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It is very critical to make the outline of a company’s strategy of growth in a business plan. However, having numbers to back up the plan makes the whole strategy complete. The description of what one plans to do and how he plans to do it in future is what is referred to as business plan. However, the plan is conceptual until numbers and terms are filled. The business plan can never mean anything if the business can never be justified with the use of good figures. This is done in the financial section of the business plan. Doing a financial forecast is one of the greatest things that one can do since it helps on to steer his business and if one has hope to win future investors in the business in future.
The sales forecast is the initial step. It is essential to set a projection on a spreadsheet for a period of three years. There should a separate section that different lines of sales and other columns indicating sales for every year that are filled either quarterly or semi-annually. It is essential in projecting the sales on different blocks each block indicating pricing, unit sales, product of the units and the sales, unit cost and the last block containing the product of the units and the unit cost. Cost of sales is important since one can be able to calculate the gross margin.
It’s also essential in creating an expense budget which helps one to understand how much it will cost in making the sales that one has forecasted. It is essential if one understands the difference between variable and fixed cost because less risk can always be projected by lower fixed cost.
A cash-flow statement is also critical to develop in order to establish the flow of cash in and out of the investment. It is therefore essential to have a cash flow projected and broken down for a period of 12 months. It is also critical to understand that when compiling the cash-flow projections, it is necessary to ensure that a realistic ratio of the number of invoices paid in a month will be chosen.
Projecting the income is also necessary since it indicates the profit and loss statements. This contains the details of the business forecast for the coming 3 years. The numbers that were used in the cash flow statement, the expense projection and sales forecast, should be used in this.
The assets and the liabilities should be dealt with. This creates the necessity for a projected balance sheet. This is due to the fact that there are additional assets that are not listed in the loss and profit statements that one must deal with in order to make a projection of the business at the end of the business year.
The breakeven analysis must also be done to indicate the point where the expenses of the business are matching the volume of the business services or sales. The analysis is backed up by the projection that is made for the three years
A business plan should always be used as a tool for managing the business rather than using it as the initial plan and then forgetting it in future. It is essential for the executives to have a sitting at least once every month and compare the actual figures of profit and loss with the figures in the projections. The comparisons should then be used to carry out revisions in the future projections. It should also be used in the comparing the financial statements over time as well as comparing those statements with the statements of other businesses thus helping measure other businesses against yours. The financial history of the business should also be included in the financial section of the business because sometimes it is a requirement by the bank when one wants to take a loan.
In a nutshell, the financial section of a business is very critical. However, it should not be confused with accounting since the financial sections indicate the current to future projections of the business while accounting indicates the figures obtained from the present and those obtained in the past. When developing a financial section, a break-even analysis should be done, assets and liabilities should be dealt with, income projections should be made, a cash-flow statement should be developed, an expense budget should be created and also the sales forecast should be initially be done.
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