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3 year forecast...

A client of mine is applying for funding and needs 3 year forecast (P&L, Cash, BS)

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A client of mine is applying for funding and needs 3 year forecast (P&L, Cash, BS), the cashflow forecast is easy enough, here are my questions any assitance much appreciated. we already prepare management accounts and cashflow for them quarterly, they use xero.

1. Any software recommended to make this less time consuing to pull together vs say excel

2 I have not been asked to produce P&L and balance sheet forecast before - any tips on how to approach this

3. What sort of price would you charge for this - 

4. Does anyone have a template they can share for the 3 year P&L & balance sheet forecast

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By David Ex
22nd Sep 2021 17:42

Avant Garde wrote:

2 I have not been asked to produce P&L and balance sheet forecast before - any tips on how to approach this

From previous discussions on the subject, I think the answer is along the lines of avoid like the plague if it’s intended for a third party.

https://www.icaew.com/technical/technical-releases/corporate-finance-fac...

https://www.icaew.com/technical/business-and-management/financial-manage...

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By SXGuy
22nd Sep 2021 17:41

What kind of template would it be? Surely if you've done forecasts before then the 3 years of P and l and BS are just forecasted Totals of income and expenses etc etc?

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By paul.benny
22nd Sep 2021 17:46

Fundamentally, it's the client's forecast. You can crunch numbers based on client's projections but client has to provide the inputs - growth/decline in income, margins, costs, etc.

You can add value by challenging client projections: if they're increasing income, are they increasing staff? Are the increases in stock and debtors consistent with revenue growth? Etc.

What to charge? How much is client borrowing and are there any other fees? How big is business today/future? What's your current fee?

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By paul.benny
22nd Sep 2021 17:54

Oh. And you might need a separate engagement letter that the lender is also party to. It should make clear that you've done the adding up and taking away and the numbers are 100% client's. Not yours

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By darren.austin
22nd Sep 2021 18:05

I use Spotlight Reporting to prepare fully integrated forecasts like this. It integrates with Xero which means you can import the opening position, actuals and the chart of accounts.

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paddle steamer
By DJKL
22nd Sep 2021 18:15

I used to model these in excel (and way back Supercalc)by setting up what if frameworks with an assumption/data input screen, so for instance you might have a front sheet where you typed in things like :

Anticipated sales growth
Debtor Days
Creditor Days
GP%
Staff cost percentage to sales(though I never in real life observed staff as variable cost, the nearest I ever got was counter staff in a Burgerking, but management staff were always fixed/semi fixed costs)
Vat splits if appropriate (standard/zero/exempt)

I would set up workings for CT comps, Vat, PAYE/NI so the whole thing self generated and changed based on changes in my assumptions

Catch is each model created was bespoke to the business and certainly ,when I worked in retail with significant creditors, they took hours to write. (I used to model by main supplier terms, supplier by supplier)

I will say important as the numbers are it is the narratives that work re fund raising with say banks, careful writing of the final exective summary and clear marking of the underlying assumptions is in my experience key, for larger borrowings I would often have three different sets of financials within the bound set..

They also often need other documents included if for banks, for instance in our case we would put in property valuation summaries from surveyors, lease schedules, model leases/licences, photos, plans, desktop appraisals, planning permissions etc.

To get an idea re size the finished spiral bound doc might be 100 pages or more and the financials might be only 30-40 pages out of the 100.

Re cost, I am now in house so apart from years ago in the 90s never did these in practice except on an hourly rate, certainly fixed cost/quotes would only be simple sets for someone say borrowing £100k or so, but a full set to pitch to a bank for my later employers could easily be 30-40 hours work.

(I think it is why I got offered the job way back in 1999, I did the projections for a bank move upping the RC facility from £2.8 to £5.3 and they twigged that having me as an employee was cheaper than having me billed on an hourly rate by my then employer, and of course raising money is the bread and butter of property development)

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ALISK
By atleastisoundknowledgable...
22nd Sep 2021 19:32

We’d use Futrli, but there a other good options. It’ll pull the Xero data through and you can adjust future trade +/- % of last/current year or manually adjust or do whatever you want.

I’d get the client to give some growth/future ideas of figures, then import from Futrli and draft some figures, then go through then with client tweaking. They‘ll probably be 3-5 versions. I charge £900 or £1250 for 3 yr depending on complexity- factoring makes it tricky, multiple trade centres etc

My pack is a cover, contents, background/funding requirements, Exec Summary then about 4 pages of financials depending on industry (maybe a P&L by qtr, BS by qtr, CF graph, Income v Profit v Cash line chart …)

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By williams lester accountants
22nd Sep 2021 20:06

I tend to prefer putting together in excel still and would be charging in the range £1,200 to £1,750+VAT depending how good figures given by the client are and how much we need to discuss with them.

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By Tax is always taxing
23rd Sep 2021 08:00

It depends on the business, and the lender / funder. If its bank / SME lenders for an established business its usually a tickbox exercise and you can get away with just using current figures and changing a little for growth etc or for whatever the funding is being used for.
If its an early stage business or grant funders it can be a bit more difficult. Either way it is pretty easy to set up your own spreadsheet with assumptions and sensitivities that can be flexed. You should be using clients numbers anyway, they know the business, not you - albeit you can challenge them if they look silly or have obvious omissions.
Price depends, i have charged from £1,250 to £10,000, depends on the complexity.

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By bernard michael
23rd Sep 2021 09:08

How are you going to do a cashflow forecast ("is easy enough") without forecasting the P & L and Balance Sheet ??

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Replying to bernard michael:
ALISK
By atleastisoundknowledgable...
23rd Sep 2021 09:21

bernard michael wrote:

How are you going to do a cashflow forecast ("is easy enough") without forecasting the P & L and Balance Sheet ??

My clients do it all the time, then wonder why the final forecast looks different.

I had one who’s customers were on 90 day terms, but the CFF acted as if payment was on day 1!

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By I'msorryIhaven'taclue
23rd Sep 2021 09:38

Ideally an integrated P&L / Cashflow / Bal Sheet, so that varying key assumptions and/or key data (playing "what if.." - which I believe the financial modelling fraternity call sensitivity analysis) ripples through the results of all 3 of those forecast documents.

At least £1k +VAT, even for a relatively small loan amount and simple forecasts with perhaps only a dozen key input variables.

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