Overview
Driver Spread allows you to apply a recognition profile to values entered in a linked Driver element, automatically spreading each monthly Driver value across a window +/- 12 months. This is particularly powerful for businesses where the timing of revenue recognition or cost incurrence differs from when a contract is signed, a sale is made or an expense is committed.
How it Works
When Driver Spread is selected as the method on a Sales or Cost-type element, the element draws in the values from a linked Driver element. Each monthly Driver value represents a transaction or contract value entered in the month it occurs.
The spread profile is then applied to each Driver value independently, treating the month in which that value sits as month zero. The recognised P&L values (revenue for Sales elements, expense for Cost-type elements) are shown in the row below the Driver values, spread across the months defined by the profile.
If multiple months contain Driver values, the spread profile is applied to each one individually and the recognised values across all spreads accumulate in the P&L row.
Setting up the Spread Profile
The spread profile is a percentage split defined across a window of up to +12 months (forward) and -12 months (backward) from month zero. All cells in the +/- 12 month table exist by default with a value of zero, except for month zero which defaults to 100%.
To define your spread profile:
- Enter percentage values across the months in the spread table on the settings toolbar to reflect your desired recognition pattern - Months you do not need can be left at zero
- The total of all cells across the entire window must equal exactly 100% before the profile can be confirmed
- Click OK to confirm the spread profile
The same spread profile is applied uniformly to every Driver value across the entire forecast period.
Worked Example: Construction Revenue Recognition
A construction business has a contract worth $1,000,000 to for a project over 5 months. The contract value is entered as a single Driver value in the month the contract is signed, say Jan-26.
The spread profile below is set to recognise 1/5th of the contract value in the contract month and in each of the 4 months following the contract date:
Important: Backward Spread into Actuals Months
The spread profile can extend backward up to 12 months from the month the Driver value is entered. However, if the backward portion of the spread falls into months that contain actuals data, those recognised values will not be added to the actuals layer. Actuals data exists as a separate layer over projected data and is not affected by the spread calculation.
Use Cases by Industry
| Industry | Application |
|---|---|
| Construction | Spread a contract value over the build period to recognise revenue progressively, refer to: Modelling: Construction WIP |
| Professional services | Spread a project fee over the expected delivery period to match revenue recognition to work performed |
| Software implementation | Spread a licence or implementation fee over the contracted delivery or support period |
| Property development | Spread land or development costs over the anticipated build and settlement timeline |
| Event management | Spread event revenue or costs backward and forward around the event date to reflect pre-event costs and post-event settlements |
| Subscription businesses | Spread an upfront annual subscription payment across the 12-month service period |
If you need any assistance please contact our support team at: support@castawayforecasting.com