Wednesday, December 13, 2017

How to Write a Financial Plan

Building a business or starting your own business is very complex and need a thorough calculation. You have to be very careful in managing your business. That’s why you need to write a financial plan that you will have a good and strong business. What is a financial plan and how to write it? A financial plan is a tool key for someone who has a business or is starting a business to help them manage their finance. It is very crucial for any businessman to have a financial plan as it is the completion of balance sheet, the cash flow and the company’s income statement.

A businessman can look at his business in a financial way. This is a preference for the most investors. You don’t need to be a mathematician or an expert in calculation in making a financial plan. But you have to comprehend how your business is affected by the numbers. That’s the reason why a businessman has to make a financial plan. Now the question is should the businessman himself write a financial plan? If he should, does every businessman know how to write a financial plan?

The Quick Guide

Starting and building a new business, someone has to understand how to deal with all the finance and the risk of having any difficult situations may occur during the time. Writing a financial plan is the way a businessmanset his business finance. Many of the businessman are clueless, doesn’t understand what a financial plan is and how to write it. They don’t know what thing comes first to be written in their financial plan.Here I give a quick guide of how to write a financial plan:

The first thing you should prepare is the financial model. In this step, simplify the financial planning process by providing an Excel model of your financial worksheet or a business plan template. In this model you should include short term and longer term financial statements which consist of balance sheet, cash flow statement and income statement. However, you should remember that making this model from the beginning need a good knowledge of the accounting principles and require a longer time to finish, especially for all new businessmen.

The next thing you should prepare is the startup costs. Before determining the capital investment required, collect the costs you have researched earlier. The model ought to have a space to add the information on these costs which include early marketing, business licensing, equipment, furniture, leases, and insurance.
A cash-flow projection is also important to be prepared in writing a financial plan. It enables you to see the flowing of your money in and out of your business. With this cash-flow projection you can prepare for adeficit or a surplus.

The last thing on how to write a financial planis checking your business cash flow. Make sure that the ending of your cash balance remains positive at all times. It is necessary to do double-check. If it ends up negative means that your company urges to add up capital both invested and loaned.

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