A regional energy company engages Darby to provide complete FP&A services
As a regional energy company found themselves in a challenging commodity-price environment, the management team required a more insightful budget and rolling forecast to ensure spending did not outpace cash generation. Management also needed a better understanding of how key investment decisions would impact cash flow and profitability.
Company management found itself needing more insightful information to make tough decisions while experiencing the depths of the Oil & Gas downturn. Management decided to implement a bottoms-up budget and rolling forecast to ensure they did not outspend cash generated from ongoing operations. After surveying the market for possible solutions, Darby was engaged to provide ongoing FP&A services, including an annual budget, rolling forecast, monthly management reporting and decision support.
FP&A Solution Roll-out
Month 1 of the engagement focused on importing the company’s historical and current-year financials into the market-leading budgeting tool we utilize; the tool ensures the cost of delivering FP&A services are efficient and cost effective. We then had several collaborative discussions with management and key accounting staff before developing the company’s budget from the bottom up. We used over 10 forecasting methods to build both intelligent financial and non-financial projections. Non-financial budget/forecast schedules were created for each department (i.e. budget owner) in order to collect necessary budget/forecast inputs.
Month 2 was focused on collecting inputs for the budget from identified budget owners by sending (and then receiving) populated budget schedules to maximize efficiency. With the necessary information now collected, we created the company’s first comprehensive bottoms-up 5-year plan, which included a monthly budget and 4-year outlook.
Months 3+ were focused on providing continued FP&A support, according to the calendar that was created with management and accounting staff in Month 1.
The company is continuing to improve its profitability and liquidity with its continued use of FP&A. Darby continues to provide FP&A support by leading the budgeting/forecasting process, providing monthly management reporting (including cloud-based dashboards, reports and scorecards) and decision support. Management’s initial success was due to its close involvement with rolling out the budget process to employees. Management’s continued success is rooted in its use of decision support (i.e. ‘what-if’ analysis) before making key decisions.