By Carl Seidman, CSP, CPA, Principal at Seidman Financial
If you’re like many finance professionals, you experience apprehension when tasked with forecasting large ventures and capital expenditures. The famous quote, “All models are wrong, but some can be useful,” describes the dilemma we face: We can’t be perfect, but hopefully we can be directionally correct because the consequences of missteps can be enormously consequential. For project-driven companies and those with significant capital expenditures, the success of projects — strategically and financially — is a key to organizational growth and financial health.
What if you could forecast major projects and capital expenditures with greater confidence and view them as crucial opportunities — not as the greatest risks steeped in uncertainty?
For a decade and a half, I’ve been introducing integrated planning and forecasting to companies experiencing distress. We’ve needed to employ powerful tools because factors that bring these companies to the brink can be exacerbated by unintended gaffes. Inaccuracy in major project planning and errors in invoicing, collections, costs and disbursements can result in further bleeding of cash and profitability. Walking the wrong side of this fine line may be the difference between a company that ends up in restructuring or liquidation and one that stages a successful turnaround.
Many of the companies that utilize my methods survive because they get a grip on the slippery slope of planning and then control their finances. These companies reach a degree of precision in their forecasting and achieve an improved accuracy in their project planning. They come to understand their project profiles more thoroughly, how controllable activities can be more effectively managed, and how risks of unforeseen or uncontrollable elements can be mitigated. The financial and operational benefits are clear.
But wait, there’s more …
When I return to these companies to inquire how they’re getting on, they often share a similar sentiment:
“Even though we’re out of the woods and in the clear, we’re still using this model.”
The billion-dollar wins aren’t merely the turnrounds; these companies reengineer the processes used to track and analyze projects during and after project execution. Additionally, this awareness leads to a further reexamination of how projects are valued and evaluated in the first place. The successes go beyond financial — they become strategic and cultural revolutions as well.
The AFP 2022 session, “How to Quantify the Value of Major Projects,” will provide a hands-on, step-by-step walk-through of the very project models used to turn around, revitalize, and grow large corporations and small businesses alike. Despite differences between large and small organizations in terms of relative complexity, the planning model and the process are the same.
Key takeaways will be:
- Understanding how to quantify project value, returns and financial benefits/risks.
- Reviewing the key elements of the major project and capex forecasting model and how to integrate it for a company’s financial projections.
- Discovering the degree of granularity necessary to balance the time committed with the desired level of accuracy.
- Gaining greater confidence in the major project and capex forecasting process.
- Learning dynamic modeling approaches, allowing models to stretch into the future, update seamlessly and require minimal mechanical intervention.
Hear from Carl Seidman and our full lineup of speakers at AFP 2022, October 23-26, in Philadelphia.