Pub. 9 2020 Issue 4

Pub. 9 2020 Issue 4 33 expect them to weigh in on strategic decision making. Consequently, we advise lenders to help borrowers begin to analyze their businesses from the “bottom-up” using transaction-level data. As it relates to recovery planning, the first step is to construct a dynamic 13-week cash flow roller to identify critical liquidity gaps. The cash flow model should include multiple discrete data sources, which feed into the model, so the uncertainty regarding the timing and amount of various cash f lows can be evaluated. The second tool we advise building is a bottom-up unit-level economic model. The purpose of the economic model is to analyze the two largest unknown dynamics affecting profit variability: the effect of changes to your volume and mix. This model has several components, including a unit-level sales and margin model, which looks at contribution margins by different segments of the business (such as customer, item, product line or business unit) and effects of planned cost-saving initiatives and then feeds into projection tools to forecast changes in mix and product volume on a longer-term basis. 3. Realign Operating Models and Business Strategies While the bottom-up economic model is built to evaluate changes in the business, it is also critical to evaluate changes to the business. This may include assumptions about economic recovery or additional regulation. Nonetheless, we advise lenders to help borrowers identify specific drivers of change to evaluate the impact on future profitability. As operating models change and are realigned to new business strategies, risk profiles will change, too. The lender who is involved at this level should be able to not only better assess risk but also identify opportunities. Right now, every lender is faced with opportunities. Those who are proactive in the financial recovery planning process will serve their customers well, not just for the next few months but for many years to come. This article is for general information purposes only and is not to be considered as legal advice. This information was written by qualified, experienced BKD professionals, but applying this information to your particular situation requires careful consideration of your specific facts and circumstances. Consult your BKD advisor or legal counsel before acting on any matter covered in this update. Article reprinted with permission from BKD CPAs & Advisors, bkd.com. All rights reserved. THE POWER OF PARTNERSHIP WORKING TOGETHER FOR YOUR HOMEBUYING CUSTOMERS For nearly 19 years, Mortgage Investment Services Corporation (MISC) has been a strong partner with Kansas community banks. MISC’s only purpose is to assist community banks to make home loans for their customers. We combine our high-tech features with your face-to-face customer service. Your bank and your customers benefit from this working partnership. • No cost to sign up. No risk to give us a try. • No software or hardware investment by your bank • Free training and ongoing support for your loan officers • Wide range of fixed rate loan products • Free marketing support to attract new families to become bank customers • MISC serves 240 Community Banks in OK, KS, MO & CO • Fannie Mae Approved Seller/Servicer. Call Andrew Holtgraves today to unlock the Power of Partnership! Andrew: (913) 390-1010 ext. 1019 Andrew@MISCHomeLoans.com