Financial Forecasting for Your Business Plan


Financial forecasting - Cash flow

Cash Flow Statement

You now have an idea of your incoming and your outgoing, so it’s time to put together a cash flow statement. Many new businesses fail because they fail to monitor their cash flow properly. Therefore it’s important that you think carefully about this when financial forecasting. Create another spreadsheet that is split into each month, with rows covering all of the incomings and outgoings. You want to put in your projected profit and expenses, in order to see how much money is left at the end of each month. Consider things like supplier bills. Are these paid straight away or are you given 30 days to pay? The same when it comes to sales. Do customers pay right away or are there specific invoicing terms? If either of these are the case then you might find that a cash flow statement is hard to balance out. Work out how many invoices you think will realistically be paid in the same month. If it’s 80% then you need to base your income on that, with the next 20% being carried over and so on.

Income Projections

You now have a pretty good idea of your projected profit/loss for the first year (or three) of your business. This will help you put together a pro forma profits and loss sheet, detailing your predictions for your business. You already know gross profit margin based on the workings out above, but now you can work out net profit too.

Gross margin – expenses and taxes = net profit

You can now use this income projection as a solid base for building your business. It can also be used to set up business bank accounts and apply for funding or loans. To help you on your way, we’ve compiled some of the best financial forecasting templates we could find. Use our guide and these templates to help you plan your business finances.

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