It is crucial for businesses to have certain goals for achieving. A good financial plan can serve such a purpose. Besides, it allows making good pitches to investors, getting better funding and reaching success.
Some may think that you need special education for writing a financial plan. It is much easier than you imagine. There are just certain major steps, which you must accomplish while preparing such a document.
What Is a Financial Plan?
To put it simply, a financial plan just displays the current state of your business finances. It also includes perspectives for further growth. The writing process requires having figures and data, which you can review.
It allows monitoring finances, including forecasting income for the next months. You can detect any financial problems earlier too. You should consider writing such a plan to have an in-depth view of your current business.
Evaluate Profit & Loss
The very first part of your plan is the profit and loss financial statement. It focuses attention on describing all the revenue sources and expenses for a certain period. It is common to divide data according to three-month quarters.
You should write about revenue, cost of goods sold, and gross margin. These are the fundamentals of a financial plan. Besides, do not forget to mention operating expenses. They include rent, insurance, gas, and other monthly spending.
Cash Flow Statement
It is the second most important part of your financial plan. The cash flow statement describes the amount of money your business earns. It includes incoming cash, outcoming funds, and the ending cash balance at the end of a month.
By knowing where the money comes from and how much you spend on running a business, you can optimize it. Such information helps to avoid bad times and define what kind of salary you can pay yourself.
Accrual Accounting & Cash
In accounting, you can use both accrual and cash methods. The first one calculates sales and expenses simultaneously. You account revenue not after preordering a product but when you have finished manufacturing and delivering it to customers.
Cash methods focus attention on gaining money right after sale, without calculating expenses for creating a product. The accrual approach allows seeing the actual profit of every sale you make. Professionals from paper writing service MasterPapers recommend switching to it.
For an accurate financial plan, you should know your possessions and their value. For this purpose, you need to write a balance sheet. It includes information on your assets like inventory, money in the bank, accounts receivable, etc.
You should describe liabilities like loan payments, credit card balances, and payable accounts. Evaluating such data allow knowing the overall state of your business. It helps to define whether you need investors or not.
It is always difficult to predict future sales. However, depending on your business, you can have more and less profitable seasons. Preparing a sales forecast is very important if you have investors.
They want to know approximate income for the next period. Such predictions can be made according to the statistical data of former months. According to the profit and loss forecast, you can prepare needed materials for manufacturing goods in approximate quantities earlier.
Every business always evaluates the value of each employee. If you are a sole proprietor without workers, you can just skip this section or evaluate yourself. In another case, it is necessary to calculate personnel labor.
While describing each worker, you can figure out who is crucial for your business and who is not. A personnel plan also helps to define what qualities and skills you want to see in workers.
Find a Break-Even Point
Everyone wants to run a profitable business. For that, you have already prepared the above-mentioned data, which will help to define a break-even point. It describes the amount of money you must earn to cover all the expenses. That is what a financial plan helps to figure out through the data analysis of your business.
Get Professional Assistance
Sometimes it is very difficult to create a good business plan on business. You should have good analytical and writing skills. Alternatively, you can get experienced writers from MasterPapers or other professional writing services.
To select a good platform, check the review of the 4 most uprated academic writing services – business docs and other papers included. It is better to learn more about websites that can help prepare a financial plan before purchasing services.
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