Why Prepare a Financial Plan?

by Jason Varner Financial Projections Template
A financial plan is a financial tool that can be utilized both for business and personal usage. A financial plan will help set priorities towards financial freedom and achieving financial goals. It is invaluable for companies to prepare a financial plan as it serves as the guide in making business decisions. It is vital if you had a clear goal in mind upon preparing for a financial plan. After setting the goal, incorporate it in creating your financial plan.

By preparing a financial plan, your business's current situations and projections are laid out, giving a more precise direction for the business decisions you must make. You will be able to capitalize on the business aspects that provide more value and improve lagging parts. With the financial plan implemented in your company, it is highly possible to bring in more sales and eliminate unnecessary expenses.

Template for a Financial Plan

In preparing a financial plan, below are the essential parts designed to produce a clear and relatable financial plan. Some features of the template for a financial plan will differ depending on its purpose and objective. 

1.    Sales Forecast

Since the business's primary goal is to earn a profit, creating a sales forecast is one of the vital parts of your financial plan. Based on the market analysis and historical data, you can create a sales forecast that would include the target for short-term and long-term goals. These can serve as your guide for you and your team in achieving target revenues.

2.    Projected Expenses

By projecting your expenses, the company will be more prepared to meet its financial needs and unusual expenses that occur once in a while. Back-up sources for additional funds, either from additional investment or loans, can be planned to meet significant cash outflows out of the ordinary business operations. Projecting expenses can also help the company save resources and use them effectively to produce more outputs.

3.    Personnel Plan

It is common for a start-up to commence the company with few or no employees. However, a personnel plan must be included in the financial plan since it is a vital part of the business operation as the company started to grow. Ensuring that you hire the most qualified personnel and provide them with appropriate salaries and benefits would require company resources. By projecting it, you can prepare the company for an upcoming cost when it occurs.

4.    Financial Statements

Financial statements are necessary parts in preparing your financial plan since it presents and projects the revenues, costs, funds invested, and how it is used in the day-to-day business operation. It is composed of the income statement, balance sheet, and cash flow statement.

The income statement projects the revenue and the costs incurred in operating the business. The balance sheet depicts the assets, liabilities, and owner's equity, in which it helps the management evaluates how much of its assets are financed by debt and equity. The cash flow shows the ins and out of cash and is further classified into three: cash flow for operations, cash flow for investing activities, and cash flow for financing activities. 

A financial plan is an invaluable tool for companies to project what can happen to the business operation, helping the company prepare for contingencies and unfavorable conditions. There are available templates for a financial plan in eFinancialModels that you can use to prepare one for your company. It is efficient to utilize and manipulate as these are designed for investors and financial analysts' optimized use to prepare a financial plan.

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About Jason Varner Innovator   Financial Projections Template

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Joined APSense since, February 16th, 2018, From Zurich, Switzerland.

Created on Oct 14th 2020 05:17. Viewed 238 times.


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