projected profit and loss in business plan

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Tim berry on business planning, starting and growing your business, and having a life in the meantime., standard business plan financials: projected profit and loss.

Continuing with my series here on standard business plan financials, all taken from my Lean Business Planning site, the Profit and Loss, also called Income Statement, is probably the most standard of all financial statements. And the projected profit and loss, or projected income (or pro-forma profit and loss or pro-forma income) is also the most standard of the financial projections in a business plan.

• It starts with Sales, which is why business people who like buzzwords will sometimes refer to sales as “the top line.”
• It then shows Direct Costs (or COGS, or Unit Costs).
• Then Gross Margin, Sales less Direct Costs.
• Then operating expenses.
• Gross margin less operating expenses is gross profit, also called EBITDA for “earnings before interest, taxes, depreciation and amortization.” I use EBITDA instead of the more traditional EBIT (earnings before interest and taxes). I explained that choice and depreciation and amortization as well in Financial Projection Tips and Traps , in the previous section.
• Then it shows depreciation, interest expenses, and then taxes…
• Then, at the very bottom, Net Profit; this is why so many people refer to net profit as “the bottom line,” which has also come to mean the conclusion, or main point, in a discussion.

The following illustration shows a simple Projected Profit and Loss for the bicycle store I’ve been using as an example. This example doesn’t divide operating expenses into categories. The format and math start with sales at the top. You’ll find that same basic layout in everything from small business accounting statements to the financial disclosures of large enterprises whose stock is traded on public markets. Companies vary widely on how much detail they include. And projections are always different from statements, because of Planning not accounting . But still this is standard.

A lean business plan will normally include sales, costs of sales, and expenses. To take it from there to a more formal projected Profit and Loss is a matter of collecting forecasts from the lean plan. The sales and costs of sales go at the top, then operating expenses. Calculating net profit is simple math.

Keep your assumptions simple. Remember our principle about planning and accounting. Don’t try to calculate interest based on a complex series of debt instruments; just average your interest over the projected debt. Don’t try to do graduated tax rates; use an average tax percentage for a profitable company.

Notice that the Profit and Loss involves only four of the Six Key Financial Terms . While a Profit and Loss Statement or Projected Profit and Loss affects the Balance Sheet because earnings are part of capital, it includes only sales, costs, expenses, and profit.

Hi, In case of bank financing for machineries and working capital, how can it be broken down in to the expense stream? ( capital + interest)

When you spend on assets is not deductible from income, and is therefore not an expense. What you spent to repay the principle of a loan is not deductible, and therefore not an expense. The interest on a loan is deductible, and is an expense.

Excuse me, may I know if the project profit & loss should plan for the first year only or for year 1-3 in business plan of a new company?

Kattie Wan, I recommend for normal cases the projected profit and loss monthly for the first 12 months, and two years annually after that. There are always special cases, though; every business is different.

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How To Create Financial Projections for Your Business Plan

Building a financial projection as you write out your business plan can help you forecast how much money your business will bring in.

Planning for the future, whether it’s with growth in mind or just staying the course, is central to being a business owner. Part of this planning effort is making financial projections of sales, expenses, and—if all goes well—profits.

Even if your business is a startup that has yet to open its doors, you can still make projections. Here’s how to prepare your business plan financial projections, so your company will thrive.

What are business plan financial projections?

Business plan financial projections are a company’s estimates, or forecasts, of its financial performance at some point in the future. For existing businesses, draw on historical data to detail how your company expects metrics like revenue, expenses, profit, and cash flow to change over time.

Companies can create financial projections for any span of time, but typically they’re for between one and five years. Many companies revisit and amend these projections at least annually. 

Creating financial projections is an important part of building a business plan . That’s because realistic estimates help company leaders set business goals, execute financial decisions, manage cash flow , identify areas for operational improvement, seek funding from investors, and more.

What are financial projections used for? 

Financial forecasting serves as a useful tool for key stakeholders, both within and outside of the business. They often are used for:

Business planning

Accurate financial projections can help a company establish growth targets and other goals . They’re also used to determine whether ideas like a new product line are financially feasible. Future financial estimates are helpful tools for business contingency planning, which involves considering the monetary impact of adverse events and worst-case scenarios. They also provide a benchmark: If revenue is falling short of projections, for example, the company may need changes to keep business operations on track.

Projections may reveal potential problems—say, unexpected operating expenses that exceed cash inflows. A negative cash flow projection may suggest the business needs to secure funding through outside investments or bank loans, increase sales, improve margins, or cut costs.

When potential investors consider putting their money into a venture, they want a return on that investment. Business projections are a key tool they will use to make that decision. The projections can figure in establishing the valuation of your business, equity stakes, plans for an exit, and more. Investors may also use your projections to ensure that the business is meeting goals and benchmarks.

Loans or lines of credit 

Lenders rely on financial projections to determine whether to extend a business loan to your company. They’ll want to see historical financial data like cash flow statements, your balance sheet , and other financial statements—but they’ll also look very closely at your multi-year financial projections. Good candidates can receive higher loan amounts with lower interest rates or more flexible payment plans.

Lenders may also use the estimated value of company assets to determine the collateral to secure the loan. Like investors, lenders typically refer to your projections over time to monitor progress and financial health.

What information is included in financial projections for a business?

Before sitting down to create projections, you’ll need to collect some data. Owners of an existing business can leverage three financial statements they likely already have: a balance sheet, an annual income statement , and a cash flow statement .

A new business, however, won’t have this historical data. So market research is crucial: Review competitors’ pricing strategies, scour research reports and market analysis , and scrutinize any other publicly available data that can help inform your projections. Beginning with conservative estimates and simple calculations can help you get started, and you can always add to the projections over time.

One business’s financial projections may be more detailed than another’s, but the forecasts typically rely on and include the following:

True to its name, a cash flow statement shows the money coming into and going out of the business over time: cash outflows and inflows. Cash flows fall into three main categories:

Income statement

Projected income statements, also known as projected profit and loss statements (P&Ls), forecast the company’s revenue and expenses for a given period.

Generally, this is a table with several line items for each category. Sales projections can include the sales forecast for each individual product or service (many companies break this down by month). Expenses are a similar setup: List your expected costs by category, including recurring expenses such as salaries and rent, as well as variable expenses for raw materials and transportation.

This exercise will also provide you with a net income projection, which is the difference between your revenue and expenses, including any taxes or interest payments. That number is a forecast of your profit or loss, hence why this document is often called a P&L.

Balance sheet

A balance sheet shows a snapshot of your company’s financial position at a specific point in time. Three important elements are included as balance sheet items:

• Assets. Assets are any tangible item of value that the company currently has on hand or will in the future, like cash, inventory, equipment, and accounts receivable. Intangible assets include copyrights, trademarks, patents and other intellectual property .
• Liabilities. Liabilities are anything that the company owes, including taxes, wages, accounts payable, dividends, and unearned revenue, such as customer payments for goods you haven’t yet delivered.
• Shareholder equity. The shareholder equity figure is derived by subtracting total liabilities from total assets. It reflects how much money, or capital, the company would have left over if the business paid all its liabilities at once or liquidated (this figure can be a negative number if liabilities exceed assets). Equity in business is the amount of capital that the owners and any other shareholders have tied up in the company.

They’re called balance sheets because assets always equal liabilities plus shareholder equity. 

5 steps for creating financial projections for your business

• Identify the purpose and timeframe for your projections
• Collect relevant historical financial data and market analysis
• Forecast expenses
• Forecast sales
• Build financial projections

The following five steps can help you break down the process of developing financial projections for your company:

1. Identify the purpose and timeframe for your projections

The details of your projections may vary depending on their purpose. Are they for internal planning, pitching investors, or monitoring performance over time? Setting the time frame—monthly, quarterly, annually, or multi-year—will also inform the rest of the steps.

2. Collect relevant historical financial data and market analysis

If available, gather historical financial statements, including balance sheets, cash flow statements, and annual income statements. New companies without this historical data may have to rely on market research, analyst reports, and industry benchmarks—all things that established companies also should use to support their assumptions.

3. Forecast expenses

Identify future spending based on direct costs of producing your goods and services ( cost of goods sold, or COGS) as well as operating expenses, including any recurring and one-time costs. Factor in expected changes in expenses, because this can evolve based on business growth, time in the market, and the launch of new products.

4. Forecast sales

Project sales for each revenue stream, broken down by month. These projections may be based on historical data or market research, and they should account for anticipated or likely changes in market demand and pricing.

5. Build financial projections

Now that you have projected expenses and revenue, you can plug that information into Shopify’s cash flow calculator and cash flow statement template . This information can also be used to forecast your income statement. In turn, these steps inform your calculations on the balance sheet, on which you’ll also account for any assets and liabilities .

Business plan financial projections FAQ

What are the main components of a financial projection in a business plan.

Generally speaking, most financial forecasts include projections for income, balance sheet, and cash flow.

What’s the difference between financial projection and financial forecast?

These two terms are often used interchangeably. Depending on the context, a financial forecast may refer to a more formal and detailed document—one that might include analysis and context for several financial metrics in a more complex financial model.

Do I need accounting or planning software for financial projections?

Not necessarily. Depending on factors like the age and size of your business, you may be able to prepare financial projections using a simple spreadsheet program. Large complicated businesses, however, usually use accounting software and other types of advanced data-management systems.

What are some limitations of financial projections?

Projections are by nature based on human assumptions and, of course, humans can’t truly predict the future—even with the aid of computers and software programs. Financial projections are, at best, estimates based on the information available at the time—not ironclad guarantees of future performance.

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Why is a profit and loss forecast important for businesses?

Financial planning and forecasting play a crucial role in ensuring the success and sustainability of a company. Without a clear understanding of future revenues and expenses, companies may struggle to make informed decisions, allocate resources effectively, and ensure sustainable growth. A powerful tool to tackle these challenges is the profit and loss forecast.

This article aims to shed light on the significance of a profit and loss forecast and its calculation and provide examples to help you understand its practical application.

Profit and loss forecast: definition

A profit and loss forecast is the projection of a company's anticipated financial performance over a specific period . By analysing historical data, market trends, and economic indicators, this forecasting tool empowers business owners to anticipate revenue, assess expenses, and determine the net profit or loss they may face.

This tool helps in forecasting profitability and plays a crucial role in cash flow management and liquidity planning . Providing insights into anticipated revenues and expenses, it enables businesses to proactively manage their cash flow , meet financial obligations, optimise resource allocation, and maintain a healthy financial position.

What are the elements of a profit and loss statement?

The profit and loss (P&L) statement, or income statement , summarises the following key elements or performance metrics of the company’s operations:

• Revenue/Sales: It is the total amount of money generated from the sale of goods, services, or other operating activities during a specific period.
• Cost of Goods Sold (COGS): These include the costs directly attributable to the production or acquisition of goods or services, such as raw material purchases, labour costs, and manufacturing overheads.
• Gross Profit : It is the difference between sales and COGS and represents the profit made before accounting for operating expenses.
• Operating Expenses: These encompass the non-production costs associated with running the daily operations, namely rent, utilities, and administrative costs.
• Operating Profit: It is the difference between gross profit and operating expenses and is representative of the profitability of the business’ core operations.
• Other Income and Expenses: These include gains and losses from the sale of assets, interest income/expense, taxes, etc. and aren’t pivotal to a company’s core.
• Net Income/ Loss: It represents the overall profit or loss earned by the company after accounting for all expenses.

See also: Balance Sheet Forecast: How-To

Profit and loss forecast example

Let us consider an example to understand a profit and loss forecast.

Sarah's Bakery, a popular local bakery, wants to evaluate the financial viability of expanding its product line to include gluten-free and vegan options. They create a profit and loss forecast specifically for the new product line.

The forecast includes projected revenues from the sale of gluten-free and vegan products, costs associated with ingredients, packaging, marketing, and additional staff. By analysing the forecast, Sarah's Bakery can determine if the expansion will generate sufficient profit and help them meet customer demands.

Profit forecast vs Profit and Loss forecast

In business terminology, a profit forecast and a profit and loss forecast are essentially the same thing. The terms "profit forecast" and "profit and loss forecast" are often used interchangeably to refer to a financial projection that estimates the expected profit or loss for a given period, typically a year.

What is the difference between profit and loss forecast and forecast?

The primary difference between a profit and loss forecast and a general forecast lies in their focus and scope .

A profit and loss forecast specifically centres around the financial performance of a business. This forecast is prepared using common accounting standards and is tailored to provide insights into the financial health and profitability of the company. It considers factors such as sales projections, production costs, operating expenses, and other revenue-generating or cost-incurring activities.

In comparison, a general forecast typically encompasses a broader range of predictions beyond financial aspects. It may include projections related to market trends, customer behaviour, industry growth, technological advancements, or any other relevant factors that impact the overall business environment.

A general forecast aims to provide a comprehensive outlook to guide decision-making, strategic planning, and resource allocation across various aspects of the business.

Cash flow forecast vs profit and loss forecast

While both cash flow forecasts and profit and loss forecasts are important financial tools for projecting business performance, they vary greatly as they are concerned with different aspects of the company.

A cash flow forecast provides a precise view of the company’s net cash position by projecting cash inflows and outflows over a specific period, including cash sales, customer collections, loan repayments, and more. It helps assess the company's liquidity and working capital management from a short-term perspective, typically on a weekly or monthly basis. By proactively identifying any cash shortfalls , it enables firms to timely meet their obligations.

Conversely, a profit and loss forecast estimates the firm’s revenues and expenses , and how much profit it has earned over a certain period of time. It is concerned with the company’s operational performance and provides insights into the company’s cost management and profitability. Unlike a cash flow forecast, it has a relatively long-term perspective.

How do you calculate profit and loss forecast?

To calculate a profit and loss forecast, you need to consider several key elements. Here's a step-by-step guide on how to calculate it:

Gather historical data: Collect relevant financial information from past periods, such as sales revenue, cost of goods sold, operating expenses, and other income or expenses. This data will serve as a foundation for estimating future performance.

Define the forecast period: Determine the timeframe for the forecast, whether it's monthly, quarterly, or annually. The length of the period may vary depending on the business's needs and industry.

Project revenue: Estimate the expected sales revenue for each period based on market trends, historical sales data, anticipated changes in customer demand, pricing strategies, and any upcoming product launches or promotions.

Estimate cost of goods sold (COGS): Calculate the direct costs associated with producing goods or services, including raw materials, labour, manufacturing expenses, and any other variable costs. This estimation should align with the projected sales volume.

