In this article:
Analyze phase: 2 hours required
- Step 3.01: Review Dashboard data and note historical trends
- Step 3.02: Compare Industry Data metrics column to Actuals column
- Step 3.03: If starting forecast from accounting data, review for trends
- Step 3.04: Confirm preliminary forecast categories
- Step 3.05: Compile list of forecasting assumptions
- Step 3.06: Confirm Initial Balances are correct
Forecast phase: 3 hours required
- Step 4.01: Adjust preliminary revenue based on growth patterns
- Step 4.02: Adjust direct expenses using gross margin target(s)
- Step 4.03: Enter employee labor in Personnel or as expense line item
- Step 4.04: Adjust expenses using established ratios
- Step 4.05: Enter Assets & schedule
- Step 4.06: Enter Dividends & schedule
- Step 4.07: Enter estimated rate for corporate & sales taxes
- Step 4.08: Set Cash Assumptions (AR & AP Days)
- Step 4.09: Enter any Financing Needs based on the forecast
- Step 4.10: Confirm automated Starting Balances
- Step 4.11: Finalize Mapping
To jump to specific steps, use the links above.
Note: This page is for Strategic Advisors.
Now that you've conducted the Kickoff and Planning meetings with your client and have learned more about their business goals, you're ready to build your client's forecast in LivePlan.
To make the process easier, LivePlan uses your client's chart of accounts to automatically create a starting point for this forecast. From here, you'll have two steps:
- In the Analyze phase, you'll use your client's historical data and what you learned in your meetings to formulate an overall structure for the future forecast.
- In the Forecast phase, you'll update the automated starting forecast or build a forecast from scratch.
Some notes on Planning vs. Accounting
- The LivePlan forecast is not meant to mimic the chart of accounts exactly. Your client's chart of accounts was likely built with a more transactional focus, and may be structured to make bill-paying and tax-paying simpler. For the forecast, you'll be looking at the business more broadly and strategically.
- The Dashboard contains your client's actuals from the past three years. Your forecast should start at the beginning of your current fiscal year, and cover three years into the future.
Step 3.01: Review Dashboard data and note historical trends
When you connect LivePlan with your client's accounting solution, you'll instantly have access to up to three years of historical data in the Dashboard tab. You can use the Trends view to dig into this data through a variety of metrics, or you may want to run a report to work from:
Basic instructions for this step:
Step 3.02: Compare Industry Data metrics column to Actuals column
The preliminary forecast in the Forecast tab is populated from your client's most recent year of actuals. Using the knowledge you've gained in the Kickoff and Plan meeting with your client, look over these preliminary numbers to determine what trends and ratios are needed in order to get your client from the current actuals to their future goals.
Step 3.03: If starting forecast from accounting data, review for trends
In the Industry Data section, compare the historical results with the industry data for your client's industry. What differences do you see? What adjustments might need to be made to the future forecast based on these differences?
Basic instructions for this step:
Step 3.04: Confirm preliminary forecast categories
As mentioned earlier, the beginning set of forecast categories will be created from your client's chart of accounts. Since the chart of accounts is so specific and transactional, you may want to make some consolidations in the categories to create a more strategic view.
You don't have to make these kinds of changes all at once. You may want to stay close to the chart of accounts for the initial work and then evolve the forecast categories with your client's input over time.
Using the Pitch as a guide
Keep in mind, too, that when you worked with your client to complete the Pitch, you may have configured some short lists of primary revenue streams and cost centers in the Forecast section. These lists can provide a good basis for forecast categories:
Note: if you do change the starting forecast categories, you'll need to adjust the mapping between LivePlan and your chart of accounts afterward. We'll cover this in Step 4.11 below.
Basic instructions for this step:
Step 3.05: Compile list of forecasting assumptions
Based on your review work, compile a list of assumptions to help you set up your forecast items. This can include ratios such as direct margins, expense-to-revenue ratios, days to pay, and days to get paid.
