Escaping Excel Hell – Tips for Forecasting and Budgeting

When preparing a budget or forecast, especially if extra funds are being sought, the last thing you want is a major error. If it is found by the potential funder it’s one problem. Not spotting it at all is another. Unfortunately it is very easy to make a mistake using Excel, such as missing costs and getting links between sheets incorrect.

Excel is a great tool for one person preparing a budget for a simple business. As things get more complex, other tools are more appropriate to handle aggregation and use by multiple people. Some of these tools use Excel as the user interface, or a grid that looks somewhat like Excel.

Whatever tool is used, it’s important to remember:

• Cash flow is typically what matters, and this is not the same as the P&L account. There can be significant timing differences. Often costs have to be paid in advance, including capital expenditure, and customers may pay some significant time after a sale.
• Funders, especially banks, like to see projected balance sheets, against which the level of lending is assessed.
• As mentioned above, with Excel it is extremely easy to make a mistake in formulae or links.

To address all these points, it is vital that the forecasting model consists of three main elements:

• Profit and Loss account
• Cash Flow
• Balance Sheet

If these all balance, there can be some comfort in the formulae, although it is still necessary to check the model carefully.

If you would like help in building a successful forecasting model, do ring me on 01628 632914 or send me an email.

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