How To Build Monthly Budgeting & Forecasting Model

A monthly budgeting and forecasting model includes monthly assumptions, operational drivers (for revenue, expenses, capital costs), integrated financial statements (income statement, balance sheet, cash flow statement), and the ability to roll forward with historical data. It also features charts and graphs to visualize outputs.

This type of model is crucial for internal corporate planning and decision-making, budgeting and forecasting, measuring results and evaluating performance, and strategic planning and analysis.

The model has a cover page and table of contents. It's organized into sections for assumptions, three financial statements, supporting schedules, and charts. Actual results are on the left, and forecast results are on the right, allowing for seamless integration of new actual data.

The model incorporates assumptions for business operations (e.g., number of stores for a retail business), balance sheet, and financing. These drive the forecasted income statement, balance sheet, and cash flow statement. Supporting schedules, debt covenants, and leverage ratios, along with summary charts for cash flow and debt, are also included.

To roll forward, new actual monthly results are inserted as a new column, replacing the prior forecast. The forecast then extends one more month to the right. This process is repeated each month to continuously update the model with fresh data, maintaining a 12-month rolling forecast.