PLEASE SIR, MAY I HAVE SOME CASH?

July 28, 2020 Johnny Kipps
forecast5
The UK’s planned infrastructure bank is likely to need accurate forecasting before granting loans now that the annual 8 billion euros from the EIB have gone. Europe’s non-profit investment bank was established in Kirchberg, Luxembourg in 1958.

In the post-COVID world, old-fashioned bank-loan regulations just won’t cut it any more.

Last week the Financial Times reported that the Treasury is drafting a blueprint for an infrastructure bank that will deliver on Boris Johnson’s election promise to invest in infrastructure projects in the UK’s left-behind areas and provide billions of pounds’ lending for capital projects.

The bank, to operate outside London, would partly replace the European Investment Bank that lent some 8 billion euros annually to this country for projects from Crossrail to sheltered accommodation.

Various ministers, including the Chancellor, were reported to have met with the PM at Chequers over the week-end to thrash out a plan that is likely to be revealed in Rishi Sunak’s autumn statement. With lots of interested parties throwing about ideas from a Green Investment Bank to an Export-Import Bank, this lender will not only have to be many things to all people—but have a successful track record from Day One – or the critics will bay for blood.

Past no indicator of future

Historical accounting does not anticipate results. While proper financial disciplines are only to be expected from all loan applicants – who are likely to range from behemoths to beauty bars if it caters to all the various voices – how they see the future success of their businesses will matter more than how well they did before coronavirus.

Surely a key discipline should for applicants to submit fleshed out and fully auditable forecasts as part of the applications, with these being built into the loan covenants? And requiring actual results to be delivered in the same format as forecasts would facilitate simplified, like-with-like comparisons, enabling the development of a “comply or explain” reporting environment.

Consequently, periodic performance reports would focus not only on traditional tools like interest cover but require comprehensive variance analyses showing—and where necessary, explaining when actual results differ substantially from forecasts.

The investment bank could decide the period to call for reports – generally this would be quarterly or half yearly – requiring rolling forecasts, integrating actual performance with forecasts, line by line and updating the expected financial results – and importantly – resource and requirements to project completion..

A new approach

And we just happen to have that forward-looking control tool – Forecast 5. This popular forecasting program will provide early warning of risks appearing on the horizon, such as a growing working or long-term capital shortfall.

Traditional spreadsheets just don’t hack it as sound, simple to use forecasting tools for they easily harbour hidden errors – a quick glance at the horror stories on the EuSprRig website proves this point, whereas Forecast 5 has been purpose-built and uses four way, balanced reporting to ensure that results are 100% accurate.

Designed to be user-friendly with a familiar, Microsoft look and feel, Forecast 5 provides accurate profit and loss and balance sheet performance reports, gives a clear insight into cash- and funds-flow and allows for easy and quick integrated reporting. It provides “sensitivity” analyses and generates variance reports, rolling forecasts and a number of supporting schedules.

You can produce your first forecast in half an hour. Prove it by downloading the 21 day free trial. Without it, periodic performance variance reports—to the new infrastructure bank or to shareholders—will be costly and time-consuming to generate regularly.

Click here for a 21-day free trial of Forecast 5, the acclaimed financial forecasting program.

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