Helping management plan ahead, monitor contract performance and stay in control of overheads and cashflow.
For a contract-led business, an annual budget is only the starting point. Contract performance changes, costs move, overheads fluctuate and the timing of cash receipts and payments can have a significant impact on the business.
Management needed a financial planning process that went beyond setting an annual target. The aim was to establish a realistic financial plan before the start of the financial year, then regularly refresh the outlook using actual results and the latest forecasts.
This would give the directors greater visibility of expected performance, highlight emerging issues and help them make informed decisions throughout the year.
Profectus developed a structured budgeting and forecasting process, bringing together contract performance, overheads and cashflow into one joined-up financial plan.
Starting three months before the new financial year, we worked on the annual budget to give management time to review assumptions, assess commitments and plan ahead.
The budget brought together three key areas:
This provided a forward-looking financial baseline before the year began, helping management understand both the profit they were aiming to achieve and the cash needed to support operations.
After the first three months of the financial year, we prepared the F1 forecast.
This combined three months of actual financial performance with a forecast for the remaining nine months.
Rather than simply comparing actual results against the original budget, we updated the outlook to reflect the latest information on contract performance, costs, overheads and anticipated cash movements.
This helped management assess whether the original plan remained achievable and identify where action might be needed during the remainder of the year.
At the six-month point, we prepared the F2 forecast, incorporating six months of actual results and forecasting the remaining six months.
With half the financial year completed, there was a stronger evidence base on which to assess the expected full-year outcome.
The F2 forecast refreshed expectations for contract profitability, overhead expenditure and cashflow, helping the directors understand how the year was likely to finish and where priorities might need to change.
A key part of the process was linking the financial forecasts to cashflow.
A profitable contract does not necessarily generate cash at the same time as revenue is recognised. Payment terms, project expenditure, retentions and the timing of supplier payments can all affect the cash position.
By considering contract performance, overheads and cashflow together, management could assess not only the anticipated financial result but also the funding implications of delivering the work.
The process established a more structured approach to financial planning, moving from an annual budget to progressively updated forecasts as the year developed.
It helped management to:
More than your accountant. Part of your team.
At Profectus, we believe good financial management is about looking forward, not just looking back.
By building an annual budget and refreshing it through structured F1 and F2 forecasts, we help businesses turn financial information into a practical planning tool.
The result is a clearer view of where the business is heading, what may affect its performance and what decisions need to be made along the way.
Talk to Profectus about budgeting, forecasting, management accounts and fractional Finance Director support.
