Connect with us

Entrepreneurs

7 Tips On Writing The Financial Section Of Your Business Plan

Published

Written by: Freddie Tubbs

As a business owner, one of the things that you’ll have to do is take out a loan which will give you enough assets to be successful in the future.

However, before you take outlet a loan, you need a business plan. A business plan is an aborted educated guess which tries to convince your investors that your business will be successful.

You can use the business plan for more than just getting the loan – later you can use it internally or for investors.

One of the most important elements of any business plan is the financial section. However, it’s the one most people struggle with, not understanding how forecasting works. Some predict unrealistic improvement rates for the next few months and some make a lot of mistakes.

But if you are still confused on how to write it, here are some tips:

Create a sales forecast

The first thing you need to do is create a spreadsheet which will showcase your sales in the next few years – three is a good number. “You’ll need to create different sections for different sales and columns for each month for the first year. You can describe the second and the third year on a monthly or quarterly basis”, – explains Jillian Triggs, a Sales Manager at Bigassignments.

The spreadsheet should have a section for each of these:

  • Unit sales
  • Prices
  • Units multiplied by price
  • Unit costs
  • Unit costs times number of units

Units multiplied by price give you your sales and unit costs times the number of units gives you cost of sales.

With standard data, you’ll be able to accurately guess the growth potential but if you are working on a new product or a line of business, it can be a bit trickier and you’d have to guess.

Related: 5 Ways to Think Like an Entrepreneur in the Corporate World

Related: Entrepreneurial Success is All About the Right Mindset

Describe expenses budget

To truly understand how much it’s going to cost you to produce avl certain amount of units, you should look at your fixed and variable costs.

Fixed costs are things like the rent, the payroll and so on while the variable costs are mostly marketing related or promotional.

Lower fixed costs mean that you are taking a lower risk.

But in your financial section, you will also have to estimate the taxes and interest in order to create a good financial section of the business plan.

Edit, proofread and format

Writing a business plan is similar to writing copy. You are supposed to persuade your investors to invest in your business. There are some great techniques that make the writing more appealing and compelling to the reader.

For this, you’ll need some solid copywriting guides and tools that can help you write amazing and accurate copy for your business plan.

  • Stateofwriting and Viawriting – To truly understand copywriting and its value, you’ll need a good and educational guide with examples. Here are the two sites that can give you that.
  • Ukwritings and Paperfellows – Copywriting is not perfected without editing and every good copywriter knows this. Your business plan will need editing too, so you can use these tools.
  • Academ advisor – Grammar is important when writing a business plan. If you mess it up you’ll not only cause confusion but also change how others see you. Use this grammar checker to fix any errors.
  • My writing way – If what’s confusing and scaring you about your business plan are financial terms, this is a perfect guide for you to explore before you start writing.
  • Boomessays and Essayroo – Another thing that you need to make sure of is that your work is well-organized and formatted. Use these tools for help.

Talk about cash flow

This is a statement which shows cash moving in and out of your company. It’s one of the most important things in the business plan, based to forecasts and assumptions in case you are a new company. However, if you are an already existent company, you can look at older data and historic documents and base your predictions upon that. You need to choose a realistic ratio of how many invoices will be paid in cash and over what period of time.

Follow GAAP

GAAP stands for Generally Accepted Accounting Principles. Your financial plan should follow these rules. Especially if you are creating a business plan specifically in order to get a loan or a line of credit.

Look for help

If you are really insecure about your business plan financial section, you can always seek some outside assistance. An accountant, for instance can put everything together more efficiently and accurately. If an accountant is working on your financial statements, you should state that in your plan.

Do the breakeven analysis

The breakeven point is where your sales match your expenses. “This is an important analysis for all of your investors. At a certain point in time, if your business has been viable, your revenue will be much bigger than your expenses”, – explains Caren Baehr, a Financial Adviser at Oxessays and Assignment service.

Bottom Line

Financial section of your business plan is probably the hardest one to write because you have to do a lot of assuming. Follow these tips to write a good financial section.

Freddie Tubbs is a communication manager at Academized. He regularly contributes articles to online magazines and blogs, and is writing Oxessays and Australian help blogs.

Continue Reading

Trending