Financial modeling is a common tool used in business to make projections about potential outcomes. These projections can take many forms, but they all answer the question, “What are you going to do with this money that we’re about to give you?” Lenders, investors, and other business stakeholders often rely on financial modeling to make decisions about whether or not to provide funding and other resources.
Any successful business operator will tell you that having a set of reliable financial documents is essential to running a successful company. Good financial projections will forecast discretionary cash flow, identify required working capital, and demonstrate the company’s ability to service debts and deliver a return on investment. Without this critical financial information, it would be very difficult to make sound decisions about how to allocate resources and grow the business.