5 STEPS TO USING AI TO FORECAST BUSINESS EXPENSES IN EXCEL

The quickest and most accessible way to use AI to forecast business expenses in Excel is by leveraging the built-in Forecast Sheet feature, which uses an Exponential Smoothing (ETS) algorithm to generate reliable projections based on historical data.

5 Steps to Using AI to Forecast Business Expenses in Excel

The 5-Step Process for AI-Powered Business Expense Forecasting in Excel:

1. Prepare Clean, Time-Series Data

   The AI algorithm requires your historical expense data to be clean and consistently structured. Messy data will produce unreliable forecasts.

   Action: Create an Excel Table with two columns: one for Dates (or time periods, like "Jan-24", "Feb-24") and one for Values (the expense amounts). Ensure the dates are sequential and the intervals are consistent (e.g., all monthly totals). Use Power Query to clean and standardize date formats if necessary.

   
   

2. Access the AI Forecast Tool

   Select your entire historical data range, including both the Date and Value columns.

   Action: Go to the Data tab on the Excel ribbon, and in the Forecast group, click the Forecast Sheet button. This opens the AI-driven tool's preview window.

   
   

3. Define the Forecast Horizon and End Date

   In the dialog box, you must specify the timeline for your budget projection.

   Action: Use the Forecast End drop-down menu to select the specific date you want your expense forecast to stop (e.g., December 31, 2026). Excel will instantly generate a preview line chart showing the predicted trend.

   
   

4. Customize Seasonality and Confidence

   (Optional but highly recommended) Expenses often have seasonal patterns (e.g., quarterly software subscriptions, annual insurance payments).

   Action: Click Options to access advanced settings. Verify that Excel's Seasonality setting accurately reflects your expense cycle (e.g., setting it to 12 for monthly data to capture annual trends). You can also review the Confidence Interval (the default is 95%) to understand the predicted high and low range of future expenses.

   
   

5. Generate and Analyze the Predictive Model

   Clicking "Create" generates the final output, which serves as your predictive expense model.

   Action: Excel generates a new worksheet with a table showing three key columns: the Forecasted Value (your best estimate), the Upper Bound, and the Lower Bound. These bounds represent the potential range of error, allowing you to incorporate risk analysis into your budgeting by planning for the worst-case (Upper Bound) expense.

AI is transforming budget creation by moving beyond simple historical averages. By leveraging the Forecast Sheet tool and ensuring clean data, you can quickly generate a dynamic, statistically-driven expense forecast that provides immediate insight into future cash flow needs, making financial planning more proactive and accurate.