Figures that move together

Why some figures are linked

In most businesses, certain figures rarely move on their own. Sell more, and there's usually more cost of sales, more VAT, more corporation tax alongside it. Take someone on, and there's usually employer's National Insurance and a pension contribution that comes with them.

None of that is unique to sherloc. It's just how a business works. The only thing that changes from one business to the next is how much moves, and that's the part only you know.

Why we leave the amount to you

sherloc doesn't automatically link revenue to cost of sales, VAT or corporation tax, and your staff records have no fields for employer's National Insurance or pension. It leaves the size of a knock-on change to you, because there's no single right answer that works for every business. Cost of sales might sit at 20% of revenue for you and 60% for someone else. One employer matches pension contributions in full, another doesn't. A fixed rule that works for one forecast would be wrong for the next.

That's why we leave it to you to add the matching assumption, rather than guess on your behalf. It keeps your forecast honest: the relationships between your figures are ones you choose.

When you do want one figure to follow another, you can link them yourself. When you create an assumption, choose the Set to a percentage of a line item change type. You'll be asked Which sheet?, then Which line item?, then Which value?, and finally What percentage? Each month of your figure then becomes that percentage of the line item you picked, and it moves whenever that line item moves.

What to check when you set an assumption

Before you rely on a new assumption, ask whether it brings anything else with it.

Does this bring a cost with it?

Growing revenue usually means growing the costs behind it too: cost of sales, VAT, corporation tax. If you're modelling more coming in, it's worth checking whether more should also be going out.

Does this involve people?

Adding or changing headcount usually brings employer's National Insurance and pension contributions with it, on top of the salary itself.

Would this look different to someone reading your figures?

If a number would raise an eyebrow on its own (revenue up with no extra cost anywhere, headcount up with no extra people cost), it's worth a second assumption alongside the first.

Worked example

Round numbers: revenue growing 20% a month, cost of sales currently a third of revenue.

Left alone, cost of sales holds at last month's figure while revenue climbs, so margin looks better every month than it's likely to be in practice. One extra assumption keeps the two moving at the rate you'd expect for your business.