START YOUR BUSINESS BUILD YOUR FINANCIAL PLAN

Starting a business for the first time is exciting and scaring all at once. To help you assess properly your financial plan, we’ve written and compiled a checklist of key steps.

BEFORE STARTING YOUR BUSINESS

When you are starting a business or building a business plan, a financial plan will help you assess your cost structure, operational expenses, and your business revenue forecast.

To complete your financial plan, it should include the following:

  • Profit and loss statement (It is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period)
  • Cash flow statement (Provide data regarding all cash inflows and cash outflows that a company receives from or pay for its ongoing business activities and investment during a given period)
  • Balance sheet (It is a statement of the financial position of a business that lists the assets, liabilities, and owner’s equity at a particular point in time)
  • Sales forecast (the process of estimating future sales)

WHAT IS A FINANCIAL PLAN?

A financial plan is a forecast table that allows you to calculate the financial indicators necessary to validate your business project profitability, and thus viability.

It is an important tool in your business creation, as well as to properly manage your operations. It is also justified when an investment has to be made, such as a request for financing (from a bank, private investors, etc.).

How to prepare your business financial plan?
The financial plan is usually a part of an overall business plan (learn more about “how to create a proper business plan“), where goals are set and strategies are chosen to help the business grow:

  1. Prepare a budget showing the sales and profit you expect to achieve and the costs involved in doing your business (Set up a profit and loss account)
  2. Estimate your total sales (forecast and plan your sale)
  3. Prepare a monthly cash flow forecast, looking ahead one year

IDENTIFY YOUR FUTURE CASH FLOWS

Having a thorough understanding of your cash flows is vital for your business and play an essential role in having healty finances.

These flows are a projection of an organization’s future financial position, based on anticipated payments and receivable. It also can help you get to know how much and when to potentially borrow money, and how much cash you are likely to have at a given time. When you need to apply for a loan, banks will require your forecast to analyze your business overall health.

Why are cash flow forecast important?

  • By comparing your actual income and expenses with your forecast, you can analyze which areas of your business are over or underperforming and act accordingly
  • It helps to budget for equipment purchases or to identify the need for a loan (which can be useful for your tax preparation for example)
  • Banks, investors and so on usually want to examine your business’ cash flow forecast before investing in them or providing a loan. A well established cash flow forecast is a great way to get external stakeholders

WHAT SHOULD BE INCLUDED IN A CASH FLOW FORECAST?

A cash flow forecast identifies the sources and amounts of cash coming into your business and the destinations and amounts of cash going out, over a given period of time. The forecast is done for a year or quarter in advance and divided into weeks or months.

Cash Inflow:

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Cash Outflow

The total outgoing funds from your company that include expenses such as salaries, communication, supplies, as well as paying dividends or servicing any debt held by the company.

TO ACCESS OUR CASH FLOW FORECAST TEMPLATE, CLICK HERE >

KEY POINTS

  • Financial planning allows you to have better visibility over your business creation or project
  • Establishing a 3 years financial plan allows for a better understanding of your business potential and growth
  • The financial plan ensures that you are maintaining a reasonable balance between your business outflow and inflow so that stability is maintained.

Don’t forget that having a great plan will help you sell your business idea to financial institutions, private funding sources or any other funding.

Contact us if you wish to knnow more about our financing solutions for your business!