Factor in operating expenses: Consider all operating expenses, such as rent, utilities, salaries, marketing expenses, insurance, and other administrative costs. Ensure they are accurately accounted for in the forecast.

Calculate gross profit: Subtract the projected COGS from the estimated revenue to determine the gross profit for each period. This represents the profitability before accounting for operating expenses.

Deduct operating expenses: Subtract the operating expenses from the gross profit to calculate the operating profit (also known as earnings before interest and taxes, or EBIT). This figure reflects the profitability after accounting for all operating costs.

Include non-operating income and expenses: Factor in any non-operating income (e.g., interest income, investment gains) or expenses (e.g., interest expense, foreign exchange losses) that may impact the overall profit or loss.

Calculate net profit/loss: Subtract non-operating expenses from non-operating income and add the result to the operating profit. This will provide the net profit or loss for each period.

Review and adjust: Evaluate the forecasted figures, considering any external factors like market conditions, regulatory changes, or business-specific circumstances. Revise the forecast as needed to ensure its accuracy and relevance.

What is the profit and loss forecasting model?

Various templates and software are available to simplify the process of creating a profit and loss forecast. These tools provide predefined categories and formulas that enable you to easily input your revenue and expense figures. An example of a template is given below.

How do you make a profit and loss forecast in Excel?

Microsoft Excel is a powerful tool that can be used to forecast profit and loss. Here's a step-by-step guide on how to forecast profit and loss using Excel:

Create a new Excel worksheet and set up a table with columns for Year, and rows for Revenue, Cost of Goods Sold, Operating Expenses, Other Income, and Net Profit. Alternatively, you can use the template given above.

Enter the forecasted revenue for each year in the Revenue row.

Calculate the cost of goods sold by entering the projected costs associated with production or delivery in the Cost of Goods Sold row.

Enter the forecasted operating expenses in the Operating Expenses row.

Include any other sources of income in the Other Income row.

Calculate the net profit by subtracting the total cost of goods sold and operating expenses from the revenue and adding any other income.

Format the table as desired and review the forecast for accuracy.

Refine the forecast by adjusting inputs and assumptions as needed.

Is profit and loss forecast included in a business plan of a new business?

Yes, a profit and loss (P&L) forecast is an essential component of a business plan and is included in its financial section. Serving as a financial roadmap, a P&L forecast demonstrates the new business’ profitability and viability to financial experts, which helps attract potential investors and lenders. It can also be used to benchmark the company’s actual performance after it becomes operational.

How to use your profit and loss forecast to make informed decisions and plan for the future

To gain actionable insights and make informed decisions based on your profit and loss forecast, take the following steps:

• Continuously monitor actual performance and compare it against the P&L forecast to identify variances.
• Analyse the causes of variation, including assumptions underlying revenue and expense projections, material changes in market and economic trends, and pricing effects.
• Conduct scenario planning and sensitivity analysis to understand the impact of differing circumstances on business performance and to better anticipate risks and opportunities.
• Follow it up by tweaking and realigning your financial targets with strategic goals for informed decision-making.

What are the main factors that affect a business's profit and loss forecast

There are several factors that impact a business’ P&L forecast, such as sales volume, pricing strategies, and cost structure. External factors like market conditions, economic events, seasonality, and the regulatory environment also affect financial forecasts.

How to monitor your actual performance against your forecast and adjust accordingly

Businesses must establish key profitability metrics, such as gross profit ratio, EBITDA margin, and net profit margin, to effectively monitor their actual financial performance. These figures are then compared against P&L projections to identify variances. For instance, if the operating profit falls short of expectations, analyse whether it is related to lower sales or higher costs and accordingly take corrective action. Eventually, the underlying assumptions can be changed in the event of permanent changes in the circumstances facing the business.

What are the limitations and challenges of profit and loss forecasting?

Profit and loss forecasting involves certain limitations, such as data limitations, complexities in assumptions, and a lack of control over external factors, which may result in projections being less than accurate. Businesses must also be cautious of data integration challenges and the role of human biases when reviewing P&L forecasts. The ultimate aim should be to strike a balance between accuracy and adaptability to make more informed decisions.

Key Takeaways:

Profit and loss forecasting is a resourceful tool to help you make informed decisions, allocate the limited resources effectively, and ensure your business's sustainable growth.

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The Comprehensive Guide to Projected Profit And Loss

The Comprehensive Guide to Projected Profit and Loss provides essential financial forecasting insights. It empowers businesses to anticipate revenue, expenses, and net income.

Understanding the nuances of a Projected Profit and Loss (P&L) statement is critical for businesses aiming to map their financial trajectory. This guide serves as a cornerstone for entrepreneurs, financial planners, and investors seeking to master the art of financial prediction.

It sheds light on how to accurately project a company’s fiscal health, facilitating informed decision-making. The P&L forecast is not just about predicting future profits; it’s about understanding potential losses and identifying opportunities for financial optimization. This guide offers a thorough walkthrough of the key components such as sales forecasts, cost analysis, and the methodology behind crafting a robust profit and loss projection. Managers and stakeholders can harness this powerful tool to set realistic financial goals, and strategize accordingly to steer their businesses toward sustainable growth and profitability.

Introduction To Projected Profit And Loss Statements

Imagine having a crystal ball for your business finances. That’s what projected profit and loss statements are like. They’re not just reports; they are vital tools for forecasting your company’s financial health. Let’s dive into the basics and explore why they’re essential for your financial planning .

Understanding The Fundamentals Of Profit And Loss

At the heart of business finance is the Profit and Loss statement, or P&L. It’s a simple report showing revenues, costs, and expenses during a specific time. This financial snapshot helps you measure success and pinpoint areas needing attention.

The Importance Of Projections In Financial Planning

Why guess the future when you can plan for it? Projecting your P&L can shine a light on your financial path. Be ready for tomorrow with an informed today. Rely on projections to set goals, manage cash flows, and ready your business for opportunities and challenges.

Differentiating Between Projected And Actual Profit And Loss Statements

Think of projected and actual P&L statements as two sides of the same coin. The projected outlines your financial goals, while the actual shows what really happened. Comparing these can uncover the reality of your business performance. It reveals progress, flags issues, and fuels strategic decisions. Learn from the past to forecast a better future.

Here, a table would not be suitable since we’re providing overview information rather than data that needs to be organized in columns and rows.

Creating A Projected Profit And Loss Statement

Understanding future finances is key to business success. A projected profit and loss (P&L) statement provides a forecast of income, expenses, and profits. Below, explore how to craft a detailed projection to steer your business effectively.

Essential Components Of A Projected P&l Statement

Every projected P&L statement should include several key elements:

• Revenue Estimates: Forecasted sales figures based on market analysis.
• Cost of Goods Sold (COGS): Predicted costs for producing goods or services.
• Gross Margin: Revenue minus COGS.
• Operating Expenses: Expected costs of running the business.
• Net Profit: The bottom line after subtracting expenses from gross margin.

Step-by-step Guide To Building Your Own Projection

• Start with estimated revenue figures for the upcoming period.
• Determine your COGS to forecast gross margin.
• Subtract estimated operating expenses from the gross margin to find net profit.
• Adjust the forecast based on historical data and industry benchmarks.
• Review and refine your projection to ensure accuracy.

Using Software Tools And Templates For Projections

Digital solutions simplify creating P&L statements. Many software options come with built-in templates you can customize. Choose tools with features for:

• Automated Calculations: Speed up the process by reducing manual work.
• Integration Capabilities: Sync with other financial systems for real-time data.
• Customizable Templates: Modify predefined templates to suit your business.

Incorporating Market Trends And Business Intelligence In Projections

For projections that resonate with reality, integrate market trends and business intelligence:

• Analyze Competitors: Understand market position and pricing strategy.
• Study Market Forecasts: Keep abreast of industry predictions and economic conditions.
• Leverage Data Analytics: Use past performance and current data to enhance accuracy.

Analyzing Projected Profit And Loss

Understanding the financial future of a business is crucial for success. Projected profit and loss statements help paint this picture. They show if a business plan holds the promise of profit. Proper analysis of these projections helps guide companies towards profitability and financial health. Here’s how to dissect the future fiscal narrative of your business accurately.

Assessing Revenue Streams And Cost Predictions

Revenue streams form the lifeblood of any business. Examining these projections tells us about potential sales and income. Revenue projections should align with realistic market expectations. At the same time, predicted costs need scrutiny. They reveal if the business can maintain healthy margins. Assess costs such as materials, labor, and overhead meticulously.

• Identify all potential revenue sources : direct sales, subscriptions, or ad revenues.
• Review cost estimates for goods, services, and operational expenses.

Evaluating Profit Margins And Break-even Points

A business needs to know when it will stop losing and start gaining money. This is the break-even point. Profit margin assessment shows the potential for income versus expenses. A thin margin suggests a higher risk, requiring adjustments for sustainability. Understanding these figures helps set profitable pricing strategies.

Adjusting Projections Based On Industry Benchmarks And Ratios

Businesses do not operate in isolation. Industry benchmarks and ratios provide context. They help assess if projections are on par with sector standards. Ratios such as return on equity or asset turnover indicate efficiency. Companies can adjust future financial plans by looking at these critical industry metrics. This ensures competitiveness and realism in projections.

• Compare with industry averages for revenue growth and expense ratios.
• Adjust forecasts to reflect market conditions and competition data .

Implementing Sensitivity Analysis For Risk Assessment

Different scenarios can affect a business’s financial outcomes. Sensitivity analysis tests how changes impact profit and loss projections. This analysis involves fluctuating key variables. Items like pricing, cost inputs, and market size see how they affect the bottom line. It helps businesses prepare for uncertainties and builds stronger, adaptable financial strategies.

• Change revenue assumptions to reflect different market realities.
• Model cost variations for raw materials or labor changes.
• Understand how changes in one area can impact overall financial health .

Utilizing Projections For Business Decision Making

A well-crafted projected Profit and Loss (P&L) statement is a powerful tool. It helps steer a business towards its goals. Smart leaders use these projections to make informed decisions. Let’s dive into how this financial forecast aids strategic moves in a company.

Integrating P&l Projections In Strategic Planning

P&L Projections are crucial in strategic planning . They set the financial framework for setting goals. Realistic profit forecasts align actions with company vision and growth targets. Businesses can use these insights to focus on profitable ventures.

Influence Of Projections On Budgeting And Capital Allocation

Accurate projections influence how funds get distributed . They ensure money goes where it can grow. Companies avoid overspending in one area by seeing the future financial impact. This leads to better cash flow management.

Leveraging Projections In Negotiations And Investor Relations

P&L projections are leverage in discussions with partners and investors . They showcase potential growth and stability. A promising projection can secure better deals and investments . Businesses can use these numbers to build trust.

The Role Of Projections In Scenario Planning And Contingency Strategies

Projections prepare businesses for different futures . They help create response plans for potential scenarios. Firms can adapt quickly to changes. They reduce risks by planning for multiple outcomes.

Challenges And Best Practices In Projected P&l Statements

Understanding the challenges and best practices in projected Profit and Loss (P&L) statements is crucial for a business’s financial health. An accurate P&L forecast helps businesses plan for the future and make informed decisions. Yet, crafting these projections often comes with its own set of hurdles.

Common Pitfalls In Profit And Loss Forecasting

Create accurate P&L statements to avoid these common errors:

• Overly optimistic revenue estimates: Always base forecasts on realistic, data-backed assumptions.
• Ignoring market trends: Stay updated on economic conditions that may impact your projections.
• Forgetting to adjust for seasonality: Note the ebbs and flows in your sales cycle.

Best Practices To Ensure Accuracy And Reliability

Adhere to these strategies for dependable P&L forecasts :

• Reference historical data to ground your predictions.
• Factor in current market conditions and trends.
• Use conservative figures to manage expectations.

Updating Projections: When And How To Revisit Your Pl

Timely P&L updates are essential for relevance:

Case Studies: Lessons Learned From Successful And Failed Projections

Real-world examples offer valuable insights :

• Analyze case studies of successful forecasts to replicate their methodology.
• Review failed projections to understand and avoid similar pitfalls.
• Learn from diverse industries to broaden the applicability of your P&L forecast strategies.

Frequently Asked Questions On The Comprehensive Guide To Projected Profit And Loss

How do you calculate projected profit and loss.

Calculate projected profit and loss by estimating future sales, costs, and expenses, then subtracting total projected expenses from total projected revenue to determine net profit or loss.

What Is A Comprehensive Profit And Loss Statement?

A comprehensive profit and loss statement details a company’s revenues, expenses, and net income over a specific period. It reflects financial performance by showing profits or losses.

What Is The Formula For Profit And Loss Forecast?

The profit and loss forecast formula is “Expected Revenue – Estimated Costs = Forecasted Profit or Loss. ” Keep revenue projections realistic and expense estimates comprehensive for accuracy.

What Is The Profit And Loss Forecast Model?

A profit and loss forecast model predicts a business’s future revenues, costs, and expenses to estimate net financial gains or losses. It helps in budgeting and financial planning .

Understanding projected profit and loss is crucial for business success. This guide aimed to simplify these financial forecasts for you. We explored key concepts and tools to effectively plan your financial future. Applying this information will empower decision-making, fuel growth strategies, and promote financial health.

Master your projections; secure your business’s success.

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Financial Model for Mobile App | Mobile App Business Plan

The Mobile App Financial Plan Template in Excel allows you to develop financial projections when launching a new business centered around an app insta... read more

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Coffee Shop Financial Model Excel Template

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•   Excel - Multi-User  –  $129.00 Version 1
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Discounted Cash Flow Valuation Model: Free Excel Template

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Google Sheets Project Plan Template

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Upstream Oil & Gas Project Analysis

The Upstream Oil & Gas Project Financial Model Template in Excel empowers you to project and dissect your impending Oil and Gas drilling ventures. Pre... read more

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Hotel Financial Model Excel Template

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Grocery Store Financial Model Excel Template

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Waterfall Profit Distribution Model (up to 4 Tiers)

We are introducing our 4-Tier Waterfall Profit Distribution Model. The waterfall profit distribution model template aims to support a thorough analysi... read more

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Advanced Financial Model with DCF & Valuation

Dynamic Financial Planning & Analysis Model providing up to 10 Years of Financial Projections.

