Integration with PL/BS
Numeritas integrated PL and BS, as well as providing both direct and indirect cash flows, which enabled French Connection to reconcile between the two.
Calculation Methodology Improvements
Through a review of the existing model logic, client workshops and calls, we identified and recommended a number of areas for improvements to the model. This resulted in more consistent and reliable DPO, DSO and DIO metrics.
Greater Stakeholder Confidence
Greater level of trust in model’s outputs, given that it was reviewed and improvements made by specialist financial modelers, who adhered to financial modelling standards of preparation.
Challenge
French Connection had outgrown its existing working capital forecasting model. It was not fully integrated with BS, nor did it contain an indirect cashflow.
As such, there was an increasing lack of confidence in the output metrics, and the model didn’t capture certain complexities that existed in the business.
Solution
After working with key members of the client’s finance team, we upgraded their existing model to a much higher specification. The updated model contained a set of integrated financial statements, including both an indirect and direct cashflow. Appropriate control accounts were also added to the calculation logic, and the Days Sales Outstanding / Days Inventory Outstanding / Days Payables Outstanding (DSO/DIO/DPO) logic was aligned with core business operations.
French Connection’s model now allows for a more granular working capital forecast and better analysis of movements in inventory. It also helps track receivable and payable days for each geographical area, and offers increased functionality to monitor individual licensees’ revenue and expected cash receipts.
Results
French Connection continues to use the new model on a regular basis, which supports budgeting and cash reporting needs. The client is finding the model particularly useful for the analysis of the cash impact of working capital day movements, and has been able to share its capital forecasting with key stakeholders, including auditors and lenders.
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