- In this section you need to show projected, income statements, balance sheets, and cash flow. Existing businesses should also show historical financial statements. While the time frame for projections depends upon the
complexity of the business, three to five years is generally acceptable as the standard.
- For each time frames projections prepare a sensitivity analysis to produce the "best", "likely" and "worst "case scenarios.
- Clearly state the assumptions on which your financials have been prepared.
- Pro-forma income statements should show sales, cost of operation, and profits on both a monthly and annual basis for each plan year. For all but the largest businesses, annual pro-forma balance sheets are all that are
necessary. Cash flow pro forms should be presented in both monthly and annual form. If your business is already established, past annual balance sheets and income statements should also be included.
- Include information that will assist potential lenders in understanding your projections. Lenders will give as much credence to the assumptions your projections are based on as they do the numbers themselves.
- It is important for you to understand how to compile each financial document and what they mean. Many entrepreneurs consider themselves more marketing and creativity-oriented than finance-oriented and they dislike studying
financial statements. If you are one of those, remember that it is essential for you to learn the basics of business finance so that you can run your company successfully. Use every opportunity to learn about the financial
aspects of business.
- Provide separate schedules which make up the big ticket items like the capital expenditure and employee compensation costs (esp. for service businesses). Also provide a Statement of Sources and Application of Funds to
explain clearly how the funds are being generated and used.
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