Using Accounting Software

4. Preparing Forecasts

All accounting software should make it much easier to prepare revenue and expenditure forecasts for the months and years ahead.

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.

Forecasts will also be needed if you want to talk to your bank or outside backers about funding.

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

• You can use the software to feed any regular payments into your projections. For example, you should be able to identify rent, rates, bank charges and wages as recurring expenses.
• 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. For example, you may need to slow down sales growth or talk to the bank.

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.