To grow your business, you need money.
Creating realistic financial projections can help you obtain the capital you need to expand. Financial projections can help convince investors and money lenders that your business is likely to make a profit. Internally, financial projections can help you set realistic financial goals and establish a business budget that aligns with your needs. Here are some tips to help you make your own financial projections!
Level Up Your Finance Skills
If the idea of making financial projections for your business is daunting, you may want to improve your finance skills. Understanding financial concepts will help you make better decisions for your business. Once you start learning, you’ll quickly discover that finance and accounting are surprisingly simple! Going back to school is a great way to enhance your financial acumen. MBA programs from online schools are ideal for busy entrepreneurs looking for flexible learning opportunities.
Project Your Future Business Sales
One of the first steps in making financial projections is estimating your future business sales. According to LivePlan, sales forecasting involves combining past sales information, economic trends, and industry data to predict how much money you are going to make in the coming months and years. There are a number of different ways to predict your future sales. Some sales forecasting strategies work better for businesses that are already established and have a lot of past sales data while others are better suited for startups. You can start forecasting sales before you even find your first customer! You will need to use market research techniques to determine the potential market for a product that you have yet to launch.
Include Important Financial Statements
A formal financial projection typically includes three main financial statements: a balance sheet, income statement, and cash-flow statement. You will need all three to make accurate projections. A balance sheet is a picture of your company’s net worth at a given time and serves as a summary of your assets, liabilities, and equity. An income statement shows your expenses and revenues over a certain period, detailing your total income before and after taxes. Finally, cash flow projections demonstrate how much money is expected to come in versus how much you expect to leave your business.
Take Advantage of Financial Software
Preparing all of these financial statements can take a lot of time. Fortunately, modern financial software can automate much of this process for you! Some of the best business accounting apps can generate financial projections for you using all of your existing accounting data. If you’re currently tracking all of your business finances on spreadsheets, your first order of business is to input all of your financial data into a bookkeeping program. This will make your life much easier going forward!
Work with an Accountant
When in doubt, always call a professional. Hiring an account will ensure your financial projections are as accurate as possible, so you can make informed business decisions. Just hand your accountant all of your financial statements and they will build logical financial projections and explain what they mean for your business. If you don’t know how to generate these financial statements yourself, your account can handle that too! Accountants have the skills to make informed financial suggestions that can help you create effective business budgets, establish goals, and visualize the growth of your business.
Creating financial projections is absolutely essential. You’ll be able to draw on these projections to write up a realistic business plan, sway potential investors, secure loans and lines of credit, and have a better understanding of your business as a whole. Building financial projections may not be the most exciting part of running a business, but it will set you up for long-term success!
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