Forecasting can be challenging, similar to navigating through a maze. However, don't fret – with the appropriate knowledge and tools, you can extract valuable insights.

Forecast+, offers customized techniques for various financial aspects, ensuring a comprehensive and relevant outlook. Exciting, isn't it?

Let's dive into the specifics:

1. Revenue Forecasting In Forecast+, we provide you with three main ways to project your revenue:

2. Cost of Revenue, Expenses, Other Income, Other Expenses Here, you have one additional method at your disposal, making a total of four:

3. Balance Sheet Items The methods are the same as above but with an essential caveat for the Bank and Equity accounts. These are auto-forecasted based on the Cash Flow Statement (Bank) and Profit & Loss and Retained Earnings (Equity).

Let's now delve deeper into these methods and how they work:

You have two types to choose from:

To summarise, a Fixed Average recalculates based on the newest actuals but remains constant throughout the forecasted period. In contrast, a Trailing Average continuously recalculates, considering both the most recent actuals and the forecasted figures, thus adjusting for each future month in your forecast period.

Example - Let's consider a scenario where the actuals for the last three months are as follows:

Now let's consider two forecasting methods: 3-month Fixed Average and 3-month Trailing Average for the next three months.

3-Month Fixed Average

The average for April, May, and June is (100+200+300)/3 = 200. This average remains the same for the forecasted period irrespective of the forecast figures for future months.

When a new actual for July (let's say 400) comes in, the fixed average is recalculated considering the last 3 months (May, June, and July), but it remains constant at 300 for all future months in the forecast.

3-Month Trailing Average

For a 3-month trailing average, it considers the last 2 months of actuals (May and June) and the forecast for the next month (July).

For July, the forecast is (200+300)/2 = 250 (since we only have 2 months of actuals here).

For August, the forecast is (200+300+250)/3 = 250.

For September, the forecast is (300+250+250)/3 = 267 (approx).

When a new actual for July comes in (let's say 400), the forecast for August is recalculated as (300+250+400)/3 = 317 (approx). Then, the forecast for September is recalculated as (250+400+317)/3 = 322 (approx).

In summary, Fixed Average uses a static average based on the last n months of actuals for all future forecasts, while Trailing Average continuously recalculates based on the most recent actuals and the forecasts for each subsequent month.

The Average + Growth method combines the Average method with a specified growth rate. Here, you can choose between a fixed growth rate, which remains constant throughout the forecast period, or a varying growth rate, which changes according to the changes in the forecasted data.

This method calculates the average of historical actuals just like in the Average method, but then applies the specified growth rate to each future month.

For example, if the average of your actuals over the last three months is $100 and you specify a growth rate of 5%, then your forecast for the next month would be $105 ($100 + 5%), and for the month after that, it would be $110.25 ($105 + 5%), and so on.

The % of Revenue method is used when you want to forecast a certain item as a percentage of your revenue. This is especially helpful when you are dealing with expenses that vary directly with revenue.

For example, if you are forecasting Cost of Goods Sold (COGS), and you know that COGS typically represents 30% of your revenue, you can input this percentage into Forecast+. Then, Forecast+ will calculate the COGS forecast based on your revenue forecast. If your revenue forecast for the next month is $1000, your COGS would be $300.

Manual Forecasting is a type of forecasting that gives you complete control over your projections, allowing you to set the values according to your judgment or insights. This is particularly useful when trends aren't consistent, or significant changes in business operations are expected.

There are two types of manual forecasting:

Let's discuss these in detail:

Auto-fill Manual

Auto-fill Manual is a method where a manually input value is auto-filled in all forecast cells. This is handy when you want to maintain a certain constant value for your forecast, without the influence of historical trends or growth rates.

For example, if you believe that your advertising expenses will be $5000 per month for the entire forecast period, you can manually input $5000 and auto-fill it for all forecasted months.

Moreover, this method also provides an option to apply a growth factor at a defined interval, thereby simulating different growth scenarios. This can be useful when you anticipate a steady growth rate in your figures, but this isn't reflected in your historical data.

For example, if you believe that your monthly advertising expenses of $5000 will grow by 10% every quarter, you can set the initial value as $5000 and set a growth rate of 10% every 3 months. As a result, the value will increase by 10% at the start of every new quarter.

Override Manual

The Override Manual approach provides maximum flexibility, allowing you to override the value in any specific cell, irrespective of the forecast type set for the line item. This is particularly helpful when you have specific information for certain periods, which may not align with the rest of your forecast.

Double-click any cell to manually override values. The Manually overridden values are highlighted in a different shade.

For instance, if you are using an Average or Average + Growth forecast but know that there will be a one-time major expense in a particular month, you can manually override the forecast for that month without affecting the rest of the forecast.

In summary, manual forecasting in Forecast+ allows you to fully customize your forecasts, giving you the freedom to project your figures based on your unique insights and expectations. This makes it a powerful tool for anticipating and planning for future financial scenarios.

As mentioned earlier, certain accounts like Bank and Equity are auto-forecasted. The Bank account forecast is based on the Cash Flow Statement, whereas the Equity account forecast is based on the Profit & Loss and Retained Earnings. This approach is used because these accounts are not independent; instead, they are a function of other accounts and are automatically adjusted as these other accounts change.

Overall, Forecast+ offers you a wide array of methods to choose from according to your specific requirements and the nature of your business. Whether it's a fixed, trailing, or growth average, a percentage of revenue, or a manual input, you have the flexibility and the power to forecast the way you want. This way, you can make the most informed decisions for your business.

📊 Forecast+ offers a variety of forecasting methods for revenue, costs, and balance sheet items.

🔄 Methods include fixed and trailing averages, growth rates, and manual input.

💹 The % of revenue method is particularly useful for expenses that vary directly with revenue.

🏦 Bank and Equity accounts are auto-forecasted based on other accounts.

✍️ Manual forecasting allows complete control over projections and can be used with auto-fill or override methods.

🎯 Forecast+ provides flexibility and power to forecast according to specific requirements and business nature.

This method is very similar to the Average Forecast method, with the addition of a growth percentage to the calculated average. The growth percentage is applied after the average calculation, increasing the forecasted value for future months.

Manual Forecast Method:

Note: Manual forecasts also allow for the input to grow over time, with the ability to set the interval and amount of growth. Multiple conditions can be set for different intervals.