country code selected in such a way that it is commensurate with the production cycle.
Let's say you need to spend a week from the moment of paying for advertising until closing deals, every 7 days the company's turnover increases by 1.5-2 times. In this case, it is worth dividing the forecast period into weeks. In most cases, the most convenient modeling period is one month. If you calculate indicators by quarters, the complexity of construction increases, because it is necessary to correctly transfer the carry-over parts of salaries and other regular payments between quarters. This turns out to be most labor-intensive when payments depend on the season.
If it is necessary to build a financial model for a very long period, after 2-3 years of monthly breakdown, switch to an annual breakdown, provided that the indicators should change at a slower rate.
Read also!
"Selling price list: 5 marketing tricks + 10 tips for design"
Read more
The Impact of Inflation and Exchange Rates on the Financial Model
Experts cannot come to a consensus on how to build a financial model: in constant prices or taking inflation into account. The latter is important to consider when it is at a high level, and the company has a significant loan or installment plan - here we need to remember the example with an annual subscription. In all other cases, it is more rational to calculate the financial model in constant prices.
If the company's expenses increase against the backdrop of inflation, it is always possible to raise the price. Other market representatives use a similar method, because the depreciation of money for business cannot be avoided. It should also be taken into account that a small entrepreneur does not have the opportunity to forecast macroeconomic indicators on his own. Of course, you can use information from experts, but there is no point in this, since it is unknown how accurate this assessment is.
The Impact of Inflation and Exchange Rates on the Financial Model
If your financial model takes into account a large credit load, replace the nominal loan rate with the real one, remembering to subtract current inflation.
Do not try to forecast and include different exchange rates in the model taking into account time, since it is easier to play off their changes due to price dynamics. If your revenue is calculated in rubles, you do not need to take a foreign currency loan in order to reduce the interest rate - such a move is fraught with serious financial risk. It is recommended to openly include the exchange rate you are basing your calculations on in your assumptions and use it for scenario analysis. This will allow you to assess how the indicators will be affected by an increase in the dollar exchange rate, say, by 10 rubles. In addition, you will be able to plan activities to level out such growth.
If it is impossible to avoid taking into account the dynamics of the exchange rate, use as a reference the cost of futures contracts on the exchange for this currency in the period of time you need.