Accounting for Finances in Your Business Plan

All businesses should have a business plan in place to help steer the business and plan for success. In its most basic form, a business plan is a written plan for the business for the future. It typically has three main sections, including your business concept—how your business will be arranged, the industry you will operate in, and how you plan to provide a service or product to your customers. A business plan should also cover the marketplace—your target audience, competition, and so on. And finally, the business plan should cover the finances of the business—income streams, costs, prices of your goods and services, and other financial considerations. The business plan is completed with many smaller subsections.

A well-written business plan will help guide the business and make concrete plans for the future. Writing a good plan will help your business find investors, qualify for business loans, and gain support. It will also help your small business prepare for successfully managing your finances. Existing companies should revisit their business plans every few years to readjust and make sure the future of the company is accounted for and written down.

Writing the Financial Section

The financial portion of your business plan should help you do two very important things. First of all, it will help you walk through all the options and scenarios to provide solid projections for your business idea. Use this time to really understand the potential outcomes of the business. If you can’t make the numbers work, go back to the drawing board until you can create a plan that is financially sound. Secondly, this section will give any investors, bankers, or business partners an understanding of what your business will be capable of. Without a realistic financial section in your business plan, it will be hard to attract investment and confidence in your vision.

As you write a business plan for your business or update your current plan, keep these tips in mind for the financial section:

• Be Realistic: While we all hope to hit the lottery, no business is immediately a huge success; it takes time and hard work. Be realistic with your projections. Investors and supporters are much more likely to buy into your cause if they feel like it’s actually achievable.
  
  

• Include a Sales Forecast: Every financial section of a business plan should forecast sales over the next several years. This should give you an idea and goal of how sales should trend over time.
  

• Account for Expenses: As you look at sales, don’t forget to account for expenses. You should understand how much it will cost you to get the sales you’re after including supplies, employee salaries, office space, and so on.
  
  

• Develop a Cash Flow Plan: Understanding your potential cash flow and making a plan for successfully managing money is a huge portion of the business plan. Companies live and die by their cash flow, making in incredibly important to address. You can base this portion on your projected expenses and sales forecast to give you a good idea how your cash will flow.
  
  

• Consider Liabilities and Assets: You’ll need a projected balance sheet that includes your assets and liabilities to include in the financial section of your business plan. This may include your startup costs and other things you have that won’t be accounted for in any profit and loss statements.
  
  

• Know Your Breakeven Point: The breakeven point will come when your startup costs or expenses match your income to allow you to start making positive revenue. Knowing when your business will break even and become profitable is an important part of this section.
  
  

• Utilize Your Plan: Last but not least, don’t write your plan and put it on a shelf. Use it! Check your plan once a month or so and fill in actual numbers to help you better predict the future of the business and to make strategic business decisions to keep your business growing and improving.

Does your business need help writing or updating the financial section of your business plan? Tally Services in Fort Collins, Colorado, is here to help you adequately and realistically prepare for future success by better understanding your financials. We can help you look at existing data and make projections to help you best detail your business plan. We partner with businesses of all sizes to provide accounting and bookkeeping services to keep the financial side of your business running smoothly. Contact us to learn more!