Financial statement software, Excel based, AFP, Accounting for practitioners, Accounting for professionals.

Managing By the Numbers Comes of Age

Managing By the Numbers Comes of Age

By Alan Salmon
Reprinted by permission © 2005 Alan Salmon & Associates:
2325 Hurontario Street, Ste 222, Mississauga, ON Canada L5A 4K4 - 800-456-9320 : www.salmon.ca

Financial statements for most small business owners are historical documents. What they live and die by is their cash flow and most small to medium accounting software solutions have been sadly lacking in the area of cash flow reporting and forecasting. But that situation is changing dramatically.

Analytical tools are surfacing in the new versions of almost every accounting software solution. Simply Accounting 2005, QuickBooks 2005 and the new Version 7 of BusinessVision all begin to deal with the need for analytical tools such as cash flow forecasting. In the midrange Microsoft's FRx Forecaster does a great job of analyzing the financial health of a company. In the high end, Cognos, a Canadian success story, is doing well with their enterprise analytic solution.

For the small business owner the move by the accounting software vendors is a positive step but they are still in the embryo stage. For a fully functional cash forecasting tool a great solution is Pro-forma Plus. This cash flow forecasting and budgeting software has long filled a need for a streamlined, simple-to-use, professional level program aimed squarely at accountants in public practice and companies that want to manage by the numbers. The latest version of PFP retains the clear, intuitive Excel-based interface the program has been known for the past fifteen years, while delivering a vastly improved printing interface, automatic .pdf file creation, and the ability to download income and expense numbers from any accounting program that can export to Excel.

The download feature is a welcome addition. Variance analysis, which can be run monthly or quarterly, can be updated as soon as the actual-to-date numbers are available. Mapping to PFP's accounts is simple and once completed for the current year, all prior and future year data is automatically mapped.

The new feature that is particularly interesting is the ability to download up to five years of historical data. Pro-forma Plus organizes this data in income statement format, creates a trend line for each item, and compares the trend to next year's budget. Talk about eliminating blue-sky budgets! While this feature is not fool-proof, it forces a further, more in-depth look at the numbers for the upcoming year.

If you're new to Pro-forma Plus, some background is in order. PFP is a model that runs in Microsoft Excel. PFP produces a full set of projected financials including the balance sheet, cost of sales schedules (if applicable), the income statement, overhead schedule, and cash flow schedule plus additional schedules for accounts receivable, accounts payable, and if applicable, inventory.

PFP formats the statements to suit the company, whether it's for a service organization, a manufacturer, distributor or retailer and whether the company is incorporated, a proprietorship, or a partnership.

The model creates amortization schedules for an unlimited number of long-term loans and automatically allocates the current and long-term portions on the balance sheet. Tax calculations provide for federal and provincial rates as well as changes to the thresholds. There are numerous options for management bonuses including meeting ROI criteria.

PFP calculates the margin requirements for bank credit lines and predicts where monthly loan balances exceed the working limits. All interest calculations are automatic.

Amortization of capital assets is automatic including an option to use half-year rates in the year of purchase.

Additional features include consolidations including currency conversion and eliminating entries, business valuation, forecasting for short fiscal periods, and multi-year forecasting including an automatic annual comparative summary.

Sales and expenses can be broken down into as much detail as required. Cost of sales schedules can be produced for up to seven categories in the Corporate Edition Plus series or produced for an unlimited number of categories in the Modula Edition series.

Complete details can be shown for each expense item and can be formatted to express the item as a percentage of sales, distributed in even monthly increments, or amounts can be manually entered each month.

When Pro-forma Plus is opened, it adds a new item to the Excel menu bar, the PFP Menu. From this drop-down, selections can be made for all features in the model. When the file is closed, the menu item is deleted.

Printing is automatic and includes options for letter size and legal size paper. Printing to a .pdf file is just a matter of selecting "Print to PDF File" from the PFP print menu. This should help those who need to distribute documents electronically to people who need to review, print, and archive, but not necessarily contribute to or alter, the data they contain.

There is a version of Pro-forma Plus to suit the needs of accountants in public practice and accountants in companies.

The Corporate Edition Plus series, aimed at small-to-mid-size businesses and public practices, is $799 for the Silver version and $999 for the Gold version. For large companies and those companies requiring direct input from each manager, the Modula Edition is $1,199 for the Silver version and $1,499 for the Gold version.

Proforma Plus has been around for 15 years and it just keeps getting better. It's still easy to use, well documented, and sets the benchmark against which other models can be judged. For the business owner who truly wants to manage by the numbers, Pro-forma Plus provides the solution.

Quick Info

Pendock Mallorn Ltd.
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Alan Salmon, Managing Director of Alan Salmon & Associates Inc., is a leading authority on accounting software. He is Vice-President, Canadian Operations of K2 Enterprises, a North American consulting firm providing technology training to accountants. In addition to his work with consultants, accountants, and software companies in both Canada and the US, he is the chairperson of the Microsoft Accounting Technology for the 21st Century seminar series. He can be reached by e-mail at asalmon@salmon.ca or by visiting www.salmon.ca

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