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Create microforecasts

Forecast events, projects, and business decisions on top of your baseline

Updated over 3 weeks ago

This feature is included with Fathom Pro - the plan with access to all of Fathom's features. Companies on Portfolio can be upgraded to Fathom Pro at any time.

What is a microforecast?

A microforecast is a self-contained set of Profit & Loss and Balance Sheet movements.

Microforecasts can be used to model and isolate the impacts of individual business decisions, events, or projects, providing greater visibility into how these decisions contribute to your forecast or scenario.

Microforecasts can be used to model events like:

  • Large asset purchases (e.g. equipment purchases)

  • New hires

  • Loans

  • Projects

  • Marketing campaigns

  • New product lines

  • Fundraisers

Because it is easy to change the timing of microforecasts, they are especially helpful if you’re unsure of when a business event will happen or if you want to determine the best timing for an event.

You can also turn a microforecast on or off instantly in your main forecast or a scenario to add or remove the financial impacts of a potential decision. They’re perfect for modelling events you are considering, but may or may not happen.

💡Smart Tip: What's the difference between microforecasts and scenarios? Learn from our 'Forecast What-ifs' article.

How do microforecasts interact with the baseline?

Microforecasts sit on top of the baseline. They can contribute to an account’s overall total, but they are forecast separately from the baseline.

The value rules, timing profiles, journals, and/or schedules used to forecast the baseline of an account do not need to match the rules used to forecast that same account in a microforecast.

By default, the timing profiles will match the baseline forecast, but they can be changed in a microfrecast.

Example: A 'Sales' account has a timing profile set so 100% of the 'Sales' revenue is collected as Cash the same month it is recorded on the Profit & Loss.

The business is considering offering an additional product line. The new product line will be more expensive than the business's existing products, so they will offer extended payment options.

The business creates a microforecast to model the new product line and its expected 'Sales' revenue. The timing profile for the 'Sales' account in the microforecast is set so 70% of the sales revenue is collected as Cash the same month it is recorded on the Profit & Loss. The remaining 30% is collected in the following month.

Any value rules you wish to carry into a microforecast from the baseline will need to be re-created in the microforecast.

Example: A company is forecasting additional sales revenue as a result of a marketing campaign. On the baseline, the company has forecast a Cost of Sales account as 20% of all 'Sales' revenue.

The company has modelled the marketing campaign using a microforecast, which includes the additional sales revenue. The company will need to recreate the formula value rule for the Cost of Sales account in the microforecast to ensure that the additional Cost of Sales is included.

Tax Settings will carry over from the main forecast into microforecasts, so the impacts of any microforecast movements are automatically calculated and included in the microforecast.

Example: A company has set up a withholding tax on its 'Salaries' expense account to forecast the tax withheld from its employees' paychecks. They forecast a new hire with a microforecast. When they add the new hire's expected salary to the 'Salaries' expense account in the microforecast, the additional withholding tax is automatically added to the microforecast.

Account linkages cannot be changed in a microforecast. Account linkages must be the same as those used to forecast the baseline.

How to create a microforecast

You can create up to 50 microforecasts in a company or consolidated group’s forecast.

To create a microforecast:

  1. Click the Microscope icon on the left sidebar.
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  2. At the bottom of the menu, click + Create microforecast.
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  3. Fill out the fields:
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    1. Name the microforecast.
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    2. Select or add a new category.
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    3. Set a starting date. The timing of the microforecast can be easily changed later on.
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  4. Click Create.
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  5. Choose a wizard or select + Add account to begin building a microforecast from scratch.
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    1. A microforecast wizard will ask you to fill out a few fields to help you create a microforecast. Both options will eventually take you to the microforecast grid.
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  6. Like in the main forecasting grid, you can use the following tools to forecast microforecast values:
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    1. Value rules (P&L amounts)
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    2. Timing Profiles (AR, AP, Unearned Revenue, Prepaid Expenses)
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    3. Schedules & Journals (Other Balance Sheet accounts)
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  7. To bring in additional accounts, click the green Add account button at the top right of the microforecast grid.

Timing profiles in a microforecast will default to matching the baseline timing profile used for an account. However, you can create a new timing profile for an account that does not match the baseline timing profile.

Tax Settings and account linkages will carry over from the Forecast Settings and baseline.

💡 Smart Tip: If an account does not yet exist in your Chart of Accounts, but is needed to forecast, then you can create a future account.

Example microforecast

Example: A business needs to model hiring a new sales associate. The associate is expected to be a full-time, permanent employee with an annual salary of $65,000. They will be in training for the first two months on the job before they are expected to bring in additional revenue and increase their performance by 5% month-over-month.

