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Future Oriented Financial Information
Eileen Reppenhagen,
Certified QuickBooks ProAdvisor
One of the coolest things about QuickBooks is that you are not restricted as to the time period open and available for use.
I have used QuickBooks to create 10 years of transactions for a voluntary disclosure.
- Working with a client who is struggling to provide information, without having to close off each year, is such a bonus!
Then, there were times when I have used QuickBooks to look into the future for anywhere from a few months to a few years.
Two types of Future Oriented Financial Information (FOFI).
- The first type of Future Oriented Financial Information (FOFI) is forecasts where we are forecasting based on the present. Usually we do not forecast for more than a year.
- With QuickBooks you can copy the current data file and using the current data on file, create a forecast forward in time. For example, you might be looking forward to see if the cash flow will be adequate to grow the business over the next months.
- Projecting sales, purchases, deposits and payments will provide you with a way to forecast the bank balance to ensure it won’t exceed the line of credit, or provide you with lead time to ask the bank for a larger line of credit or look for alternative financing for you or your client.
- The second type of Future Oriented Financial Information (FOFI) is a projection. A projection is where we make assumptions about what the future could look like and based on those assumptions we prepare a projection.
- You could use either a copy of the file or create a new file in QuickBooks, copying in the opening balances or starting from scratch for a new venture. Based on your assumptions, you can project anything forward for many years into the future.
With QuickBooks you can generate reports including balance sheets, income statements, and cash flow projections into the future. These reports will help you assess whether your assumptions will hold up over time and provide you with the financial documentation to attach to a business plan.
Happy New Year and Happy Planning To All…
Eileen Reppenhagen writes and speaks about personal tax credits and surviving an IVI tax audit. She is also a volunteer on the Disability Advisory Committee to advise the Minister of National Revenue.
Eileen is the originator and contributing author of Section 800 of the CGA Canada Public Practice Manual "Future Oriented Financial Information" (1999), and a participant in CGA Canada's Video: Taking Care of Business (2000). If you have concerns about disability tax administration or IVI Audits, Eileen would love to hear about them and many be contacted at : 1 604 943-7414 or by email: eileen.reppenhagen@gmail.com.
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