Creating a financial plan can be a daunting task for a start-up business. A financial plan is essential for any business. Businesses with a complete financial plan can expect long-term success and can reach out to investors.
Fortunately you do not need any accounting knowledge to create the first financial plan. What you need to know are the important factors and what they are getting into.
We have simplified the process of creating a financial plan for start-ups. See the full article to create a financial plan and successfully start your own business.
What is a financial plan?
A financial plan is a complete overview of your current finances, financial goals and strategies that you have set up to achieve your business objectives. The best financial planning contains information such as cash flow, savings, debt, investment and more.
How to make a first financial plan:
1. Create a budget for your startup costs
The first step you need to take is to make a difficult plan for your expenses. Your investors want to know your budget, what your investors can expect and your monthly expenses.
Some important points you need to include in budget planning:
The products / services you sell, with prices and volumes.
How many employees do you need and their salary details?
They also want to determine how much you need to pay for your debts and how long it will take you to repay your principal loan.
2. Statement of cash flows
The cash flow statement is as important as your profit and loss statement. The cash flow statement gives you details of how much you have contributed to the business, how much you have spent and how often you have a monthly balance.
Without realizing how much money you have, the profits you make and the investments you face may make it difficult for you to run a successful business. Without realizing how much money you have, the profits you make and the investments you face may make it difficult for you to run a successful business. Without a cash flow statement providing comprehensive information on lenders and investors, you may not be able to raise funds.
The cash flow statement helps you understand the difference between your profit and loss - and what your real financial position is.
3. Balance
The balance sheet is a screenshot of the financial position of your business. Where are you currently standing, how much money do you have in the bank, how much do your customers owe you and how much do you owe your sellers?
Things to say on the balance sheet:
Assets: Current bank status, inventory, your accounts receivable etc.
Debts: Credit card balance of your account, loan payments etc.
Equity: For most start-ups, this may be the owner's equity but may also include investor stock, stocks, savings and more.
It is called a balance sheet because the equation is a balance:
Assets = Liabilities + Equity
The total amount of debt added to your total assets is equal to the value of your assets.
At the end of the financial year, your total profit / loss increases or decreases your savings. This makes the savings profit and loss of your business as a start-up business.
4. Break-Even Analysis
Vacation analysis helps your creditors understand when to start making a profit that will cover your fixed costs. Break-even analysis is essential for any business by selling products / services or setting the right amount of products / services.
It is usually expressed in terms of sales format of the graph in X-axis and revenue in Y-axis. Flexible and adjusted costs are added.
This analysis is highly recommended for service-based businesses to reflect the overall profit points for specific services.