Financial results become visible too late
Budget-to-actual analysis becomes available after the month closes, when opportunities for corrective action are already limited.
Financial results often become visible after the period closes, when opportunities to influence them are already limited.
Different explanations for variances
Finance, sales, production and procurement explain the same change in margin or cash flow differently.
Profit does not translate into liquidity
A positive result in P&L is not accompanied by sufficient cash flow due to inventories, receivables, payment timing or CAPEX.
Project profitability becomes clear only at completion
The actual profitability of the contract or project becomes clear after completion, not during execution.
Why this happens
Revenue growth does not always produce sufficient cash flow. A project may appear profitable before the costs of rework, correcting non-conformities and rescheduling are included. Budget line items may be on target while the overall financial target remains unmet.
Finance, sales and production often give different explanations for the same variance at management meetings. This happens when the financial model records actuals without linking financial results to operational events.
The financial result is formed before the period closes.
If operational changes are not reflected in the forecast, financial management becomes an explanation of actuals.
The financial model links actions to results
Financial result
What changes in profit, liquidity and capital?
Revenue, margin, costs, working capital, investment and cash flow linked to operational events.
Management objects, line items, drivers, recognition rules and plan versions.
Driver owners
Who influences the outcome?
Function, project, product and site managers whose areas generate the causes of financial variances.
Driver owners, areas of influence, analysis rules and corrective actions.
Control cycle
How does variance turn into action?
Plan, forecast, scenarios, payment calendar, management accounting and regular analysis of variances.
Calendar, versions, data sources, variance thresholds and procedures for revising assumptions.
More about the model
Management finance needs to explain both what happened and why financial results are changing. Order volume, price, sales mix, capacity utilisation, delivery dates, procurement terms, project stages and turnover need to connect to the P&L, balance sheet and cash flow.
The plan defines the target, the forecast reflects the most likely outcome, and the gap between them becomes a subject of regular control. The financial model is therefore built around performance drivers, their owners and management actions.
How we build financial and performance management
The scope depends on the business model. Our approach is consistent: identify financial drivers, connect plans and forecasts, configure liquidity management and establish a regular cycle for handling variances.
Identify the financial model and drivers of the result
We link financial results to the objects being managed: orders, projects, products, sites, contracts and functions.
More about our work
Starting point
The financial result is analysed by budget items, but the reasons for the variances are not related to operational actions.
What we do
We identify the drivers of revenue, margin, costs, working capital and cash flow, and define accounting objects, recognition rules, analytical dimensions and driver owners.
How to check the results
To change the financial indicator, it is clear which operational factor influenced the result and who can change the situation.
Separate budget, forecast and scenarios
The plan sets the target, the forecast shows the most likely outcome, and scenarios define the range of possible consequences.
More about our work
Starting point
The budget is perceived as the only version of the future, and the forecast becomes its updated copy.
What we do
We delineate the target plan and the forecast, set the rules for revising assumptions, scenario calculation and regular updating of expectations.
How to check the results
When prices, volumes, timing, procurement requirements or capacity utilisation change, financial implications are visible before period close.
Connect liquidity, commitments and capital
The payment calendar, working capital, investment and funding sources are considered within a shared framework.
More about our work
Starting point
Profitability in P&L is not accompanied by sufficient liquidity, and the risk of a cash gap becomes visible too late.
What we do
Link proceeds, payments, contractual obligations, receivables, inventories, CAPEX and funding sources.
How to check the results
The need for financing and the risk of cash gap are identified when the prerequisites change before the due date.
Establish the financial performance management cycle
A variance prompts management action as well as an explanation in the report.
More about our work
Starting point
Budget-to-actual analysis explains the past period, but does not always lead to corrective actions.
What we do
We establish regular variance reviews: driver, financial impact, owner, corrective action and deadline.
How to check the results
For each significant variance, the cause, owner, timing of the adjustment and the action that falls into the management cycle are determined.
Services within this practice
Engagements and deliverables range from budgeting models and management accounting to treasury, budget-to-actual analysis and consolidated group reporting.
Financial management assessment
A map of financial management gaps, showing where planning, accounting, treasury, projects and management reporting diverge and fail to provide a consolidated view of performance.
Establishing budgeting and management accounting
A methodology for income and expense budgets, cash flow budgets, the balance sheet, responsibility centres, line items, accounting objects, scenarios, plan versions and rules for recording management actuals.
Implementing budgeting and management reporting systems
A working budgeting process: forms, approval workflows, roles, actual data imports, budget-to-actual analysis, reports, access permissions and integrations with accounting systems.
