Accounting Equation in a Business Plan

The accounting equation may be expressed as Assets = Liabilities + Equity and is the basis for all accounting using the double entry bookkeeping system. One side of the equation shows the assets of the business whereas the other shows how those assets are funded. The basic accounting equation underlies all financial projections based on the three statement financial model.

Last modified February 8th, 2019 by Michael Brown
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Links Between Financial Statements in a Business Plan

The financial projections template produces an income statement, balance sheet and cash flow statement for the business. These 3 financial statements appear initially to be unconnected; however, closer investigation shows that they are linked and a change in one statement substantially impacts the other statements. The entrepreneur need to understand these connections in order to be able to understand the financial performance of the business.

Last modified February 8th, 2019 by Michael Brown
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Financial Statement Analysis Report

As part of the process of producing financial projections for a start-up business it may be necessary to undertake a simple financial statement analysis of competitor businesses. This process will help the entrepreneur understand what drives the financial model and assist in generating reasonable assumptions for the business plan.

Last modified February 8th, 2019 by Michael Brown
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How to Determine Other Liabilities Days Outstanding

For the purposes of the financial projection template other liabilities are defined as amounts owed by a business at the year end arising from operating expenses, finance costs, and income tax expenses. The year end value of other liabilities is calculated using the other liabilities days assumption.

Last modified January 29th, 2019 by Michael Brown
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Enter Other Liabilities Opening Balance

The opening day other liabilities balance forms part of the opening balance sheet of the business. For the purposes of the financial projections. other liabilities are amounts which are owed by the business in respect of operating expenses, finance costs and income tax expenses.

Last modified January 29th, 2019 by Michael Brown
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16 Things To Know About Creating Financial Projections

Financial projections are made up from three financial statements, the balance sheet, the income statement, and the cash flow statement. Here are sixteen things to know about creating financial projections which should give you a better understanding of what’s included in the three financial statements, and how they relate to each other.

Last modified January 29th, 2019 by Michael Brown
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Invoice Factoring

Invoice factoring is a process of raising short term funding particularly suited to high growth start up businesses. The method involves the business selling its outstanding customer invoices (accounts receivable) to a factoring company for a cash advance to fund working capital.

The invoice factoring company is responsible for collecting the accounts receivable, and pays the business the remaining balance less any fees due, when the customer has settled the account.

Last modified February 8th, 2019 by Michael Brown
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Budget vs Forecast vs Projection vs Pro Forma

The terms financial budget, financial forecast, financial projection and pro forma financial statement are often used to refer to the same thing. However, while they have a very similar format, normally comprising a balance sheet, income statement, and cash flow statement shown over a period of months or years, they are each based on a very different set of assumptions.

Last modified February 8th, 2019 by Michael Brown
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Pro Forma Financial Statements

The terms pro forma financial statements, financial projections, financial forecasts, and financial budgets are often used interchangeably, but they are not the same thing.

Pro forma financials simply refers to a set of financial statements in the usual format (balance sheet, income statement, and cash flow statement), which have been prepared in order to show the effects of a transaction on the historical financial statements prior to the transaction actually taking place.

Last modified February 8th, 2019 by Michael Brown
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Startup Financial Projections Checklist

The financial projections checklist can be used at any stage, but is particularly useful for startup businesses preparing financial projections for first time. The checklist provides a listing of some of the most common items to check for when reviewing financial projections.

Last modified January 29th, 2019 by Michael Brown
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