In this article, we will discuss the financial data you need for business plans and startups. We will divide the article into subheadings to clarify the content better.
The Financial Data You Will Need
You may need several different types of financial data depending on the lender’s requirements and your own technical expertise. The data that you will definitely need includes:
- Startup budget or cash flow statement for the project
- Startup cost sheet
- Projected profit and loss statement (project)
- Projected balance sheet (project)
The lender may also want the following financial data:
- Statement of sources and uses of funds
- Break-even analysis
Arranging These Data
First, prepare the startup budget and the startup cost sheet. You will need a lot of estimates at this stage. You should estimate revenues on the lower side and expenses on the higher side so you can create a more realistic picture of your business during the first year or two.
Then, prepare the profit and loss statement for the first year. The lender will definitely want to see this statement. Although it won’t be precise, lenders like to see the projected balance sheet for the project.
Some lenders may ask for a break-even analysis, cash flow statement, or statement of sources and uses of funds. We will cover these data so that you can provide them quickly if requested.
Startup Budget for the Business
The startup budget for the business is similar to the projected cash flow statement, but it includes a bit more guessing.
The lender wants to know your budget – what you expect to achieve in revenue and what you expect to spend each month. Lenders want to know that you can stick to the budget and that you won’t overspend.
They also want to know how much you will need to pay your bills while starting your business (working capital), and how long it will take to have positive cash flow (earning more revenue than expenses).
Include some key information in your budget:
- The products or services you will sell, including estimated prices and quantities
- The main expense factors, such as the number of employees you will need and your marketing initiatives
The regular budget sheet should extend over three years so that the lender can see how you expect to generate cash to pay the monthly loan installments.
Startup Cost Sheet
The startup cost sheet answers the question “What do you need money for?” In other words, it shows all the purchases you will need to make to open your business. This statement can be referred to as “Day One” because it includes everything you will need on the first day of your business.
Include:
- Utility costs, such as deposits on insurance and utilities
- Office and computer equipment, phones
- Supplies and advertising materials like signs and business cards
- Website setup fees and email for your business
- Legal fees, licenses, and permits
Profit and Loss Statement / Income Statement
After completing the monthly budget and gathering some other information, you should be able to prepare a profit and loss statement or income statement. This statement shows your business activity over a specified period, such as a month, quarterly, or annually.
To create this statement, you will need to list all your sources of total revenue during that period. Then, list all the expenses for the same period.
Since you haven’t started yet, this statement is called a “Projected Profit and Loss Statement” because it reflects your forecasts for the future.
This statement compiles all your income sources, including showing your profit or loss for the year and how much tax you estimate you will have to pay.
Break-even Analysis
A break-even analysis shows the lender that you know the point at which you will start making a profit or the price that will cover your fixed costs. Break-even analysis is primarily used for businesses that make or sell products, or to determine the right price for a product or service.
Typically,
The displayed content is represented as a graph with the sales volume on the horizontal axis and revenue on the vertical axis. Then, fixed and variable costs (those that you need to pay) are included. The breakeven point indicates where costs are covered.
This analysis can also be useful for companies that provide services to show the overall profit point for specific services. If you include breakeven analysis, make sure you can explain it.
Opening Balance Sheet
The opening balance sheet is challenging to prepare, even if there’s not much to include. The opening balance sheet shows the value of the assets you have purchased to start, the amount of debt you owe to lenders and other creditors, and any initial investments you made to begin. The date of this sheet is the business opening day.
Statement of Sources and Uses of Funds
Large companies use statements of sources and uses of funds in their annual reports, but you can create a slightly different simple statement to show the lender what you need the money for, what sources you already have, and what remains to be funded.
To create this statement, list all general working capital needs and ongoing cash needs, the amount of collateral you will provide for the business, other funding sources, and the amount of money you need to borrow.
Optional: Business Requirements Document
The business requirements document is similar to a proposal document but is used for a larger and more complex project or a startup. It provides a complete picture of the project or business plan. It goes into greater detail about the project that will use the financial data.
Inclusion of Financial Data in the Business Plan
You will need a complete startup business plan to present to the bank or another lender. Financial data is a crucial part of this plan. Present the key points in the executive summary and include all the data in the financial section.
Finally, Check for Errors!
Before submitting your startup business plan and financial data, check this list. Don’t make these common mistakes in business plans!
Check all numbers for accuracy and consistency. Make sure that the amounts you request are specific and consistent throughout all parts of your business plan.
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Source: https://www.thebalancemoney.com/financial-statements-business-plans-397551
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