Finance

1. Budgeting

   Allocating money to what the organisation intends to do, and holding that allocation as a decision rather than a ceiling to be argued upward.

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2. Forecasting

   Projecting where the numbers are heading, revised as reality arrives. A rolling forecast is more useful than an accurate annual one, because it is available when decisions are made.

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3. Cash flow

   When money actually arrives and leaves, and how much runway that leaves. The question that determines whether the organisation survives long enough for the strategy to matter.

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4. Financial reporting

   Producing the numbers other people rely on — internally for decisions, externally for obligation. Accuracy and timeliness pull against each other and the trade-off should be deliberate.

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1. DuPont analysis

   Donaldson Brown, at DuPont · 1912

   Break return on equity into margin, asset turnover and leverage, so the number says where it came from.

   The same return can be produced by a high margin on few sales, a thin margin on many, or borrowed money — and those are three entirely different businesses with three different risks. Decomposition turns a headline ratio into a diagnosis, and it is one of the oldest management tools still in daily use.

   Reach for it when

   When a return figure is being compared across periods or against a competitor and the comparison is doing no work.

   Where it stops

   It works on reported accounting numbers, with everything that implies about timing, policy and judgement. It explains the arithmetic, not the business.

   Developed at E. I. du Pont de Nemours from 1912; see Alfred D. Chandler, Strategy and Structure, MIT Press, 1962.

2. Break-even and cost–volume–profit analysis

   Established management accounting practice · 1930s

   Also known as CVP analysis, Break-even analysis

   How much has to be sold before the fixed costs are covered, and what each sale after that is worth.

   Separating fixed from variable cost gives a contribution per unit and a volume at which the business stops losing money. The insight that survives beyond the arithmetic is about shape: a high-fixed-cost business is fragile below the line and very profitable above it, and knowing which kind you are running changes what risk you can take.

   Reach for it when

   Before committing to fixed costs, and when pricing something whose volume is uncertain.

   Where it stops

   It assumes costs stay neatly fixed or variable and that price holds as volume grows. Both assumptions fail exactly where the decision is interesting.

   Walter Rautenstrauch, The Economics of Business Enterprise, Wiley, 1939; standard in management accounting since.

3. Unit economics

   Developed in subscription and direct-marketing practice · 2000s

   What it costs to win one customer, set against what that customer is worth over the whole relationship.

   Acquisition cost against lifetime value, with the payback period between them. Its discipline is that growth stops being self-evidently good: a business that spends more to win a customer than the customer will ever return simply loses money faster the more it grows, and revenue charts hide that for years.

   Reach for it when

   Whenever growth is being funded, and before increasing spend on any channel.

   Where it stops

   Lifetime value is a forecast wearing the clothes of a measurement. Change the assumed retention slightly and the whole case turns over.

   Developed in direct marketing and subscription practice; see David Skok, “SaaS Metrics 2.0”, 2013, for the standard treatment.

These are other people’s models, named here so you can go to the source and use them properly. The Omnigoal is not affiliated with their authors and is not endorsed by them; nothing of theirs is reproduced here — no canvas, no diagram, no wording. Each is described in our own words, with the originator credited, because the framework is a place to put thinking, not a replacement for the people who did it. Model names and trademarks belong to their respective owners and are used here only to refer to the work itself.

Track cash separately from profit, on a different page. Combining them is how organisations discover the difference too late to act on it.