THE FINANCIAL PLAN

THE FINANCIAL PLAN

1. Use a template!

2. The numbers MUST:i. Be realistic;ii. Be conservative;iii. Relate back to

‘words’ in the Business Plan;

iv. Encompass all costs associated with the business.

THE FINANCIAL PLAN

3. The Financial Plan must include a 12 MONTH cash flow and 3-5 YEAR PROJECTIONS for Income Statements and Balance Sheets.

i. Already in business and looking to re-finance or expand? You will be required to provide 2 years of financial history. (Both P&L and Balance Sheets).

ii. Not in business yet? You will be required to provide 2 years of personal Income Tax returns.

THE FINANCIAL PLAN

4. The Cash Flow MUST identify:i. All revenues anticipate on a monthly basis;ii. All financial contributions to the business iii. All expenses associated with maintaining the

business each month;iv. All costs associated with generating the

revenues;v. Any initial capital or one-time expenditures

required to get the business started;vi. The costs of financing the business.

THE FINANCIAL PLAN

5. Cash Flow – REVENUES:i. How many of the products/services that you

are marketing will be sold each month? Seasonality; Payment Terms; Start from the bottom and work up.

THE FINANCIAL PLAN

6. Cash Flow – FINANCIAL CONTRIBUTIONS:i. What contribution either in cash or kind are

you making to the business?ii. What grants and/or other forms of non-

repayable funding are available to the business?

iii. What amount of loans or other form of repayable funding is being negotiated for the business?

THE FINANCIAL PLAN

7. Cash Flow – EXPENSES:i. What recurring monthly expenses are required

to operate the business? (Rent, utilities, telephone)?

ii. What monthly expenses are required that vary with revenue generation. (Wages, Bank charges, delivery costs)?

iii. What do you expect to draw from the business?

THE FINANCIAL PLAN

8. Cash Flow – COST OF SALES:i. What are the costs of goods sold in every

month?ii. In the case of product sales only, this will be

the actual inventory cost.iii. For services it may include product, wages,

and overhead absorption.

THE FINANCIAL PLAN

9. Cash Flow – EXPENDITURES:i. What do you need to spend to get into

business or to allow for expansion?ii. Computers, furniture, fixtures, leasehold

improvements, equipment, vehicles, buildings and land are all costs that need to be identified here.

THE FINANCIAL PLAN

10. Cash Flow – FINANCING COSTS:i. What are the actual costs of the financing

alternatives that have been negotiated?ii. You will require an amortization schedule

from your financial institution so that the interest vs. principal payments can be properly allocated on your financial statements.

THE FINANCIAL PLAN

11. Cash Flow – OBJECTIVE:i. The primary objective of the 12 month cash

flow is to demonstrate to both owners and investors that the business will be adequately financed to meet all the obligations that have been identified assuming that the conservative revenue forecasts are met.

THE FINANCIAL PLAN

12. Profit and Loss (Income Statement) and Balance Sheet.

i. Any good Financial Planning Statement should allow the numbers from the Cash Flow to automatically generate Income Statements and Balance sheets. (With some minor adjustments for depreciation, loan balances etc.)

ii. Regardless these are necessary documents to complete the Financial Plan.

THE FINANCIAL PLAN

13. The PROFIT AND LOSS Statement:i. Derived directly from the Cash Flow with the

exception of non-cash items such as depreciation.

ii. Shows the company’s financial performance (Profit and/or Loss) over a specific time period.

iii. Most SMEs DO generate this statement.

THE FINANCIAL PLAN

14. The BALANCE SHEET:i. Derived from the Cash Flow and summarizes

company's assets, liabilities and shareholders’/owners’ equity at a specific point in time.

ii. It provides a complete picture of a company’s worth.

iii. Most SMEs DO NOT generate a Balance Sheet.

THE FINANCIAL PLAN

15. Projection Preparation vs. Ongoing Statement Generation:

i. Initial financial projections can be completed with the assistance of whatever financial institution a prospective business owner is working with to obtain appropriate financing.

ii. They must always be realistic, conservative and be developed in support of the business plan.

iii. Highly recommended that the ongoing generation of these statements be done professionally by a Bookkeeper or Accountant hired to assist the owner in maintaining accurate and useable financial data.

THANK YOU!