How to Write the Financial Section of your Business Plan

Posted 01 Dec 15

Creating a strong business plan is a crucial step on a journey to success.

Although the majority of company owners seem to understand its important at the start of their business’ activity or when planning to approach outside investors, we recommend that writing a business plan becomes one of the tasks you add to your annual routine.

A strong business plan will allow you to review your company’s goals and aims and provide you with feedback, which will help you manage your business better. Having a clear view on your company’s performance will enable you to predict its future status, potential sales and costs and in consequence, plan investments and funds while avoiding unnecessary risks.

In order to make the most out of your business plan, you will need to give each of its sections the sufficient amount of thought and research. One of the most daunting sections to complete is the financial part of your business plan, since it often requires predictions you might find difficult making at a certain stage of your company’s life.

In this article we will focus on the financial section of your business plan analysing everything you need to include in it to benefit from it the most.

The purpose of this section of your business plan is to include as many details of the financial aspects of your company, such as predicted earnings, sales and losses. The key areas you will need to focus on are profit and loss, cashflow and balance sheets.

One of the ways to predict your sales and income is by looking at a company similar to yours (in terms of size, type of business and target client). However, there are other factors which influence the financial success of every company, so those aspects are only a small percentage of what you should consider.

Profits and loss

The profits and loss statement, also known as an income statement is the way of measuring the profits and loss of your company over a specific period of time. It derives information from revenue, expenses, capital and cost of goods using the following equation:

Revenue minus Costs of Goods minus Expenses = Net

The net can be a profit or a loss. Do not worry if in the first year of your business activity your company mainly loses money. It is a typical result of the investments you have to make to create high quality products and marketing them to potential clients.

Cashflow

Cashflow is a way of determining how much money goes in and out of your company. Having good cash flow will show a good credit risk, which is one of the information potential investors and lenders will be most interested in.

Balance Sheets

You will need to compile the balance sheet on an annual basis. The balance sheet will provide you with the overall view on your business’ financial state. It includes assets, liabilities and equity.

If you are struggling to get your head around your finances or you would like to find out how to run your business in a successful way, contact our business consultants at Tawanda Accountants.

We cover the majority of services associated with a leading business consultancy firm, including tax planning, personal business growth, tax and assurance issues, asset management, self-assessment and business lending and loans.

We will help you maximise your profits and minimalise your risks while offering professional and friendly advice and guidance in all business areas.

About Us

As a leading UK accounting firm and expert business consultancy, Tawanda Accountants carry out scrupulous accounting and provide payroll services and procedures for small businesses, individuals and business start ups.