The importance of forward financial planning

by The Times 100 on Thursday 16th April, 2009

For a business to survive it needs to look ahead, decide the budget available and plan how the money is going to be spent. Key people involved in such decision making and future business planning are management accountants. Management accountants are specifically trained through organisations such as The Chartered Institute of Management Accountants (CIMA). Their focus is on financial forecasting and they play a strategic role in the management of large companies, such as ITV.

ITV is considering whether it needs to raise cash after meeting with its leading shareholders. Cash flow is fundamental in strategic planning. ITV currently owes £730 million and its short-term trading remains poor. Advertisements bookings are expected to fall by 18% in April for ITV1 although growth for ITV's digital channels may ease the decline. Although ITV does not have to repay any debt until a £335 million bond falls due in March 2011, it is important to raise enough cash to manage current debts. (The Times, 7 April 2009).

ITV believes it could raise up to £500 million through a rights issue, but this would only go ahead if the board decides it is necessary. One shareholder said that he would probably support a rights issue and he was reasonably enthusiastic that value still existed in the broadcaster (The Times, 7 April 2009). Read the Times 100 case study on CIMA, the Chartered Institute of Management Accountants. Management accountants look forward to the future and use financial information to advise companies on forward planning.

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