Financial projections use existing or estimated financial data to forecast a business’s future income and expenses. They often include different scenarios so you can see how changes to one aspect of your finances might affect your profitability.
The financial forecast translates a company’s goals into specific targets and establishes milestones for gauging progress. Variances from the forecast provide early warning of problems and the opportunity to make corrections.
In general, you will need to develop both short and mid-term financial projections. A short-term projection accounts for the first year of your business, outlined month by month. A mid-term financial projection typically accounts for the coming three to five years of business, outlined year by year.
An outline of your company’s growth strategy is essential to a business plan, but it is incomplete without numbers backing it up. StartupWize’s experienced consultants can help convert conceptual business plans into financial figures to give the plan a credible financial section and attract serious investors.
The balance sheet is one of the three main financial statements of a company, and is sometimes referred to as the statement of financial position. It communicates the book value of an organization, as calculated by subtracting all of the company’s liabilities and shareholder equity from its total assets.
The projected balance sheet, also referred to as pro forma balance sheet, presents a picture of your business’ net worth at a particular time either by using historical data or estimates from the factors playing a key role in your business plan.
Forecasting a balance sheet allows businesses to see what they’re likely to own and owe at a specified future date, a prerequisite to plan for future purchases and other important business decisions.
The income statement is a results-oriented report, showing the net profit or loss over a specified period. It provides a view of the profitability of your business after things such as cost of goods sold, taxes, and other expenses have been subtracted.
If you are developing these projections prior to starting your business, this is where you will want to do the bulk of your forecasting. It can give you a clear idea of how your business is currently performing and serve as the basis for estimating net income for the next one to three years.
Producing a possible income statement demonstrates that you’ve done your research and have created a good-faith estimate of your income for the next three years.
A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. It measures how well the company generates cash to pay its debt obligations and fund its operating expenses.
The cash flow statement shows how money is being spent, a must for those looking to attract an investor or obtain financing. A cash flow projection will demonstrate to a creditor or investor that you are a good credit risk and can pay back a loan if it’s granted.
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