Creating a financial plan is often the most daunting task when writing a business plan. It is, however, essential for businesses that want to be taken seriously by investors, secure funding, and achieve long-term success. Fortunately, you don’t need a degree in accounting to put together a winning financial plan. All you need to know are the key components and what goes into each one. The six elements that need to be included in your financial plan are detailed below. By including these components, you can successfully launch your business.
Tips to Write a Financial Plan for Your Small Business
1 – Make a Profit and Loss Statement
You can include a projected income statement on your business plan with estimated income and expenses. It is always a good idea to start with a profit and loss statement to get a general idea of how your business will fare.
2 – Create a Cash Flow Statement
A cash flow statement gives you a picture of how much money your business should make and how much you will need to keep on hand to operate on a daily basis. It accounts for a number of transactions.
3 – Calculate Your Break-even Point
Your break-even point is the point at which expenses are equal to revenues. You will have to know this number to know how many sales you’ll need to meet your daily operating costs or to predict whether the business can eventually be profitable.
4 – Estimate Your Business Costs
Factors to include in your business costs are rent, equipment, payroll, advertising, utilities, and other related costs. The more money you can estimate for these expenses, the more intelligent your financial plan will look.
5 – Make a Balance Sheet
In a balance sheet, the assets of a business are listed on the left side, and their corresponding liabilities are listed on the right side. This will allow you to view the financial strength of your business in one simple overview.
6 – Do a Sales Forecast Report
A sales forecast report is a document that estimates the revenue you can expect from a business in the future. This report is based on what your competition is doing and what your market will demand from you.
7 – Make a Personnel Plan
You should also contemplate how many people you need and what they should earn. This can be done on a per-hour basis to give you a rough estimate of how much you will pay employees once your business is up and running. It can also be done based on salary, in which case you need to come up with a dollar amount.
8 – Look into Business Ratios and Break-Even Analysis
Business ratios and break-even analysis will give you a breakdown of the financial status of your business. They will also tell you how confident you can bet that your business will be successful.
Conclusion
Creating a solid financial plan is one of the most important steps in creating a business plan. It will allow you to make sound decisions as you move forward.
If you have a small business, you are well aware of the fact that your business plan is a living document. If it is to be a living document, then you need to make sure that it is a well-written one that includes all the relevant financial information you need to run your business. This will make the document a valuable tool for the future.
If you are looking for an accounting service for your small business, contact Accountants247 Golders Green. We do more than keep the books. We get to really know your business; this way, we can help business owners, managers, investors, and other stakeholders in Golders Green evaluate the financial performance of their businesses.
