Financial Forecasts in a CVA

9 August 2017

Why do I need detailed financial forecasts to get a CVA approved?

If you are thinking of making a CVA (or IVA/PVA) proposal to your creditors, one of their critical prerequisites is your CREDIBILITY. Think about it: many of them will have been chasing you for weeks and may even have issued a Winding Up Petition. If you come back to them with what they may see as yet another promise about to be broken, or with a less-than-professional proposal to pay them, you can understand that they will need some convincing.

That's where our skill in helping present forecasts for your business comes in. We help give you credibility so that, when you stand up in front of your creditors and suggest to them that you will pay them X pence in the , spread over the next five years, and that you will be paying them on time for all future supplies, they are inclined to believe you. That's the job of work that well constructed and presented forecasts do.

We are often asked what sort of forecasts are required. The best starting point is whatever you yourself are used to using for your own management purposes. After all, these will be in a format and style with which you are most familiar and therefore give us the best insight as to which aspects of your business are most important.

Ultimately, a CVA proposal is a commitment to pay cash, of certain regular amounts, over a predetermined period of time. It is not an offer to pay profits. Therefore it is the cashflow element of the forecasts that is actually most critical. Having said that, our standard approach is always to forecast not only the cashflow, but also the P&L and Balance Sheet, all consistent with one another. All three are required for any proper analysis.

The reality of business is cash coming in and going out; it is accountants who then allocate those cash transactions into different periods of time and call them P&L accounts. Our template happens to be driven off a forecast P&L and Trial Balance (TB); on that basis, the assumptions converting the P&L back to the expected reality of cash flow become critical. We can, however, work equally well with a forecast whose starting point is cashflow.

If you do not regularly make use of forecasts, then that in itself tells a story and may well be part of the reason your business is in the predicament it is. Again, we can help you resolve that absence, whether with a short term cashflow template and/or the longer term combined template (P&L, CF & B/S). Either way, the emphasis is on restoring predictability, improved decision-making and, thereby, credibility and a successful outcome.

Below is a snapshot of a cashflow forecast when a business is in a CVA.


A forecast is not a crystal ball that tells us how the business will perform but it is a tool that helps to paint a picture of the viability of a company that is undergoing a restructure. It is also a balancing act between being too bullish, and making promises that there is a risk of the business not being able to meet, or too conservative so that creditors are unimpressed by the return.

Like all analysis, it is important to have accurate facts and figures as to the company's position to help make an accurate forecast. The more information that we have at the early stages the easier it is to help. That said, if you are struggling to get financial information out we can recommend accountants and perhaps part-time directors to help.

Financial Forecast

Categories: CVA, What is a CVA or Company voluntary arrangement?

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