Business Financial Plan

Your business financial plan will help you to assess the costs associated with your business, your business income and your cash flow needs. Without accurate and up to date financial reports and projections you will have no idea how money is flowing into and out of your company. If you are new to managing business finances, an accountant or bookkeeper will be able to offer a lot of good advice when you are preparing your business financial plan.

This information is presented to give you an overview of basic information that is typically included in a business plan financial statement and analysis and not meant to substitute for the advice of a professional who can set up your books for you and give you good insight into developing effective financial policies.

There are several worksheets that are typically used for financial projections and statements, the most important are the:

Income Statement, which shows whether your business is making a profit.

• Typically you'd prepare monthly projections for the first year, quarterly projections for years two and three and annual projections for years four and five.
  
• Categories on your income statement may include (but are not limited to): gross sales, salaries and wages, employee benefits, payroll taxes, rent, maintenance, equipment, interest expenses, utilities, postage, office supplies, marketing, travel, entertainment/meals, insurance, professional services, telephone/telecommunications, other.

Cash-Flow Projection, which shows whether the company has the cash required to pay upcoming bills.

• Typically you'd prepare monthly projections for the first year and quarterly projections for years two and three.

Balance Sheet, which shows how much the company is worth in total.

• Quarterly projections for the first year and annual projections for years two to five are typical.

When you are preparing your business financial plan, keep in mind that some items will be estimates (particularly if your company is a start-up). The more experience you have in an industry, the more accurate your estimates will tend to be. Be conservative with your estimates, don't assume the best possible scenario will unfold.

Be prepared to justify your numbers. Although you may need to estimate, your estimates should be well researched. You'll need to explain any assumptions you make in order to arrive at certain figures you have quoted. You'll need to access statistical data about your industry and target market. Much of this information can be found through your government census as well as report published by professional associations. The business research sources page provides links to several sources of this type of information.

Preparing your business financial plan is one area in which professional advice can be very helpful, particularly if business accounting and bookkeeping is new to you.

Additional Resources
Business plan outline with links to further information about each section
The Successful Business Plan by Rhonda Abrams book review