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Report name: Sample Forecast

How Forecast Overheads are Calculated

This is how overheads analysis is presented. Fixed overheads are entered in the form as straight values, variable overheads as percentages of sales.


forecast for year beginning the 1st.May 2017May 2018May 2019
 Wages, Pensions and NI 300,000310,000330,000
 Administrative Overheads and Expenses
 Rent & Rates20,00010,00010,000
 Bank Charges8001,2001,500
 Factoring Service Charges000
 Rental of Equipment 1,0002,0004,000
 General Administration80,000110,000125,000
 Legal & Professional4,0004,0005,000
 Selling Overheads and Expenses
 Internet & Web4,0006,0006,000
 Motor, Travel & Entertainment16,00022,00030,000
 Carriage Out 60,00066,00088,000
 Bad Debts46,12550,73867,650
 Charge Card Service Charges5,2565,7621,917
 Total 136,381156,500203,567
 Depreciation 10,87617,54320,290
 Operating Overheads and Expenses553,057611,243699,357
 Interest Charges
 Hire Purchase1,9574,8484,768
 Factoring / Invoice Discounting000
 Total Overheads and Expenses558,119618,712704,751

Planning and Forecasting Overheads and Expenses with Figurewizard

This overheads analysis forecast can be updated by editing the form or even better by the What-If Calculator to view in real time how changes can improve profits liquidity and cash flow.

Definition of Operating Overhead

Only those expenses concerned with the trading activity of the business, i.e. operations qualify as operating overheads. These are separated into their activities i.e. wages; administration; selling and depreciation.

Budgeting Forecast Fixed Overheads

These are the overheads (not incl. wages - shown separately) that are concerned with Adminstration, rent, legal and professional and so on. Their forecast yearly values will have been entered into the form. 

Because they are fixed values and not dependent on volumes of trade, the system assigns them as equal monthly values.

The table below using our What-If Calculator shows how profits, cash and liquidity improve when reduced by degrees of 5%.

Less Fixed Overheads Pre-Tax Profits Plus/Minus Borrowings Working Capital Interest Charges Bank Year-End
0% 130,000 99,443 53,854 63,022 5.062 -35,439
5% 123,599 101,135 47,319 68,493 4,807 -28,905
10% 117.000 107,890 40,785 73,965 4.553 -22,370

Budgeting Forecast Wages

The bigget overhead is almost always going to be that for wages (including director salaries) NI and pension contributions.That makes it the first to be controlled. The table below shows how reductions by degrees of 5% affect profits, liquidity and cash.

Less Wages Pre-Tax Profits Plus/Minus Borrowings Working Capital Interest Charges Bank Year-End
0% 300,000 99,443 53,854 63,022 5,062 -35,439
5% 285,000 110,031 38,203 75,699 4,411 -19,789
10% 270,000 125,516 22,719 88,241 3,927 -4,305

Consolidating Budgets for Wages and Fixed Overheads

Reducing both wages and fixed overheads by degrees of 5% will of course show even more dramatic improvements.

Less Wages & Fixed OH Pre-Tax Profit Plus/Minus Borrowings Working Capital Interest Charges Bank Year-End
0% 430,000 99.443 53,854 63,022 5,062 -35,439
5% 408,500 116,779 31,676 81,165 4,164 -13,261
10% 387,000 138,712 9,962 98,391 3,730 -2,457

Our unique and powerful What-If Calculator can also be used in dozens of other combinations for planning and budgeting profits, working capital, cash-flow solvency and equity simply with single clicks of a mouse.

Financial Overheads

Financial fees such as bank, charge card or factoring service charges are part of the administrative function of the business and so belong in operating overheads.

On the other hand interest relates to servicing external financing debt which is not connected to trading. That is why interest is only charged to profit and loss after the operating profit has been calculated. Interest charges are nevertheless tax deductible.

Non-Tax Deductible Overheads

Entertainment expenses, fines and provisions that do not involve cash (e.g. depreciation) are not tax deductible overheads. Depreciation is replaced by capital allowances, which often allow greater levels of tax relief than your depreciation charge would.

Allocation of Overheads to Cost of Goods Sold

Labour, material and other costs that are directly related to the cost of goods for resale are added to the cost of purchases and not charged as operating overheads. These will include inward freight, labour, materials or depreciation charges for equipment specifically used in processing goods for resale such as assembly, relabelling or repackaging.

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