Recently I was working on an assignment for my students. I asked them to select a publicly traded company and analyze the firm’s financial condition. Since this is the first assignment of its kind, I decided I should lead by example and prepare a model for my students. Many of them have never been asked to analyze a company before.
I started researching Ford Motor Company back in 2020 to test out some financial models I built. In an effort to save time, I continued using Ford and performed my analysis using data as of FYE 2019.
In the transcript of the earnings call in Q4 2019, the CEO touted the strength of their balance sheet and the liquidity available to them. I dug deeper and referenced the 10-K report, where Ford management said they like to keep an extra $10 billion of availability on their corporate credit facility for “exogenous shocks” to the market.
3 months after that earnings call the entire economy shut down! Say what you want about Ford’s operational issues in 2019. Their financial discipline and foresight was commendable.
Like the large corporations, forecasting is a critical exercise that all small business owners must undertake. I know it can be cumbersome, especially if you use Excel spreadsheets that go stale within a week. I partner with Fathom, a leading financial reporting and forecasting software. As a Certified Fathom Advisor, I went through a rigorous training process so that I can bring all the tools and features of the service to my clients. Fathom’s dynamic forecasting tool allows you to build a roadmap for the future, forecast various economic scenarios, and assess the cash flow impact of upcoming events such as adding a new location, financing a piece of new equipment, or hiring a new employee. Forecasting takes the guesswork out of decision-making and prepares you to withstand “exogenous shocks” that may be lurking around the corner.
Please take my advice and implement forecasting into your business. Remember, no forecast will be 100% accurate of course. A good forecast should be assessed and maintained monthly. Only then can you feel confident in the data to make strategic decisions for your business.
If you have any questions about how to integrate forecasting into your business, please contact me at mark@ampbusinessconsulting.com.
About the author
Mark Ahern is founder and CEO of Amp Business Consulting, LLC near Denver, CO. Mark earned his MBA from DePaul University in Chicago and has over a decade of commercial lending experience, including several years at firms such as GE Capital and Wells Fargo. Mark is also an affiliate finance professor at Regis University.
Amp Business Consulting, LLC
Amp provides affordable CFO and advisory services to small and medium sized business. Amp specializes in reporting, analysis, and forecasting to provide business owners with the tools and information they need to make informed, strategic decisions.