How to create a forecast based on historical Xero accounting data

In business, time can be as valuable as cash, so to help you make the most of yours, we’re going to show you how to set up a forecast for the next 12 months in less than five minutes.

We recommend, if you’re new to the platform, that you have Futrli open as you go.

The beauty of cloud-based software is its agility and speed. Both Xero and Futrli are malleable to you or your clients’ wants and needs. Remember that real-time data is the best way to peek into the inner workings of a business, and a forecast allows you and your clients to see pending storms on the horizon.


Lay your foundations

Xero acts as your foundations. Essential, reliable and strong software, it’s designed to build upon. Xero has an entire marketplace that you can browse to find the best add-ons for your stack. Your foundations are a fundamental part of your plans and you want to elevate your client’s company. Therefore, getting Xero as your base is key to this hack.

Building on Xero

Futrli is the structure upon Xero’s foundations. Our platform starts where Xero’s finishes – because while it’s essential to have a reliable cloud accounting software, you need more to sustainably grow your company. Never neglect those important data settings, as they’ll impact your ability to build your forecast.

Navigate to the ‘Scenarios’ section of Futrli. This is where you build everything from budgets, to scenarios to effortless cash flow forecasts. Before you can create your projection, you first need to enter your tax settings and map your default bank account, accounts receivable and accounts payable lines. These only have to be entered once, so let the system work out the core automatic calculations for you.

Use your past data to instantly create a picture of how you expect the business to perform in the future. Adjacent to your organisation, click ‘New’, which will give you four main options, one of which being ‘Create from Last Year’s Actuals’.

Once you press ‘Quick Create’, Futrli will look at your profits, costs and overheads month-by-month for the 12 months prior to your scenario’s chosen start date. These will then be applied going forward, thus ensuring that any seasonal variety is taken into account. For example, if sales are higher in March and lower in April, you’ll see that factored into your projection.

The next steps

Now it’s time to monitor and track your key performance indicators (KPIs). These are quantifiable measures of activity in your business.

For example, you might have:
KPI 1: Revenue over the next 12 months. The best companies in the world have a hockey stick curve in the cumulative income line, something we are all gunning for!
KPI 2: Net income/profit. You must be aware of how much profit you’re likely to make, so you can make informed business decisions.
KPI 3: Net cash flow. This helps you identify KPIs that you can’t afford to fall below zero.
KPI 4: Bank accounts (cash flow). This is a great one to highlight areas of concern.

Even if you have some tricky months ahead, a forecast can help you build the plan to get your business out of the hole. Every business should be working like this: it’s not traditional, but now technology such as Futrli does the heavy lifting.

To get a better handle on your business’ metrics, call in at our KPI Library, and don’t miss our industry-specific KPI lists.