How to Ensure Your Mine Site Budget is Water Tight
Mine firms big and small share universal financial management responsibilities. Proper financial management and budget planning helps rejuvenate revenue streams and possibly create new revenue opportunities. Comprehensive mine site financial management and planning also holds the potential to help mining corporations weather downturn markets and fortify themselves against stiffening competition. Take advantage of the following outline to make sure you’re not letting anything slip through the cracks of your mine-site budget and cost management.
Driving Productivity Improvements
There is a strong cyclical nature to the mining industry. Sometimes finding themselves at the mercy of Fortune’s Wheel, even top mining firms across the world can find themselves at the bottom of their budgets after a boom bust. Therefore, mining firms, whether riding a boom or weathering a downturn economy, need to focus on driving productivity improvements. Improved productivity during a strong mining market promotes increased profits, which are obviously desirable, regardless of how well the market is performing. What’s perhaps more important though, the profits produced through improved productivity also serve to keep the company strong in times of a poorly performing market.
Financial management and budget planning are key drivers behind improved productivity. It’s vital that these components stay connected. Primarily, there needs to be a comprehensive degree of financial visibility. Throughout the mining industry, there is significant evidence that Boards and senior management are calling for an increase in this type of visibility. The ability to see the entire scope of a mining firm’s financial picture is frequently impeded because vital statistics and financial information are often buried under numerous levels of operational numbers.
There is growing demand for mine-site financial managers to increase the visibility of a larger, more detailed range of statics. These numbers include the firm’s individual, unique numbers as well as industry wide trends and KPI’s. Ensuring that a firm’s numbers are considered in relation to the industry and the performance of their top competitors helps create a more realistic, accurate understanding of their fiscal performance, as opposed to a skewed perception void of concrete relation. Furthermore, making these numbers highly visible to the key decision makers of the firm creates a greater degree of control.
Mine-site financial planners, mining firm budget managers and those in similar positions can affect significant, positive change in the current and future health of their firm by assigning greater importance to financial visibility and its powerful byproduct of improved control. As part of this, performing in-depth plan versus actuals analyses allows for extremely valuable variance reporting. This type of reporting grants an improved understanding of the reasons and contributing logic behind the causes of specific, significant activity underlying a company’s performance.
A great deal more can be done to properly plan and manage budgets when armed with the vital information garnered from variance reporting. While the ideal situation would include a flexible budget, it is usually only a minority of companies that are able to enjoy said flexibility. However, incorporating variance reporting does help facilitate some degree of liquidity in budget, providing strong indicators of areas that are matching up well with their budgetary expectations and those that need to be adjusted accordingly.
Another powerful, invaluable financial management and budget planning tool for mine sites is the use of past and present data sets, including plan versus actual, to improve prediction capabilities regarding capital and operating cost structures. Harnessing the ability to predict the financial implications of changes in the mining environment is of critical importance to a mining company’s success.
Centralized Financial Platform
Granted, there exists great power in the inherent knowledge that accompanies successful predictions. But this highlights the important responsibility of mining-firm financial managers to properly present these predictions and convincingly show the right, key confidence factors to establish a strong enough case for the best course of action. Board members look at the financial profile of a company much differently than the financial managers and budget planners. This highlights how beneficial a central platform can be for the financial management of a company.
A robust software suite, financial toolbox or budget-purposed program enables in-depth analysis and the generation of different scenarios using auditable and validated information. Mining corporations who have adopted this as part of their standard operating procedures are able to consistently expose the strengths and weaknesses of the mine plan and provide critical information which management can use to act upon. In essence, this mode of operation serves as a pervasively effective means of bridging the gap between the mine and the boardroom.
A predictive environment, obviously, isn’t always possible. When unexpected events do occur, such as equipment failure, weather-related events, fluctuations in the labor market or a major shift in commodity prices, solidifying your understanding of the financial impact on the business is crucial. You need to be able to make informed decisions based on your financial analysis to promote cost-saving, performance-enhancing agility. Sometimes, this also involves a modicum of pride management as well. For example, some financial managers and budget planners have taken their mine even further down the wrong tunnel simply due to an unbending adherence to their original projections, insisting that the market or weather will randomly come back around to match up perfectly with the original budget or financial plan.
Regardless of the degree of planning or certainty applied to the initial budget or cost assessment, the mine’s vitality can often hinge on management’s ability to reforecast. Standardizing financial costing models, enabling fast consolidation and central control of underlying assumptions can provide a strong component of successful flexibility.
Comprehensive Financial Planning
Comprehensive financial planning should be considered a prime objective necessary for excelling in today’s mining environment. Increasing a firm’s financial data mining, analysis, planning and replanning, combined with improved access to information for technical and operational decision-making, delivers more efficient, more productive mining and increased certainty for key stakeholders.
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