Did you know that the U. S. Small Business Administration recommends that all businesses keep a business plan, no matter the size?
One of the most crucial components of any business plan is the financial section. It lets investors know that your business can turn a profit and that you have a growth-minded plan for your business.
If you need to write a financial projection for your business, don’t worry. Follow these key steps to make sure you have everything you need for you, your investors, and your business.
Before you write your financial statements, you need records of all the money coming into and going out of your business.
If you can, separate the funds by category. For income, this means separating out the money you make from sales of products vs. your startup capital. For expenses, separate funds by operating expenses, employee wages and contractor fees, advertising, and anything else you spend money on.
For new businesses, records from the past three months will be enough to get you started. If you’ve been in business more than a year, keep track of fluctuations in your income and expenses year-over-year.
Show Your Business’s Current Financial Status
Now that you have records of your cash flow, it’s time to put those pieces into a format that’s easy to read and analyze.
One of the most fundamental reports to put together is the profit and loss statement. This lists out all your income and expenses for a given period of time. At the bottom of the report, you see your net profit or loss during that time. Ensuring you have a convenient P&L template on Google Sheets, Excel, or whichever platform will allow you to create an effective and timely report.
A balance sheet complements the data shown through your profit and loss statement. Balance sheets show the total amount of assets owned and liabilities owned by your company. This tool provides a snapshot of the overall financial health of your company.
Forecast for the Future
In addition to showing the current financial status of your business, a robust financial business plan also shows your anticipated income and expenses for the future.
A cash flow projection does just this. In it, you provide your best guess for the money you’ll bring into your business and the money that will be spent by your business. A cash flow projection can range anywhere from three months to one year in the future.
A sales forecast serves a similar purpose. It shows the number of sales you expect your business to make based on past data and current market trends.
Build Up the Financial Section of Your Business Plan
If you’re new to business accounting, this information can be overwhelming.
For help creating these financial statements and more, check out the Financial Modelling Handbook. This amazing tool will help you build financial models quickly and accurately.
Strengthen Your Business Plan Today
Business ownership is thrilling but exhausting work. You have a million things on your to-do list and limited time throughout the day. Though it may not seem like it, spending some of those precious hours on building the financial section of your business plan now will pay dividends in the long run.
Whether your goal is to wow your investors or take stock of your business, use profit and loss statements, balance sheets, and cash flow projections to take charge of your business’s financial health today.
Looking for more ways to take your business to the next level? Check out the other articles on our site!