Beginning of the Testing Period

This pre-planning for a back test requires setup in the model at the beginning of the testing period.  You will enter your assumptions into the model and process the projection results, which is something you now do as a part of your normal month end processing procedures.  Before you download the next month’s data, you will save the results as a budget set.

This creates a unique, separate file of the assumptions and results which can be accessed at any time in the future.  This also allows you to modify the model during the evaluation period without affecting the initial assumptions.  By saving your assumption reports at the time of creation, you have an audit trail of the assumptions made for the evaluation. You may want to consider creating a back test set either monthly or quarterly, and just make it a habit so the “starting point” back test is available.