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Gasoline and EV Charging Station Financial Model

Investors can assess the viability of setting up and investing in gasoline stations with a charging station by downloading a financial model for their... read more

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Lending Platform Financial Model (LaaS)

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Outpatient Clinic Financial Model Excel Template

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All My Financial Models, Spreadsheets, Templates, and Tools: 120+

Lifetime access to all future templates as well! Here is a set of spreadsheets that have some of the most valuable logic in the world. I have been thr... read more

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Beverage Manufacturing Start-up Financial Model

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Bakery Financial Model Excel Template

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Cafe Financial Model Excel Template

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Due Diligence P&L – Exhaustive Revenue and Costs Analysis Template

Model for in depth understanding of high level profit and loss and revenue analysis. Big-4 like checklist of due diligence analyses. This Financial Du... read more

Online Clothing Store Financial Model Excel Template

Impress bankers and investors with a proven, solid Online Clothing Store Financial Projection Template. Five year online clothing store cash... read more

Poultry Farm Financial Model Excel Template

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Startup Company Financial Model – 5 Year Financial Forecast

Highly-sophisticated and user-friendly financial model for Startup Companies providing a 5-Year advanced financial forecast.

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Clothing Store Financial Model Excel Template

Get Your Clothing Store Budget Template. Creates 5-year Pro-forma financial statements, and financial ratios in GAAP or IFRS formats on the fly. Five-... read more

Green Hydrogen (Electrolysis) Production Financial Model

This green hydrogen financial model template builds a multi-year financial plan to analyze the financial feasibility and profitability for the product... read more

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Dental Practice Financial Model Excel Template

Check Dental Practice Financial Model. Fortunately, you can solve Cash Flow shortfalls with a bit of effort. A sophisticated 5 year dental p... read more

10 Year P&L, Balance Sheet, Cash Flow, and Break-even Analysis

This excel template is great for those wanting a professional-looking forecast 10 years of financial statements, those starting out as an entrepreneur... read more

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Mixed-Use Real Estate Model: Leverage / JV Options

A general real estate model to plan all assumptions for up to 7 'uses' for a given property. Includes development / acquisition, leverage if desired, ... read more

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Poultry Project Financial Feasibility Model

This poultry financial model template in Excel provides a framework to determine the financial feasibility of a new poultry project for producing bro... read more

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Spa Financial Model Excel Template

Download Spa Financial Projection Template. This well-tested, robust, and powerful template is your solid foundation to plan a success. Creates ... read more

Digital Marketing Agency Financial Model Excel Template

Check Our Digital Marketing Agency Financial Projection Template. Excel Template for your pitch deck to convince Investors. Digital Marketing Ag... read more

Start Up Solar Farm Excel Model and Valuation

Start Up Solar Farm Excel Model presents the business case of an investment in the construction of a solar farm and the sale of the energy generated f... read more

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Nail Salon Financial Model Excel Template

Check Nail Salon Financial Model Template. Excel - well-tested, robust and powerful. Get you solid foundation to plan your business model. Five-year f... read more

Boutique Hotel Financial Model Excel Template

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Budget vs. Actual (Logistic Company)

The Budget vs. Actual financial model is used to measure actual results against the budget projected for the financial period.

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Fintech Financial Model Excel Template

Try Fintech Financial Projection Template. Enhance your pitch decks and impress potential investors with a proven, strategy template. Five ... read more

Restaurant Financial Model Excel Template

Get Your Restaurant Financial Model Template. Spend less time on Cash Flow forecasting and more time on your products. Restaurant Financial ... read more

Insurance Agency Financial Model Excel Template

Shop Insurance Agency Financial Plan. Fortunately, you can solve Cash Flow shortfalls with a bit of effort. Generates 5-year insurance agency ex... read more

Travel Agency Financial Model Excel Template

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Real Estate Brokerage Firm Financial Model Template

Financial model template for a high-level real estate brokerage firm that facilitates the buying and selling of real estate properties between buyers ... read more

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Equipment Rental Cash Flow Model

Highly dynamic financial model that is specific to renting equipment out. High attention paid to the cash flows and timeliness of them so the user has... read more

•   Version 2  –  $75.00
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Open Pit Mine Financial Model

Allow a potential miner to see visually and numerically (annual basis) what their possible financial position would look like when starting up an open... read more

•   Excel Model  –  $45.00 Version 4

Beauty Salon Financial Model Excel Template

Get Your Beauty Salon Financial Model Template. Creates 5-year financial projection and financial ratios in GAAP or IFRS formats on the fly. Creates 5... read more

Payroll Budget Plan Excel Template

A professional template to budget payroll expenses

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Inventory Dashboard Model Template

!! Kindly use the latest Microsoft Excel Version before purchasing the model, otherwise, the dynamic dashboard will NOT work.!! Inventory Dashboard Mo... read more

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Medical Practice Financial Model Excel Template

Check Our Medical Practice Financial Projection. Simple-to-use yet very sophisticated planning tool. Get reliable results with minimal exper... read more

Mergers & Acquisitions (M&A) Model

The Mergers & Acquisition (M&A) Model provides a projection for a company looking to potentially merge or acquire another company. This model runs... read more

•   Full Excel Version  –  $75.00 Version 1

Pizzeria Financial Model Excel Template

Get Your Pizzeria Budget Template. Excel template - robust and powerful. This is your solid foundation to plan your business model. Five-year horizon ... read more

Coffee Farm Financial Feasibility Model Template

This coffee farm financial feasibility model template prepares a financial plan for your next coffee growing project! Figure out the expected incomes ... read more

•   Standard version  –  $89.00 Version 1.2
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Solar Panel Manufacturing Plant Business Plan Financial Model Excel Template

Get the Best Solar Panel Manufacturing Plant Financial Model. Spend less time on Cash Flow forecasting and more time on your products. The Solar Panel... read more

Generic Cost Benefit Analysis Excel Model

User-friendly Excel model intended for the preparation of a Cost-Benefit Analysis to determine the financial viability for a proposed project or inves... read more

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Budget vs Actual Excel Template

Create your very own budget vs actual analysis by trying out this Budget vs Actual Analysis Excel Template.

Resort Financial Model Excel Template

Order Resort Financial Model. Excel template - robust and powerful. This is your solid foundation to plan your business model. Five year res... read more

Cannabis Financial Model Excel Template

Download Cannabis Farming Financial Model. Creates 5-year financial projection and financial ratios in GAAP or IFRS formats on the fly. Cann... read more

Generic Startup Financial Projection 3 statement Excel Model

User-friendly Excel model intended for the preparation of a 3 statement (Income Statement, Balance Sheet and Cashflow Statement) financial projection ... read more

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Real Estate Financial Model Bundle

This is a collection of financial model templates that provides the financial projections and valuations for Real Estate businesses and its related se... read more

•   Template Bundle  –  $299.00 Version 1

Skin Care Financial Model Excel Template

Order Skin Care Pro-forma Template. Generate fully-integrated Pro-forma for 5 years. Automatic aggregation of annual summaries on outputs tabs. Create... read more

Bar Financial Model Excel Template

Try Bar Financial Plan. Requesting a loan without a financial model for paying it back is a common way to land in the rejection pile. Creates 5-... read more

Real Estate Portfolio Template – Excel Spreadsheet

The Real Estate Portfolio Template forecasts the financial performance when building a real estate portfolio. The model allows simulating various scen... read more

•   Full Excel Version  –  $199.95 Version 2.5
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Flower Shop Financial Model Excel Template

Discover Flower Shop Financial Model Template. Allows investors and business owners to make a complete financial projection in less than 90 mins... read more

Barber Shop Financial Model Excel Template

Check Barber Shop Financial Projection Template. Creates 5-year financial projection and financial ratios in GAAP or IFRS formats on the fly. Generate... read more

Shopping Mall Financial Model

Shopping Mall Financial Model presents the case of an investment into a shopping mall and its operation. The model generates the three financial state... read more

Manufacturing Startup Feasibility Model

Launching a manufacturing startup can be complex, and securing financing requires a solid financial plan. Our Manufacturing Startup Financial Feasibil... read more

•   PREMIUM Excel Version  –  $129.95 Version 2.41
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Full Service Hospital Financial Model

This financial model attempts to give the user a full scope of starting a 250 bed (adjustable) hospital. It will allow for all revenue and cost assump... read more

•   Full Model  –  $45.00 Version 1.2

Price Volume Mix Charts and Analysis – On revenue and Gross Profit by Product

Best practice model for a complete Price Volume Mix (PVM) analysis on revenue and on gross profit by product.

Clinic Financial Model Excel Template

Shop Clinic Financial Plan. Create fully-integrated financial projection for 5 years. With 3 way financial statements inside. Five year clin... read more

E-Commerce 3 Statement Financial Projection Model with Valuation

Highly versatile and user-friendly Excel model for the preparation of a rolling 3 statement (Income Statement, Balance Sheet and Cash flow Statement) ... read more

•   Excel Model Populated  –  $59.00
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Food Truck Financial Model Excel Template

Purchase Food Truck Financial Projection Template. Excel Template for your pitch deck to convince Investors. The food truck budget financial model is ... read more

Top 16 Google Sheet Templates

This is a bundle of all the most useful and efficient google sheet templates I have built over the years. Includes everything from budgeting and crew ... read more

Jewelry Shop / Store 5 Year Startup Business Model

A bottom-up financial model that is designed specifically for a jewelry store, but could easily be used for any retail business startup. Includes 3-st... read more

Clinical Lab Financial Model Excel Template

Order Clinical Lab Financial Projection Template. This well-tested, robust, and powerful template is your solid foundation to plan a success... read more

Physiotherapy Financial Model Excel Template

Impress bankers and investors with a proven, solid Physiotherapy Financial Plan. Five-year physiotherapy budget financial model for startups and... read more

E-com Simple Financial Model Excel Template

Get Your Simple E-Commerce Pro Forma Projection. There's power in Cash Flow Projections and the insight they can provide your business. Five-year simp... read more

Fish Farm Financial Model Excel Template

Get the Best Fish Farm Pro Forma Projection. This well-tested, robust, and powerful template is your solid foundation to plan a success. Highly ... read more

Chicken Egg Farm – Business Plan

This chicken egg farming model aims to plan the operations, financial feasibility, and profitability of a new poultry egg farming business. This Start... read more

•   Excel Version  –  $99.95 Version 1.3
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Electric Vehicle (EV) Charging Station Financial Model – 5 Year Monthly Projection

Electric Vehicle (EV) charging Station FM helps user asses financial viability of setting up and operating a charging station.

Juice Bar Financial Model Excel Template

Get Your Juice Bar Financial Model. Impress bankers and investors with a proven, strategic business plan that impresses every time. Five year juice ba... read more

Catering Financial Model Excel Template

Check Our Catering Pro-forma Template. Excel template - robust and powerful. This is your solid foundation to plan your business model. Highly versati... read more

Vegetable Farming Financial Model Excel Template

Buy Vegetables Farming Pro-forma Template. Solid package of print-ready reports: P&L and Cash Flow statement, and a complete set of ratios. ... read more

Digital Product Marketplace Model

The digital product marketplace model prepares a financial plan in Excel for online marketplace Startup businesses similar to concepts such as Themefo... read more

•   Free PDF Demo Versons  –  $0.00 Version 1.1
•   Basic Excel Model Version (5Y)  –  $59.00 Version 1.1
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Abacus Solar & Wind Debt Sculpting Financial Model

Abacus is a bankable, easy-to-use, debt-sculpting financial model for use in renewable (solar, wind, etc.) energy as well as PPP transactions.

Bed And Breakfast Financial Model Excel Template

Buy Bed And Breakfast Financial Projection Template. This well-tested, robust, and powerful template is your solid foundation to plan a success.... read more

SaaS Startup Financial Model – Enterprise and User

Advanced Financial Model providing a dynamic up to 10-year financial forecast for a Software as a Service (SaaS) startup business.

•   Excel Financial Model - Standard Version  –  $99.00 Version 2
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Cash Flow Statement Template with Budget Versus Actuals Analysis Excel

Cash Flow Projection Template Highlights One-year Cash Flow Projection template is a useful tool for cash flow forecasting and for effectively plannin... read more

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Pharmacy Financial Model Excel Template

Shop Pharmacy Financial Projection. Excel template - robust and powerful. This is your solid foundation to plan your business model. Five-year h... read more

Clothing Manufacturing Business Plan Financial Model Excel Template

Shop Clothing Manufacturing Financial Model. There's power in Cash Flow Projections and the insight they can provide your business. Five-year Clothing... read more

Hair and Beauty Salon Business Plan – 5Yr Financial Projection Model

Highly-sophisticated and user-friendly Hair and Beauty Salon financial model providing advanced financial projection for a 5-Year Business Plan.

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Dairy Farm Valuation Model

The Dairy Farm Valuation Model forecasts the expected financials for a dairy farm and calculates the resulting DCF value.

•   Excel Model  –  $39.95 Version 2
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Day Care Financial Model Excel Template

Discover Daycare Financial Model. Spend less time on Cash Flow forecasting and more time on your products. A sophisticated 5-year daycare pr... read more

Countback method for DSO – DIO – DPO Best Practice (Includes countforward method!)

The right way to compute DSO DIO DPO - Using the countback method, fully automated!

Candy Store Financial Model Excel Template

Order Candy Store Financial Model Template. Sources & Uses, Profit & Loss, Cash Flow statements, KPIs and 30+ graphs Inside Generates 5-... read more

Business Plan for a Biodiesel Manufacturing Plant

Setting up a biodiesel manufacturing plant requires a comprehensive and executed business strategy. To assess biodiesel production's financial sustain... read more

•   Premium Excel File  –  $119.95 Version 2.1
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Food Production Financial Model Excel Template

Buy Food Production Financial Projection. Creates 5-year Pro-forma financial statements, and financial ratios in GAAP or IFRS formats on the fly... read more

•   Excel - Multi-User  –  $129.00 Version 2

Food Delivery Financial Model Excel Template

Check Our Food Delivery Financial Model. Allows investors and business owners to make a complete financial projection in less than 90 mins. A so... read more

Rice Farming Financial Model

The Rice Farming Financial Model enables rice farmers and investor to evaluate an investment into a rice farming operation via Discounted Free Cash Fl... read more

•   Full Excel Version (MS Excel)  –  $29.95 Version 3.1
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Urgent Care Center Financial Model Excel Template

Buy Urgent Care Center Pro Forma Projection. Sources & Uses, Profit & Loss, Cash Flow statements, KPIs and 30+ graphs Inside Five-year h... read more

Discounted Cash Flow DCF Valuation Model Template (Mining Company)

Financial model that performs a DCF & Relative valuation on Mining Company.

