Are You Trendy ?
Chandoo is off Holidaying teaching excel in the Maldives and has lent me the keys to his Blog (Chandoo.org) and this week I plan to take it for a spin.
I will be posting 3 posts on Trend Analysis/Forecasting using Excel and a forth post on some Hidden Worksheet Properties which I stumbled onto last week !
Hopefully if I look after the Blog while Chandoo is gone, He will let me borrow the keys another day.
Forecasting
“Tomorrows weather will be fine and hot with a chance of showers in the morning.”
We have all seen this type of forecasting during the nightly news.
This week I am going to go through the basics of forecasting and trend analysis using Excel as a tool.
We will look at some simple trends and make predictions about future values.
In later posts we will look at more complex data and other methods of tackling these analysis.
Introduction
Often you may have a set of data and need to know what an intermediate or future value of that data may be.
This week we will investigate 3 methods of tackling this problem using Excel.
In this post we’ll look at doing forecasting manually
In the second post we’ll look at a few excel functions that assist us with forecasting
The third post will discuss a method of looking at any value along an Excel generated Trend Line and give you a tool to assist you in this.
Manual Forecasting
In all environments where numbers are collected and people make use of these numbers the ability to forecast or extrapolate data may be required.
In forecasting we are going to look at the trends that the data has and use these trends to help forecast future values or values outside the measured data. The trends can also be used to infill data where gaps may be missing in the collected data.
This post will look at doing this manually, albeit with some help from Excel.
We will examine a business that makes things and we will measure some measurement of those things every 5 days. In trend analysis it doesn’t matter what you measure or what your measuring it against.
We have collected some data which is tabulated
| Day | Measure |
| 5 | 7 |
| 10 | 10 |
| 15 | 24 |
| 25 | 30 |
| 30 | 40 |
One of the easiest ways to visualise this relationship is to draw a quick chart of one measure vs a base or in our case a time line.
This can be shown graphically as a simple Excel Scatter chart
You can see that there is some level of variability in the measurement as the data doesn’t quite fit a straight line.
Manually we can make an estimate of a line of best fit and draw it on the chart by adding a new data series consisting of 2 points.
There are 3 quick methods of using this line of best fit
- Manual Estimates
- Equal Triangles
- Equation for the line
Manual Estimates
If we want to know what the measurement would be for a location where no measurement was taken we can use the chart and 2 quick lines to show in this example that for 20 days we would expect a measurement of about 26 units.
This can also be used for extrapolation of our data past the limits of what was measured.
By extrapolating the Line of Best Fit beyond the data, the same technique can be applied to estimating what some future value maybe.
Equal Triangles
Equal Triangles is a technique where a simple ratios of 2 similarly shaped but different sized right angle triangles can be used to make estimates of missing or extrapolated data.
Using Equal Triangles the ratio of the height to the width of Triangle 1 (Red) is equal to the ratio of the height to the width of Triangle 2 (Blue).
So in the example above
Y1/X1 = Y2/X2
Y1 = 38 – 8 = 30
X1 = 30 – 5 = 25
Y1/X1 = 30/25 = 1.2
So for Triangle 2
Y2/X2 = 1.2
Y2 = ? – 8
X2 = 20 – 5 = 15
from Y2/X2 = 1.2
(? – 8 ) /15 – 1.2
We can rewrite this as
? = 8 + 1.2 x 15 = 26.0
Or
Unknown Y = Min Y + Ratio x (New X – Min x)
Once we have an equation we can setup a new series on out chart based on an equation in some cells and then directly plot the data onto our chart.
In this case we have used the equation =F105+1.2*(E111-E105)
Equation of the line of Best Fit
If we are using a straight line to model our line of best fit, we can also write an equation for the line in the form
Y = mX + c
Where: Y is the unknown measure
X is the X value for which we want to know the value of Y
m is the gradient of the line
c is the Y intercept of the line (or Y value when there is no X value or X =0 )
The gradient m is calculated as the Rise / Run or in our example 30/25 = 1.2
The Y Intercept is the value when x = 0. This can be back calculated from the first point (5,8)
C = 8 – (5 x 1.2) = 2.0
So the equation for our line of best fit is Y = 1.2 X + 2
We have used this in the next example =E136*1.2 + 2
The good thing about having an equation for the line is that we can use that to calculate any value of our measure.
So if we want to know the measure on a day outside the range we measured, say the 40th day
Downloads
You can download examples of all the above charts from the following link
https://chandoo.org/wp/wp-content/uploads/2011/01/Trends1.xls
Benefits of Manual Estimation
- Applicable to simple models
- Can be used without a computer or a calculator in the field
- Gives the user a better feel for the data
Problems of Manual Estimation
- Only applicable to simple models
- Reliant on the accuracy of your estimate of the trend
- No measure of how accurately your estimate fits the data
Next:
In the next post we will look at using excel functions to automatically estimate lines of best fit and other excel functions to aid in estimation of non-linear functions.