Step 3.06: Confirm Beginning Balances are correct
As part of the automatic starting forecast, LivePlan will build a set of Initial Balances, which are the total assets, liabilities, and equity a company has as of the start date of the forecast. These inputs create a beginning point for the balance sheet.
As you can see in the example below, the initial balances are separated into their own column, placed before the first month of the forecast:
In this step, you'll review the auto-populated starting balance figures, and make any additions needed.
Note: Pre-existing financing isn't added to the Initial Balances automatically. We'll add it in Step 4.09 below.
Basic instructions for this step:
Step 4.01: Adjust preliminary revenue based on growth patterns
We recommend starting your update of the starting forecast on the Revenue page. This video explains how to update the numbers:
Basic instructions for this step:
Step 4.02: Adjust direct expenses using gross margin target(s)
The starting direct costs, or COGS, should be tied directly to specific revenue streams whenever possible. This video shows you how to do that:
Basic instructions for this step:
Step 4.03: Enter employee labor in Personnel or as expense line item
In this step, you'll create forecast entries on the Personnel page so that LivePlan can compare them against your labor actuals in the Dashboard. This video explains:
Basic instructions for this step:
- Entering personnel
- How can I represent part-time personnel in by forecast?
- Understanding head count details for personnel
- Entering commission payments in your forecast
Step 4.04: Adjust expenses using established ratios
This step involves working with the overhead expenses that have been imported from the chart of accounts. This video has more details:
Basic instructions for this step:
Step 4.05: Enter Assets & schedule
LivePlan places pre-existing assets your client already owns in a different part of the forecast than future assets your client plans to acquire. This video explains:
Basic instructions for this step:
Step 4.06: Enter Dividends & schedule
If your client wants to forecast payments back to investors, use the Dividends entry to schedule these. For more details, please see this article:
Step 4.07: Enter estimated rate for corporate & sales taxes
LivePlan calculates income and sales taxes as flat percentages - remember, forecasting is different than accounting, so these simple calculations are fine for forecasting. To set the projected tax percentages and payment schedules, please see this article:
Step 4.08: Set Cash Assumptions (AR & AP Days)
In the Cash Flow Assumptions page of the forecast, you'll set up the basis for future Accounts Receivable and Payable, along with future inventory. This video shows you how:
Basic instructions for this step:
Step 4.09: Enter any Financing Needs based on the forecast
In this step, you'll not only be entering future financing you and your client decide to add to the forecast, but you'll also represent any existing financing your client has as of the start of the forecast. The video below covers loans, investments, and lines of credit:
Basic instructions for this step:
- Entering loans, interest, and loan payments
- Entering investments
- Entering lines of credit
- Entering a loan with a custom payment schedule
Step 4.10: Confirm automated Initial Balances
The Initial Balances field of LivePlan has been auto-populated with your client's assets, certain liabilities, and equity as of the forecast start date. We touched on the starting balances in the Assets step. In the Financing step, you also added any pre-existing financing to these starting balances.
In this step, you'll review the starting numbers to make sure they accurately reflect the business as of the start of the future forecast. This article will help you with this step:
Step 4.11: Finalize Mapping
Now that you've made some changes to the forecast, it's important to revisit the mapping page of the Dashboard tab and update the mapping between LivePlan and the client's accounting solution. The articles below explain how to do this in detail.
Basic instructions for this step:
- Adjusting the mapping between QuickBooks Online and LivePlan
- Adjusting the mapping between Xero and LivePlan
General resources for forecasting:
- Helpful forecast features
- Changing the start date of your forecast
- Changing the forecast length and years of monthly detail
- How do I edit or delete forecast entries?
- How can I find the in-app videos again?
Sharing the forecast with your client
You can share the completed forecast with your client in several ways:
- Issue the client a guest pass to LivePlan, so they can view the forecast entries and financial statements in the app
- Print customized reports from the Forecast tab
- Export the projected financial statements as a PDF or Word document
- If you like, you can also add more detail to the downloaded Profit and Loss