Opening Day Balance Sheet – Cash
The opening day cash balance forms part of the opening balance sheet of the business. The cash balance includes notes and coins and amounts held at a bank such as current and savings accounts.
The opening balance comes under the heading of current assets in the balance sheet of the business.
Cash Opening Balance in the Financial Projection
The cash included in the opening balance sheet is no different than any other cash, only the timing differs.
It is important to realize that the cash opening balance is simply cash that was available before the first day of the financial projection. Consequently if cash is generated after the first day, it will show up as part of the cash flow in the appropriate year. The opening cash should not be included in both places as this will result in double counting.
The date on which the financial projection starts is entirely a matter of personal choice. Generally it is usually better to have it consistent with the start of a financial year.
Established Business Plan
For an established business, there will always be a cash balance (assuming the business has surplus cash). The value of the opening balance can be found on the latest available balance sheet. The figure to use is the total of the amounts shown under the headings cash, petty cash, on demand deposits with the bank or any other cash related amounts.
Startup Business Plan
For a startup business, we recommend the use of our startup costs calculator. This produces an opening balance sheet for inclusion in the financial projections template.
The figure to use for the cash opening balance is the cash value shown under the heading opening balance sheet in the calculator. This is effectively the amount of cash the business has decided it needs available when it starts trading. The balance is funded from the opening debt and equity injections.
Having entered the opening balance, the template calculates the balance at the end of each subsequent year. It does this using the following formula.
Closing cash balance = Opening cash balance + Cash flow
What’s the Next Step?
The next step in producing a five year financial projection for your business plan using our financial projections template, is to enter the accounts receivable opening balance in the opening balance sheet of the financial projection.
This is part of the How to Create Financial Projections Guide a series of posts on how our template is used to produce simple financial projections for a business plan.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.