Developing your financial plans
When I started out in my corporate life, I studied to become a qualified accountant. Therefore, I know how to prepare accounts and financial statements.
However, if you've never put financial plans together, I know this can be a real headache. Where do you begin and what financial documents do you need to prepare? In this lesson, I'll go through some of the essentials you need.
The financial statements you need to prepare
The basic three statements you need to develop for your business for the next three years are:
- Profit and Loss Account
- Cash flow forecast
- Balance Sheet
For the first 12 months in your business plan, you need the above statements on a monthly basis. Then for years two and three by year. The reason the first 12 months are important is because these are where most businesses fail so you need to show lenders and yourself just how you will grow your business in the short term.
Most businesses don't actually make a profit in the first 12 months and you may not actually be able to pay yourself a wage because you are investing the profits you do make back into your business.
But when you plan ahead you'll see exactly the volume of sales you need to make to achieve your first year's profit.
Cash flow and profits
If you don't have any cash to pay your bills you will quickly go out of business. Many a profitable business have failed because they don't have the cash so ensure you pay attention to your cash flow.
The difference between your profit and loss and cashflow is the timing between when you make a sale and when you receive payment for the sale. And the same for purchases. This is the time between you making a purchase and paying for that same purchase.
In all my business plan packages, I provide a very easy to use but robust "Financial Planning Wizard". The wizard is set up so you type in information about your sales and costs, and it produces all three financial statements you need. You can keep trying out different scenarios until you find the one that is best suited to your requirements.
To your success,
Best-Selling Author, Speaker and
Business Growth Strategist