3 Statement Financial Modeling with DCF & Relative Valuation – Self Learning Kit

Financial Modeling Tutorial guides user via step by step approach on how to build financial models with DCF valuation

Solar (PV) Power Plant – Project Finance Model

Project Finance Model providing forecast and profitability analysis for a development and operating scenario of a Solar (PV) Power Plant.

•   Excel Financial Model  –  $149.00 Version 1

Forestry Financial Model

The forestry financial model is a comprehensive financial model in Excel which allows to calculate the financial viability (IRR, NPV, ROI multiple) f... read more

•   Excel Model  –  $49.95 Version 7
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Car Wash Tunnel – 5 Year Financial Projection

Build your dream car wash scenario and see what kind of cash flows play out. Financial statements included.

•   Full Model  –  $45.00 Version 4

Liquor Store Financial Model Excel Template

Get Your Liquor Store Financial Plan. Creates 5-year Pro-forma financial statements, and financial ratios in GAAP or IFRS formats on the fly. Cr... read more

Restaurant Key Performance Indicator Tracker (Sales, Average Customer, Top 10 Menu & Worst 10 Menu, etc.)

This financial report explained the trend in quantity sold, sales per day, number of pax, average spending per person, and customer turnover for the r... read more

Veterinary Financial Model Excel Template

Shop Veterinary Pro Forma Projection. Creates 5-year Pro-forma financial statements, and financial ratios in GAAP or IFRS formats on the fly... read more

Manufacturing Startup/Existing Business Financial Projection 3 Statement Model

3 statement 5 year rolling financial projection Excel model for a startup /existing manufacturing business

•   Excel Model  –  $65.00 Version 1
•   PDF Demo  –  $0.00 Version 1

Agriculture Financial Model Templates Bundle

This is a collection of financial model templates for businesses in the Agriculture Industry and its related sectors.

Renewable Energy Financial Models Bundle

A collection of user-friendly Project Finance Models in the Renewable Energy Sector offered at a discounted price you can’t miss!

•   Template Bundle  –  $400.00 Version 1

Financial Business Plan for Nail Salon

The Financial Business Plan Template for starting a Nail Salon was developed to obtain a comprehensive view on the economics and financial prospects o... read more

•   Full Excel Template  –  $99.00 Version 1.2
•   PDF Demo Preview  –  $0.00 Version 1.2

Greenhouse Start Up Model Template in Excel

Excel model for a start up Greenhouse business for you to download and use.

•   Paid Excel  –  $59.00

Monthly Recurring Revenue SaaS Financial Model Excel Template

Check Monthly Recurring Revenue SaaS Financial Model. This well-tested, robust, and powerful template is your solid foundation to plan a success. Five... read more

Dialysis Center Financial Model Excel Template

Discover Dialysis Center Financial Projection. Creates 5-year financial projection and financial ratios in GAAP or IFRS formats on the fly. Crea... read more

Subscription Business – 10 Year Financial Model

Financial Model providing a 10-year financial plan for a startup or operating Subscription Business.

Mobile Home Park / Community Financial Feasibility – Up to 40 Parks

Plan out all aspects of starting up to 40 mobile home communities or parks. End to end from assumptions to return data. 3 Statement model and dynamic ... read more

•   Full Version (40 parks)  –  $175.00 Version 7
•   Lite Version (5 parks)  –  $125.00 Version 7

Franchisor Licensing: Financial Model with Cap Table / 3-Statements

Build up to a 10 year financial forecast with assumptions directly related to the startup and operation of a franchisor. Formal statements and reports... read more

•   Excel Model  –  $75.00 Version 2

Nightclub Financial Model Excel Template

"Get Nightclub Pro-forma Template. Investor-ready. Includes a P&L and cash flow statement, balance sheet, and a complete set of financial ratios. ... read more

Inventory Valuation Using FIFO – Automatically Calculate COGS Accordingly

Any accountant that needs to comply with IFRS will have to use the FIFO valuation method for calculating their cost of goods sold (COGS) in a given pe... read more

Lending Company Financial Model – 5 Year Forecast

This Financial model template presents a business scenario of a corporation engaged in granting loans from its own capital funds or from funds sourced... read more

•   Excel Financial Model  –  $129.00 Version 2

Social Media Agency Financial Model Excel Template

Check Social Media Agency Financial Model. Creates 5-year Pro-forma financial statements, and financial ratios in GAAP or IFRS formats on the fl... read more

Renewable Energy Financial Model Template Bundle

Take this opportunity and get a discount by getting the Renewable Energy Bundle where you get Solar, Wind and Bio Gas Plant Financial Model Templates!

Food Truck Cash Flow Model

Plan out all the cash flows that are relevant to opening and running a food truck for 10 years. Includes 3-statement financial model / capitalization ... read more

Joint Venture – Preferred Equity Model

A straight forward cash distribution testing model for joint ventures. Logic is built for preferred equity and common equity to exist.

•   Excel Model  –  $45.00 Version 3

Financial Modeling Analysis

The main purpose of the model is to allows user to easily compare the financial performance result from one period to the next or between actual and b... read more

•   Full Excel Model  –  $69.00 Version 1

Hotel Startup/Existing Business Financial Projection 3 Statement Excel Model

User-friendly 3 Statement 5 year rolling financial projection Excel model for a startup or existing Hotel business generating revenue from room occupa... read more

•   PDF Example  –  $0.00

Small Business Playbook (Financial / Tracking Template Bundle)

This is a set of financial models, tools, and templates designed for your average mom and pop shop.

Ophthalmology Financial Model Excel Template

Download Ophthalmic Center Pro Forma Projection. Creates a financial summary formatted for your Pitch Deck. Ready to Raise Capital. Five-year ho... read more

Start Up Restaurant Financial Model Template

This detailed, yet easy to use three statement financial model will allow you to calculate your business' profit and loss, build a balance sheet and c... read more

Pre-School Care Financial Model Excel Template

Get the Best Pre-School Care Financial Projection Template. Creates a financial summary formatted for your Pitch Deck. Ready to Raise Capital. F... read more

Construction Work in Progress Calculator Template

For construction companies that perform contact work, the work in progress (WIP) is an essential financial tool and accurate way to know the true prof... read more

•   PDF Version  –  $0.00 Version 7
•   Excel Version  –  $14.00 Version 1

Joint Venture Real Estate Model

The purpose of this model is to give investors and sponsors a clear picture of what their projected cash flow returns will be (based on over 30 Inputs... read more

•   Version 1 (basic)  –  $45.00 Version 1
•   Waterfall Logic (1 Investor promote,1 Sponsor promote)  –  $45.00 Version 1
•   Waterfall Logic (1 Investor promotes, 2 Sponsor promote)  –  $45.00 Version 2
•   Joint Venture Annual Only and Includes Refi Option  –  $45.00 Version 4
•   Waterfall with 5 Scenario Analysis  –  $45.00 Version 2

Gift Shop Financial Model Excel Template

Try Gift Shop Financial Projection. Investor-ready. Includes a P&L and cash flow statement, balance sheet, and a complete set of financial r... read more

Geothermal Energy Feasibility Model Template

The objective of the Geothermal Energy financial feasibility model template is to analyze a new Geothermal Energy project in quite some detail in orde... read more

•   PDF Demo Preview  –  $0.00 Version 1.8
•   Full Excel Model  –  $99.95 Version 1.8

Bundle – Business Financial Forecasting Models

The purpose of this Bundle of Business Forecasting and Financial Models is to assist Business Owners and Consultants with a consistent approach to for... read more

•   Template Bundle  –  $137.00 Version 1

Project Finance – Toll Road – Build and Operate Excel Model with 3 Statements and Valuation

Toll Road Build and Operate financial model is a project finance model for construction and operations of a toll concession

Tea Cafe Financial Model Excel Template

Check Our Tea Cafe Pro-forma Template. Excel template - robust and powerful. This is your solid foundation to plan your business model. Five year tea ... read more

Starting or Buying a Coffee Farm – Financial Model

The goal of this model is to assist you with starting or buying a coffee farm. The financial spreadsheet templates assist in analysing and forecasting... read more

•   Full Excel Template  –  $69.00 Version 1.2
•   PDF Demo Version  –  $0.00 Version 1.2

Dropshipping Financial Model Excel Template

Purchase Dropshipping Financial Model Template. Creates 5-year financial projection and financial ratios in GAAP or IFRS formats on the fly. Dro... read more

Hotel/Guesthouse/Resort Development Model and Valuation – 20 year Three Statement Analysis

This Hotel / Holiday Resort Development Model will take you through a 20-year period of Three Statement Analysis and provide you with key valuation da... read more

•   Full Open Excel  –  $67.00 Version 7
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Construction/Engineering Project Business Financial Projection 3 Statement Model

3 statement 5 year rolling financial projection Excel model for a startup /existing business engaged in construction or engineering projects

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Liquor Distillery Financial Plan Template

Distilleries, with their rich history of crafting spirits, have experienced a resurgence in popularity, driven by consumer interest in artisanal and l... read more

•   Excel Version  –  $199.95 Version 5.5
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• Business Planning

Business Plan Financial Projections

Written by Dave Lavinsky

Financial projections are forecasted analyses of your business’ future that include income statements, balance sheets and cash flow statements. We have found them to be an crucial part of your business plan for the following reasons:

• They can help prove or disprove the viability of your business idea. For example, if your initial projections show your company will never make a sizable profit, your venture might not be feasible. Or, in such a case, you might figure out ways to raise prices, enter new markets, or streamline operations to make it profitable. 
• Financial projections give investors and lenders an idea of how well your business is likely to do in the future. They can give lenders the confidence that you’ll be able to comfortably repay their loan with interest. And for equity investors, your projections can give them faith that you’ll earn them a solid return on investment. In both cases, your projections can help you secure the funding you need to launch or grow your business.
• Financial projections help you track your progress over time and ensure your business is on track to meet its goals. For example, if your financial projections show you should generate $500,000 in sales during the year, but you are not on track to accomplish that, you’ll know you need to take corrective action to achieve your goal.

Below you’ll learn more about the key components of financial projections and how to complete and include them in your business plan.

What Are Business Plan Financial Projections?

Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes. There are three main financial statements that you will need to include in your business plan financial projections:

1. Income Statement Projection

The income statement projection is a forecast of your company’s future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.

There are a few key items you will need to include in your projection:

• Revenue: Your revenue projection should break down your expected sales by product or service, as well as by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Expenses: Your expense projection should include a breakdown of your expected costs by category, such as marketing, salaries, and rent. Again, it is important to be realistic in your estimates.
• Net Income: The net income projection is the difference between your revenue and expenses. This number tells you how much profit your company is expected to make.

Sample Income Statement

2. Cash Flow Statement & Projection

The cash flow statement and projection are a forecast of your company’s future cash inflows and outflows. It is important to include a cash flow projection in your business plan, as it will give investors and lenders an idea of your company’s ability to generate cash.

There are a few key items you will need to include in your cash flow projection:

• The cash flow statement shows a breakdown of your expected cash inflows and outflows by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Cash inflows should include items such as sales revenue, interest income, and capital gains. Cash outflows should include items such as salaries, rent, and marketing expenses.
• It is important to track your company’s cash flow over time to ensure that it is healthy. A healthy cash flow is necessary for a successful business.

Sample Cash Flow Statements

3. Balance Sheet Projection

The balance sheet projection is a forecast of your company’s future financial position. It should include line items for each type of asset and liability, as well as a total at the end.

A projection should include a breakdown of your company’s assets and liabilities by category. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.

It is important to track your company’s financial position over time to ensure that it is healthy. A healthy balance is necessary for a successful business.

Sample Balance Sheet

How to Create Financial Projections

Creating financial projections for your business plan can be a daunting task, but it’s important to put together accurate and realistic financial projections in order to give your business the best chance for success.  

Cost Assumptions

When you create financial projections, it is important to be realistic about the costs your business will incur, using historical financial data can help with this. You will need to make assumptions about the cost of goods sold, operational costs, and capital expenditures.

It is important to track your company’s expenses over time to ensure that it is staying within its budget. A healthy bottom line is necessary for a successful business.

Capital Expenditures, Funding, Tax, and Balance Sheet Items

You will also need to make assumptions about capital expenditures, funding, tax, and balance sheet items. These assumptions will help you to create a realistic financial picture of your business.

Capital Expenditures

When projecting your company’s capital expenditures, you will need to make a number of assumptions about the type of equipment or property your business will purchase. You will also need to estimate the cost of the purchase.

When projecting your company’s funding needs, you will need to make a number of assumptions about where the money will come from. This might include assumptions about bank loans, venture capital, or angel investors.

When projecting your company’s tax liability, you will need to make a number of assumptions about the tax rates that will apply to your business. You will also need to estimate the amount of taxes your company will owe.

Balance Sheet Items

When projecting your company’s balance, you will need to make a number of assumptions about the type and amount of debt your business will have. You will also need to estimate the value of your company’s assets and liabilities.

Financial Projection Scenarios

Write two financial scenarios when creating your financial projections, a best-case scenario, and a worst-case scenario. Use your list of assumptions to come up with realistic numbers for each scenario.

Presuming that you have already generated a list of assumptions, the creation of best and worst-case scenarios should be relatively simple. For each assumption, generate a high and low estimate. For example, if you are assuming that your company will have $100,000 in revenue, your high estimate might be $120,000 and your low estimate might be $80,000.

Once you have generated high and low estimates for all of your assumptions, you can create two scenarios: a best case scenario and a worst-case scenario. Simply plug the high estimates into your financial projections for the best-case scenario and the low estimates into your financial projections for the worst-case scenario.

Conduct a Ratio Analysis

A ratio analysis is a useful tool that can be used to evaluate a company’s financial health. Ratios can be used to compare a company’s performance to its industry average or to its own historical performance.

There are a number of different ratios that can be used in ratio analysis. Some of the more popular ones include the following:

• Gross margin ratio
• Operating margin ratio
• Return on assets (ROA)
• Return on equity (ROE)

To conduct a ratio analysis, you will need financial statements for your company and for its competitors. You will also need industry average ratios. These can be found in industry reports or on financial websites.

