Chapter 6 : What is the usual process in COMMITLY?

COMMITLY focuses on medium- to long-term cash flow planning. In times of crisis in particular, a clear strategy offers not only orientation but also the chance to meet financial challenges head-on. In this chapter you will learn how to professionalise your cash flow planning with COMMITLY.

Medium- to long-term cash flow planning: a systematic approach

In a crisis in particular, long-term cash flow planning is indispensable. One example is KfW business loans, whose maximum loan amount is limited to the current financing requirement for the next 12 to 18 months – depending on the size of the company. For companies that means: to secure the necessary financing, precise and forward-looking planning is required.

Let us briefly illustrate with a hypothetical example how COMMITLY can support medium- to long-term cash flow planning:

Step 1: How do you get started?

With COMMITLY you can optimise your cash flow planning and get an overview of the financial developments of the coming months. To do so, follow these steps:

• Set up the forecast You are in the planning tab and enter all the items relevant to you in the forecast column (FC), for example incoming and outgoing payments. Start with your most important expenditure items, such as salaries, travel expenses, accounting, consulting, marketing, etc. These are usually easy to forecast.

• Gross approach Enter all amounts including VAT, since the transactions arrive in the account or are paid from the account as gross amounts.
• Categories Adapt the categories to your needs. Help: Creating new categories

Step 2: Synchronise and analyse

Regularly synchronising the data (possible up to 4 times a day) keeps all data up to date and makes cash flow monitoring simple. Unplanned items, outliers and deviations from the plan can be spotted faster that way.

Step 3: Create a plan and gain insight

When a company grows, investments are often the next step. For the bank to approve an overdraft facility, however, detailed planning for the financial year is required.

With COMMITLY you create this plan directly on the basis of the current forecast.

• The plan then already contains all the available actual figures as well as the values from the forecast.
• On that basis you finalise the plan from your point of view and hand it over to the bank.

Coordinating with third parties (banks, investors, shareholders, etc.)

For loan negotiations or investor talks, COMMITLY offers a structured procedure:

• Fixed plans: by ‘committing’ your plans they are fixed, which means they can no longer be changed. Read our article about it: Committing, what is that about?
• Target/actual deviations and reports can be produced on that basis.
• Because the plan can no longer be changed, you are also always aligned with the bank.
• Committing also turns the plan into the new forecast.

• Because the plan can no longer be changed, you are also always aligned with the bank.
• Committing also turns the plan into the new forecast.

We have described the considerations about which plans should ultimately be sent to the bank here: Which reports banks want to see

Keeping your flexibility, even when the future turns out differently

Even after a few months it can happen that planned incoming payments fail to arrive. No problem – adjust the forecast flexibly in COMMITLY without changing the values already sent to the bank, and keep your operational overview.

• Adjust the forecast: update the forecast to keep an eye on developments.
• The plan stays unchanged: the committed plan remains in place, only the forecast changes.
• Target/actual comparison: compare the current figures with the plan sent to the bank.
• Consistent reports: reports continue to refer to the committed plan.

New business opportunities through targeted financial planning

Growth requires planning. With COMMITLY you can assess new business opportunities realistically and spot the financial effects early.

Start with scenario planning on the basis of your forecast. That way you see how much capital your project requires and whether a (subsidised) loan is needed.

To keep your operational planning clear:

• Investments are recorded as cash flow from investing.
• Loans run under cash flow from financing.

COMMITLY uses the direct method in order to distinguish between operating business, investing and financing. You will find a detailed explanation [here].

That keeps your operating cash flow clearly structured and helps you take well-founded decisions – for a successful expansion.

The need for a revised plan

It often happens that the bank asks for updated planning – understandably, since business developments change all the time.

• Create a new plan: use your current forecast to create the revised plan.
• Coordinate with the bank: present the new plan to the bank and agree it with them.
• Commit the plan: once it is approved, commit the new plan in COMMITLY.
• Start the cycle again: the process begins anew – always with current and precise data.

Summary

• Committed (fixed) plan: a firmly adopted plan (for a financial year, for example) that can no longer be changed. It serves as the basis for target/actual comparisons and for the forecast.
• New plan: if adjustments are necessary, a new plan is created on the basis of the committed plan. Before committing, the old plan should be set to inactive.
• Forecast: the forecast combines actual data and the committed plan and always stays flexible. It can be adjusted at any time, while the committed plan remains unchanged.
• Deviations: if the forecast moves too far away from the committed plan, a new plan can be created on the basis of the current forecast (step 2).
• Rolling planning system: the forecast is adjusted continuously (“rolling”), while the original annual plan remains unchanged. That keeps the review against the original targets intact and the forecast always up to date.