With a Castaway forecast there are three distinct questions to consider when reviewing whether the numbers are correct:
- Is Castaway calculating correctly given the element settings and data inputs? Yes - Castaway's reports are designed to always have accounting integrity, based on three-way modelling and double-entry accounting principles. The reports will be correct based on the element settings and data inputs provided.
- Are the element settings and working capital settings appropriate for what is being modelled? Castaway cannot determine this - but there are structured ways to check this yourself, covered in the steps below.
- Do the data inputs reflect what the business expects to happen? Castaway cannot determine this either - but it is straightforward to check yourself using the structured approach below.
A Structured Approach to Reviewing your Forecast
When reviewing a forecast, work through the following steps in order:
- Review the element settings for each element
- Review the working capital settings for each element
- Review the reports as a sanity check
Step 1: Review Element Settings
Use Element Groups (Forecast > Element Settings > Element Groups) to review and edit settings across all elements in one place, grouped by element type. This is the most efficient way to work through your settings systematically when reviewing a forecast built by someone else.
For settings not visible in the Element Groups view, select the element name directly in the chart of accounts within the Forecast workspace to open the full element editor where all settings can be reviewed and edited.
Step 2: Review Working Capital Settings
Each element in Castaway includes settings for working capital items such as tax rate, income tax treatment and cash flow terms including payment terms, prepayments, accruals, provisions and work in progress settings.
GST / VAT
- To check GST / VAT values, go to Analysis > Reconciliation > Tax Reconciliation. This report is useful for identifying elements where tax rates have been incorrectly applied.
- To check tax payment settings, go to the GST/VAT elements at the bottom of the chart of accounts in the Forecast workspace.
Income / Corporation Tax
- Use Element Groups to check which elements are included in the taxable income calculation, you can also review the Tax Exempt setting in each element. If Tax Exempt is set to No, the element is included in the taxable income calculation.
- To check income tax lodgement, instalment and payment settings, go to the Income Tax / Corporation Tax element in the chart of accounts.
Element Payment Terms
- Use Element Groups to review payment terms for an individual element, you can also review these setting in each element. The detail of some settings will not be visible in the Element Groups view, for example the % Spread monthly values, this only visible in the element view.
- For a quick review of cash flow by element, use the Cash Flow Report (Analysis > Reports > Key Reports) or the Trade and Other Debtors and Payables Reconciliation reports (Analysis > Reports > Reconciliation).
Cash Flow from Opening and Actuals Balances
- To check cash flow arising from opening and actuals debtor and creditor balances, go to the Cash Flow Report (Analysis > Reports > Key Reports) and expand the Sales and Costs sections. The first line in each section - General Trade Debtors and General Trade Creditors - shows how Castaway expects these balances to be collected or paid.
- To review how these amounts are calculated, go to Forecast > Element Settings, scroll to the bottom of the chart of accounts and locate the Balance Sheet element under the System heading. Review the Cash Flow Method applied against each component.
Other Working Capital Items
- To identify other working capital items, go to the Funds Flow Report (Analysis > Reports > Key Reports) and review the Working Capital Movements section.
- Right-click on any line and select Edit Element to open the element data entry screen and review the workings.
Step 3: Review the Reports as a Sanity Check
Once you are satisfied with the element settings and working capital settings, review the reports. A sanity check is a practical way to highlight major issues in the numbers, though smaller discrepancies may require closer inspection.
There is no fixed order for reviewing reports, but a recommended starting point is the Profit and Loss, followed by the Balance Sheet.
If you need any assistance please contact our support team at: support@castawayforecasting.com