I have been asked by one of my self employed client's to produce projections for this tax years income.
I have been thinking about the best way to tackle this, and wondered what your thoughts on it were.
I already have last years income figure of approx £15k from 1sept 2009 - 5 april 2010.
Would it be suitable for me to look at his income month by month from 6th april 2010 to date and see if there is an increase or no increase and then if there is a gradual increase lets say 5% per month then to guessimate this tax year income on that basis.
Would that be enough? - his is thinking of renting a property and they have asked for last years figures and next years projected figures, please could someone give me some pointers on best way to tackle this type of work, it would be very much appreciated as always.
My other query is - I take it, it would be acceptable for me to charge for the work as I would need to sit down and run through all the figures.
How much should I charge for work like this, I already charge a monthly bookkepping fee, but then this is extra work for me to produce
When doing projections, you take the previous figures to start with, then look at the economic climate, see what the clients thinks he's going to do in the next year and move forward.
I would always do a month by month projection, with sales and a detailed expenditure section. Looking at the previous figures, you can see any trends and just increase by a margin that the client would be happy with. You can't tell how his business is going to perform unless he tells you whether he's going to do more work or about the same!
You must def charge for this work - its very time consuming and you have to set up the templates etc etc - how much you charge is down to you, depending on the time you think it will take, a few hours at least!
I would quote him a figure for the additional work and make sure he understands that this is outside the scope of your ongoing arrangement.
I would be tempted to prepare a spreadsheet template that allows you to manipulate the figures how you see fit. you could do monthly columns in a sort of profit and loss format, very much like a cash flow kind of layout.
This way you can put some base figures in and then discuss and amend with the client. The client should know the market better than you so he should be able to give you the expected turnover projections or work load and then you just need to filter it though to the direct costs and amend the variable overheads such and travel, stationery, advertising etc..
its never easy and it will never be 100% correct so don't fret about it being wrong.
I myself use spreadsheets to do this and use a set template that I change to suit different clients.
Just a quick point. I do projections in my day job, though a little different as they are for NHS performance forecasting.
Do you have any more accounts besides 09/10. We usually base projections on at least three years, preferably five. Taking an average of all years activity irons out any blips and querks. For example, if someone works outside, the abnormally bad weather we saw in January and February 2010 would have had a negative affect on income levels for those months. Therefore, by taking into account other years activity during those times, we can iron out the abnormallities, yet in a way that doesn't ignore them as they are included in the average.
This is done on a monthly basis and on the year end totals.
After that, and following discussions where "assumptions" are made about the coming years activity, the averages plus assumptions are then modelled through several times using excel and an average is again taken of all the models predictions.
he there, i only have one years worth of accounts and have been told that he expects to increase his workload as that was his first year trading. he is expecting to have more of his own clients.
You may have seen my other post, year end adjustments, i have been thinking as that is the same client i am talking about, should i use the net profit figure on my final profit and loss or do i need to include my adjustment from converting the fuel expenditure to 40p per mile, this increase the fuel expense by about 2k. This is my first time doing projections for self employed cleint i have done them previously in college and also my full time job for a ltd company. I am also confused whether to include my adjustments in my projections.
-- Edited by lor on Monday 30th of August 2010 12:41:36 PM
