Here are the six components you need to include in the financial section of your business plan:
A financial forecast isn't necessarily compiled in sequence. And it is probable that you won't present it in the final document in the same sequence you compile the figures and documents, as stated by Inc.com. In other words, you should know that it is possible to make alterations as you go along with the plan.
Here's with what you should start with:
1. A sales forecast. In this case, as the same source explains, you should set up a spreadsheet projecting your sales over the course of three years and set up different sections for different lines of sales and columns for every month for the first year and either on a monthly or quarterly basis for the second and third years.
Note that you'll want to include cost of sales in a sales forecast since you want to calculate gross margin.
2. The expense budget. According to the same source, you should multiply estimated profits times your best guess tax
percentage rate to estimate taxes and, as a next step, multiply your estimated debts balance times an estimated interest rate to estimate interest.
*********** Top Rated Product ***************
Get the answers to over 500 of the trickiest accounting problems businesses across South Africa face
Find out how
3. A cash flow statement: You can project a cash flow statement broken down into 12 months and, as stated by the source, it is important to understand when compiling this cash flow projection that you need to choose a realistic ratio for how many of your invoices will be paid in cash, 30 days, 60 days, 90 days and so on.
4: Income projections: Here, you will be writing about the pro forma profit and loss statement. You'll need to use the sales forecast, the expense projections and the cash flow statement.
5. Assets, liabilities and a projectd balance sheet: "You have to deal with assets and liabilities that aren't in the profits and loss and project the net worth of your business at the end of the fiscal year. Some of those are obvious and affect you at only the beginning, like start-up assets. A lot are not obvious", explains Inc.com.
6. Break-even analysis. In other words, the break-even point, according to Inc.com, refers to the moment when your business' expenses match your sales or service volume. For this aspect, you can use the three-year income projection.
Note that this is only a part from your entire business plan but it is nevertheless one of the most important ones! Use the help of a financial planner if you think it would benefit the plan!