Forecasts can be used to create a budget, or to plan scenarios under different circumstances, or for target setting –almost any time you need projections that may not be as formal as your budget, and forecast is a great place to start.

If you are using QuickBooks Online Advanced you can now create forecasts based on your own actual data, and apply percentages to your income, cost of sales, and expenses to test different scenarios.  Probably easiest to show you how.  

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Check out the video:

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To get started with creating a forecast, you have several options. You can create a forecast for the remainder of the year, up to two years, or even three years.

You can choose to use a forecast based on an average of actuals from the past three, six, nine, or twelve months. This is particularly useful if your business doesn't experience seasonal fluctuations.If the last three months accurately represent your anticipated figures, averaging your actuals from this period could be a great approach.

 However, if your business is more seasonal, it's advisable to consider your actual figures for a more realistic base. For example, higher sales during Christmas or increased activity in the summer should be taken into account to make your forecast accurate.

Once you have selected the actual data you would like to base your forecast on, you are then able to set some rules.

We might forecast an income increase of25%. At the same time, reality dictates that costs are rising, so we could project the cost of goods sold to increase by 15%, while operating expenses might only go up by about 5%.

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Once your parameters are set, the system creates a forecast for the period you have selected.   You are then able to review the results and

adjust these parameters right there on the screen.

You can also export this forecast to Excel for further manipulation or simply save it as is. This flexibility allows you to experiment with different scenarios before finalizing it.  

You have the option of turning this forecast into a budget once you are satisfied with the projections.

For tracking purposes, it's a good idea to give your forecast a specific name, like "Stretch Forecast to December2025." The reference data used for this forecast should be your actuals to date, ensuring a reliable comparison.

Effective forecasting is a great tool for strategic decision-making. Understanding how to create and adjust forecasts gives you the flexibility to respond to changing conditions and set realistic and ambitious goals for your business.

Remember, this is only available in the QuickBooksOnline Advanced Plan.  There is a link below to check out the current pricing offers available and the features of the different plans.

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Don't hesitate to reach out if you have any further questions, and check out further options below:

Download a free Small Business Month-End Checklist to help ensure your books are accurate and up to date!

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Cheers!

Advanced Forecasting

Kerry: [00:00:00] Hi, Kerry here from my cloud bookkeeping. I work with small businesses and entrepreneurs to help them manage their business finances in QuickBooks online. If you're not sure if you're using the best plan for your business, check out my plan comparison below and be sure to watch right to the end for some useful tips for your business.

There's a new feature in the advanced plan that allows you to create a forecast based Based on your actual data, you may create a forecast as an incentive and management tool. You're often different to a budget, which may be required for external parties and needs to be close to your reality. You can stretch things and test scenarios a little more in a forecast, which makes them a very powerful tool.

I'll walk you through how to create your forecast. Unfortunately, the sample company does not have this forecasting feature. So I've kind of got this. Fake quick book set up here that doesn't really have much useful information [00:01:00] in it, but I will be able to show you how to go about the process in your books.

So if we pop to financial planning and we choose forecasts and not budgets. So as I mentioned, this is only available in the advanced plan. So what we're going to do is we're going to create a forecast here and we have the option to create a forecast for the rest of the year or for a while, up to two years or up to three years, I'm going to choose up to two years.

Now we can then say that we want to use a forecast with an average of actuals, which could be for the last three months. six months, nine months, or 12 months. And where you would use this is if your business doesn't have seasonal fluctuations. So if the last three months are representative of what you are anticipating, I would go with, you know, average of actuals last three months, last 12 months, this would be a great way to do it.

Now, if you're a lot more seasonal, you may want to pick [00:02:00] up your, your actuals, because if you have higher sales around Christmas or a lot more activity in the summer, this is going to give you a lot more realistic base to start with. So then, you can say, I'm going to increase my Income by now, this is a forecast.

It's different to a budget. We might be really wanting to push our sales people, have this forecast, create some incentives and say, we are going to increase our income by 25%. And we all know that costs have been rising. So perhaps realistically, our cost of goods has gone up by 15%. Maybe not expenses. We might just say that our operating expenses are going to go up by, let's say 5%.

Perhaps those aren't going to fluctuate as much. I'm not going to put anything in for other income, other expense. That's just your random stuff. So now what this is going to do, it's going to set up [00:03:00] a forecast for the rest of this year. And 2025 based on 2023s numbers, but then it's going to increase income by 25% cost of goods sold by 15% and expense accounts by 5%.

So let's click next. Now here you can see we have some actuals and this is not a real company. Obviously these numbers are a little bit crazy. But, uh, then we have a forecast coming across here, which it does look a little insane because we've increased everything by $25,000. But here's our forecast for the remainder of the year, August to December.

Let's pop down here and have a look at what it looks like for 2025. You can scroll across here. And here we have our numbers all the way across. Now here we have a couple of options. We can save this as our forecast, or we can actually make this into a budget. I'm not going to make it into a budget. I've just imported a budget for a different video.

I'm going to save [00:04:00] this right now as a forecast. So now that we have our forecast, we might want to reconsider. Some of the parameters that we said, so we do have the option right here and now to change some of these. We might realize that perhaps that was a little bit ambitious. We want, might want to change this to 20%.

So we have the option right here in the forecast to rework what we're looking at and, and rework our forecast, which is kind of cool because we might want to play around with it for a while before we turn it into a budget. We can export it to Excel to play around with it a little bit more. Or if we're happy with it, we might decide to create this as a budget so that we can run reports against it.

But maybe what we'll do is we'll rename it. We'll rename it our, our stretch forecast

to December 2025. And, uh, the reference data here that we'll be comparing to is, [00:05:00] yeah, I guess it's the actuals to date. And then we can save this. I once again, it's getting so much better. We can edit this in a spreadsheet, use spreadsheet sync to bring it back in. I'm not going to do that right now, but hopefully this is kind of giving you an idea of how you can work with some different parameters.

This is so cool. Look how beautiful this is. Now we've got our actuals and we go across. I'm just trying to scroll this to see everything that we've built is just displayed so beautifully for us in a new forecast, have the option here. We could look at a quarterly. We can also look at it annually. I love this forecasting tool for creating different scenarios using your actual numbers.

Now have a play around with it. When the numbers are real and they're yours, it makes so much more sense. And by creating a budget when you're done, you can then prepare reports to hopefully motivate those who are using the targets. For more reporting that you can use each month, [00:06:00] be sure to download the month end checklist below.

It'll help keep your finances up to date and on track. If you have any questions or comments, please make a note below. I love to hear from you. Cheers.

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