Enter Debt Opening Balance

Opening Day Balance Sheet – Debt

The opening day debt balance forms part of the opening balance sheet of the business. Debt represents amounts owed by the business to providers of debt finance usually referred to as lenders. Accordingly debt can take many forms including loans, borrowings, mortgages, overdrafts, and credit cards. Generally any form of finance on which interest is paid is regarded as debt.

The debt opening balance is recorded in the balance sheet of a business under the heading of current or long term liabilities depending on whether the amount is repayable within one year or longer.
enter debt opening balance - extract from the financial projections template

Debt Opening Balance in the Financial Projection

The debt included in the opening balance sheet is no different than any other debt, only the timing differs. For simplicity, in the financial projection template, all debt is entered under the heading debt in the balance sheet.

The debt opening balance is simply the balance that was there before the first day of the financial projection. Consequently if the debt is incurred after the first day, it will show up as part of the debt in the appropriate year. It is important to realize that the opening debt 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. Usually it is better to have a date consistent with the start of a financial year.

Established Business Plan

For an established business, there will normally be an opening debt (assuming the business has already raised finance in this way). The value of this 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 debt, loans, overdrafts, or any other debt related headings.

Startup Business Plan

For a startup business, we recommend the use of the startup costs calculator. This calculator produces an opening balance sheet for inclusion in the financial projections template.

The debt opening balance is the debt value shown under the heading opening balance sheet in the calculator. This is effectively the amount of debt the business has when it starts trading. This debt forms part of the startup funding together with the opening equity injections and accounts payable.

Having entered the opening debt, the template calculates the debt at the end of each subsequent year. It does this by taking the opening debt, adding any new debt raised, and deducting any debt repayments made during the year. Debt repayments are shown in the cash flow statement,

Closing debt balance = Opening debt balance + New debt – Debt repayments

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 opening debt payment term to enable debt payments to be calculated for the cash flow.

This is part of the How to Create Financial Projections Guide. The guide is a series of posts on how our template is used to produce simple financial projections for a business plan.

Last modified August 29th, 2023 by Michael Brown

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.

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