Once you have the necessary information, you can calculate the ratios for your company and compare them to the industry averages or to your own historical performance. If your company’s ratios are significantly different from the industry averages, it might be indicative of a problem.

Be Realistic

When creating your financial projections, it is important to be realistic. Your projections should be based on your list of assumptions and should reflect your best estimate of what your company’s future financial performance will be. This includes projected operating income, a projected income statement, and a profit and loss statement.

Your goal should be to create a realistic set of financial projections that can be used to guide your company’s future decision-making.

Sales Forecast

One of the most important aspects of your financial projections is your sales forecast. Your sales forecast should be based on your list of assumptions and should reflect your best estimate of what your company’s future sales will be.

Your sales forecast should be realistic and achievable. Do not try to “game” the system by creating an overly optimistic or pessimistic forecast. Your goal should be to create a realistic sales forecast that can be used to guide your company’s future decision-making.

Creating a sales forecast is not an exact science, but there are a number of methods that can be used to generate realistic estimates. Some common methods include market analysis, competitor analysis, and customer surveys.

Create Multi-Year Financial Projections

When creating financial projections, it is important to generate projections for multiple years. This will give you a better sense of how your company’s financial performance is likely to change over time.

It is also important to remember that your financial projections are just that: projections. They are based on a number of assumptions and are not guaranteed to be accurate. As such, you should review and update your projections on a regular basis to ensure that they remain relevant.

Creating financial projections is an important part of any business plan. However, it’s important to remember that these projections are just estimates. They are not guarantees of future success.

Business Plan Financial Projections FAQs

What is a business plan financial projection.

A business plan financial projection is a forecast of your company's future financial performance. It should include line items for each type of asset and liability, as well as a total at the end.

What are annual income statements? 

The Annual income statement is a financial document and a financial model that summarize a company's revenues and expenses over the course of a fiscal year. They provide a snapshot of a company's financial health and performance and can be used to track trends and make comparisons with other businesses.

What are the necessary financial statements?

The necessary financial statements for a business plan are an income statement, cash flow statement, and balance sheet.

How do I create financial projections?

You can create financial projections by making a list of assumptions, creating two scenarios (best case and worst case), conducting a ratio analysis, and being realistic.

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How to Write the Financial Section of a Business Plan

An outline of your company's growth strategy is essential to a business plan, but it just isn't complete without the numbers to back it up. here's some advice on how to include things like a sales forecast, expense budget, and cash-flow statement..

A business plan is all conceptual until you start filling in the numbers and terms. The sections about your marketing plan and strategy are interesting to read, but they don't mean a thing if you can't justify your business with good figures on the bottom line. You do this in a distinct section of your business plan for financial forecasts and statements. The financial section of a business plan is one of the most essential components of the plan, as you will need it if you have any hope of winning over investors or obtaining a bank loan. Even if you don't need financing, you should compile a financial forecast in order to simply be successful in steering your business. "This is what will tell you whether the business will be viable or whether you are wasting your time and/or money," says Linda Pinson, author of Automate Your Business Plan for Windows  (Out of Your Mind 2008) and Anatomy of a Business Plan (Out of Your Mind 2008), who runs a publishing and software business Out of Your Mind and Into the Marketplace . "In many instances, it will tell you that you should not be going into this business." The following will cover what the financial section of a business plan is, what it should include, and how you should use it to not only win financing but to better manage your business.

Dig Deeper: Generating an Accurate Sales Forecast

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How to Write the Financial Section of a Business Plan: The Purpose of the Financial Section Let's start by explaining what the financial section of a business plan is not. Realize that the financial section is not the same as accounting. Many people get confused about this because the financial projections that you include--profit and loss, balance sheet, and cash flow--look similar to accounting statements your business generates. But accounting looks back in time, starting today and taking a historical view. Business planning or forecasting is a forward-looking view, starting today and going into the future. "You don't do financials in a business plan the same way you calculate the details in your accounting reports," says Tim Berry, president and founder of Palo Alto Software, who blogs at Bplans.com and is writing a book, The Plan-As-You-Go Business Plan. "It's not tax reporting. It's an elaborate educated guess." What this means, says Berry, is that you summarize and aggregate more than you might with accounting, which deals more in detail. "You don't have to imagine all future asset purchases with hypothetical dates and hypothetical depreciation schedules to estimate future depreciation," he says. "You can just guess based on past results. And you don't spend a lot of time on minute details in a financial forecast that depends on an educated guess for sales." The purpose of the financial section of a business plan is two-fold. You're going to need it if you are seeking investment from venture capitalists, angel investors, or even smart family members. They are going to want to see numbers that say your business will grow--and quickly--and that there is an exit strategy for them on the horizon, during which they can make a profit. Any bank or lender will also ask to see these numbers as well to make sure you can repay your loan. But the most important reason to compile this financial forecast is for your own benefit, so you understand how you project your business will do. "This is an ongoing, living document. It should be a guide to running your business," Pinson says. "And at any particular time you feel you need funding or financing, then you are prepared to go with your documents." If there is a rule of thumb when filling in the numbers in the financial section of your business plan, it's this: Be realistic. "There is a tremendous problem with the hockey-stick forecast" that projects growth as steady until it shoots up like the end of a hockey stick, Berry says. "They really aren't credible." Berry, who acts as an angel investor with the Willamette Angel Conference, says that while a startling growth trajectory is something that would-be investors would love to see, it's most often not a believable growth forecast. "Everyone wants to get involved in the next Google or Twitter, but every plan seems to have this hockey stick forecast," he says. "Sales are going along flat, but six months from now there is a huge turn and everything gets amazing, assuming they get the investors' money."  The way you come up a credible financial section for your business plan is to demonstrate that it's realistic. One way, Berry says, is to break the figures into components, by sales channel or target market segment, and provide realistic estimates for sales and revenue. "It's not exactly data, because you're still guessing the future. But if you break the guess into component guesses and look at each one individually, it somehow feels better," Berry says. "Nobody wins by overly optimistic or overly pessimistic forecasts."

Dig Deeper: What Angel Investors Look For

How to Write the Financial Section of a Business Plan: The Components of a Financial Section

A financial forecast isn't necessarily compiled in sequence. And you most likely won't present it in the final document in the same sequence you compile the figures and documents. Berry says that it's typical to start in one place and jump back and forth. For example, what you see in the cash-flow plan might mean going back to change estimates for sales and expenses.  Still, he says that it's easier to explain in sequence, as long as you understand that you don't start at step one and go to step six without looking back--a lot--in between.

• Start with a sales forecast. Set up a spreadsheet projecting your sales over the course of three years. Set up different sections for different lines of sales and columns for every month for the first year and either on a monthly or quarterly basis for the second and third years. "Ideally you want to project in spreadsheet blocks that include one block for unit sales, one block for pricing, a third block that multiplies units times price to calculate sales, a fourth block that has unit costs, and a fifth that multiplies units times unit cost to calculate cost of sales (also called COGS or direct costs)," Berry says. "Why do you want cost of sales in a sales forecast? Because you want to calculate gross margin. Gross margin is sales less cost of sales, and it's a useful number for comparing with different standard industry ratios." If it's a new product or a new line of business, you have to make an educated guess. The best way to do that, Berry says, is to look at past results.
• Create an expenses budget. You're going to need to understand how much it's going to cost you to actually make the sales you have forecast. Berry likes to differentiate between fixed costs (i.e., rent and payroll) and variable costs (i.e., most advertising and promotional expenses), because it's a good thing for a business to know. "Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Berry says. "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such." Once again, this is a forecast, not accounting, and you're going to have to estimate things like interest and taxes. Berry recommends you go with simple math. He says multiply estimated profits times your best-guess tax percentage rate to estimate taxes. And then multiply your estimated debts balance times an estimated interest rate to estimate interest.
• Develop a cash-flow statement. This is the statement that shows physical dollars moving in and out of the business. "Cash flow is king," Pinson says. You base this partly on your sales forecasts, balance sheet items, and other assumptions. If you are operating an existing business, you should have historical documents, such as profit and loss statements and balance sheets from years past to base these forecasts on. If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months. Pinson says that it's important to understand when compiling this cash-flow projection that you need to choose a realistic ratio for how many of your invoices will be paid in cash, 30 days, 60 days, 90 days and so on. You don't want to be surprised that you only collect 80 percent of your invoices in the first 30 days when you are counting on 100 percent to pay your expenses, she says. Some business planning software programs will have these formulas built in to help you make these projections.
• Income projections. This is your pro forma profit and loss statement, detailing forecasts for your business for the coming three years. Use the numbers that you put in your sales forecast, expense projections, and cash flow statement. "Sales, lest cost of sales, is gross margin," Berry says. "Gross margin, less expenses, interest, and taxes, is net profit."
• Deal with assets and liabilities. You also need a projected balance sheet. You have to deal with assets and liabilities that aren't in the profits and loss statement and project the net worth of your business at the end of the fiscal year. Some of those are obvious and affect you at only the beginning, like startup assets. A lot are not obvious. "Interest is in the profit and loss, but repayment of principle isn't," Berry says. "Taking out a loan, giving out a loan, and inventory show up only in assets--until you pay for them." So the way to compile this is to start with assets, and estimate what you'll have on hand, month by month for cash, accounts receivable (money owed to you), inventory if you have it, and substantial assets like land, buildings, and equipment. Then figure out what you have as liabilities--meaning debts. That's money you owe because you haven't paid bills (which is called accounts payable) and the debts you have because of outstanding loans.
• Breakeven analysis. The breakeven point, Pinson says, is when your business's expenses match your sales or service volume. The three-year income projection will enable you to undertake this analysis. "If your business is viable, at a certain period of time your overall revenue will exceed your overall expenses, including interest." This is an important analysis for potential investors, who want to know that they are investing in a fast-growing business with an exit strategy.

Dig Deeper: How to Price Business Services

How to Write the Financial Section of a Business Plan: How to Use the Financial Section One of the biggest mistakes business people make is to look at their business plan, and particularly the financial section, only once a year. "I like to quote former President Dwight D. Eisenhower," says Berry. "'The plan is useless, but planning is essential.' What people do wrong is focus on the plan, and once the plan is done, it's forgotten. It's really a shame, because they could have used it as a tool for managing the company." In fact, Berry recommends that business executives sit down with the business plan once a month and fill in the actual numbers in the profit and loss statement and compare those numbers with projections. And then use those comparisons to revise projections in the future. Pinson also recommends that you undertake a financial statement analysis to develop a study of relationships and compare items in your financial statements, compare financial statements over time, and even compare your statements to those of other businesses. Part of this is a ratio analysis. She recommends you do some homework and find out some of the prevailing ratios used in your industry for liquidity analysis, profitability analysis, and debt and compare those standard ratios with your own. "This is all for your benefit," she says. "That's what financial statements are for. You should be utilizing your financial statements to measure your business against what you did in prior years or to measure your business against another business like yours."  If you are using your business plan to attract investment or get a loan, you may also include a business financial history as part of the financial section. This is a summary of your business from its start to the present. Sometimes a bank might have a section like this on a loan application. If you are seeking a loan, you may need to add supplementary documents to the financial section, such as the owner's financial statements, listing assets and liabilities. All of the various calculations you need to assemble the financial section of a business plan are a good reason to look for business planning software, so you can have this on your computer and make sure you get this right. Software programs also let you use some of your projections in the financial section to create pie charts or bar graphs that you can use elsewhere in your business plan to highlight your financials, your sales history, or your projected income over three years. "It's a pretty well-known fact that if you are going to seek equity investment from venture capitalists or angel investors," Pinson says, "they do like visuals."

Dig Deeper: How to Protect Your Margins in a Downturn

Related Links: Making It All Add Up: The Financial Section of a Business Plan One of the major benefits of creating a business plan is that it forces entrepreneurs to confront their company's finances squarely. Persuasive Projections You can avoid some of the most common mistakes by following this list of dos and don'ts. Making Your Financials Add Up No business plan is complete until it contains a set of financial projections that are not only inspiring but also logical and defensible. How many years should my financial projections cover for a new business? Some guidelines on what to include. Recommended Resources: Bplans.com More than 100 free sample business plans, plus articles, tips, and tools for developing your plan. Planning, Startups, Stories: Basic Business Numbers An online video in author Tim Berry's blog, outlining what you really need to know about basic business numbers. Out of Your Mind and Into the Marketplace Linda Pinson's business selling books and software for business planning. Palo Alto Software Business-planning tools and information from the maker of the Business Plan Pro software. U.S. Small Business Administration Government-sponsored website aiding small and midsize businesses. Financial Statement Section of a Business Plan for Start-Ups A guide to writing the financial section of a business plan developed by SCORE of northeastern Massachusetts.

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• Business Plans

Writing a Business Plan—Financial Projections

Spell out your financial forecast in dollars and sense

Creating financial projections for your startup is both an art and a science. Although investors want to see cold, hard numbers, it can be difficult to predict your financial performance three years down the road, especially if you are still raising seed money. Regardless, short- and medium-term financial projections are a required part of your business plan if you want serious attention from investors.

The financial section of your business plan should include a sales forecast , expenses budget , cash flow statement , balance sheet , and a profit and loss statement . Be sure to follow the generally accepted accounting principles (GAAP) set forth by the Financial Accounting Standards Board , a private-sector organization responsible for setting financial accounting and reporting standards in the U.S. If financial reporting is new territory for you, have an accountant review your projections.

Sales Forecast

As a startup business, you do not have past results to review, which can make forecasting sales difficult. It can be done, though, if you have a good understanding of the market you are entering and industry trends as a whole. In fact, sales forecasts based on a solid understanding of industry and market trends will show potential investors that you've done your homework and your forecast is more than just guesswork.

In practical terms, your forecast should be broken down by monthly sales with entries showing which units are being sold, their price points, and how many you expect to sell. When getting into the second year of your business plan and beyond, it's acceptable to reduce the forecast to quarterly sales. In fact, that's the case for most items in your business plan.

Expenses Budget

What you're selling has to cost something, and this budget is where you need to show your expenses. These include the cost to your business of the units being sold in addition to overhead. It's a good idea to break down your expenses by fixed costs and variable costs. For example, certain expenses will be the same or close to the same every month, including rent, insurance, and others. Some costs likely will vary month by month such as advertising or seasonal sales help.

Cash Flow Statement

As with your sales forecast, cash flow statements for a startup require doing some homework since you do not have historical data to use as a reference. This statement, in short, breaks down how much cash is coming into your business on a monthly basis vs. how much is going out. By using your sales forecasts and your expenses budget, you can estimate your cash flow intelligently.

