Sometimes calledcash flowprojection, this is one of the most important steps in completing your financial plan. It details your incoming and outgoing cash and helps make sure you have enough money to keep your business running.You can use theBusiness cash flow viewto see a monthly summary of your incoming and outgoing cash flow in the CommBank app.
Try this simple cash flow formula:
Determine the period you want to focus on (e.g. the next 3 or 6 months)
Start with your opening cash balance
Estimate your incoming cash and expenses for the period
Subtract the estimated expenses from your income and add it to the opening balance
You can look at your cash flow statement from previous years to determine if you’ll have enough to cover your costs, like wages and rent, over the specified period. It’s important to allow for glitches like late payments when projecting your cash flow.
2. Income statement
Also known as profit and loss statement (P&L), this shows you a clear view of your income and expenses, and how these change over a period of time.
What goes into an income statement depends on the type of business. You should at least cover these key areas:
Revenue
Cost of goods or services
Total profit or loss (revenue minus cost of goods/services)
Operating costs (e.g. rent)
General expenses (e.g. marketing, advertising, depreciation)
Operating income (total profit minus expenses)
Estimate your sales and expenses on a monthly, quarterly or yearly basis to see whether you can expect to make a profit or loss for these periods. This will help you develop sales targets and find ways to grow your business.
3. Balance sheet
Unlike your cash flow statement which looks at the future, and your income statements which looks at the past, your balance sheet is a financial snapshot of your business in the present.
Try this simple balance sheet formula:
In one column list all your assets (e.g. cash, inventory, buildings)
On the other side list your liabilities (e.g. accounts payable and loans)
Subtract your total liabilities from your total assets to determine your equity
Your balance sheet can help you evaluate the financial health of your business, show your profit at a glance and work out if you’ll have enough resources to run your day-to-day operations.
Take your business financial plan to the next level
To enhance your business financial plan, consider preparing a break-even analysis. This shows you the number of sales needed to cover costs – anything above this number can be counted as a profit.
The break-even point can be useful for analysing the sales, costs and pricing numbers used in your earlier forecasts and judge whether your business idea is feasible. For example, if your break-even point is years away, you may want to revisit your numbers to see if there are any opportunities to make your business more profitable.
Next steps
Once it’s ready, treat your financial business plan as a guide to running your business. Remember that it’s a working document, so if your goals and circ*mstances change, update the plan. If you need help, an accountant could help assess your prospective financial position and ensure you’ve thought through all potential income and expenses.
Check out our small business hub for more tools and insights on starting, running and growing your business.
Ready to start your business?
Open a Business Transaction Account1, available with a $0 monthly account fee option.
The plan should be comprehensive and highly customized. It should reflect an individual's personal and family financial needs, investment risk tolerance, and a plan for saving and investing. Planning in finance starts with a calculation of one's current net worth and cash flow.
The financial plan is used to project your revenues and expenses for the coming months. It allows you to plan for lower cash flows, identify your financing needs and determine the best time to get your projects off the ground.
All business financial plans should include: a profit and loss statement; a cash flow statement; a balance sheet; a sales forecast; a personnel plan; business ratios; and a break-even analysis.
To develop a robust financial plan, startups need to focus on several key components. These components include detailed revenue projections, a thorough expense budget, headcount requirements and hiring plans, income statements, cash flow statements, balance sheets, capital requirements, and fundraising plans.
You can prepare your financial statements in house, but if you're like many small business owners, you may prefer to have an outside professional to prepare your financial statements in accordance with an accounting framework that is appropriate for your business.
Financial worksheets, financial statements, and Cash flow projections are all included in a business financial plan. Financial worksheets, financial statements, and cash flow projections will show what money is coming in, your revenue, and also what is going out, your expenses.
Introduction: My name is Melvina Ondricka, I am a helpful, fancy, friendly, innocent, outstanding, courageous, thoughtful person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.