Looking to begin forecasting? Contact us to go through your options together
The right kind is dependent on what you want to achieve from the process. There’s a smorgasbord of options that are in the clouds or on the desktop.
We’ve tried each of them and they’re all useful for their purpose. However choosing the right one needs some careful analysis:
What’s your Goal?
When preparing a forecast, a client will usually tell us they want to do one (or a multiple) of these three activities:
- They want to forecast what they think is going to happen
- They want to set some company targets
- They’d like to monitor ongoing progress
It’s useful to really know what you’ll be using your forecast for, before you find a suitable forecasting system.
To find out what’s coming up, you need to go through every item in your cashflow statement, balance sheet and profit and loss statement. Looking at historical trends, you can predict the kind of run rate and growth rate expected before looking at your planning, and what’s happened recently (for example, a recent addition to the team). This kind of forecasting is very useful when there are issues with cashflow or tax payments.
Setting targets can be confused with forecasting because often our intentions are different from performance. Throughout the year something significant may change that will change whats going to happen for the rest of the year. The forecast will then change, but the targets will not as they’re usually agreed in advance, and its unfair to change the goalposts in the middle of the game. But it’s not helpful to continue planning on making the budgeted amounts when something significant has changed.
The ability to monitor actual results against these forecasts is a big help to monitoring assumptions and progress towards a target.
How often will you look at it?
How often you’ll monitor progress might also weigh in on your decision. The more often you’ll review progress, the more automated you’ll want it to be (trust us!).
A Three Way?
A thorough forecast will model your business in three ways, through the profit and loss statement, it's impact on cash flow and the impact on your balance sheet.
Cloud or Desktop?
We’ll never argue that more collaboration and having a single source of data is a bad thing. But you also have to weigh up the performance and usability factors against it being available everywhere.
A cloud option may integrated better with your accounting software. This sounds positive as the time saved manually inputting figures is quantifiable. But sometimes manually looking over and entering data gives you a better chance of catching errors that look wrong and gives you an opportunity to better understand of the figures.
Flexibility vs Robustness
Spreadsheets can do whatever you like, which is great! But even in experienced hands there are many mistakes that can be made that will throw your figures out.
Cost
There’s the price you pay to enter the game, and the price you pay to play the game. Cloud systems can go for anywhere between $20 and $50 per month ($240-$600 per year) while desktop software costs around $500 on off.
The price to play the game includes training, upkeep and upgrades. All need to be considered together.
But as Warren Buffett says “Price is what you pay, Value is what you get”.
Looking to begin forecasting? Contact us to go through your options together