In the dynamic landscape of distribution and manufacturing, the significance of cash in sustaining business operations cannot be overstated. With persistent supply chain challenges, escalating raw material costs, and delayed payments from clients, cashflow management remains a paramount concern for organizations. While some are actively tackling immediate cashflow hurdles, forward-thinking professionals are leveraging three-way financial models to ensure precise cash assessments not just today but also in the upcoming year and beyond. Implementing cutting-edge financial software solutions like Nirmalya Enterprise Platform Suite is essential for enterprises looking to streamline their financial data from diverse sources in real-time, providing the finance team with a comprehensive and accurate cashflow overview for informed decision-making.

What is Three Statement Financial Model and Best Way to Create the Model?

The three-statement model is a fundamental tool that intertwines financial statements to predict income statements, balance sheets, and cash balances for a company. While historically essential, executing this model using spreadsheets has been complex. However, with the advent of business planning and analytics platforms, the process has been streamlined. By integrating all data into live statements, any alterations made to the balance sheet or profit and loss statements automatically reflect in the cashflow statement, offering a precise depiction of the company's financial status and the impact of decisions on cashflow. By unifying the income statement, balance sheet, and cash flow statement into a dynamically connected financial model, decision-making becomes more straightforward as you can analyze growth, profitability, and cashflow against key business drivers, setting the standard for financial planning and analysis (FP&A).

Three Statement Models

When comparing creating a financial model in Excel versus Nirmalya Enterprise Platform Suite, traditional finance managers learn the value of software. Nirmalya offers robust models with a clean structure, three built-in mini drivers, and the flexibility to add custom drivers. The platform streamlines modeling interactions between Profit and Loss statements and Balance Sheet items, avoiding manual formula entry and broken formulas.

When using three statement modeling in Nirmalya Enterprise Platform Suite, mini drivers connect assertions to forecast items like debtor days accurately for Cash Flow depiction. Accountants handle spreadsheets well, but creating a thorough 3-statement model requires advanced expertise, intertwining spreadsheets, innovative thinking, and complex formulas. Choose a model supported by a reliable data platform for seamless integration of consolidated data, budgets, and closures across the three statements by merging data from various systems for a comprehensive organizational overview.

How Does A Three Statement Financial Model Help with Planning?

Implementing a three statement financial model using Nirmalya Enterprise Platform allows businesses to effectively plan for the future. This model provides an accurate representation of how changes in business strategy will impact the income statement, balance sheet, and most importantly, cashflow. In today's challenging business environment, having a clear understanding of how issues affect cashflow in the short and long term is crucial for finance leaders. This financial model offers certainty when making complex economic decisions, helping businesses navigate uncertainties like supply chain delays, inflation, and labor shortages.

It can be challenging to manage day-to-day operations effectively, but the owner realizes the importance of tackling broader issues to ensure long-term viability. One primary concern is the need to upgrade outdated business systems to improve the go-to-market strategy and adapt to evolving customer preferences. With numerous factors to consider, it can be daunting to determine where to focus efforts. However, utilizing an automated three statement model can help the manufacturer evaluate how financial and operational changes will impact the overall business strategy and provide clear direction.

A financial model can help business leaders answer questions about hiring, profitability, cash flow, and the impact of different financial terms. By integrating the three financial statements, the model provides a full picture for making strong economic decisions. Changes in one statement automatically adjust the others, ensuring accurate and clear ongoing analysis. Nirmalya Enterprise Platform Suite gives leaders and their team confidence to move forward with their decisions.

How Does the Nirmalya Enterprise Platform Aid in Three-Statement Financial Model Planning?

Nirmalya Enterprise Platform Suite streamlines the process of adjusting forecasts by utilizing integrated data, eliminating the time-consuming task of manually generating accurate predictions. This not only helps prevent negative cash flow situations but also empowers organizations to utilize positive cash flow for funding growth initiatives. For instance, if a CFO or finance controller identifies an inaccurate average accounts receivable timeframe of 30 days, they can easily pinpoint this as a mini-driver within Nirmalya Enterprise Platform. Mini-drivers are key factors that impact forecasts, with pre-built templates available for debtors, creditors, and stock scenarios. By quickly adjusting the timeframe from 30 to 45 days using the mini-drivers, organizations can make more informed financial decisions.

Nirmalya Enterprise Platform Suite automates the revision of your receivables, cash, and cash flow. Rather than manually sorting through excel spreadsheets and adjusting formulas, you can quickly make changes and instantly see their impact with just a few clicks.
After making adjustments, you can view your updated financial statements and analyze them in relation to your budgetary objectives. Additionally, you have the choice to generate a dashboard that compares your initial budget to your revised forecast. This functionality allows you to view your new data within the context of your original and adjusted cash flow projections automatically, providing valuable insights for decision-making.

Consider the accounts receivable example. If you adjust the timeframe from 30 to 45 days, you may notice a decrease of about 4% in cash on hand six months from now. Yet, keep in mind that you have planned to buy a new piece of equipment in seven months. With a 4% reduction in cash, your liquidity may fall below your desired comfort level.

With Nirmalya Enterprise Platform Suite, adjustments to income statements, balance sheets, and cash flow statements can be made easily, allowing users to see instant impacts on their forecasting methods. This suite simplifies the forecasting process and provides users with a clear understanding of how changes in financial elements can affect their overall forecasts and gain access to instant business analysis to aid in making well-informed decisions. By automating aspects of cash flow forecasting, you not only enhance accuracy but also minimize manual efforts required. To know more about Nirmalya Enterprise Platform Suite, Please Contact us today!