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 While
the main purpose of a financial model is to generate a forecast P&L,
balance sheet and cash flow, the model should also reflect the key
interrelationships in the business. Only through making the
interplay between KPIs and financial outcomes transparent can the
business manage and monitor the impact of revenue enhancement and
cost reduction initiatives.
Much our financial modelling work goes into understanding the
business drivers and whether the organisation has the KPIs and
performance management systems in place to establish appropriate
targets for the model's operating assumptions. This "front-end"
investment is critical to generating robust financial forecasts.
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