Definition of ‘Financial Projections’
Business financial projections are estimates of financial statements (income statements, balance sheets, and cash flows) based on a set of ‘what if’ assumptions about the future of the business.
The set of assumptions is not necessarily what the business thinks is going to happen in the future (this would be referred to as a financial forecast). For example, the business might want to see what would happen if sales doubled, or if interest rates trebled, the business does not think this will happen, but wants a financial projection to see what would be the outcome and the effect on the financial statements, if it did.
Financial projections are normally drawn up for a period of three to five years after the last balance sheet date, on a monthly, quarterly or annual basis depending on requirements.
As the starting point for most business plan financial projections is historic information, the financial projections should be in a similar format to the financial statements from the accounting system; this also makes comparisons to actual numbers easier at a later date.
For further information see the Wikipedia financial projections definition.
Using the Financial Projections Template
If you are looking to start or finance a business, financial projections will almost certainly be needed, the process for creating financial projections is detailed in our How to Make Financial Projections section.
If you would like to create your own financial projections, then download our business plan financial projections template, which will produce income statements, balance sheets, cash flows, and important ratios for the next five years of trading.
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