What is a Financial Plan?
A custom financial plan can be described as a plan written exactly as per the requirements of your business. It provides you a clear picture of your business, whether operations are feasible or not. This is one of the most important business documents from the investors’ point of view. They critically examine it to find technical mistakes or possibility of over projected profit. You can take help from online resources as well as consult with a professional financial plan writer, but ultimately you are in control and responsible for your own financial plan.
There are many types of financial plan outlines, depending on the business requirement, but following are most common elements that are usually found in a financial plan:
1. Profit & Loss / Income Statement:
This statement is used to show yearly profit or loss of a company.
2. Cash Flow Statement:
This statement shows cash flows of your business, both incoming and outgoing. This is very important to understand whether or not company has enough liquidity to clear its outstanding bills.
3. Balance Sheet:
A balance sheet is a snapshot of company’s financial situation. It provides listed summary of assets, liabilities and capital as of a specific date, normally at the end of a fiscal year.
4. Break-Even Point:
It shows the point where your business starts making profit after sales exceeds cost of sales.
5. Start-up Cost:
This is used to tell investors how much financing you require in starting your business.
6. Ratio Analysis:
They are used to analyze financial condition of business and explain it in numbers. Following are commonly used ratios:
• Profitability ratios
• Liquidity ratios
• Activity ratios
• Debt ratios
• Market ratios
