If your bank has asked you to create a set of financial projections for your loan application, and you are hoping to use your Quickbooks data to help project your future financials, I have 2 things to say:
- You are out of luck
- You are not alone
Unfortunately Quickbooks does not have a decent solution for business owners attempting to create financial projections based on past accounting data. In the screenshot below of the Intuit Community you can see that Quickbooks users have been asking question after question to figure out how to create a set of financial projections. There are 798 results for “financial projections.”
So what are your other options right now?
Basically, the only option you have is to use the Quickbooks budget tool which is fairly limited in functionality, OR you can create your own financial projections from scratch. Typically you end up finding and using a Excel spreadsheet template that someone has published on the internet. The problem is that the average business owner doesn’t have a PhD in spreadsheet modeling, and really has no idea if their forecasts are realistic or accurate.
Doesn’t it seem like there has to be a better way? Intuit is also the maker of TurboTax which takes a complicated subject like taxes and makes it simple through software. Why isn’t there a TurboTax for financial projections?
We thought that there has to be a better way, so we are building a better way.
ProjectionHub is a web application that helps entrepreneurs create financial projections without the need to have a PhD in spreadsheet modeling. You can see how our projection tool works here.
Right now the tool is fairly basic, it walks you through the process of creating up to a:
- 3 year Cash Flow Forecast
- 3 year P&L Forecast
But we have big time ambitions! We believe that data can truly change the way business owners project the future success or failure of their company, and that data can help banks better analyze the creditworthiness of a business. Here is a diagram from Quickbooks that shows how web application like ProjectionHub can utilize aggregate Quickbooks data:
So what exactly does this mean practically?
Imagine that you can connect your own Quickbooks data to ProjectionHub. ProjectionHub then looks at the past couple years of data and notices trends in both sales and expenses. ProjectionHub then automatically forecasts what your financial statements would look like if those trends were to continue.
Pretty cool, but that is only the start!
Quickbooks Aggregate Data
Now this could get really interesting when ProjectionHub pulls in aggregate data from the millions of businesses around the world that use Quickbooks. The app could look at trends by Country, State, and City. We could find trends by industry. Or let’s say you open a cafe and you have been in business for 2 years. The application would be able to look at financial data from other cafes in their second year of business, and then look what they did over the next 3 years. If the average 2 year old cafe grew 20% per year for the next 3 years, that would make a strong case for your projected growth.
On the other hand, the application might be able to see that 50% of 2 year old cafes fail within the next 3 years.
As you create your own financial projections the tool should be able to tell you when you get out of line. Let’s say that only the top .01% of businesses grow as fast as you are predicting. That should be a warning sign to you and your banker that you are being unrealistic with your financial projections.
At ProjectionHub we truly believe the possibilities are endless when it comes to utilizing data to help entrepreneurs better predict the future success or failure of their company.
What do you think? How can we improve the financial projection process to make it easier and more accurate for you and your company?