Scenario analysis forecasted cashflow

The organisation consists of 5 divisions, who are responsible for different offerings, who all forecast their own cash flows according to 4 different scenarios: best, worst, most likely and submitted.

Given the challenges to the travel industry during the pandemic, our client was changing some of their service offerings which also needed to be modelled and forecasted.

Approach

We created a consolidated forecasting cash flow model based on the intricacies of each  division and the different scenarios, which involved multiple steps, including:

• Scoping workshop to understand the different forecasting methods
• Understanding the current and new offerings, which are most volatile and which need to be able to be changed within the model
• Understanding the  "overlays", such as financing, tax and leases and how these affect the forecasting of the entity as a whole
• Clearly defining the four different scenarios, the variables and how these will be presented in the model
• We designed a skeleton that modelled all of the above points and after discussion and consensus developed the model further to produce the required outcomes.

Outcomes

The forecast model we produced was highly interactive, allowing the user to change variables that directly affected the forecasts of each individual division as well as the organisation as a whole. In addition to this, the user could change any of the four scenarios or select the desired scenario to be viewed alone.

Other outcomes included:

• Monthly cash flow forecast for 5 years for each scenario
• Monthly balance sheet forecast for 5 years for each scenario
• Monthly income statement forecast for 5 years for each scenario
• Individual cash flow statements for each different division.
• A dashboard that showed different KPIs and financial ratios for the forecast
• A second dashboard provided a comparison of different forecasted years as well as a comparison to the different divisions over time.

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