Usually created as part of a business plan roughly once a year, your business plan is the go-to point for the strategies you form to help reach specified targets through the year. A sound plan will help to tackle any potential cash shortages and prepare finances for the year ahead.
What do you need to produce the plan?
To start off with, there are four statements that will be used when producing a financial plan:
• cashflow statement
• balance sheet
• an income statement
• personal financial statement
These will be used to provide an accurate overview of the company and personal finances. The plan will outline how income is generated, the expenditure and whether the company has sufficient finance to support future plans.
Forecast revenue
Build a revenue model that assumes a certain number of customers buy your merchandise or services. Calculate the costs of producing the service or product and determine the projected revenues and profits. Use the worst case scenario by changing the variables and produce a forecast for every month during the next year. Use the system to produce realistic figures so you have a forecast to work with.
The cost of production
Calculate how much it will cost to produce a realistic amount of merchandise, or to produce a reliable good quality service for clients. Once you have done this, look at the cost of raw materials and other variables so that you can reduce costs where possible.
Additional expenditure
If you are intending to increase output, you may need to factor in additional expenses, perhaps including additional staff to meet the demand. You may need to upgrade machinery or relocate to larger premises to accommodate the increased output. The extra costs should be factored in to the financial plan.
Final review
Once the financial plan is complete for the year ahead, review it on a regular basis so that you can make adjustments. Many companies outsource the production of a financial plan to a finance and accounting service, where a professional will create a strategic plan for your company. Review the plan each month so that you can make necessary amendments. Regular cashflow, income, and expenditure statements should be produced so that you have realistic figures to use in calculations and projections.
Using resources shrewdly
Remember that creating financial plans can be complex, especially if you have limited resources, yet their accuracy is of paramount importance. If you would like to discuss your plan for the year ahead with a forward-thinking company, why not get in touch with Sollertia today.