In order to get the attention of serious investors, it is important to have realistic financial projections incorporated into your business plan. Projections can be a tricky business as you try to anticipate expenses while trying to predict how quickly your business will grow. Nobel Thomas can help you with your financial planning and forecasting.
In its simplest form, a financial projection is a forecast of future revenues and expenses. Typically, the projection will account for internal or historical data and will include a prediction of external market factors.
In general, your Melbourne accountant needs to develop both short- and mid-term financial projections. A short-term projection accounts for the first year of your business, normally outlined month by month. A mid-term financial projection typically accounts for the coming three years of business, outlined year by year.
There are many online templates for financial projections that are a good place to start when you are preparing to draft your projections. It is also recommended to include charts and tables when explaining copious amounts of numerical data; it is a much cleaner and engaging presentation than just paragraphs of numbers and figures.
All financial projections should include three types of financial statements:
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 the bulk of your forecasting. The key sections of an income statement are:
Cash Flow Projection: A Cash Flow Projection will demonstrate to a loan officer or investor that you are a good credit risk and can pay back a loan if it’s granted. The three sections of a Cash Flow Projection are:
Balance Sheet: This overview will present a picture of your business’ net worth at a particular time. It is a summary of all your business’ financial data in three categories: assets, liabilities and equity.
To complete your financial projections, you’ll want to provide a quick overview and analysis of the included information. Think of this overview as an executive summary, providing a concise overview of the figures you’ve presented.
When it comes to preparing financial projections, it’s most important to be as realistic as possible. You don’t want to over- or underestimate the revenue your business will generate. This is why its a good idea to have a reliable Melbourne accountant work with you on your financial projections. Also, be sure to avail yourself of all the online resources available – it’s best to learn from people who have created projections before.