Keep in mind that revenue often will trail sales, depending on the type of business you are operating. For example, if you have contracts with clients, they may not be paying for items they purchase until the month following delivery. Some clients may carry balances 60 or 90 days beyond delivery. You need to account for this lag when calculating exactly when you expect to see your revenue.

Profit and Loss Statement

Your P&L statement should take the information from your sales projections, expenses budget, and cash flow statement to project how much you expect in profits or losses through the three years included in your business plan. You should have a figure for each individual year as well as a figure for the full three-year period.

Balance Sheet

You provide a breakdown of all of your assets and liabilities in the balances sheet. Many of these assets and liabilities are items that go beyond monthly sales and expenses. For example, any property, equipment, or unsold inventory you own is an asset with a value that can be assigned to it. The same goes for outstanding invoices owed to you that have not been paid. Even though you don't have the cash in hand, you can count those invoices as assets. The amount you owe on a business loan or the amount you owe others on invoices you've not paid would count as liabilities. The balance is the difference between the value of everything you own vs. the value of everything you owe.

Break-Even Projection

If you've done a good job projecting your sales and expenses and inputting the numbers into a spreadsheet, you should be able to identify a date when your business breaks even—in other words, the date when you become profitable, with more money coming in than going out. As a startup business, this is not expected to happen overnight, but potential investors want to see that you have a date in mind and that you can support that projection with the numbers you've supplied in the financial section of your business plan.

Additional Tips

When putting together your financial projections, keep some general tips in mind:

• Get comfortable with spreadsheet software if you aren't already. It is the starting point for all financial projections and offers flexibility, allowing you to quickly change assumptions or weigh alternative scenarios. Microsoft Excel is the most common, and chances are you already have it on your computer. You can also buy special software packages to help with financial projections.
• Prepare a five-year projection . Don’t include this one in the business plan, since the further into the future you project, the harder it is to predict. However, have the projection available in case an investor asks for it.
• Offer two scenarios only . Investors will want to see a best-case and worst-case scenario, but don’t inundate your business plan with myriad medium-case scenarios. They likely will just cause confusion.
• Be reasonable and clear . As mentioned before, financial forecasting is as much art as science. You’ll have to assume certain things, such as your revenue growth, how your raw material and administrative costs will grow, and how effective you’ll be at collecting on accounts receivable. It’s best to be realistic in your projections as you try to recruit investors. If your industry is going through a contraction period and you’re projecting revenue growth of 20 percent a month, expect investors to see red flags.

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7 Financial Forecasting Methods to Predict Business Performance

• 21 Jun 2022

Much of accounting involves evaluating past performance. Financial results demonstrate business success to both shareholders and the public. Planning and preparing for the future, however, is just as important.

Shareholders must be reassured that a business has been, and will continue to be, successful. This requires financial forecasting.

Here's an overview of how to use pro forma statements to conduct financial forecasting, along with seven methods you can leverage to predict a business's future performance.

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What Is Financial Forecasting?

Financial forecasting is predicting a company’s financial future by examining historical performance data, such as revenue, cash flow, expenses, or sales. This involves guesswork and assumptions, as many unforeseen factors can influence business performance.

Financial forecasting is important because it informs business decision-making regarding hiring, budgeting, predicting revenue, and strategic planning . It also helps you maintain a forward-focused mindset.

Each financial forecast plays a major role in determining how much attention is given to individual expense items. For example, if you forecast high-level trends for general planning purposes, you can rely more on broad assumptions than specific details. However, if your forecast is concerned with a business’s future, such as a pending merger or acquisition, it's important to be thorough and detailed.

Forecasting with Pro Forma Statements

A common type of forecasting in financial accounting involves using pro forma statements . Pro forma statements focus on a business's future reports, which are highly dependent on assumptions made during preparation⁠, such as expected market conditions.

Because the term "pro forma" refers to projections or forecasts, pro forma statements apply to any financial document, including:

• Income statements
• Balance sheets
• Cash flow statements

These statements serve both internal and external purposes. Internally, you can use them for strategic planning. Identifying future revenues and expenses can greatly impact business decisions related to hiring and budgeting. Pro forma statements can also inform endeavors by creating multiple statements and interchanging variables to conduct side-by-side comparisons of potential outcomes.

Externally, pro forma statements can demonstrate the risk of investing in a business. While this is an effective form of forecasting, investors should know that pro forma statements don't typically comply with generally accepted accounting principles (GAAP) . This is because pro forma statements don't include one-time expenses—such as equipment purchases or company relocations—which allows for greater accuracy because those expenses don't reflect a company’s ongoing operations.

7 Financial Forecasting Methods

Pro forma statements are incredibly valuable when forecasting revenue, expenses, and sales. These findings are often further supported by one of seven financial forecasting methods that determine future income and growth rates.

There are two primary categories of forecasting: quantitative and qualitative.

Quantitative Methods

When producing accurate forecasts, business leaders typically turn to quantitative forecasts , or assumptions about the future based on historical data.

1. Percent of Sales

Internal pro forma statements are often created using percent of sales forecasting . This method calculates future metrics of financial line items as a percentage of sales. For example, the cost of goods sold is likely to increase proportionally with sales; therefore, it’s logical to apply the same growth rate estimate to each.

To forecast the percent of sales, examine the percentage of each account’s historical profits related to sales. To calculate this, divide each account by its sales, assuming the numbers will remain steady. For example, if the cost of goods sold has historically been 30 percent of sales, assume that trend will continue.

2. Straight Line

The straight-line method assumes a company's historical growth rate will remain constant. Forecasting future revenue involves multiplying a company’s previous year's revenue by its growth rate. For example, if the previous year's growth rate was 12 percent, straight-line forecasting assumes it'll continue to grow by 12 percent next year.

Although straight-line forecasting is an excellent starting point, it doesn't account for market fluctuations or supply chain issues.

3. Moving Average

Moving average involves taking the average—or weighted average—of previous periods⁠ to forecast the future. This method involves more closely examining a business’s high or low demands, so it’s often beneficial for short-term forecasting. For example, you can use it to forecast next month’s sales by averaging the previous quarter.

Moving average forecasting can help estimate several metrics. While it’s most commonly applied to future stock prices, it’s also used to estimate future revenue.

To calculate a moving average, use the following formula:

A1 + A2 + A3 … / N

Formula breakdown:

A = Average for a period

N = Total number of periods

Using weighted averages to emphasize recent periods can increase the accuracy of moving average forecasts.

4. Simple Linear Regression

Simple linear regression forecasts metrics based on a relationship between two variables⁠: dependent and independent. The dependent variable represents the forecasted amount, while the independent variable is the factor that influences the dependent variable.

The equation for simple linear regression is:

Y ⁠ = Dependent variable⁠ (the forecasted number)

B = Regression line's slope

X = Independent variable

A = Y-intercept

5. Multiple Linear Regression

If two or more variables directly impact a company's performance, business leaders might turn to multiple linear regression . This allows for a more accurate forecast, as it accounts for several variables that ultimately influence performance.

To forecast using multiple linear regression, a linear relationship must exist between the dependent and independent variables. Additionally, the independent variables can’t be so closely correlated that it’s impossible to tell which impacts the dependent variable.

Qualitative Methods

When it comes to forecasting, numbers don't always tell the whole story. There are additional factors that influence performance and can't be quantified. Qualitative forecasting relies on experts’ knowledge and experience to predict performance rather than historical numerical data.

These forecasting methods are often called into question, as they're more subjective than quantitative methods. Yet, they can provide valuable insight into forecasts and account for factors that can’t be predicted using historical data.

6. Delphi Method

The Delphi method of forecasting involves consulting experts who analyze market conditions to predict a company's performance.

A facilitator reaches out to those experts with questionnaires, requesting forecasts of business performance based on their experience and knowledge. The facilitator then compiles their analyses and sends them to other experts for comments. The goal is to continue circulating them until a consensus is reached.

7. Market Research

Market research is essential for organizational planning. It helps business leaders obtain a holistic market view based on competition, fluctuating conditions, and consumer patterns. It’s also critical for startups when historical data isn’t available. New businesses can benefit from financial forecasting because it’s essential for recruiting investors and budgeting during the first few months of operation.

When conducting market research, begin with a hypothesis and determine what methods are needed. Sending out consumer surveys is an excellent way to better understand consumer behavior when you don’t have numerical data to inform decisions.

Improve Your Forecasting Skills

Financial forecasting is never a guarantee, but it’s critical for decision-making. Regardless of your business’s industry or stage, it’s important to maintain a forward-thinking mindset—learning from past patterns is an excellent way to plan for the future.

If you’re interested in further exploring financial forecasting and its role in business, consider taking an online course, such as Financial Accounting , to discover how to use it alongside other financial tools to shape your business.

Do you want to take your financial accounting skills to the next level? Consider enrolling in Financial Accounting —one of three courses comprising our Credential of Readiness (CORe) program —to learn how to use financial principles to inform business decisions. Not sure which course is right for you? Download our free flowchart .

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How to Prepare a Financial Plan for Startup Business (w/ example)

Free Financial Statements Template

Ajay Jagtap

• December 7, 2023

13 Min Read

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis , and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

• Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
• Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
• Preparing a financial plan is easier and faster when you use a financial planning tool.
• Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup or small business, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

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Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

• Cost of goods or cost of sale
• Gross margin
• Operating expenses
• Revenue streams
• EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

• Indicates the capital need of the business
• It helps to identify the allocation of resources
• It calculates the requirement of seed money you put up, and
• How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

• Fixed costs: fixed expenses that stay the same no matter what.
• Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup or small business.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your small business and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan for your business plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

• Market analysis
• Sales forecast
• Pricing strategy
• Growth assumptions
• Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

• Fixed costs
• Variable costs
• Employee costs or payroll expenses
• Operational expenses
• Marketing and advertising expenses
• Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan for your small business, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

• The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
• The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
• The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
• Sales are cash basis – nonaccrual accounting
• Moderate ramp- up in staff over the 5 years forecast
• Barista salary in the forecast is $36,000 in 2023.
• In general, most cafes have an 85% gross profit margin
• In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Cash-Flow Statement

Projected Profit & Loss Statement

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

• Net profit margin
• Current ratio
• Quick ratio
• Working capital
• Return on equity
• Debt-to-equity ratio
• Return on assets
• Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or small businesses often consider analyzing these three scenarios:

• base-case (expected) scenario
• Worst-case scenario
• best case scenario.

About the Author

Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more

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Profit and Loss (with LivePlan)

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The Standard Profit and Loss (Income Statement)

• It starts with Sales, which is why business people who like buzzwords will sometimes refer to sales as “the top line.”
• It then shows Direct Costs (or COGS, or Unit Costs).
• Then Gross Margin, Sales less Direct Costs.
• Then operating expenses.
• Gross margin less operating expenses in gross profit, also called EBITDA for “earnings before interest, taxes, depreciation and amortization.” I use EBITDA instead of the more traditional EBIT (earnings before interest and taxes). I explained that choice and depreciation and amortization as well in Financial Projection Tips and Traps , in the previous section.
• Then it shows depreciation, interest expenses, and then taxes…
• Then, at the very bottom, Net Profit; this is why so many people refer to net profit as “the bottom line,” which has also come to mean the conclusion, or main point, in a discussion.

The following illustration shows a simple Projected Profit and Loss that LivePlan does for the bicycle store I’ve been using as an example. At this point you’ve already done all the inputs for the formal projection. LivePlan gathers the information it already has, and puts it into a formal projection matching normal standards.

This example doesn’t divide operating expenses into categories. The format and math start with sales at the top. You’ll find that same basic layout in everything from small business accounting statements to the financial disclosures of large enterprises whose stock is traded on public markets. Companies vary widely on how much detail they include. And projections are always different from statements, because of Planning not accounting . But still this is standard.

LivePlan also puts the formal Projected Profit and Loss as an annual summary into your plan, as shown in the illustration below; and a monthly version into the appendices.

LivePlan will also automatically draw charts to insert in a plan along with the Projected Profit and Loss. The following illustration shows a LivePlan chart of Projected Net Profits.

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Home > Financial Projections > Income Statement Forecast

Income Statement Forecast

The income statement forecast, sometimes called the profit and loss forecast, is one of the three main statements for business plan financials. The income statement forecast shows a business’s financial performance over an accounting period. It is important to realize that the accounting period can be any length but is usually a month or a year.

Income Statement Forecast Format

A typical and useful income statement format for management is shown in the example below. The level of detail for each item will depend on your business, and who is using the information. For example, revenue could be broken down by product category, or operating expenses could be broken down into multiple lines such as rent, wages, light & heat etc.

Example Format

Understanding the income statement.

The projected income statement is important for many reasons:

• Firstly management should use the income statement forecast to identify whether the business made a profit for the period. The important figure is the bottom line net income. It should also use it to establish % relationships between expenses and revenue, to spot trends in operating profit ratios, and for comparison of actual results against a projection.
• Secondly they are used by suppliers to decide on whether credit is given as they identify the profitability of your business.
• Bank Managers utilise the income statement forecast as they base their lending ratios on certain aspects of it, for example interest cover = earinings before interest and tax / interest paid is used to determine whether the profit the business is making is sufficient to cover the interest payments on their loan.
• Finally the income statement forecast is used by investors to decide whether to invest or not and at what price. For example they will look at the income before tax to establish their likely return on investment.

Any number of people could be using your income statement forecasts to make decisions about your business. It is important that you have an understanding of what information the income statement is providing and what that information is telling you.

Our financial projections template includes the projected income statement template.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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Free Financial Projection and Forecasting Templates

By Andy Marker | January 3, 2024

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We’ve collected the top free financial projection and forecasting templates. These templates enable business owners, CFOs, accountants, and financial analysts to plan future growth, manage cash flow, attract investors, and make informed decisions.  On this page, you'll find many helpful, free, customizable financial projection and forecasting templates, including a  1 2-month financial projection template , a  startup financial projection template , a  3-year financial projection template , and a  small business financial forecast template , among others. You’ll also find details on the  elements in a financial projection template ,  types of financial projection and forecasting templates , and  related financial templates .

