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How to Layout the Financial Section of Your Business Plan

This section of your business plan summarizes the structure of your business and is the life blood of your company. Without the proper management and budgeting set in place, your business could falter and ultimately close. The financial section of your business plan is imperative to not only everyday management but will also play a crucial role in any business loan or valuation assessment.

Keep a few guidelines in mind when organizing your financial strategies into your business plan.

The Purpose

  • Creating an Expense Budget – Before you can predict a sales forecast, you’ll need to understand your expenses so that you can define the sales needed to turn a profit. Differentiate between your variable and fixed costs, not only because it’s a good thing to know, it’s also vital to creating an expense budget that is laid out without any grey area with ad spends, rebates, wages, utilities, etc.
  • Before You Can Predict a Sales Forecast – First things first, organize a spreadsheet that will project your profits over the next 3 to 5 years of your business. List rows for various revenues streams and columns for each month, organizing the information to track the progress on a monthly basis.
  • Build a Cash Flow Statement – Nothing is more concrete than tracking the physical money that’s making its way in and out of the company. If your business has been in operation for quite some time, instead of making assumptions, use historical documents from previous years and base your forecast on those numbers.
    If your business is new and you don’t have anything to track the revenues and expenses of past trading, as a business owner, you need to be realistic about your ratio. In cases like this, it may be in the best interest of the company’s success to invest in a business planning software, template, or seek professional advice/mentorship from a colleague or local enterprise office for assistance. .
  • Debtors and Creditors – Correctly accounting for creditors and debtors is crucial to calculating financial ratios and predicting the efficiency of your company. Accounts payable involves the debt you have to pay and any outstanding loans that have accrued, keeping a close eye is optimal for monitoring expenses.

How to Make Use of Your New Financial Plan

Often, the financial section of a business plan is overlooked and not reviewed nearly as often as it should. When regularly checking your financial statements, you can compare them to previous fiscal years, and month to month to see what is working, and identify areas for improvement and overall ratio analysis. Adopting a business planning software is not uncommon for companies, especially for small businesses that may not have a specialist assisting in this area. The software programs allow you to use some of your projections to generate charts and graphs that will highlight the financials, sales history, or projected profits in the years to come. Your entire business plan, of course is vital, but having the financial section right and maintaining consistency throughout the year will ensure your business is on target and making any essential amendments to projections and revenue streams as required.

The Most Important Aspect of Your Businesses Financial Plan

A business plan in itself is imperative to planning and projecting how your company is going to succeed within your specific industry. When it comes down to the financial section of said plan, it’s more than writing numbers down and monitoring profits versus losses, it’s a physical track of your business’s success and how to continue down that path or even improve upon it. Set yourself up for success with a financial plan that will act as a powerful guide for your company finances and progress while making a good impression for investors or lenders that you may approach for support during your business development journey.

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