Replacement Budget Forecast

1. Introduction

Before use, please review the module Set Up details.

The module estimates the required asset replacement budget for up to 20 years.

Results present

•Forecast annual replacement cost

•Forecast annual recovery value

•Net annual budget budget required

Forecasts are based on:

Delivery Date and Delivery km	Fleet>>MMSB, Categories & Flags
Retirement Method: Age/Utilisation/Both (whichever occurs first)
Expected Life (months and/or km/hours)
Replacement Type
Purchase Price

Utilisation used to forecast retirement date is based on average daily utilisation using readings in Odometer Summary.

1. Manual Changes to Forecasts

In the results, the initial purchase price and recovery value can be manually updated

E.g.

•To correct historical special offer prices

•To change the purchase price of an asset that was bought second hand that will be replaced with a new one

•To build in a risk premium

•To increase/decrease sale value of assets in a particularly good or poor condition

2. Generating Forecasts

Replacement Forecast>>Generate Forecast

•Forecasts begin from the next financial year. Replacements due before the start of the next financial year are assumed to take place

•Forecasts are saved as batches to be reviewed/reworked

•Annual inflation/deflation (in the Replacement Type reference file) is applied to the results of the previous year

Example

Purchase price =$10,000
Year 1 inflation rate: 10%	$10,000 + 10%	Replacement cost 1 year after delivery: $11,000
Year 2 inflation rate: 10%	$11,000 + 10%	Replacement cost 2 year after delivery: $12,100
Year 3 inflation rate: 5%	$12,100 + 5%	Replacement cost 3 year after delivery: $12,705
Depreciation is calculated in the same way.

Follow the steps below to generate a forecast.

•Years refer to financial year E.g. 2020 means year ending June 30th 2020

•In the results, "Year 1" represents the upcoming, full financial year, not the current one

Step 1. Settings

Step 2. Choose assets to include/exclude

Step 3. Results

Changing the purchase or sale price from the system calculated values * updates the entire forecast.

End of Chapter