Simple Financial Projection Template

Download a Sample Simple Financial Projection Template for 

Excel | Google Sheets  

Download a Blank Simple Financial Projection Template for 

Excel | Google Sheets    

Small business owners and new entrepreneurs are the ideal users for this simple financial projection template. Just input your expected revenues and expenses. This template stands out due to its ease of use and focus on basic, straightforward financial planning, making it perfect for small-scale or early-stage businesses. Available with or without sample text, this tool offers clear financial oversight, better budget management, and informed decision-making regarding future business growth. 

Looking for help with your business plan? Check out these  free financial templates for a business plan to streamline the process of organizing your business's financial information and presenting it effectively to stakeholders.

Financial Forecast Template

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This template is perfect for businesses that require a detailed and all-encompassing forecast. Users can input various financial data, such as projected revenues, costs, and market trends, to generate a complete financial outlook. Available with or without example text, this template gives you a deeper understanding of your business's financial trajectory, aiding in strategic decision-making and long-term financial stability. 

These  free cash-flow forecast templates help you predict your business’s future cash inflows and outflows, allowing you to manage liquidity and optimize financial planning.

12-Month Financial Projection Template

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Use this 12-month financial projection template for better cash-flow management, more accurate budgeting, and enhanced readiness for short-term financial challenges and opportunities. Input estimated monthly revenues and expenses, tracking financial performance over the course of a year. Available with or without sample text, this template is ideal for business owners who need to focus on short-term financial planning. This tool allows you to respond quickly to market shifts and plan effectively for the business's crucial first year. 

Download  free sales forecasting templates to help your business predict future sales, enabling better inventory management, resource planning, and decision-making.

Startup Financial Projection Template

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This dynamic startup financial projection template is ideal for startup founders and entrepreneurs, as it's designed specifically for the unique needs of startups. Available with or without example text, this template focuses on clearly outlining a startup's initial financial trajectory, an essential component for attracting investors. Users can input projected revenues, startup costs, and funding sources to create a comprehensive financial forecast.

3-Year Financial Projection Template

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This three-year financial projection template is particularly useful for business strategists and financial planners who are looking for a medium-term financial planning tool. Input data such as projected revenues, expenses, and growth rates for the next three years. Available with or without sample text, this template lets you anticipate financial challenges and opportunities in the medium term, aiding in strategic decision-making and ensuring sustained business growth.

5-Year Financial Forecasting Template

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CFOs and long-term business planners can use this five-year financial forecasting template to get a clear, long-range financial vision. Available with or without example text, this template allows you to plan strategically and invest wisely, preparing your business for future market developments and opportunities. This unique tool offers an extensive outlook for your business’s financial strategy. Simply input detailed financial data spanning five years, including revenue projections, investment plans, and expected market growth. Visually engaging bar charts of key metrics help turn data into engaging narratives.

Small Business Financial Forecast Template

Download a Sample Small Business Financial Forecast Template for 

Download a Blank Small Business Financial Forecast Template for 

Excel | Google Sheets 

The small business financial forecast template is tailored specifically for the scale and specific requirements of small enterprises. Business owners and financial managers can simply input data such as projected sales or expenses. Available with or without sample text, this tool offers the ability to do the following: envision straightforward financial planning; anticipate future financial needs and challenges; make informed decisions; and steer the business toward steady growth.

Elements in a Financial Projection Template

The elements in a financial projection template include future sales, costs, profits, and cash flow. This template illustrates expected receivables, payables, and break-even dates. This tool helps you plan for your business's financial future and growth.   

Here are the standard elements in a financial projection template:   

• Revenue Projection: This estimates future income from various sources over a specific period.
• Expense Forecast: This predicts future costs, including both fixed and variable expenses.
• Profit and Loss Forecast:  This projects the profit or loss by subtracting projected expenses from projected revenues.
• Cash-Flow Projection: This assesses the inflows and outflows of cash, indicating liquidity over time.
• Balance Sheet Projection: This predicts the future financial position, showing assets, liabilities, and equity.
• Break-Even Analysis: This calculates the point at which total revenues equal total costs.
• Capital Expenditure Forecast: This estimates future spending on fixed assets such as equipment or property.
• Debt Repayment Plan: This outlines the schedule for paying back any borrowed funds.
• Sales Forecast:  This predicts future sales volume, often broken down by product or service.
• Gross Margin Analysis:  This looks at the difference between revenue and cost of goods sold.

Types of Financial Projection and Forecasting Templates

There are many types of financial projection and forecasting templates: basic templates for small businesses; detailed ones for big companies; special ones for startup businesses; and others. There are also sales forecasts, cash-flow estimates, and profit and loss projections. 

In addition, financial projection and forecasting templates include long-term planning templates, break-even analyses, budget forecasts, and templates made for specific industries such as retail or manufacturing. 

Each template serves different financial planning needs. Determine which one best suits your requirements based on the scale of your business, the complexity of its financial structure, and the specific department that you want to analyze.

Here's a list of the top types of financial projection and forecasting templates:  

• Basic Financial Projection Template: Ideal for small businesses or startups, this template provides a straightforward approach to forecasting revenue, expenses, and cash flow.
• Detailed Financial Projection Template: Best for larger businesses or those with complex financial structures, this template offers in-depth projections, including balance sheets, income statements, and cash-flow statements.
• Startup Financial Projection Template: Tailored for startups, this template focuses on funding requirements and early-stage revenue forecasts, both crucial for attracting investors and planning initial operations. 
• Sales Forecasting Template:  Used by sales and marketing teams to predict future sales, this template helps you set targets and plan marketing strategies. 
• Cash-Flow Forecast Template: Essential for financial managers who need to monitor the liquidity of the business, this template projects cash inflows and outflows over a period. 
• Profit and Loss Forecast Template (P&L):  Useful for business owners and financial officers who need to anticipate profit margins, this template enables you to forecast revenues and expenses.  
• Three-Year / Five-Year Financial Projection Template: Suitable for long-term business planning, these templates provide a broader view of your company’s financial future, improving your development strategy and investor presentations. 
• Break-Even Analysis Template:  Used by business strategists and financial analysts, this template helps you determine when your business will become profitable. 
• Budget Forecasting Template:  Designed for budget managers, this template uses historical financial data to help you plan your future spending. 
• Sector-Specific Financial Projection Template:  Designed for specific industries (such as retail or manufacturing), these templates take into account industry-specific factors and benchmarks.

Related Financial Templates

Check out this list of free financial templates related to financial projections and forecasting. You'll find templates for budgeting, tracking profits and losses, planning your finances, and more. These tools help keep your company’s money matters organized and clear.

Free Project Budget Templates

Use one of these  project budget templates to maintain control over project finances, ensuring costs stay aligned with the allocated budget and improving overall financial management.

Free Monthly Budget Templates

Use one of these  monthly budget templates to effectively track and manage your business’s income and expenses, helping you plan financially and save money.

Free Expense Report Templates

Use one of these  expense report templates to systematically track and document all business-related expenditures, ensuring accurate reimbursement and efficient financial record-keeping.

Free Balance Sheet Templates

Use one of these  balance sheet templates to summarize your company's financial position at a given time.

Free Cash-Flow Forecast Templates

Use one of these  cash-flow forecast templates to predict future cash inflows and outflows, helping you manage liquidity and make informed financial decisions.

Free Cash-Flow Statement Templates

Use one of these  cash-flow statement templates to track the movement of cash in and out of your business, so you can assess your company’s level of liquidity and financial stability.

Free Discounted Cash-Flow (DCF) Templates

Use one of these  discounted cash-flow (DCF) templates to evaluate the profitability of investments or projects by calculating their present value based on future cash flows.

Free Financial Dashboard Templates

Use one of these  financial dashboard templates to get an at-a-glance view of key financial metrics, so you can make decisions quickly and manage finances effectively.

Related Customer Stories

Free financial planning templates.

Use one of these  financial planning templates to strategically organize and forecast future finances, helping you set realistic financial goals and ensure long-term business growth.

Free Profit and Loss (P&L) Templates

Use one of these  profit and loss (P&L) templates to systematically track income and expenses, giving you a clear picture of your company's profitability over a specific period.

Free Billing and Invoice Templates

Use one of these  billing and invoice templates to streamline the invoicing process and ensure that you bill clients accurately and professionally for services or products.

Plan and Manage Your Company’s Financial Future with Financial Projection and Forecasting Templates from Smartsheet

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Business Plan Income Statement: Everything You Need to Know

Business plan income statement is an important financial document, which shows a company's profitability in a given period of time. 3 min read

Business plan income statement is an important financial document, which shows a company's profitability in a given period of time.

Understanding an Income Statement

An income statement or a profit and loss statement helps to understand a company's sources of revenue and various items of expenses. In other words, it tells you where the money is coming from and where it's going. A glance at the income statement can tell anyone whether the business is profitable. Basically, an income statement lists out various items and amounts of revenue and expenses, with the net profit figure at the bottom.

You might have heard people talking about a company's bottom line. It's the last line in an income statement, which shows you the amount of net profit of a company in a given period of time after meeting all expenses.

This is the “profit” referred to in a profit and loss statement or the letter “P” of “P & L” account. The “loss” or “L” is the figure that appears if the total amount of expenses exceeds the total amount of revenue.

An income statement is probably the most common and standard financial statement. Another similar statement called the projected profit and loss statement is a standard financial projection tool used in business planning.

Breakdown of a Business Plan Income Statement

It's essential to include a projected income statement in your business plan. Whether you are planning for the internal purpose of the company or preparing a financial document to present before your investors, it's important to know whether you expect the business to be profitable over a specific period of time.

You should start a business plan with an executive summary, followed by other standard components. It must include a financial plan section, complete with a projected balance sheet, cash flow, and income statement. In business planning, the word “projected” is often replaced with the word “pro-forma,” but it means the same thing.

An income statement typically includes the following components:

• Direct cost of sales.
• Production expenses.
• Gross margin.
• Operating expenses.
• Marketing expenses.
• Depreciation .
• Utility expenses.
• Insurance premiums.
• Payroll taxes .
• Profit before interest and taxes.
• Interest expenses.
• Net profit.

Sales or Revenue

The top line in your income statement represents revenue from sales. It's the net sales amount remaining after deducting goods returns and sales discounts. All the direct expenses associated with sales will be deducted from this figure.

Direct Costs of Sales

The cost of goods sold includes all the direct costs incurred in making and delivering the products or services that contributed to sales. It does not include office rent, salaries, and other expenses that are not directly connected with sales.

Gross Margin or Gross Profit

Subtracting the direct cost of goods sold from the number of net sales gives you gross margin. This is the profit before considering operating expenses and taxes.

Operating Expenses

Except for the cost of goods sold, all other expenses necessary to run the business are covered under this head. Rent, utilities, payroll, and marketing costs are examples of operating expenses.

Operating expenses include marketing and administrative expenses like:

• Sales salaries.
• Collateral and promotions.
• Advertising.
• Travel, meetings, client meals, etc.
• Office salaries.

Operating Income

Operating income or earnings before interest, taxes, depreciation, and amortization (EBITDA) is the most reliable indicator of a company's profitability.

If the company is making any interest payments on a loan, it should be included under this head.

Total Expenses

This is the sum total of all expenses, excluding taxes and interest.

Depreciation and Amortization

These are the expenses incurred on tangible and intangible assets. Since the assets do not lose their utility in a single accounting period, the total cost of assets is spread over their total lifetime. The cost applicable for a single accounting period is deducted from revenue as depreciation.

Net Income Before Taxes

This figure represents total earnings of the business before paying income taxes.

This item represents the amount of income tax paid or owed to the federal, state, and local governments. Some companies allocate an estimated amount of taxes they expect to pay in the future.

Net Income or Net Profit

This is the net profit of the business remaining after paying income taxes. This is the bottom line figure that tells at a glance whether a company is making profits or incurring losses.

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Start » startup, business plan financials: 3 statements to include.

The finance section of your business plan is essential to securing investors and determining whether your idea is even viable. Here's what to include.

If your business plan is the blueprint of how to run your company, the financials section is the key to making it happen. The finance section of your business plan is essential to determining whether your idea is even viable in the long term. It’s also necessary to convince investors of this viability and subsequently secure the type and amount of funding you need. Here’s what to include in your business plan financials.

[Read: How to Write a One-Page Business Plan ]

What are business plan financials?

Business plan financials is the section of your business plan that outlines your past, current and projected financial state. This section includes all the numbers and hard data you’ll need to plan for your business’s future, and to make your case to potential investors. You will need to include supporting financial documents and any funding requests in this part of your business plan.

Business plan financials are vital because they allow you to budget for existing or future expenses, as well as forecast your business’s future finances. A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Sections to include in your business plan financials

Here are the three statements to include in the finance section of your business plan:

Profit and loss statement

A profit and loss statement , also known as an income statement, identifies your business’s revenue (profit) and expenses (loss). This document describes your company’s overall financial health in a given time period. While profit and loss statements are typically prepared quarterly, you will need to do so at least annually before filing your business tax return with the IRS.

Common items to include on a profit and loss statement :

• Revenue: total sales and refunds, including any money gained from selling property or equipment.
• Expenditures: total expenses.
• Cost of goods sold (COGS): the cost of making products, including materials and time.
• Gross margin: revenue minus COGS.
• Operational expenditures (OPEX): the cost of running your business, including paying employees, rent, equipment and travel expenses.
• Depreciation: any loss of value over time, such as with equipment.
• Earnings before tax (EBT): revenue minus COGS, OPEX, interest, loan payments and depreciation.
• Profit: revenue minus all of your expenses.

Businesses that have not yet started should provide projected income statements in their financials section. Currently operational businesses should include past and present income statements, in addition to any future projections.

[Read: Top Small Business Planning Strategies ]

A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Balance sheet

A balance sheet provides a snapshot of your company’s finances, allowing you to keep track of earnings and expenses. It includes what your business owns (assets) versus what it owes (liabilities), as well as how much your business is currently worth (equity).

On the assets side of your balance sheet, you will have three subsections: current assets, fixed assets and other assets. Current assets include cash or its equivalent value, while fixed assets refer to long-term investments like equipment or buildings. Any assets that do not fall within these categories, such as patents and copyrights, can be classified as other assets.

On the liabilities side of your balance sheet, include a total of what your business owes. These can be broken down into two parts: current liabilities (amounts to be paid within a year) and long-term liabilities (amounts due for longer than a year, including mortgages and employee benefits).

Once you’ve calculated your assets and liabilities, you can determine your business’s net worth, also known as equity. This can be calculated by subtracting what you owe from what you own, or assets minus liabilities.

