Financial Forecasting

Financial forecasting done properly, the FDPack way.

The unique FDPack forecasting methodology works with a high level of detail and double entry discipline to ensure we do the job “properly”. Detailed, accurate and integrated.

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What do we mean by
“financial forecasts done properly”?

Actual accounting statements are prepared with the discipline imposed by the double entry debit and credit system which means that, for example, you can’t record a sale into the P&L account (a credit) without also recognising that there is also a debit side to the transaction being either an invoice issued to a debtor or a cash receipt.

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Profit & Loss

cashflow

Cashflow

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Balance Sheet

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Thank you for helping us to get our figures together. I can now sleep better at night.

William Moore, CEO of AirBox Systems

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How we Forecast

When it comes to forecasting anyone can create a profit & loss on a spreadsheet by simply listing revenue and expenses, but a P&L on its own will only tell part of the story.

For example, will the business have the finance it requires to deliver the predicted level of activity and what does the balance sheet look like at the beginning and end of the forecast period?

Financial modelling and rolling forecasts

The unique FDPack forecasting methodology works with a high level of detail and double entry discipline to ensure we do the job “properly”. Our model is built with the following  structure:

  • Sales & Purchases – for each category specify cash or credit and on what payment terms?
  • Fixed Assets – forecast acquisitions and disposals by month with an updated depreciation schedule.
  • Accruals & Prepayments – separate expenses that are accrued or prepaid.
  • Payroll – include all payroll taxes, employee and employer pension contributions and other benefits to replicate the actual payroll. HMRC payments are scheduled for the following month.
  • VAT – apply the appropriate VAT rate to each type of transaction above. Input and output VAT is calculated and quarterly payments scheduled.
  • Corporation Tax – the CT provision is calculated for the P&L and the cash payment scheduled for the following financial year.
  • Financing – include loan repayments or draw-downs, issue of share capital etc.
  • Bank – identify all cash flow movements arising from the forecast transactions.

Drill down into the detail

Having separated the forecast into different transaction types and attached the appropriate accounting codes, our FDPack software is then able to create all the double entry transactions that describe the forecast or budget.

This creates a single database containing, actual, forecast and budget transactions all in the same double entry format, meaning that they can be easily analysed and presented in whatever combination is required. 

If you drill down into any line of the forecast, you will see transaction level detail and not just a single figure, which is the assumed opening/closing balance movement used by some short cut forecasting methods.

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Save Time with Smart Reporting

Like all jobs that are done properly, our FDPack methodology is initially more demanding and time consuming but has significant long-term benefits for the accuracy and reliability of the forecasts and budgets.

Applying these disciplines to forecasting and budgeting ensures that the three financial statements are integrated and reassures stakeholders that the business really understands the mechanics of its finances and its cash flow.

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“The FDPack modelling technique is like renovating a classic car. At one point the parts are all over the garage floor but, by the time you have cleaned them up and put them back together again, you have an intimate knowledge of how the car works. Like any classic car it also needs continual attention to keep it running smoothly”

Simon Phippen, FDPack Consultant.

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Blogs

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