When you break it down, there are really 3 parts to this question:
- is Castaway calculating correctly given the element properties, working capital settings and data inputs entered into the forecast?
- are the properties and working capital settings for each element correct?
- do the data inputs reflect what the business expects to happen in future?
Here's the quick answers:
- Yes. Castaway's reports are designed to always have accounting integrity. All of Castaway's calculations are based on 3-way modelling principles, meaning they follow the logic of double-entry accounting. So, the reports will be correct, based on the element properties, working capital settings and data inputs
- Castaway can't tell whether the element properties and working capital settings are reasonable for the situation you are modelling. However, there are shortcut ways you can use to check for yourself whether these properties and settings are correct
- Again, Castaway can't tell whether your data is correct. However, it is easy to check for yourself
A structured approach to reviewing Castaway's report numbers
When we review forecasts internally, our team follow a structured process:
- review the element properties for each element
- review the working capital settings for each element
- review the reports as a 'sanity check'
1. Review the element properties for each element
There are several ways to do this:
- to review the element properties in a printable report, go to Reporting > Element Properties Report
- to review all of the element properties in a dynamic table, go to Forecast > Element Settings, then click the Element Groups button. Properties can be changed dynamically from this table
- to review elements individually,select the element name in the Chart of Accounts on the Castaway main screen
2. Review the working capital settings for each element
Each element in Castaway provides appropriate settings for working capital items like GST/VAT rate, income tax treatment and cashflow terms (including payment terms as well as cashflow modifiers like prepayment, accrual, provision and work-in-progress settings). There are different ways to check each of these settings. Here's how we review these settings:
- to check GST/VAT rates in a list view, go to Element Groups and work through each of the element types that allow GST/VAT settings (Sales, Costs, Inventory, Fixed Assets)
- to check GST/VAT values calculated by Castaway, go to Reporting > Other Reports and review the GST/VAT Reconciliation report. This is a great way to spot elements that have GST/VAT incorrectly applied
- to check GST/VAT payment settings, go to the GST/VAT Payments element at the bottom of the Chart of Accounts in the Forecast Workspace
Income tax/Corporation tax
- to check which elements are included in the calculation of Taxable Income, go to Element Groups and review the Tax Exempt setting for each element. If Tax Exempt is set to No, it means the element is included in the calculation of Taxable Income
- to check Income Tax/Corporation Tax lodgement, instalment and payment settings, go to the Income Tax/Corporation Tax element around the middle of the Chart of Accounts
Element payment terms
- to check the Cashflow Method used to calculate payment terms for each element, go to Element Groups. This screen also lets you review the payment terms assumptions where the Cashflow Method is set to % Spread
- to check both the Cashflow Method and the payment terms assumptions in one report, go to Reporting > Element Properties Report
- to review payment terms for each element individually, double-click the element name in the Chart of Accounts
- for a quick review of the cashflow arising from each element, use the cashflow report (Reporting > Cash Flow), or use the Accounts Payable and Accounts Receivable reconciliations (Reporting > Other Reports)
Cashflow from Opening/Actuals Balances
- to check the cashflow arising from opening/actuals debtors and creditors balances, go to the cashflow report (Reporting > Cash Flow) and expand the Sales and Costs sections. The first line in each section (General Trade Debtors and General Trade Creditors respectively) shows how Castaway expects the opening/actuals debtors and creditors to be collected/paid
- to review how these amounts are calculated, go to Forecast > Opening & Actuals and open the Balance Sheet Data screen. Click the dropdown arrows next to the General Trade Debtors and General Trade Creditors balances
Review other working capital items
- to identify other working capital items, go to the Funds Flow report (Reporting > Funds Flow) and review the Working Capital Movements section. Double-click on items to open the element data entry screen and review the workings
3. Review the reports as a sanity check
Once you are comfortable with the element properties and working capital settings for each element, it's time to review the reports. A quick sanity check is a great way of highlighting major issues in the numbers. Naturally, smaller issues may not be as easy to spot.
There is no 'right' order to review the reports, but we tend to start with the Profit & Loss, then move to the Balance Sheet