Hello all!
I was meant to start doing more sharing, but I'm sure like everyone else, work takes over!
Here's a technique that hopefully others may find useful. This is the default way we build our modular files as we tend to work with clients whose charts of accounts never line up with the way they run their forecasts. This method allows us to extract the general ledger in any format, and then we are able to map detailed driver based forecasts to align with their historical accounts. This is quite nifty for things like S&W, where often Xero only shows Base S&W and Super.
We take this approach as a lot of our models get provided to financiers that want to see things line up, so they can scrutinise at a GL level.
The technique is nothing new, as it's effectively the same method that gets applied to things like AR, AP, Fixed Assets etc. in the current generic financial content library. The Screencap below is the module setup, with a central Mapping Module that brings in historical data (GL + Historical numbers) as well as the detailed drivers.
Modano Structure
The following screencap shows how this structure works in a modular workbook for revenue only. In a full modular build, this same methodology can be applied across most income statement and balance sheet items. The balance sheet side is a bit more complicated and has more considerations, so the income statement is a good place to start.
Detailed Drivers
Stepping into the detailed forecasts (screencap below), you can see that each module is a category - funnily enough, another approach to deal with Modules as Categories...
The module allows for many categories, you can duplicate / mirror the modules and create as much detail as you need, so long as you provide the "Revenue (Drivers)" link out so that the detailed forecasts get passed into the Revenue Mapping module. We have a library of different drivers with this default link built in, which we can leverage depending on the client's industry.
The next step is to then select an appropriate mapping for each category (screencap below). In this case, the links are on a category basis, but this can readily be changed to Totals to help with reducing the number of SUMIFs. This may be useful if each module is meant to reflect separate products.
The mapping module contains the historical data as well as the forecast data, now mapped to line up against historical ledger accounts. This mapping module also contains the standard Modano Revenue Link-out, which allows it to work within the generic financial model library. Better practice would be to improve the labelling that comes from the detailed forecast modules. I will get into different techniques of doing that in the next post.
The end result of this method is to see an income statement that shows revenue categories aligned to historical chart of accounts.
Happy to step through in detail if people have questions. Thought I'd share something that we've found to be supremely helpful. More than 90% of our builds involve mapping, either entirely or in pieces.
Hope that helps generate some ideas!
Until next one, thanks all.
Jun
Hey Jun,
This is really cool, I'm just trying to understand the use case... So in your example your historical income statement contains 3 revenue categories - Apples, Bananas and Avacados - but you want to forecast multiple revenue streams with drivers before allocating them to these categories. Is this understanding correct?
M.
Got it. Nice.
We've done a similar thing in our upcoming professional services modules because income statement revenue is way too basic for the detail required for forecasting. So I can see what you mean now.
M.