Treasury automation and interactive cash flow budgeting
A liquidity management tool: payment calendar, payment requests, payment priorities, balances, receipts, scenarios, cash shortfalls and payment discipline controls.
Managing project, product and contract performance
A model for assessing the economics of a project, product, contract or business unit: planned and actual margins, variances, their causes and their impact on financial results.
Consolidating group management reporting
Unified management reporting across legal entities, responsibility centres, projects and business units, with rules for consolidation, adjustments, intragroup transactions and data sources.
What the management team receives
Financial business model
Management objects, line items, analytical dimensions, performance drivers, recognition rules and driver owners.
Budget, forecast and scenarios
A clear distinction between the target plan and the forecast, with rules for reviewing assumptions and calculating scenarios.
Payment calendar
Receipts, commitments, payment priorities, funding sources and the liquidity forecast.
Management accounting methodology
Shared rules for line items, analytical dimensions, intragroup transactions, adjustments and consolidation.
Economics of projects and contracts
Planned and current profitability, forecast to completion, impact of deadlines and changes in the scope of work.
Variance review cycle
Factor, financial impact, owner, corrective action, deadline and execution control.
What changes in financial performance management
Results are visible in reporting and in the connection between an operational event, its financial impact, the driver owner and the corrective action.
Forecast before period closeThe financial implications of the operational changes are visible before the close of the month.
Starting point
Changes in timing, volumes, prices or procurement requirements appear in reporting after period close.
What's changing
Changes in operating assumptions recalculate the outlook for P&L, balance sheet and cash flow during the period.
How to check the results
Management sees the expected financial result and range of variances before the close of the month.
Margin driversMargins are explained through factors the team can manage, alongside reporting line items.
Starting point
The change in margin is explained by different versions of sales, production, procurement and finance.
What's changing
One model traces the impact of price, sales mix, productivity, procurement, timing and costs on discrepancies.
How to check the results
For each significant change in margin, the factor, owner and possible corrective action are identified.
Liquidity managementCash flow is linked to sales, procurement, inventory, projects and investment.
Starting point
A positive result in P&L is not accompanied by sufficient cash flow, and the cash gap is detected late.
What's changing
Funding needs and cash gap risk are associated with sales, supply, project and investment plans.
How to check the results
The payment calendar shows future liquidity deficits, sources of coverage, and owners of actions.
Consistent methodology across the groupLegal entities and business units become comparable through a shared financial model.
Starting point
The reporting of the group is formed according to different rules and requires manual adjustments to each reporting date.
What's changing
Line items, analytical dimensions, intragroup transactions and adjustments are defined in one methodology.
How to check the results
The consolidated picture is reproduced according to the general rules without separate manual preparation.
Action on variancesFinancial analysis leads to management action, beyond explaining actuals.
Starting point
Budget-to-actual analysis captures the variance and set of explanations in the reporting.
What's changing
The reason, financial impact, owner, corrective action and deadline are defined for the variance.
How to check the results
For each significant variance, you can see what action was taken and who is responsible for its implementation.
When this practice is especially useful
This practice is needed when financial results depend on operational changes but become visible only after the period closes.
Growth and liquidity management
Revenue growth is not accompanied by sufficient cash flow
More details
- A positive result in P&L does not translate into liquidity.
- Accounts receivable, inventories or CAPEX grow faster than cash flow
- The risk of cash gap is identified shortly before payment
- Sources of funding are discussed after the shortage
- The payment calendar is not connected to operational assumptions
Budget and forecast
The budget quickly becomes outdated after approval
More details
- Preparation of the budget takes several months
- The forecast repeats the budget rather than reflecting the likely outcome
- Changes in prices, volumes, timing or procurement do not trigger a recalculation of the financial result
- budget-to-actual analysis is available only after the month closes
- management does not see the range of possible outcomes
Project or contract business
The economics of the project become clear only after completion
More details
- Contract profitability is assessed only from final actuals
- Repeated work and postponement costs are taken into account late
- The forecast to completion is missing or updated manually
- Commercial and operational changes are not related to project margin
- The project manager does not see the financial consequences of the decisions
Group of companies
The group’s financial position has to be assembled manually
More details
- legal entities use different line items, analysis dimensions and calculation rules
- Intragroup operations require manual adjustments
- Comparability of products, sites and contracts is limited
- the owner lacks a consolidated view of each business unit’s contribution to margin
- Consolidation depends on individual staff and tables
This practice in projects