Turn a microforecast on or off

A microforecast can be active or inactive in your main forecast or scenarios. You can have a microforecast turned off in your main forecast and turned on in a scenario.

To turn a microforecast on or off:

  1. Ensure you’re viewing your main forecast or scenario in which you want to change the status of the microforecast.

    1. If you’re viewing a scenario, you’ll see a green box with the scenario’s name in the top-right corner of your main forecasting grid.
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  2. Click the Microscope icon on the left sidebar.
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  3. Click the toggle next to the microforecast name.

    1. If the toggle is green, the microforecast is on.

💡Smart Tip: Keep an eye on the quick metrics bar as you turn a microforecast on or off. The results on the bar will update instantly, allowing you to see the impact of a microforecast.

Change the timing & layering of microforecasts

With the business roadmap, you can:

  • Change the timing or start date of a microforecast.

  • Determine when a microforecast will have the greatest financial impact.

  • Layer microforecasts on top of one another or experiment with combinations of microforecasts.

Learn more about the business roadmap from our ‘Map out projects and events in your forecast’ article.

Edit a microforecast

You can return to or edit a microforecast at any time. Microforecast values are the same across your main forecast and scenarios, so you will need to turn off a scenario to edit a microforecast.

To edit a microforecast:

  1. Click the Microscope icon on the left sidebar.
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  2. Select the microforecast you want to edit.

You can change the category of a microforecast from the drop-down menu in the top-right corner of the microforecast.

Rename, duplicate, or delete a microforecast

To rename, duplicate, or delete a microforecast:

  1. Click the Microscope icon on the left sidebar.
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  2. Click the Three dots icon for the microforecast.
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  3. Select the appropriate option.

If you delete a microforecast, it cannot be recovered. You will need to re-create the microforecast.

Common Questions

How do you know which accounts to add to a microforecast?

If you’re building a microforecast from scratch or you are considering adding additional accounts to a microforecast created by a wizard, you may be unsure of which accounts to add.

The accounts you add to your microforecast depend entirely on the event or decision you’re modelling and its probable financial impacts.

Ask yourself these types of questions:

  1. What financial effects am I expecting from this potential decision?
    For example:
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    1. Will Revenue increase or decrease?
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    2. Will Cost of Sales or Expenses be impacted?
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  1. Which accounts will show those effects?
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    1. If you’re forecasting a Marketing campaign, you might expect an increase in Revenue to impact a Sales account. And you’re Marketing expenses would probably increase.
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    2. If you’re forecasting a loan. Which loan account will be impacted?

Some accounts will be brought in automatically as you add rules to your microforecast.

Example: A company is modelling a sales event with a microforecast. The 'Sales' account has a timing profile set on the baseline that models 60-day payment terms.

The additional sales revenue is added to the microforecast. The baseline timing profile is applied to the 'Sales' account in the microforecast by default. The Cash and Accounts Receivable amounts are automatically added to the microforecast. The company is happy with this and does not change the timing profile in the microforecast.

Can I use accounts that don't exist in my Chart of Accounts?

In some instances, you may want to forecast values for an account that does not exist in your source accounting system. You can create and add future accounts to microforecasts.

Example: A business is considering taking out a new loan. They do not have a loan account for this loan in their source accounting system.

The business models the new loan with a microforecast and adds a future account to the microforecast to accommodate the new loan.

To create and add a future account to a microforecast:

  1. In the microforecast, click the Add account option.
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  2. Type in “Account doesn’t exist yet” and select the option that appears.
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  3. Name the future account.
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  4. Choose the account’s classification.
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  5. Click Add.

If you add the account to your source accounting system later on, you can merge it with the future account.

While future accounts are created in microforecasts, you can also use them in scenarios. Learn more about future accounts from our ‘Future Accounts’ article.

Can you reference baseline values in microforecasts?

No. To prevent instances of circular reasoning and keep microforecasts self-contained, baseline values cannot be referenced in value rule formulas in microforecasts.

Because microforecasts are self-contained, they can be easily turned on or off and moved along your forecast’s timeline.

To forecast an increase or decrease to the baseline value of an account, you can use the baseline adjustment value rule in a scenario.

If you want to reflect baseline account relationships in the microforecast, you can re-create baseline value rules in the microforecast.

💡Smart Tip: Learn about the differences between microforecasts and scenarios and when you might use each one or both options from our ‘Forecast What-ifs' article.

Next steps

To continue our ‘Forecast What-ifs' workflow, you can learn about the following:

To explore...

Learn how to...

Layering and timing your microforecasts.

Business Roadmap

Creating new versions of your forecast with adjustments to your baseline rules.

Scenarios

Ready to report on your forecast? Learn how.

Learn more

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