Further Readings
17 Responses to “Budget vs. Actual Profit Loss Report using Pivot Tables”
Good Work, Yogesh & Chandoo! Thanks.
Hi everybody,
first sorry I am late to say something about this topic;actually I was waiting last part
second I am not accountant I am an Engineer
third """"Very Important""" the idea is not about Loss but I am sure it is profit
Based on third it shows:
1- How to use EXCEL
2- How to use pivot TABLES
3- How to collect and arrange DATA
4- How to make reports
Many Thanks
Hi Yogesh and Chandoo,
Thank you for sharing your knowledge!
You guys are great!
thanks chandoo and yogesh, thanks for you lessons, are great!....i have a idea for a budget. I try to do it..... thanks for all
Thanks a lot for sharing the most powerful tool worldwide "knowledge"
Warm greetings from Peru
Hi -
This is a really great article because it's a simple and common thing you'd want to do with a pivot table but not at all obvious how to do it! So - muchas gracias to Chandoo and Yogesh!
One thing - I couldn't get past the group error in the sample file. I would click on ungroup but it didn't seem to have any effect. I'd appreciate it if anybody has any pointers here.
-Juanito
Hi Chandoo
I am also having the group error. Can't seem to ungroup? Appreciate if you explain further on the steps required in order to get to calculated items.
Many thanks and keep up the great work.
Cheers
Adam
Hi Chandoo,
I'm struggling resolving the problem depicted below:
I have a set of data, with (among others) a "Region" field (can be APJ, EMEA, or AMS), and a "Country" field.
Unfortunately, I need to group data by the following 4 Regions: APeJ, Japan, EMEA and AMS.
I first tried to make a pivot with Region and Country in the rows (or columns), and then group Country data as per the above.
Alas, as soon as I have a new Country that appear in my data set, my groupings are broken, and I have to redo the job of ungrouping, grouping etc.
I thought I could try to use calculated item, by adding first a new column to my dataset concatenating Region_Country, and create an "APeJ" calculated item that would sum all the "APJ_*" and substract the "APJ_Japan", but again, no clue, as I can't find a way to use any wild card in those formulas.
Given that I already found extremely helpful tips and tricks in your site that helped me manage that bunch of data, I'm pretty sure you'll have a bright idea on how I can solve that one!
Thanks in advance for your lights!
Hi Catherine...
In such cases, I advice using an additional column in the data itself. You can set-up a grouping table else where with country in first column, region in second column. And then in the data, you can add an extra column and use VLOOKUP to fetch the region based on the country.
Then feed this entire data (with extra column) to pivot table and use the extra column to group the data.
Hi Chandoo,
Thank you for your prompt answer.
I finally came to the same conclusion - after a rest 🙂 . I was probably too tired Friday evening (it was rather late), having spent hours in manipulating all my surveys data so as to pull rolling averages, make nice graphs and so on, and was trying to find a complex solution when there was a simple one.
Thanks again,
Catherine
Hey,
Great post!
I for example have different database structure with the following fields :
Date, Expense, Income, Sum (Income - Expense), Category (Sales, Cost of Goods and etc).
Creating a P&L report for the whole year works great. Including gross margin % and etc.
Though, creating P&L report by QTR/Month is becoming impossible since i get the following error : “This PivotTable report field is grouped. You cannot add calculated item to grouped filed.”
Is there a solution for this kind of problem?
Like Adam and Juanito, I also cannot ungroup.
Would appreciate it if you can add a few more lines and a screenshot or two on where to put the mouse cursor to ungroup.
Hi, I have figured out the ungrouping problem. One of the earlier steps was to group by month, if you pull the month back down to the column then right click and then select ungroup, then pull the month back up so you end up with just data source and budget/actual as the headings, then you can continue on.
To solve the ungroup problem, my method is:
Copy the "data" sheet to a whole new Excel workbook
and directly work on Part 6.
And since it is a fresh copy, Excel don't show me the "can't ungroup" problem. Hope this help.
Thank you Yogesh for this wonderful tutorial.
Kent, Malaysia
Just when i thought pivots were awesome i learn about inserting the calculated fields and that makes them more awesome. chandoo where have you been all my life.
Hello - your P&L pivot version has really impressed my boss and would like to use it. I have applied it for a actual vs budget vs forecast model I have created. One problem. In your variance above the operating profit percent % variance shows 33.8% but I want it to show (0.01) point or the true diff from prior budget.
I know I can add calculation to the side but boss would like to see it in pivot table.
Please help
Thanks
I have a further query which may solve my above dilemma. Is it possible to add a column that calculates percent increase. So in the example above a new column would be added to show variance %.
Any help would be appreciated.
Thanks