In FD4Cast models, expenses are input in two separate sections: Direct Expenses and Overheads. To confirm the methodology, Direct Expense is an expense incurred that varies directly with changes in the volume of your business (more sales – more material purchases – more labor etc.). Note that Overheads are not directly proportional with sales volume.
In FD4Cast model, we can input direct expenses in their own menu, as shown below:
Currencies: At the top of the screen (blue region) you will see the currency ratios for each month. This section is managed from Taxation > VAT Assumptions from the model ribbon. Different currency ratios can be input for the following months for more accurate forecasts. (For more details, see: 6.1 VAT & CURRENCY ASSUMPTIONS)
Expense Items: On the left hand side of the screen (orange region) we see different expense items. These belong to the Direct Expenses category which can be added as shown at 1.4.2 Add/Remove Category Rows and renamed as shown at 1.5 Admin Sheet.
Creditor Delay: In this section in the middle (yellow region) we can manage the relation between payments and time delays. This will be explained below in more detail.
Direct Labour Input: This input area (green region) is being used for direct labour expenses. (This is another way of inputting employee expenses if users don’t want to use the Payroll Input sheet to enter employees individually. This is explained in more detail in section 3.4 Payroll Management)
Direct Expenses Input: This is the section (purple region) where expense for each category and each month can be entered manually. Expense forecasts should be entered net of VAT and in the month that the income is invoiced. Any timing differences for receiving the invoice from supplier and making the payment is managed with creditor delay, which is explained below.
Once you have input your expense forecasts, you will see various tables below your forecasts. These tables are for audit purposes only, and cannot be edited. They allow you to see the figures flowing correctly through your model and the effect they have on other parts of the FD4Cast model.
Similar to the 3.1.2 Debtor Profiles (debtor delay) in the Income section, there can also be time differences between receiving the invoice from suppliers and actually pay them. This section makes it easy to manage these delays.
In the example below, under Direct Expenses: Standard (Excl. VAT) the company has 14 days to pay 100% of its expenses relating to “Raw Material”. Whereas for “Packages” types of expenses the company has 30 days to pay 50%, however 50% of expenses are payable without any delay.
The model calculates a number of financial lines, including VAT and the impact on Direct Expenses (Cashflow) (Incl. VAT) to see how the inputs are reflected throughout the reports. (On the left hand side, you can see the relevant reports with abbreviations in red)