“It’s just a matter of time
We are running out of time
Timing is everything
A stitch in time
Time is not on our side
Time (and tide) waits for no man”
These are just some of the everyday sayings we use on a regular basis.
Our lives are all about time
Keeping time, planning our best use of time
Timing our holidays
Time to work, time to play
Time to sleep, time to rise
Imagine life without time! Quite a stretch! Probably a bridge too far!
At best, a world without time would be topsy-turvy. At worst, chaos!
And we take it all for granted.
Our lives are just one big schedule!
But could we do without it?
Possibly if we lived alone on a tropical island.
But as long as live in an integrated society, I would venture to suggest that time and routines and schedules and organization are essential ingredients in our lives.
And in a very similar way, when we talk about corporate performance and particularly measuring and forecasting performance, time is of the essence.
As are routines and structure and organization. Our performance rhetoric is about daily, weekly, monthly, quarterly and annual performance.
One of the best business lessons I ever had, many years ago, was that every business has a pulse- just as we do.
Yes I was very fortunate and privileged to meet Henry Sonnenberg, Chairman of a large international company, during my early business career.
As group chairman of an organisation operating in 78 countries around the world, he had a daily report of key business metrics on his desk by 11.00 am every day – the pulse of the business!
Yes, a key element of successful business management relates to measuring the pulse of the organization-the key metrics- on a daily basis.
And another key element of business success is to make informed business decisions, decisions informed by appropriate, flexible efficient financial models.
Financial models are about time.
Models are predictive tools to determine performance and results over a period of time and in specific time periods.
Financial models can also be used to calculate key performance metrics, such as Net Present Values (NPVs) and Internal Rates of Return (IRR %) – all based on correlating cash flows with specific dates.
I am often amazed by the limited use of financial models in business today – particularly in the light of the complexity and rate of change confronting management on a daily basis.
Is it a lack of belief in the value of financial models or simply a lack of expertise within the organisation to construct a fit for purpose reliable model?
The latter is relatively easy to address – the former needs courage and commitment and belief in the concept and practice of modelling.
Colin Human CA (SA)
Goalfix Financial Modellers