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Create A Business Plan: Writing the Financial Forecast
When it comes to a business plan, you need a financial forecast. Whether you are trying to seek money from lenders and investors or just looking to plan the business for yourself, you want to see the numbers and you want to project what your profits and losses might be from your business.
Financial Statements
What financial statements do you need to include in your financial forecast? Every business plan should have financial data in it (usually in the back) and this is an important step of the business plan process. You will want to include facts, charts, tables, graphs, formulas and spreadsheets to help represent your financial forecast.
The most common statements to include are the cash flow statement, income statement and balance sheet. These three are interchangeable as they are linked and changes in one will affect the other.
Income Statement
The income statement is pretty simple and self-explanatory. It's going to describe the proposed cash generating ability of your business. Basically, how much money you project you will be able to earn from your business. You will base your information on the costs of goods, price of your product, revenue, expenses, operating expenses, taxes, profits after taxes, etc.
Cash Flow Statement
Your cash flow statement is very important, especially if you are seeking investments or loans. This statement will explain how much money you need to start up and then maintain your business and keep it running smoothly. You are going to need to put how much money is needed to meet business and company obligations and where this money is going to come from.
Balance Sheet
The balance sheet will use all the information from the other sources to show the information on the company of assets, liabilities and equity. Established companies will want to use a balance sheet for a one year period. New businesses and start-ups may need to adjust this. At the end of the year (or period you are balancing) you will have record of the cash on hand, inventory or product, accounts receivable and your total current assets. There are liabilities, accounts payable, capital and investments and more.
Your balance sheet will basically note where you stand (or predict you will stand) after a specific period of time. If a start-up, you should have a good plan for how to achieve the goals laid out in this financial forecast.
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