How to Prepare an Efficient Finance Plan for Your Business
The financial plan section of your business plan is one of the most important components for your company’s overall game plan. This section will determine whether or not your business is operable, and it will help establish if your plan is going to be able to attract any investments for your business idea. Your financial plan should consist of three main sections: the income statement, the cash flow projection, and the balance sheet.
Income statement: This financial statement will show your expenses, revenues, and overall profit for a certain period. It should prove whether or not your business is profitable at that specific point in time. Many businesses prioritize creating their income statement each fiscal quarter, but to ensure you’re getting the best snapshot of your business’ financial state, you should make one monthly for the first year.
Cash flow projection: This will show how cash is expected to surge in and out of your business. This is a crucial tool for cash flow management, and it will let you know when your payments are too high or if you need to make any short-term investments to deal with a surplus.
Balance sheet: This will illustrate your business’ net worth at a particular point in time. It serves as a summary for all the financial data about your business, which is broken down into your assets, liabilities, and equity. Usually, businesses will make a balance sheet once a year, because it ultimately summarizes what data you’ll have from your income statements and cash flow projections.
You should also prepare all of your start up business expense data, which could include any registration fees, licenses, permits, inventories, rent deposits, down payments, or utility fees. Make sure you’re keeping track of any operating expenses too, such as salaries, rent or mortgage payments, utilities, loan payments, or any other regular expenses.
If you’re thinking about starting your own business, or you would like to modify your current financial plan, our business attorneys at Fiore & Barber, LLC are ready to help. Contact us today to get you started in mending your business finances.
