Financial forecasting

In many cases, you’ll use budget data and some computations to create a forecasting report. This basic report structure can be used for any type of report that uses budget data.

This example uses the Financial Report Writer to create a financial forecast and accompanying budget. 

Before you begin

Before you start creating your forecast, there are a few things you should do to ensure that your forecast will be as accurate as possible.

Start by looking at the current market or other trends for your industry. Is the general direction going up, or is it declining? Is it seasonal? How is your company positioned within the greater industry?

Look at past data, for example, for the past year or two. How did it compare to any budget

Consider first your fixed costs and expenses. Fixed costs include things like rent, utilities, and insurance payments. Next, tackle your more variable costs. Variable costs include expenses that vary due to production or demand, and can include materials, labor, and shipping.

Create a budget

 

With a comprehensive understanding of your fixed costs and your variable expenditures, you can begin to build your revenue budget.

Optionally, you can memorize this report for later use.

Step 2: Set up a budget or forecast

Now you have reports that you can use to make a budget or a forecast.

Create a budget

You can create next year's budget from scratch, or use last year's Profit and Loss data to start one.

Go to the Company menu and hover over Planning & Budgeting. Then select Set Up Budgets.

Select Create New Budget.

Set the fiscal year for the budget, then choose either Profit and Loss and Balance Sheet. Then select Next. If you select Profit and Loss, you can add additional criteria, such as Jobs or Class tracking.

If you select Profit and Loss, select either Create budget from scratch or Create budget from the previous year's actual data.

Select Finish.

Tip: If you rename an account you use to create a budget, it unlinks it from the budget. You'll need to recreate the budget using the new account name.

Create a forecast

If you use QuickBooks Desktop Premier, Accountant, or Enterprise, you can also create forecasts to predict future revenue and cash flow. You can create a financial forecast from scratch, or from last year's data.

Go to the Company menu and hover over Planning & Budgeting. Then select Set Up Forecast.

Select Create New Forecast.

Set the fiscal year for the forecast. You can also specify additional criteria, such as Jobs or Class tracking, but this is optional.

Select either Create forecast from scratch or Create forecast from the previous year's actual data.

Select Finish.

You’ve created your budget and you’re done! Well, not quite. Your budget should be continuously reviewed and reworked as necessary. By staying on top of your financial budget and forecasts, whether on a quarterly, monthly, or even a weekly basis, you maintain a consistent view of what’s going on. Do not underestimate the importance of this 360-degree knowledge of your business financials.