Budget Revision Template: Downside Scenario

  • Peter Lynch
As a continuation of the post titled Modeling a Crisis, the following template has been made available: Budget Revision Template. This template was designed to help small to medium-sized business owners adjust their company’s budget for an unexpected change in revenue.

The videos available below provide a walk-through of the income statement and the cash flow worksheet in an effort to make it easier to comprehend. A few text explanations of the worksheets, and some links with additional instruction can be found beneath the videos as well.

Budget Revision Worksheet

Revenue: Input historical revenue as well as the original forecast for revenue. The values for the projected period can be revised with percentages in each corresponding period. After the new revised revenue line item in the model has been calculated, discounts can be applied to arrive at net revenue.

Cost Structure: Each line item under COGS and SG&A can be toggled to reflect either a fixed, variable or semi-variable cost structure. For a better understanding of the formulas on the tab titled Budget Revision please see the link that follows: Formla’s for Fixed, Variable and Semi-Variable Cost Structure. The only line item that is not projected in this manner is payroll under SG&A. This has its own tab to allow for some additional flexibility.

Cash Flows Worksheet

This tab starts with Net Income from the Budget Revision worksheet and makes adjustments to arrive at an estimate for cash flow for each projected period. The template requires some balance sheet information for this calculation. As it relates to working capital, three accounts are included: Accounts Receivable, Inventory and Accounts Payable. Otherwise a debt payments projection is required. The remaining line items pull from the Budget Revision tab.

If you are not familiar with a three-statement model, the two videos that follow will help with some of the concepts discussed in the second video.

  1. Three Statement Model Part I
  2. Three Statement Model Part II