What is Typically Included in Small Business Financial Projections?

Financial projection statements are just about as straightforward as the name suggests: They are statements of the projected financial activity for your small business, including projected profits and/or losses, projected revenues, expenses, sales, and other items that depend on your individual small business' activities. For example, is it for your board members or is it for potential investors? At its heart, a projected financial statement should have a few things, however, as a core with the rest of the items depending on your small business and the purpose of the projected financial statement. Be aware that you may hear several names for the same general type of statement: Projected Financials, Projected Financial Statements, Pro Forma Financial Statements and Forecasted Profit-Loss Statements all refer to a report that details financial situation in the future.

First is a Balance Sheet. This is a reference to the present state of the company's financial status. It shows such things as the assets you own, debts you owe and other items that will help to give a good general idea to the reader about how well-off your company is presently. Things you'll want to include are the amount of cash assets you have, accounts receivable, and any inventory your business may have on hand to manufacture goods or render services. You'll also want to include debts, such as accounts payable, long term debts (such as loans) and other current expenses that your business has to pay. Stock, retained earnings and equity should be included, too. There are many other items that may or may not be necessary for your statement, so it's important to check with your accountant if you have any questions.

Next up are Income Statements; basically, how much you expect to earn as of any point in time (such as the end of the month, quarter, year, etc.) versus the cumulative expenses you expect to incur over that period of time. Important items here include sales and the costs thereof, what you'll pay in wages, what you'll pay in taxes and any interest you may gain (or have to pay) on any accounts or loans you have extending to that period in time. By subtracting your costs from your income, you'll be able to project how much money your business will make (or lose) over a given period of time.

Finally, the Cash Flow Statements go in to more detail about the actual expenses incurred by your business, not limited to the cost of sales, wages and interest. Your Cash Flow Statements take into account your bills, including the principle and interest of loans, changes in inventory and in accounts receivable and payable, administrative costs, sales and purchases your business makes of equipment and all other total expenses your business has to deal with. This part of the statement is arguably the most important, as it will indicate whether your business is expected to gain or lose money in the future, and how much of it may gain or lose.

Once again, depending on the nature of your small business and the intent of the report, you may or may not be required to account for other details, including other statements within the report, to adequately inform the person reading it. Although the information required is usually pretty straightforward, unless you have solid experience in creating projected financials, you may want to consult a CPA to assist you in getting everything right the first time, so that you do not suffer from small mistakes, such as forgetting an expense or a tax and misconceiving your company's profits. A trained, educated professional is always the best option when it comes to bookkeeping. Please contact us for more information about small business financial projections.