Balance Sheet Design
LEADING QUESTIONS FOR A BALANCE SHEET DESIGN:
Are Income Statement, Balance Sheet and Cash Flow Statement correct, coherent and consistent with each other? Especially is “Profit for the Period” figure identical for Balance Sheet and Income Statement?
Despite arithmetical consistency, do the results make “business sense”? For example, is the “receivables turnover” measure in conformity with the measures of the sector of the company?
Do we need more resources to achieve the targeted scnarios? Is it worth the cost of procuring the needed reources?
DESIGN A PARAMETRIC BALANCE SHEET TO:
Account for dynamic constraints to balance incompatible targets.
Design resources, processes, variables, parameters and targets completely.
Test performance by simulating targets and constraints.
Use prices, promotions and operating volumes as parametric decision variables.
Adjust customer service level to achieve strategic profitability.
Save time by reducing analysis and decison making time from weeks to hours.
USE THE PARAMETRIC BALANCE SHEET DESIGN TO MAKE DYNAMIC DECISIONS.
Parametric Balance Sheet design keeps all the other business processes consistent from end to end.
Balance sheet does not function as a safety measure, until all contradictions, inconsistencies, and deficiencies are accommodated by the user.
After all accommodations take place, Income Statement, Balance Sheet and Cash Flow Statement are generated simultaneously. As such, Reflex converts all business processes from end to end, into a fully integrated and monolithic holistic system
By making parametric scenario simulations under capacity constraint:
- Make cash flow based value increasing decisions today.
- Refrain from decisions that lower the NPV of the cash flow.
- Announce the simulation parameters that optimize the value of the company as operation targets.
- Determine the cost of additional resources that are required to attain the targeted scenarios.
- Decide whether additional resource costs should lead to the revision of targets.
The decisions that increase the value of the company are fed constantly by cash flows. Thererefore the concept and the set-up of Dynamic Cash Flow is the irreplaceable vital essence of Reflex.