Dynamic Cash Flow Projections » Update with Actuals

What Is The Purpose Of Updating With Actuals?

As stated before, projections are based on historical information. As each month ends, it will be important to “drop in” the actual numbers for Revenues, Cost, Expenses, Cash Flows, Assets, etc. In so doing, the forward-rolling projections are actually grounded in truth, and you can even see the disparities somewhat between what the estimates were versus initial estimates. As your actuals are dropped in, the goal becomes to use these actuals to help drive operations toward a target versus just benchmarking them against original estimates. Be sure to identify the months in your model which are represented by actual data instead of projections. You can do so simply by typing “Actual” above the name of the month in that month’s column.

Think of the Dynamic Cash Flow Projection as an arrow flying through the air after it has been released from a bow, BUT you are able to adjust it in mid- flight as the winds of the marketplace knock it off its original path.

Now you may not hit your original target, but during these mid-course corrections you will be able to improve the likelihood that you will hit a desirable target when the fiscal year concludes.

After 12 months go by, the projections for the year will have morphed into becoming the actual Income Statement, Cash Flow Statement, and the actual Balance Sheet for the trailing twelve months. This then can be used for tax planning purposes or debt compliance purposes.

How To Update With Actuals

Each month you should drop in the actual results in the projections. By doing so the year end net income is a moving target. The assumptions that go into the sales and expense also change frequently. Consequently, every time you update the projections with actuals, you should also review assumptions for the remainder of the year. This procedure makes your projection “dynamic.”

How Often You Should Update With Actuals

Every time a month has closed and you have access to “real numbers”, you ought to drop in the actuals. Note though, that as soon as you drop in your actuals for the Income Statement and Cash Flow Statement, you will need to balance and review that period again to make sure that the Balance Sheet balances.


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