@Gadgetman, I don’t think @lubos disagrees with you. He prefers the forecast to be a prediction based on future expectations instead of merely copying historical accounting data. Once the forecast is completed it would be converted to a budget that is used to compare to actual results.
@lubos please Is it possible to explain to us extensively about the idea of the new forecasts feature.
It seems that many of us do not understand the party and how to take advantage of the advantage and the basic purpose of its existence, according to what is included in previous discussions
Thank you for your permanent interest to improve the manager
A budget is not the same as a forecast. Each should be able to be viewed against the actuals. Where as the budget indeed could be established from an initial forecast it is much less dynamic in that you usually would not change the budget until the next budget period and where one uses the budget and actuals to improve operations while a forecast is dynamic and subject to change based on the actuals to continuously improve the forecasting and strategic decision-making.
I had a look at Budgeting vs. Financial Forecasting: What's the Difference? and there is a variance in interpretation of the need for actuals where they like Manager does state:
- Financial forecasting is used to determine how companies should allocate their budgets for a future period, but unlike budgeting, financial forecasting does not analyze the variance between financial forecasts and actual performance.
However, having practiced forecasting and budgeting for decades I can assure you that Forecasts need to be viewed as dynamic documents and that actuals should be used to adjust the future predictions. Forecasting financials is also part of a wider strategy and for example injecting change will alter the forecast and should be closely monitored. We usually issue annual budgets which indeed are also based on expected income and expenditures. However, we rarely change such budgets until a new budget is issued.
We have already indicated that ideally we would have “live” budgets and actuals in Summary and other views to help monitor financial performance. The addition of forecasts to Manager is great but ideally becomes more comprehensive to become really useful.
I agree forecasts need to be updated as new information becomes available.
I disagree they should be dynamic (by the definition of dynamic data in Manager elsewhere).
A useful forecast involves a business owner predicting future costs and income based on both prior income / expenses and an understanding of future business opportunities and risks.
In time this forecast can be compared to actuals. This comparison continues to be useful as more time passes as it gives the owner a measure of the accuracy of progressively longer term forecasts. For this data to be available to the owner this forecast document must not be dynamically updated but the actuals should be dynamically updated.
In addition to the above, as time passes the owner will want to create a new forecast which includes understanding gained from more current actual expenses and income. This should result in the generation of a new forecast, which in turn can be measured against actuals as more data becomes available.
Is suspect the above work flow is not really that controversial. What maybe more controversial is what each of these documents are called (Forecast vs Budget), and what document is cloned when the estimates need to be updated.
In summary I do strongly support the idea when an owner signs off against their understanding of a forecast, that those dollar figures remain fixed and are NOT dynamically updated.
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If you do not frequently update your forecasts based on actuals then they become useless. This is a dynamic process approach rather than a blueprint approach.
Why would be a definition of what is meant by dynamic as described here for process documents (not dynamic data) be specific to Manager (please show where you find such definition)?
In Manager
- Invoices
- Tax authority submission (via localisation)
are dynamic. So if a figure on which they depend is changes (or in some cases if the program is changed) then the document is changed. Useful behaviour when first generating these documents but can be very problematic after the documents have been sent out.
The same applies for forecasts, dynamic is useful when the owner is generating the first quarter forecast. The owner then can make reasonable decisions based on that estimate both for the next quarter and the next year.
The following year when the owner is again preparing and USING the forecasts it would be useful if the owner learnt from their experience. How good actually are the forecasts, what can be reasonably predicted from the data, what area of forecasting could be improved. None of this learning is possible if the history is not retained to be learnt from.
In the latest version (22.1.27) it’s now possible to copy forecast to budget.
When the button is clicked, the figures from forecast will be copied to new Profit and Loss Statement (Actual vs Budget).
The figures on the budget can be then compared to actual figures on ongoing basis while forecasts can continue evolving.
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I note that one cannot forecast capital accounts and sub accounts. Is this a work in progress, or is it inappropriate?
The forecast is for the Profit and Loss Statement. Capital accounts are on the Balance Sheet.
Hello @Tut
Ability for forecasting of balance sheet accounts is a great idea to be introduced into manager.