How do I prepare financial projections for my business?

Once again we come to you with financial projections. You may be wondering why, for any business to survive, an entrepreneur must be able to look through the future, to achieve his goals. He must have a basis from which he says in 10yrs given everything constant, I must have expanded to this level of growth. This is why you need to know how to interpret your business financial figures. Thereafter you can project and know how much input you need to reach what level of growth.

We bring back to you MR. YUSUF, who is the lead trainer at ERP, and is ready to train you. This piece is adopted from his live training that was hosted by the TechBuzz team, notwithstanding. This particular training is a continuation from the previous financial projections training one.

What are the things to look out for when starting my business in as far as financials are concerned?

When you’re starting up a business, it is important to first anticipate the amount of money you will need to start up with. Be it credit or equity.

What are the importance’s of future financial projections in your business?

  • Projected future sales are helpful in business as they guide you to anticipate expenses while trying to predict how quickly your business will grow.
  • Projected future sales include a forecasting of the income statement, the balance sheet, and the cash flow statement. Projections are made by indicating how and anticipates how the first full year will go including all the 12 months of a year.
  • They help you monitor cash flow, a very important aspect of your business.
  • A financial forecast presents predicted outcomes based on the conditions you expect to exist for your business.

What are some of the things you need to know, while or before carrying out financial projections?

Among the many things I have told my trainees, that they out to equip themselves with, are the terms used in financial projections. You must know them by heart. These include the following: –

Fixed costs -do not move with sales, thus they are fixed such as rent.

Variable Costs-Move with sales

If one wants to do a profit and loss analysis, you get the price of what you are selling and then divide it with the quantity of what you are selling

Cash flow

Cash flow is about how you spend your money; Cash inflow includes; investments/borrowings

Cash sales, refers to the total cash inflow not including the sum of all investments/borrowing.

Total cash inflow= sum of all investments/borrowings and cash sales

Balance sheet (the easier work tool for estimating and calculating the financial projections.)

Projected future sales are made with Excel sheet where one can adjust some of the variables that drive the forecast calculation a balance sheet will present a picture of your business’ net worth at a particular time. It is a summary of all your business’ financial data such as;

Assets: These are the tangible objects of financial value owned by your company.

Liabilities: These are any debts your business owes to a creditor.

Equity: The net difference between your organization’s total liabilities minus its total assets.

Income Statement

An income statement shows your revenues, expenses and profit for a particular period. If you are developing these projections prior to starting your business, this is where you will want to do your forecasting. The key sections of an income statement are:

Revenue – This is the money you will earn from whatever goods or services you provide.

Expenses – Be sure to account for all of the expenses you will encounter, including direct costs (i.e. materials, equipment rentals, employee wages, your salary, etc.) and general and administrative costs (i.e. accounting and legal fees, advertising, bank charges, insurance, office rent, telecommunications, etc.).

Total income – Your revenue minus your expenses, before income taxes.

Income taxes

Net income – Your total income without income taxes.

For this was a practical training, some of the details of the training are found in the recording that can be found here. It is very important as we have seen to have your finances projected to know and help you plan ahead of challenges that you may face in future as your business thrives. We remain TECHBUZZ HUB bringing you these series of blogs derives from the webinar series. Other services we offer include co working space, young entrepreneurs among others.