Cash flow statement

A cash flow statement shows the exact amount of money coming into your business (inflow) and going out of it (outflow). Each cost incurred or amount earned should be documented on its own line, and categorized into one of the following three categories: operating activities, investment activities and financing activities. These three categories can all have inflow and outflow activities.

Operating activities involve any ongoing expenses necessary for day-to-day operations; these are likely to make up the majority of your cash flow statement. Investment activities, on the other hand, cover any long-term payments that are needed to start and run your business. Finally, financing activities include the money you’ve used to fund your business venture, including transactions with creditors or funders.

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Forecasting Profit & Loss When Writing Your First Business Plan

Calculating profit and loss is the ultimate objective when writing a business plan. Doing so accurately is a vital component for managing cash flow and evaluating future company performance.

For start-ups in particular, drawing out your first business plan may be trickier than expected. It’s unlikely you’ll know every financial detail at this stage – and some unexpected expense always seems to pop up out of nowhere – so working out profit margins can be as much guesswork as it is anything else.

To help with this, we’ve put together some tips for writing out your first business plan, allowing you to visualise which areas are performing well and those that need tightening up.

Think Short-Term

It’s easy to get a bit carried away when thinking of the profit you’ll make if everything goes to plan, perhaps in 3-5 years’ time. However, the year one forecast is the most crucial to get right, with quarterly estimates also useful. Your future forecasting will also be more accurate with this solid base to work from.

Expenses First

It’s recommended to put down expenses before revenue, mainly because they’re easier to predict. Obtain quotes, research market prices and outline all your costs, no matter how big or small. Here are some typical expenses start-up businesses will incur, although your company will probably have ad-hoc payments to deal with as well:

• Office rent and utility bills
• Purchasing stock
• Staff payroll
• Legal and insurance fees
• Advertising and marketing
• Website purchase and hosting

Stay Prudent

An ideal business plan should be sensible, pragmatic, and most of all, financially prudent. Overestimate costs slightly, anticipating unexpected payments as well, whilst remaining cautious with income. Also make room for inflation, perhaps with the fall in the pound after Brexit, and suppliers raising their prices in the future.

Spreadsheets

Use spreadsheets to document your finances. Divide figures into monthly and yearly sections, inputting columns of expected revenue, expenses and profit. There are various spreadsheet templates to be found online, whilst automatic accountancy software can make things easier as well.

Wider Projections

Three basic documents are generally used to make up overall financial projections – these are the income statement, cash flow statement and balance sheet. By having this information at your disposal, you can forecast the break-even point and make investments knowing it won’t create unmanageable debt.

Market Research

The amount of income you’ll generate at the start-up stage may be unclear. Conduct thorough market research into how much the product or service can be sold for, analysing rival company prices and conducting focus groups/one-on-one interviews with friends or members of the public for greater clarity.

Seek Professional Guidance

If you’re looking to obtain finance or an investment, the business plan must be spot on. This is where a specialised accountant is worth their weight in gold, minimising mistakes and allowing you to grow the business with less hassle involved. They can also help when dealing with the HMRC, pinpointing which areas can be tailored to reduce excessive tax payments.

Would you like to know more? Check out What is Business Forecasting and How Do You Do It?

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How to Create a Cash Flow Forecast

10 min. read

Updated May 3, 2024

A good cash flow forecast might be the most important single piece of a business plan . All the strategy, tactics, and ongoing business activities mean nothing if there isn’t enough money to pay the bills.

That’s what a cash flow forecast is about—predicting your money needs in advance.

By cash, we mean money you can spend. Cash includes your checking account, savings, and liquid securities like money market funds. It is not just coins and bills.

Profits aren’t the same as cash

Profitable companies can run out of cash if they don’t know their numbers and manage their cash as well as their profits.

For example, your business can spend money that does not show up as an expense on your  profit and loss statement . Normal expenses reduce your profitability. But, certain spending, such as spending on inventory, debt repayment, and purchasing assets (new equipment, for example) reduces your cash but does not reduce your profitability. Because of this, your business can spend money and still be profitable.

On the sales side of things, your business can make a sale to a customer and send out an invoice, but not get paid right away. That sale adds to the revenue in your profit and loss statement but doesn’t show up in your bank account until the customer pays you.

That’s why a cash flow forecast is so important. It helps you predict how much money you’ll have in the bank at the end of every month, regardless of how profitable your business is.

Learn more about the differences between cash and profits .

• Two ways to create a cash flow forecast

There are several legitimate ways to do a cash flow forecast. The first method is called the “Direct Method” and the second is called the “Indirect Method.” Both methods are accurate and valid – you can choose the method that works best for you and is easiest for you to understand.

Unfortunately, experts can be annoying. Sometimes it seems like as soon as you use one method, somebody who is supposed to know business financials tells you you’ve done it wrong. Often that means that the expert doesn’t know enough to realize there is more than one way to do it.

• The direct method for forecasting cash flow

The direct method for forecasting cash flow is less popular than the indirect method but it can be much easier to use.

The reason it’s less popular is that it can’t be easily created using standard reports from your business’s accounting software. But, if you’re creating a forecast – looking forward into the future – you aren’t relying on reports from your accounting system so it may be a better choice for you.

That downside of choosing the direct method is that some bankers, accountants, and investors may prefer to see the indirect method of a cash flow forecast. Don’t worry, though, the direct method is just as accurate. After we explain the direct method, we’ll explain the indirect method as well.

The direct method of forecasting cash flow relies on this simple overall formula:

Cash Flow = Cash Received – Cash Spent

And here’s what that cash flow forecast actually looks like:

Let’s start by estimating your cash received and then we’ll move on to the other sections of the cash flow forecast.

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Forecasting cash received

You receive cash from three primary sources: 

1. Sales of your products and services

In your cash flow forecast, this is the “Cash from Operations” section. When you sell your products and services, some customers will pay you immediately in cash – that’s the “cash sales” row in your spreadsheet. You get that money right away and can deposit it in your bank account. You might also send invoices to customers and then have to collect payment. When you do that, you keep track of the money you are owed in  Accounts Receivable . When customers pay those invoices, that cash shows up on your cash flow forecast in the “Cash from Accounts Receivable” row. The easiest way to think about forecasting this row is to think about what invoices will be paid by your customers and when.

2. New loans and investments in your business

You can also receive cash by getting a new loan from a bank or an investment. When you receive this kind of cash, you’ll track it in the rows for loans and investments. It’s worth keeping these two different types of cash in-flows separate from each other, mostly because loans need to be repaid while investments do not need to be repaid.

3. Sales of assets

Assets are things that your business owns, such as vehicles, equipment, or property. When you sell an asset, you’ll usually receive cash from that sale and you track that cash in the “Sales of Assets” section of your cash flow forecast. For example, if you sell a truck that your company no longer needs, the proceeds from that sale would show up in your cash flow statement.

Forecasting cash spent

Similar to how you forecast the cash that you plan on receiving, you’ll forecast the cash that you plan on spending in a few categories:

1. Cash spending and paying your bills

You’ll want to forecast two types of cash spending related to your business’s operations: Cash Spending and Payment of Accounts Payable. Cash spending is money that you spend when you use petty cash or pay a bill immediately. But, there are also bills that you get and then pay later. You track these bills in  Accounts Payable . When you pay bills that you’ve been tracking in accounts payable, that cash payment will show up in your cash flow forecast as “payment of accounts payable”. When you’re forecasting this row, think about what bills you’ll pay and when you’ll pay them. In this section of your cash flow forecast, you exclude a few things: loan payments, asset purchases, dividends, and sales taxes. These will show up in the following sections.

2. Loan Payments

When you make loan repayments, you’ll forecast the repayment of the principal in your cash flow forecast. The interest on the loan is tracked in the “non-operating expense” that we’ll discuss below.

3. Purchasing Assets

Similar to how you track sales of assets, you’ll forecast asset purchases in your cash flow forecast. Asset purchases are purchases of long-lasting, tangible things. Typically, vehicles, equipment, buildings, and other things that you could potentially re-sell in the future. Inventory is an asset that your business might purchase if you keep inventory on hand.

4. Other non-operating expenses and sales tax

Your business may have other expenses that are considered “non-operating” expenses. These are expenses that are not associated with running your business, such as investments that your business may make and interest that you pay on loans. In addition, you’ll forecast when you make tax payments and include those cash outflows in this section. 

Forecasting cash flow and cash balance

In the direct cash flow forecasting method, calculating cash flow is simple. Just subtract the amount of cash you plan on spending in a month from the amount of cash you plan on receiving. This will be your “net cash flow”. If the number is positive, you receive more cash than you spend. If the number is negative, you will be spending more cash than you receive. You can predict your cash balance by adding your net cash flow to your cash balance.

• The indirect method

The indirect method of cash flow forecasting is as valid as the direct and reaches the same results.

Where the direct method looks at sources and uses of cash, the indirect method starts with net income and adds back items like depreciation that affect your profitability but don’t affect the cash balance.

The indirect method is more popular for creating cash flow statements about the past because you can easily get the data for the report from your accounting system.

You create the indirect cash flow statement by getting your Net Income (your profits) and then adding back in things that impact profit, but not cash. You also remove things like sales that have been booked, but not paid for yet.

Here’s what an indirect cash flow statement looks like:

There are five primary categories of adjustments that you’ll make to your profit number to figure out your actual cash flow:

1. Adjust for the change in accounts receivable

Not all of your sales arrive as cash immediately. In the indirect cash flow forecast, you need to adjust your net profit to account for the fact that some of your sales didn’t end up as cash in the bank but instead increased your accounts receivable.

2. Adjust for the change in accounts payable

Very similar to how you make an adjustment for accounts receivable, you’ll need to account for expenses that you may have booked on your income statement but not actually paid yet. You’ll need to add these expenses back because you still have that cash on hand and haven’t paid the bills yet.

3. Taxes & Depreciation

On your income statement, taxes and depreciation work to reduce your profitability. On the cash flow statement, you’ll need to add back in depreciation because that number doesn’t actually impact your cash. Taxes may have been calculated as an expense, but you may still have that money in your bank account. If that’s the case, you’ll need to add that back in as well to get an accurate forecast of your cash flow.

4. Loans and Investments

Similar to the direct method of cash flow, you’ll want to add in any additional cash you’ve received in the form of loans and investments. Make sure to also subtract any loan payments in this row.

5. Assets Purchased and Sold

If you bought or sold assets, you’ll need to add that into your cash flow calculations. This is, again, similar to the direct method of forecasting cash flow.

• Cash flow is about management

Remember: You should be able to project cash flow using competently educated guesses based on an understanding of the flow in your business of sales, sales on credit, receivables, inventory, and payables.

These are useful projections. But, real management is minding the projections every month with plan versus actual analysis so you can catch changes in time to manage them. 

A good cash flow forecast will show you exactly when cash might run low in the future so you can prepare. It’s always better to plan ahead so you can set up a line of credit or secure additional investment so your business can survive periods of negative cash flow.

• Cash Flow Forecasting Tools

Forecasting cash flow is unfortunately not a simple task to accomplish on your own. You can do it with spreadsheets, but the process can be complicated and it’s easy to make mistakes. 

Fortunately, there are affordable options that can make the process much easier – no spreadsheets or in-depth accounting knowledge required.

If you’re interested in checking out a cash flow forecasting tool, take a look at LivePlan for cash flow forecasting. It’s affordable and makes cash flow forecasting simple.

One of the key views in LivePlan is the cash flow assumptions view, as shown below, which highlights key cash flow assumptions in an interactive view that you can use to test the results of key assumptions:

With simple tools like this, you can explore different scenarios quickly to see how they will impact your future cash.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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How KQ flew into profitability after 11-year struggle

Kenya Airways on Monday reported Sh513 million in net earnings in the first half of the year, the first in 11 years up from a loss of Sh168.2 million same period last year. 

The national carrier which trades internationally as KQ   attributed the growth to its strategic turnaround plan, Project Kifaru, which focuses on customer obsession, operational excellence, financial discipline, innovation, and sustainability.

The results, which have become a national debate after a streak of heavy losses running in billions of shillings for over a decade did not come easily, according to the airlines management. 

"Our financial results are a clear indication that our strategic initiatives are delivering the desired outcomes,''KQ  boss Allan Kilavuka said. 

"We have focused on strengthening our core operations, enhancing our customer service, and exploring new avenues for growth."

In an exclusive interview with the Star early this year, Kilavuka forecast the airline to post a net profit by end of 2024, saying they have put in place operational efficiency including fleet and route optimisation and improvement in On Time Performance.

In the past three years, KQ has effected network review in a routine informed by the return to air travel as the aviation industry recovers from the Covid-19 pandemic.

Last year, the Kenya’s flag carrier announced plans to retire its Embraer and Bombardier fleet in favor of Boeing aircraft as it looks to incorporate mono fleeting.

This cost management strategy was implemented in line with the airline’s long-term fleet and route development plans.

So far, it has phased out its Embraer regional Jets and Bombardier aircraft to increase capacity and meet passenger demand.

It is progressively moving towards becoming an all-Boeing operator, which the board has since approved.

Looking at the airline’s last annual report, the group operated a fleet of 39 owned and leased aircraft.

The fleet consisted of nine Boeing 787-8s , eight  B737-800s , 13 ERJs, two B737-300Fs, and seven  DHC 8-400s . This has since been reviewed to ensure that it was fit to serve the network growth.

In a past interview, Kilavuka said they the airline was focusing on customer excellence,  putting on the entire customer journey right from booking to the next time customers think of traveling.

A few key examples include a revamped website that makes booking a breeze and a customer queries escalation system.

A redone meal service on board has been tweaked to incorporate local flavours whilst still maintaining internationally accepted gourmet standards.

"To top it all, we now have our very own frequent flyer system called Asante Rewards which is a unique and superior loyalty program that focuses on our specific customer needs,'' he said. 

These and other strategies saw the air line grow  passenger growth of   10 per cent  2.54 million.

The airline’s capacity, measured in available Seat Kilometers (ASKs), increased by 16 per cent to 7.991 billion ASKs, while Revenue Passenger Kilometers (RPKs) improved by 14 per cent.

The airline’s total revenue grew by 22 per cent to Sh91 billion, driven by higher passenger numbers. 

Despite the expansion, operating costs rose by 22 per cent, aligning with the growth in capacity. However, overheads were reduced by 22per cent, reflecting Kenya Airways' continued commitment to cost management and operational efficiency.

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