Written by Johnny Kipps
Unlike the pilot of the imaginary plane after last weekend’s European elections that saw major shifts to the right across multiple countries in the EU, the move in the UK if the pollsters are to be believed is that the UK will shift to the left.
At Forecast 5 we aren’t in the business of picking political winners or losers or commenting on policies but our clients are economic realists who need to keep an eye on the changing fortunes of the political parties and be prepared to quickly amend their budgets to cater for changes announced by the Chancellor.
So lets consider:
Changes to National Insurance
Forecast 5 enables easy wage budgeting, irrespective of the size of the payroll. Employees' NI – which has gone from 12% to 10% to 8% within the last 12 months is clearly a hot potato and may well see changes after July 4. In Forecast 5, it’s a matter of editing one figure which will roll forward to change all future net wage calculations:
Image credit: ADT
Changes to Income Tax:
Changes to Income Tax:
Whilst no parties appear to be heralding a change to personal income tax, if by chance a change slips in – unannounced, it could happen! – manual changes to Forecast 5’s PAYE table are straightforward.
Similarly, manual changes to Corporation tax are simple in Forecast 5, should any be announced in a post election budget.
The changes that haven’t been addressed, or in some cases have been studiously ignored in the leadup to the general election, are changes to Capital Gains Tax and Inheritance Taxes – and whilst these could have serious and significant ramifications for personal or family budgets, they don’t play a direct part in a corporate budget.
Interest Rates:
Interest rates could easily rise if post election budgetary announcements “spook” the market, and loans with forecast rates linked to prime or bank rate need adjusting. This is a simple adjustment in Forecast 5.
WIP Material or component prices changes in a manufacturing process:
WIP Material or component prices changes in a manufacturing process:
One of the very strong features of Forecast 5 is the ability to model manufactured stock against sales or to hold against future sales. This stock & WIP modelling allows the build up of stock, derived average cost per unit and transfer from stock from the balance sheet to the P&L of the cost of goods as and when sold.
In a complex manufacturing environment, there may be a great deal of input costs, all of which can be adjusted at the budget level in Forecast 5 to cater for perceived or actual price movements – or delays in delivery. Forecast 5 can handle all these anticipated changes, often the result of geopolitical moves!
Scenario Planning:
Scenario Planning:
In Forecast 5 every line of cost and revenue is individually budgeted, record by record, and one of Forecast 5’s strong features is the ability to “What if” the future movements in those revenues and costs.
This feature can apply to a group of records, such as a Section, a Department or a Folder – see below for explanations* as well as, incrementally, to individual records.
Resulting What if P&L reports can then be compared to original forecasted P&L reports – increasing management’s ability to make decisions based on a blend of fact and best estimates of future trends.
The graphic show Sales to France anticipated to increase by 5% on top of the overall Export Sales expected sales of 10% (not shown in the image) resulting in an accumulated Total What if Multiplier of 16%.
Forecast 5 can handle anticipated supply line delays or expected material or component price increases or decreases.
In conclusion, there are many ways in which Forecast 5 can help accountants, corporates, charities and NGOs keep track of expected movements in their budgets resulting from political changes, locally and on the international scene.
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*In Forecast 5
- A Section is a heading and grouping of Records, may be on the Profit and Loss, the Balance Sheet or Cashflow;
- A Department segregates Records that together constitute a “profit centre” (or a “loss centre”) and after entering revenues and attributable costs, the P&L by Department report shows the resulting gross profit or gross loss and the gross profit percentage. Departments also carry related depreciation ensuring full cost accounting;
- A Folder is a group of Records with a sub-total. Forecast 5 allows a series of five nested Folders.
