11.  Financial Projections

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The Guide > 11.  Financial Projections

Present key financial projections e.g. P&Ls (income statements), cashflows, balance sheets and key ratios.

Length & Structure:

Complete this entire section within 4-6 pages by ensuring that only high-level financial projections are included in summary tables. Keep within two pages for a basic/short plan.
Place all detailed schedules in appendices.
The subsections below offer a structure for presenting projections and should by and large be adhered to.

If break even is expected to occur within a year, make the projections on a monthly basis for the first year and use quarterly thereafter. Otherwise, show monthly projections until the year in which break even (for profitability and cashflow) is anticipated.  It is essential that all the financial statements be fully integrated and linked.

Most business plans include projections for either three or five years depending on their size and the amounts and timing of any external funding being sought. In exceptional cases, the financial projections may need to run for as long as twenty years to capture the totality of the business and its funding. In such cases, projections beyond five years are likely to be very speculative and illustrative rather than firm forecasts. Often, these projections would be associated with major investment or infrastructural projects being pursued in a very stable economic environment.

Financial projections must not be prepared in isolation from the rest of the plan. For example, the results of market research should flow into your sales projections that, in turn, should generate revenue forecasts.

Under no circumstances, do the detailed financial projections and then write a plan to suit. By all means, do some high-level financial planning at an early stage to get a feel for the basic figures and sensitivities but do not let the plan become a financially driven document without any strong market basis. For further tips and traps, refer to the online white paper on Preparing Financial Projections.

For help with financial projections, see Financial Projections with Exl-Plan.

The development of an integrated, error-free, spreadsheet-based financial planner is a very difficult and time-consuming task even for experienced accountants and spreadsheet users. You do not want to spend several days developing a computer model when you are really interested in planning a business. PlanWare's Exl-Plan can help smooth this process.
 
Exl-Plan runs with Excel for Windows (5, 7, 8, 95, 97, 2000 and XP). Sixteen variants are available to cover different sizes of businesses and accounting formats. Typically, Exl-Plan produces fully-integrated 1-3-5-7 year financial projections - monthly for the first year, quarterly for second-third, and annual for fourth-fifth. Based on a user's assumptions, it generates income statements, cash flows, balance sheets, ratios and graphs for each period (month, quarter & year). Many of the tables and charts in this plan have been copied and pasted directly from Exl-Plan.
 
For more information about Exl-Plan, see Introducing Exl-Plan for Financial Projections or go to http://www.planware.org/exlplan.htm for further information and trial copy downloads.
 
If using Exl-Plan to generate financial projections, refer to Using Exl-Plan with Free-Plan for guidance.

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For latest information, see the Financial Projections section in the Business Plan Guide at http://www.planware.org/gfinancials.htm

 



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