According to Oak financial advisor Perth, a financial plan is simply the statement of the current financial status of a business and its future projections. Usually, it is a section of the master business plan. Often, coming second last in the hierarchy.
Financial plan section is so crucial to any business. Be it starting or continuing. It determines the business startup financial capability and the future. Hence it can be based upon to project success of a business or ambiguity of the plan.
Importance of financial plan
For starting a business, it is even more important. Apart from the other values of financial plan below, it is a blueprint to attract able investors within the business. It also helps with:
- Successful income management
- Increases cash flow
- Raises capital
- Family security through the insurance cover
- An advisory to the shareholders or sole proprietor.
It also serves the purpose of budgeting and finical advisory to the management team or the owners.
Owing to the exceeding value for the financial plan, you need to give it the utmost keenness to be sure of achieving any success. But we do not wish for average success. Instead, we anticipate that you can achieve the highest success rate. That will only happen if you have a perfect financial plan.
But to do so, you must have financial software tools that will help in managing your business expenses effectively. For example, having an expense report software can help you check the daily status of your business finances. You must also have an understanding of the six elements that characterized a good business startup financial plan.
These key elements appear in either of the six sections of a finical plan. The sections comprise of:
- Profit and loss statement
- Cash flow statement
- Balance sheet
- Sales forecast
- Personnel plan
- Business ratios and break-even analysis
- Startup costs
The most rudimentary part of a financial plan for a startup business is the startup costs. Here three things matter most. These are:
- Asset Purchases
- Research on the project costs
- One-time Payments comprising of deposits and certificates
Research helps with background data mining about the business to come. The general costs of obtaining information from the business data analytic tools and other sources are presented in this section. These expenses must be accounted for in the accounting books of the financial plans for proper record keeping.
Assets purchases should appear in the balance sheets. And also in profit and loss accounts. They help give a clear picture of the progress on the assembling of the required preliminary information for the effective operation of the business. Assets will help investors see the value attached to the business. Hence, the need to consider it for funding.
Other initial payments which are made ones to get the business up and running should be in the financial profit and loss accounts. Such costs help in giving a clear expenditure of the business for the full accounting process.
- Running costs
These comprise of all the incurrences to carry out the daily operations of the business. Since this is a plan for a startup, the costs are nothing but mere projections basing on the prevailing circumstances. It, therefore, gives a breakdown of how capital will be effectively utilized. Always purport to present a situation of minimizing costs and expenses to increase profits.
Some of the running costs include:
- Legal & Finance
- Marketing
- Permits
- Insurance
- Bills
- Transport
- Website
- Salaries and Contracts
The staff needed for the startup is well covered in the structure and management section. But in the financial section, the cost incurred to hire, train, and maintain the staff must be covered as part of the expenses.
The salaries must include:
- All Staff
- Contractors
- Sales
In a startup business plan, there is a target market in place and marketing strategy. The marketing expenses, including product branding and packaging, are cored under the sales section. For every channel, all must be broken down for ease of interpretation and implementation by the management staff.
In the abstract, the section should include:
- Service/Product 1 (costs of selling)
- Service/Product 2 (costs of selling)
- Service /Product 3(costs of selling)
- Service/ product… (Costs of selling)
- Business startup financial Funding
The second last yet fundamental part of the financial plan is the funding section. It comprises of all the possible ways to generate income require to successfully put the business in place. Also, it shows how resources needed in meeting daily operations and all expenses are obtained from the business.
The section must be clear enough for you and all the potential investors. For you, it will show the financial deficit and give you the insight to solicit for more funds. To the investors, it will show the financial resource gap that they would fill and have your idea in place.
The section comprises of:
- Owner Capital
- Borrowing
- Other
- Brief and specific
A good Business startup financial plan should have the information mentioned above in various sections. But also, it should be less narrative and more empirical. As such, Information should be presented in short and price manner. It is also necessary to capitalize on the statistical tools of analysis and presentation.
If all the above six elements of good business startup financial Houston are put into practice, then there are higher chances of attracting investors, and successful commencement.