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How to Create a Forecast Based on Historical Xero Accounting Data

Posted on 10th August 2017 in Advisory

Written by Freya Hughes

Running a business with no forecast at all is quite frankly, irresponsible. If you have an annual forecast, but you only update or review it once or twice a year, then you’re still in the danger zone. Why do so many business owners find themselves in this position? While your forecast isn’t quite a crystal ball, it’ll show you valuable insights into what might happen next. Confidently make decisions, save cash and learn from past mistakes. It’s an incredibly quick tool to set up, and this hack will pave the way to success – if you allow it to.

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.

Disclaimer: we’re using an analogy for this business hack!

The beauty of cloud-based software is its agility and speed. This house-building analogy is just to give you an idea as to the levels of each component. Both Xero and FUTRLI are more than 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

You’ve secured a plot of land for your ideal home, and your plans show you that your client can take the plunge. Their historical data (the aforementioned plan) is what’s got them here so let’s combine their assets and build a home. The plot of land is the business – beautiful and flourishing, but not yet ready for inhabitation. The surveyor (accountant) has given you some suggestions, and now you understand the power of cloud accounting, you’re ready for construction. But don’t fear – it takes a matter of minutes, not years!

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 – see our top picks here. 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 blocks

As you explore the FUTRLI platform and sync your Xero data, you’re building the outer walls. The skeleton, if you like, combined with your foundation is exactly how you need them to be – worked into every corner of your business, ensuring its strength and ability to grow.

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. You’re not going to freestyle building rooms in your new dream home, so never neglect selecting 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. At this stage, put your feet up and let it do the hard work, and get yourself a nice cuppa.

Seal it up

You’re doing rather well at this point, and now you’re back from your tea break, it’s time to give your client’s business a proverbial security blanket. Except it’s not very soft. But don’t worry, instead it’ll keep the company cosy and protected from the harsh elements outside. Installing your windows and doors seal the business up from harm.

Get your historical data (plans) out and use this 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.

So you see, you’ve used your historical data (building plans) to protect your client’s business. Creating a strong structure atop their developing business has secured it from weathering. Your client can rest assured, sheltered from any storms, knowing their business is resilient to threats from the great outdoors.

You’ve created security for the business, and threats are visible in real-time using those windows and doors – the forecast. Another reason to get your figures into a forecast is to measure the inner workings of your business…

What now?

Now it’s time to monitor and track your Key Performance Indicators (KPIs)! These are quantifiable measures of activity in your business. To get a better handle on your business’ metrics, call in at our KPI Library, and don’t miss our industry-specific KPI lists. If you’re keen on our construction analogy, your KPIs could be your rooms.

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.

Ready for the next step? Create the perfect KPI dashboard with FUTRLI today.


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