From Capex to Depreciation: Building a Forecast That Works
Carl Seidman, CSP, CPA
Helping finance professionals master FP&A, Excel, data, and CFO advisory services through learning experiences, masterminds, training + community | Adjunct Professor in Data Analytics | Microsoft MVP
Assets don't last forever. Here's an easy explanation of how to automate a depreciation expense forecast. Grab the template if you want to use it for yourself. ??
How does depreciation expense relate to capital expenditures?
In this example, you'll see yearly investments in computers and office equipment. Assuming they last for 3 years, each year we depreciate the value of the assets.
But rather than calculate this manually, or using static approaches, this forecast leverages flexible formulas. They consider whether the assets have been fully depreciated or whether there's still useful life.
How to forecast capital expenditures? If you're going to get depreciation forecasts correct, that requires projections around capex. Some companies will have formalized capex schedules. Others will have fixed asset registers. Still more may require an analysis of growth plans and the necessary infrastructure to support them.
And finally, some capex forecasts consider trailing run rates or averages.
Whatever approach you decide to take, ensure that it can be vouched back to assumptions and updated quickly and easily.
What questions do you have? Simply message me, and I'll happily answer them.
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How can I help you?
Forecasting depreciation doesn’t have to be a manual or daunting process. With the right tools and approach, you can build a flexible and reliable model that evolves with your business needs. Whether you’re tackling capex projections, managing asset lifecycles, or just looking for a smarter way to stay ahead, this guide has you covered. Watch the walkthrough and grab the template to simplify your forecasts and boost your financial planning efficiency. For more FP&A insights, follow me on LinkedIn.
Until next time,
Carl
Event Director
1 个月Understanding capex and depreciation is crucial for accurate forecasting. How do you ensure your models stay adaptable to changing business needs?
Microsoft MVP | BXL | 5g Modeling Founder
1 个月What are your thoughts on this approach? https://sites.google.com/site/beyondexcel/home/5g-modeling/5g-component-libraries/5g-depreciate%CE%BB