Budget and forecast

A key tool for financial management is the creation of a budget before the start of a financial year and then monitoring revenue and expenditure against this.

As the year progresses, there will arise a need to update a forecast of revenue and expenditure for the financial year without losing sight of the original budget.  So while the initial forecast equals the budget, the forecast needs to be revised over time and hence kept separate from the budget.

Budget

See Xero help: https://central.xero.com/s/article/Create-a-budget

Video: https://tv.xero.com/detail/video/5131036429001/using-the-budget-manager-in-xero

Note that the “Period” is the period subsequent to the start date from which the budget is to run, while “Actuals” is the period prior to the start date for which you want to see actual expenditure. The Totals column totals both “Period” and “Actuals” figures. So if you want only the total for the budgeted period, then set the “Actuals” period to “None”.

If you have 12 months of actuals before the budget period, then you may want to base the budget on those previous 12 months. To do so, select an “Actuals” period of 12 months, export as an Excel file, change the dates in the “Account” row to be one year later (see below), and then import back into the Budget Manager. As a precaution, delete un-needed columns (months) before importing.

In practice you are unlikely to want the budget to be exactly the same as the last year. So make the changes you want in the spreadsheet and then import the edited data into Budget Manager.

Forecast

Xero does not really do forecasts. You will probably be best downloading data from Xero and manipulating it in a spreadsheet for a decent presentation of forecasts during the year.

Start by creating a new budget called Forecast (unless you have this from a previous year). Populate the forecast budget with the values of the main budget by exporting the main budget to a spreadsheet and importing the spreadsheet into the Forecast budget.

See: https://central.xero.com/s/article/Import-a-budget

Always check the dates affected by an import before importing in order to avoid overwriting values that should be retained. Do this by clicking the “View dates affected” link presented as below.

To adjust the forecast as the year progresses do the following.

Adjust the start date of the Forecast budget to the current month and the “Actuals” period to be sufficient to go back to the beginning of the year. This is rather crudely done as the choices are only 3, 6, and 12 month “Actuals” periods.

What that gives you is revenue and expenditure to date up to the last month and then the originally budgeted figures for the remainder of the year (or updates to those budget figures if you have entered these). If this is all you need for a forecast, then download the result to Excel and simply remove the unwanted month columns (before and after the financial year) to get the year totals that you want. (Xero’s clunky options for “Actuals” and “Period” don’t allow you to get totals just for your financial year in the Xero view.) You will also need to edit the period which the report says it is for, ideally making clear which months are actuals and which projected.

If you need to make some changes to future month figures, then either do this in Xero prior to the download (easiest if easy and few changes); or do the changes in the spreadsheet after download, but then upload the changed spreadsheet into Xero to update the forecast there. If importing data again, do remember to check the dates affected during the import process.