When presenting a financial plan to potential investors, one of the most important slides is the ‘use of funds’ slide, which outlines how the funds raised will be spent. It’s common to see the use of funds slides expressed as percentages, but this can be a mistake.
For one, percentages can be deceiving. The use of funds slide is a visual picture of the allocation of resources, and tiny shifts in percentages can create a drastically different picture. For example, if an investor wants to understand the balance between spending for operations versus spending for R&D, an increase in operations from 40% to 45% versus a decrease in R&D from 40% to 35% would look exactly the same in percentage terms, when in reality they represent a major shift in resources away from R&D.
Expressing the slide as absolute numbers would provide a more accurate picture of the plans. The investor could clearly see the shift in resources to operations that the adjustment to the percentages would represent.
Using absolute numbers also has the benefit of painting a clearer picture of the total resources that the organization is dealing with. Most investors will only be able to understand the size of the budget if they understand the total funding being raised.
Above all, the use of funds slide is a snapshot of an organization’s resource allocation, and it should be as accurate as possible. Expressing the slide as percentages may make it easier to compare to other slides, but it can also be deceiving. A better approach would be to express the slide as absolute numbers and give investors a better sense of the budget and how resources are being allocated.
