Generate income and expense forecasts

Warning
Manager’s forecast capability is not fully implemented. Some selections are allowed that have no effect. Others can produce unexpected results. Nevertheless, when used properly, the capability will produce accurate and useful results. Pay close attention to Notes and Warnings in this Guide.

Forecasts allow you to predict income and expenses, and therefore profitability, based on assumptions about rates of growth or decline in business results. Forecasts are different from budgets, described in this Guide. Budgets are plans for specific time periods, which often take into account assumptions about growth and are then compared to actual results. But forecasts project results, potentially for many time periods, based on a fixed set of assumptions. They can, in fact, be converted into budgets, as described below.

Forecasts require you to take steps in multiple tabs:

  • The Settings tab, where you define your forecast assumptions and content, and
  • The Reports tab, where you define specific forecast reports for desired time periods.

Define forecast assumptions and content

To use forecasts in your business, first go to the Settings tab. Click on Forecasts:

Define your forecast assumptions:

  • Date will be prepopulated with the current date, but this may be edited. The date is the starting point in time for forecasts, that is, the date from which growth or decline will be calculated.
  • Repeat defines the calculation interval for increases or decreases in income and expenses:



  • A Growth field appears after an interval is selected:



    If you wish to forecast increases in income and expenses, enter a positive number. Negative numbers will forecast decreases.
  • Description allows you to characterize the forecast for later identification.
  • Account and Amount fields are the starting points for forecasts. These could be prior accounting period results or new estimates. Only those accounts you enter will be included in forecasts, regardless of your existing chart of accounts, so you may wish to include only those accounts likely to be significant. Use the Add line button to add additional accounts. Be sure to enter expenses as negative amounts.

Click Create to save your forecast assumptions.

Notes
Manager will allow you to select balance sheet accounts when defining forecast settings. However, these accounts will not appear in a forecast, because the Forecast Profit & Loss Statement report does not include the balance sheet. However, there is no harm from including balance sheet accounts when defining forecast settings. These may prove useful to you when balance sheet capability is added to the overall forecast capability in the future.

Be careful to match intervals, growth percentages, and amounts to the reports you will eventually generate. For example, if you will be forecasting monthly results, enter monthly assumptions.

Warning
Manager allows you to create multiple forecast definitions on the Forecasts page under Settings. When you do so, however, all settings will be applied separately to forecasts generated in the Reports tab. In other words, definitions will be cumulative. You cannot choose which forecast settings to apply to any given report.

This characteristic can actually be useful, however. You can use it to assign differing growth assumptions to various accounts. For example, you could define settings for income accounts with a 5% annual growth rate and settings for expense accounts with only 2% annual growth.

Example
Brilliant Industries wants to explore future profitability for the second calendar quarter under the assumptions of 5% growth in monthly revenue, but only 2% growth in monthly expenses. It defines two sets of assumptions, one for income and another for expenses:



Define forecast reports

Once your forecast settings are in place, go to the Reports tab and click on Forecast Profit & Loss Statement, New Report:

Note
The report does not appear in the Reports tab until at least one set of forecast assumptions is defined in the Settings tab.

Define the report:

  • Title can be any distinguishing phrase that will identify the forecast for future reference. It will appear on the completed forecast.
  • Description will appear only in the Forecasts listing in the Reports tab. Here, you might include brief annotations of the assumptions used to avoid having to open the report.
  • From and To define the date range of a column on the report.
  • Column name is optional, but useful when comparative forecast periods are included. If left blank, the end date of the period will be used as the column name.
  • Footer lets you add notes to the report.
  • Show account codes, if checked, will add any account codes in your chart of accounts to accounts included on the report.
  • Exclude zero balances eliminates blank content when less detailed forecasts are created.

Example
Brilliant Industries defines a Forecast Profit & Loss Statement including each month in the second quarter:



The following report is produced:

Converting a forecast to a budget

Forecasts can be converted to budgets. While viewing a forecast, click on Copy to budget:

The Edit screen for a new Profit and Loss Statement (Actual vs Budget) will appear. If your forecast was simplified, other accounts and their budgeted balances can be added at this point.

Click Create to save the budget.

Example
Brilliant Industries is satisfied with the its second quarter forecasts. It creates a budget:

Note
When multiple columns are included in a forecast, only the first column is included in a budget generated from it. That is because the Profit and Loss Statement (Actual vs Budget) can only track performance against a single budget.

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