Understanding your past financial data is essential to forecasting for the future. Without analysing the data, your emotions or your opinion of what you’d like to happen with your business in the future are likely to colour your forecast. One easy way to use your past data to predict your business future is to build a financial prediction using Microsoft Excel.

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How to make an economic forecast using Microsoft Excel

1. Select your past sales data in Excel. The first step in creating your financial business forecast is to select the previous sales data that you wish to use. In most cases, you’ll choose the past three to five years. However, if a singular event, like the Stanley Cup Finals or the Winter Olympics being in town, dramatically impacted your sales and is likely to repeat in the future, your forecast will be more accurate if you leave that year (or at least that period) out of the data you use for your projections.

2. Click on Forecast Sheet on the Data tab. The next step is to click on “forecast sheet” located on the tab marked “data”. It’s located at the top of the page on the left side.

3. Enter the required information and hit Create. Next, you’ll need to enter the necessary information, such as the time period you’d like to forecast and, finally, hit create. You’ll have a forecast report projecting the sales and/or income into the period you selected.

How to use your forecast report to make smart business decisions

What can your forecast report be used for? If you know what your sales and income are likely to be for the next quarter or next year, you can make sure that you have the inventory, raw materials, staff and marketing that you need to support that level of sales. You can also use this report to discuss funding with your bank or another lender.