Your projections will act as an early warning system, helping you to plan for cash flow dips, identify financing needs and pinpoint the best timing for projects.
It also gives you a tool for monitoring your finances, allowing you to gauge your progress and quickly head off trouble. Create monthly financial projections by recording your anticipated income based on sales forecasts and anticipated expenses for labour, supplies , overhead, etc..
A financial plan is different from your financial statements.
Instead of looking at what’s already happened, you make projections for the coming months, forecasting income and outlays.
Don’t assume sales will convert to cash right away.
Enter them as cash only when you expect to get paid based on prior experience.
Take the monthly average of the last three years of expenses when projecting for your balance sheet, cash flow and income statements.
Also take into account the previous year's expenses more than the others, since this year may reflect new expenses based on modifications due to business growth.
Nina Nixon has more than 30 years of professional writing experience. Her articles have appeared on Chron, e How Business & Personal Finance, Techwalla, and other digital content publishing websites.
The Financial Section, in many cases, is the most scrutinized section of your business plan.