The modeling of the brewing process is a material balance of both sugar content and volume.
You set parameters for the volume calculation in your equipment profile by entering the final volume into the fermenter and all the process losses along the way. For the sugar content, it is a little different because the sugar losses are directly related to the volume losses at various stages during the process.
To define the amount of sugars needed, you set the 'brew house efficiency' or 'total efficiency' in your equipment profile. The program then calculates based upon the final volume and the brew house efficiency how much sugar is in the fermenter of the potential in the grain bill. It will back calculate how much sugar is required to be extracted from the grain bill and calculate the mash efficiency to supply that amount of sugar to the system. If you have greater than 100% mash efficiency, it means that your brew house efficiency is set too high for the losses in your process.
If you have made the recipe and entered in the volumes and gravity readings into the 'sessions' tab, then BeerSmith will calculate the actual efficiency and display it in the lower left column. Use this figure to update your equipment profile to get the software to predict results that are closer to your actual results.
If you find your volumes are off, you will need to update the equipment profile to bring the volumes into agreement with your actual results. This means defining where your losses as defined in the equipment profile differ from actual losses and updating those figures.