A financial plan is the numerical representation of your business
Before you start with your business idea, it is advisable to examine how large the expected profitability, how high the projected costs are and how much funding you think you need to have to start. On the basis of a comprehensive financial planning, the earnings expectations, the funding and financial risks of your new business figures mapped.A business plan you write primarily for yourself . In addition, the business plan is an important tool to attract investors. Mainly based on the financial plan based potential investors their decision to finance your business idea. You can read more about the five elements of financial planning and you will find some tips for preparing the corresponding budgets.
The financial planning of the business plan consists of 5 parts
In the financial plan, the following five financial budgets are treated as part of the business plan.1. Investment Budget: financial statement of the required start-up capital
The investment budget provides insight into the amount of starting capital, you need to start your business. This essential part of the business plan relates to the mapping of your investment by giving an overview of all the deals in your start-up company and the associated expenses. After the preparation of the investment budget has a clear overview of the total amount of money, which is the minimum necessary to make a good start with your new business.The investment is one of the basic elements of the financial plan and is made up of two parts; fixed assets and current assets. Under fixed assets is defined as all capital expenditure which last longer than a year, as the company premises, a company car, a computer, and machinery. Under current assets include all assets with a maturity of less than one year, such as inventories, receivables and cash.
Tips for preparing your investment budget
- Provide a sound basis for your investment by adding quotes to your business plan.
- Make an informed choice for each investment, by applying for multiple quotes from various companies and suppliers.
- Take in your investment budget at a cost for contingencies.
- Refer to examples of investment budgets in order to gain insight into the structure and all parts of the budget.
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2. Financing plan: how will you attract funding?
The second part of the financial plan consists of the funding budget. This financial budget light you clear in what way you are going to attract financing. On the basis of having a comprehensive financial plan becomes clear how the investment budget will be financed. In your business listed investments can be financed using your equity or debt. Under equity are the investments you own finances. Debt capital refers to the financing portion provided by banks and other financiers. In this part of the financial plan is also calculated the solvency, or the ratio of your equity to total assets. Investors assess the grant application and the business plan based in part on the solvency ratio.Tips when preparing your financial plan
- Clearly out of your business come forward in any way you also in the long term your debts to third parties can continue to meet.
- Banks usually require a contribution of equity. Make sure your financial planning is geared to this, by bringing an equity of at least 20% of the total assets.
- Venture capital or subordinated loans are classified as equity.
- See several examples of financial plans for an overview of the key elements that are included in the financial budget.
3. Operating Budget: make an operating forecast for the next 3 years
Using an operating budget calculate whether your business will make during the first three years of profit or loss. The development plan, which is included in the business, is also considered a budget of profit and loss account. This income is determined on the basis of expected income and expenses. By preparing an operating budget, you can see at a glance how much revenue your company must achieve at least to break even, or precisely how much revenue is needed to be profitable.When preparing a financial plan at the level of the development plan, the first step is aimed at determining the expected revenue. Revenue is then reduced by the purchase, in order to calculate the gross profit.The next step is to list all business expenses. Finally, the business costs are reduced by the taxes that must be paid.
Tips for preparing your operating budget
- In the exploitation plan all amounts are shown excluding VAT.
- Profitability, or the extent to which you make enough profit to meet debt service obligations is a key part of the financial plan. This measure is in fact affect the assessment of an application for funding and its business plan.
- Employers are the actual labor costs average 30% higher than the gross wage.
- The depreciation of your assets are business expenses.
- Good for you to prepare for the preparation of the financial budget, it is wise to analyze some examples of operating budgets.
4. Liquidity Budget: Describe the progress of all income and expenditure
In the last chapter of your business plan, financial plan is also drawn up a liquidity budget. The liquidity plan gives an overview of expected income and expenditure per month. Example, you can tune your investment on the basis of these financial budget. Using the liquidity plan, you can make an estimate of the months in which you need extra cash, or even financial reserves to build faster. The cash budget starts with calculating your opening balance on January 1 of that year. Then make an estimate of the expected income and expenditure per month. During the third step determines whether there is specific month there is a surplus or a deficit. Finally, you agree to the financial budget to allow for this by eliminating any shortages.Tips for preparing your cash budget
- In contrast to the operating budget, all amounts are stated on the liquidity budget including VAT.
- Starting entrepreneurs run the risk of early years fluctuating income. In your business plan clearly how to minimize this risk, the first few years as much as possible.
- Tune your cash budget on the average term of payment of your debtors. The term of payment of a bill can reach more than 40 days.
- Consider periodic payments such as rent, salaries, phone bills and taxes.
- Why not take any holidays, payment, payment of holiday pay, additional investments and other contingencies included in the financial budget.
- Make use of various tools in the preparation of the financial plan, including practical examples of various liquidity budgets.
5. Private budget: give an overview of your private income & expenses
The final part of the financial plan refers to budget your private expenses. For any budding entrepreneur , it is advisable to make all private expenditure in the business insight. Based on the financial budget, you can calculate monthly amount you need minimal revenue, to meet monthly to your personal requirements.To make the financial position of your startup company insight, it is wise to keep corporate payments and your private finances strictly separate. Always allow a separate administration and make use of a separate bank account for business use.
Tips for drawing up the budget of your private expenses
- Set the budget from an honest and realistic point of view. This not only creates clarity, but also security in the expectations of your private income.
- See several examples of a budget for personal expenses in order to get a good idea of the various cost items that are part of this specific financial budget.
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