# 7.2.1. Revenues and raw materials

In this section you can forecast:

The center of the screen presents the list of products or services being sold. Until you add the first item this list is empty. The list displays the amount of sales per product or service (before inflation). The assumptions for revenues and raw materials are carried in a page for each product.

## Forecasting the revenues

To add a product or service to be sold:

1. While on the product listing click on the button “Add”. You will be directed to product or service editing screen.
2. On the product or service editing screen write the name of the product or service.
3. For each year you can enter the quantities sold. When you enter a value, the app replicates the value for the following years for your convenience. Feel free to change whichever value you want.
4. For each year you can enter the price of the product or service. Take into attention that you do not need to adjust the prices for the following years due to inflation, because you have already set inflation on the version settings. You should only change the price if you believe that a non-nominal change in prices will occur.
5. Set the VAT rate. You will notice that the general VAT rate entered at the project settings is already pre-set, but you can change it as you wish.

• ## 2

###### Example – Real change of the price

Esteban’s company is introducing an innovative product in the market. They believe that due to economic conditions, the average yearly inflation rate is 1,5%.

Upon release to the market the retail price is 50 EUR. Esteban is looking into two pricing strategies:
i) If no strong competition enters the market, Esteban will keep the price at 50 EUR.

 Year 1 2 3 4 5 Real price 50,00 50,00 50,00 50,00 50,00 Inflation NA 1,50% 1,50% 1,50% 1,50% Nominal retail price 50,00 50,75 51,51 52,28 53,07

ii) If strong competition enters the market, Esteban estimates the need to reduce the real price in 5 EUR every year until a minimum real retail price of 35 EUR.

 Year 1 2 3 4 5 Real price 50,00 45,00 40,00 35,00 35,00 Inflation NA 1,50% 1,50% 1,50% 1,50% Nominal retail price 50,00 45,68 41,21 36,60 37,15

## Forecasting the raw materials and consumables

While using CASFLOAPP you have two options to forecast the raw materials and the consumables:

• by percentage of the price of the product or service
• by the sum of items that compose the product or service

While calculating by item, you should be aware that you must input unitary values: the cost of the item per each product (in the example of the image above the cost is given by adding one piece of bread, one piece of meat, one slice of tomato, one slice of cheese and one portion of lettuce). The total cost of raw materials and consumables will be given by multiplying the quantities sold (of a product) by the cost of the items.

#### Using the percentage method in CASFLO APP

In this method, for each product, the cost of raw materials and consumables is calculated as a percentage of its price. For each product or service, to set the cost of production in the simple input method you will have to:

1. Enter the percentage that the cost of production represents on the price.
2. Set the VAT rate for the acquisition of raw materials or consumables. The value is already pre-filled in with the general VAT rate entered at the project settings.

Note: just as the sales will be added of an inflation effect, so will the cost of production. You do not need the adjust for later years unless you predict an increase or decrease of the production weight.

#### Using the by item method in CASFLO APP

Entering values for raw materials and consumables in the advanced input method takes just a few more steps. You will notice that the fields for the simple input method are not present. You will have to:

1. Save the product or service you just added.
2. On the products or services listing press edit (it is a necessary step, as the product or service needs to be recorded first).
3. On the product editing page click “Add” on the lower screen.
4. Enter the name of item of the raw material or consumable. It can also include any variable cost related to that product or service.
5. For each year, enter the cost of the item. Remember: it refers to the cost of the item per unit of product or service sold.
6. Set the VAT rate for the acquisition of raw materials or consumables. The value is already pre-filled in with the general VAT rate entered at the project settings.
7. Click “Save”. You will be directed to the product or service editing page and you can now notice you cost item has been added in the raw materials and consumables listing. You can add as many items as you may want.