Using Accounting Software

4. Preparing Forecasts

All accounting software should make it easier to prepare revenue and expenditure forecasts.

These forecasts will enable you to check actual performance against your expected performance and identify where and why you have done better (or worse) than you expected.

4.1 You will be able to prepare budgets showing the sales and profits you expect to achieve, and the costs involved.

• The software should be able to handle recurring costs like rent and wages.
• You can use past experience to forecast sales levels and to identify the cost of fulfilling your orders.

4.2 You will also be able to prepare cashflow forecasts, showing what cash you expect to come in, and when (if at all) you expect to run into problems.

• Such forecasts will enable you to take remedial steps.

4.3 Use of accounting software makes it easier to change your projections and to make 'what if' calculations.

• For example, you will be able to identify the effect on both your profits and your cash position if your sales assumptions turn out to be over-optimistic.

4.4 Making use of forecasts and detecting patterns is much easier if you can represent the information graphically.

• Check the software either produces graphs or allows you to export the information into a spreadsheet.

4.5 As you use your accounting software, the library of data it contains will become a valuable resource. Make sure you can draw on it to improve projections.