While getting the numbers right indicates where your business is now and enables you to develop your vision for the future, sound strategy is what will bring the vision you have your mining and resources business to life.
Here we explore four effective business tools that provide the insights necessary for determining successful business strategy.
1: Performance Report
In its simplest form, a well-prepared performance report answers the question: ‘How did we go?’
By directly comparing ‘actual’ and ‘projected’ figures for selected KPIs (key performance indictors), performance data will reveal how effectively the business does or doesn’t achieve key objectives. Armed with this information, you will feel confident when making decisions and implementing changes.
2: Business budget
As far as tools go, your business budget is a fundamental that’s necessary for setting your financial targets.
While a key business goal is to avoid wasting money, an effective business budget will keep tabs on expenditures and cut unnecessary costs, just as importantly, it will aim to consider expenditure that can drive revenue. Taking a pro-active approach to your business budgeting, together with making good use of information delivered by your performance reporting, will allow you enjoy more rewards from your business.
3: Cashflow projections
Cashflow projections allow business owners to estimate the timing and quantity of cash in and cash out of the business over a specific period.
This valuable insight will aid planning and empower you to implement a range of solutions that can dramatically affect your cash position. Solutions may include short-term borrowing or deferring large outlays to tide you over when cash reserves are low.
For many mining and resources businesses implementing large projects over a long period of time, there can be delays in receiving payments as projects take time to complete.
Your cash dilemma will almost certainly include meeting your fixed costs such as rent and wages for your workforce. Cashflow projections will alert you to your likely cash position and, importantly, enable you to implement solutions. Your chosen strategies may include amending the payment terms of your agreement, organising short term finance, deferring unnecessary expenditures until later and calling in late payers. Cashflow projections help you to create more consistent (rather than lumpy) cashflow which will enable you to meet your obligations without financial (or personal) stress, while allowing you to confidently respond to opportunities as they arise.
4: Predictive modelling
Predictive modelling is a powerful tool that enables you to understand often-overlooked relationships between business variables that can affect business outcomes.
Put simply, predictive modelling helps you answer: ‘What would happen if…?’.
For instance, a mining and resources company could use predictive modelling to find out what would happen if they purchased an additional piece of equipment, updated a system or engaged additional workforce. The modelling would include indicators that predicted the additional revenue that could be generated in consideration of the associated costs and other financial management impacts to determine if the strategy is viable or not.
Business insights are the foundation of sound business strategy which in turn provides a framework that not only improves your business operation and outcomes, but gives you clarity and, in turn, financial confidence necessary for feeling in control of your mining and resources business. While important throughout your business life cycle, insight and strategy are even more valuable during times of uncertainty.
For mining and resources business advice, insights and strategy, please contact Brenden Yantch and David Pennell, Accountants and Business Advisors for Resources Unearthed on +61 (0)7 3007 2000 or firstname.lastname@example.org