A financial plan is the heart of any startup or existing business. It is a culmination of the income statement, the cash-flow projection and the company's balance sheet. The financial plan is a way to look at a business through a financial lens, which is the view most investors prefer. When preparing a financial plan, it is not mandatory that you be a mathematician, but you need to understand how the numbers affect a business.
Prepare your income statement. The income statement is one of the three parts that make up the financial plan. The income statement is a financial statement that will express your company's revenue and expenses. It will provide you and your investors with a financial picture of how the company is doing or will do.
Prepare a cash-flow projection. A cash-flow projection allows you to see just how the cash is flowing in and out of your business. This financial statement allows you to prepare for a surplus or a loss. If this is a startup business venture, it is best to include two columns for each month of operation. One column will list the cash-flow projections and the other will list the actual cash flow.
Prepare a balance sheet. The balance sheet of a financial plan will balance the company's assets and fixed assets against all of the company's liabilities. The balance sheet should be thought of as a way of measuring the financial health of a business, because it describes its net worth. If there is an excess of funds after the liabilities have been subtracted from the assets, the business is financially healthy.
Prepare a summary of your financial needs. Whether the business is a startup or an existing concern, a synopsis is still needed to present to investors. This shows the amount of money you will be seeking, in addition to describing how the money will be allocated (including operating expenses, equipment and salaries).
Prepare an exit strategy. Every business will not be successful, so it is best to prepare for the worst. This kind of preparation will put possible investors at ease if they know you have thought of a contingency plan. The exit strategy should explain how investors will recoup monies should the business fail.
To ensure that all of the financial statements have been prepared correctly, have them looked over by an accountant.
Revisit the financial plan on a monthly basis to check your progress.
Do not forget to include a salary for yourself in the financial plan.
Profit is the priority over revenue.
- To ensure that all of the financial statements have been prepared correctly, have them looked over by an accountant. Revisit the financial plan on a monthly basis to check your progress.
- Do not forget to include a salary for yourself in the financial plan. Profit is the priority over revenue.
LaShon Fryer began freelance writing in 2006 while pursuing her Bachelor's Degree in Communications from Temple University. Her articles have been published on the Web sites: Spend On Life, Powerful Voices for Kids and The Media Education Lab. Currently, Fryer is pursuing her Masters Degree in Broadcasting Telecommunications and Mass Media at her Alma Mater.