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May 20th, 2010 admin Leave a comment Go to comments

Pro Model Hockey

Preparing Financial Projections For Your Business

In order to make sure that your business sees success it is vital that you prepare rational forecasts of the future performance of your business. In order to be able to guide the growth of your business you must be able to prepare projections for maybe three to five years. If you are looking for investor funds or a loan then you will need convincing forecasts to sustain your business plan. Financial statements of prior years are some of the elements that have a bearing on the pro formas.

You will need to use you earlier financial statements to arrive at projections; pick out the sales and revenue amounts, average expenses, business ratios and any other information which you might think to be relevant to your accounts payable and accounts receivable. While preparing your pro formas you should expect that each financial year shows improvement over the previous year of operation, although don’t "hockey stick" your growth up too quickly, or people won’t believe it.

The position of your operations is very important while making the pro formas as well as projections. For instance, you must take into consideration whether your business requires to be relocated as a result of expansion or whether it is required to replace some costly new equipment to replace the outdated models. Also don’t forget to compare yourself to your close competitors; how close you measure up to them and whether you are in need of a revised marketing plan in order to have an edge over them. Yet another thing you ought to consider while making the pro formas is whether your company requires additional manpower or current staff to be further trained.

Then there are the external factors which also affect the pro formas and the projections; the condition of the economy of the country plays a big role in your company’s future, which is not hard to understand these days. It is important to be familiar with the trends in industry to be sure that the products or services you deal with will carry on being marketable. The astonishing way in which technologies get replaced have modified a lot of businesses and even eradicated some. Take for instance the floppies and floppy drives; today they are obsolete and we now have the pen drives which are not only convenient but also very reliable when compared to the floppy disks. Further, a manufacturer must have a dependable source for raw materials and a future hike in cost of the raw materials should also be considered if you are to arrive at a useful projections.

The pro formas include the likely future expenses, sales and profits. All these elements are required to be broken down to make it more meaningful. The estimates for sales should mention which sales person, department or area will be responsible for a certain amount of sales which adds up to the final sales total. The expenses estimates should be broken down into administrative and general, operating expenses, taxes and depreciation. All your projections and estimates must rationally flow from the previous year’s financial statements. If yours is a start-up business, you may not earn any profits until the third year or so at which time you should start showing profits which should grow with each subsequent yea unless there are huge expenses. Your pro formas must include approximations of any big expenses that will lower your profit like relocating, expansion or a new marketing campaign.

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Whether you’re familiar with accounting or not, we have software that can help you create your pro formas and projections with absolute ease!