{"id":48,"date":"2019-12-14T14:07:46","date_gmt":"2019-12-14T14:07:46","guid":{"rendered":"https:\/\/www.managementconceptscpa.com\/blog\/?p=48"},"modified":"2019-12-14T14:07:46","modified_gmt":"2019-12-14T14:07:46","slug":"at-the-very-least-update-the-financials-in-your-business-plan","status":"publish","type":"post","link":"https:\/\/www.managementconceptscpa.com\/blog\/2019\/12\/14\/at-the-very-least-update-the-financials-in-your-business-plan\/","title":{"rendered":"At the very least, update the financials in your business plan"},"content":{"rendered":"

<\/p>\n

Every new company should launch with a business plan and keep it updated. Generally, such a plan will comprise six sections: executive summary, business description, industry and marketing analysis, management team description, implementation plan, and financials.<\/p>\n

Now, ideally, you would comprehensively update each section every year. But if the size, shape and objectives of your company haven\u2019t changed all that much, you may not need to make major revisions to the entire plan. However, at the very least, you should always review and revise your financials.<\/p>\n

Explain your route<\/strong><\/p>\n

Lenders, investors and other interested parties understand that descriptions of a business or industry analysis may be subject to interpretation. But financials are a different matter \u2014 they need to add up (literally and figuratively) and contain realistic projections in today\u2019s dollars.<\/p>\n

For example, suppose a company with $10\u00a0million in sales in 2019 expects to double that figure over a three-year period. How will you get from Point\u00a0A ($10\u00a0million in 2019) to Point\u00a0B ($20\u00a0million in 2023)? Many roads may lead to the desired destination; your business plan must explain its route.<\/p>\n

Let\u2019s say your management team decides to double sales by hiring four new salespeople and acquiring the assets of a bankrupt competitor. These assumptions will drive the projected income statement, balance sheet and cash flow statement referenced in your business plan.<\/p>\n

Justify assumptions<\/strong><\/p>\n

When projecting the income statement, you\u2019ll need to make assumptions about variable and fixed costs. Direct materials are generally considered variable. Salaries and rent are usually fixed. But many fixed costs can be variable over the long term. Consider rent: Once a lease expires, you could relocate to a different facility to accommodate changes in size.<\/p>\n

Balance sheet items \u2014 receivables, inventory, payables and so on \u2014 are generally expected to grow in tandem with revenues. The financials in your business plan must accurately and reasonably justify the assumptions you\u2019re making about your minimum cash balance, as well as debt increases or decreases to keep the balance sheet balanced. And these amounts must be current.<\/p>\n

From a lending perspective, your bank will be expected to fund any cash shortfalls that take place as the company grows. So, realistic cash flow projections in your business plan are particularly critical. The financials section should outline how much financing you\u2019ll need, how you intend to use those funds and when you expect to repay the loan(s).<\/p>\n

Keep it fresh<\/strong><\/p>\n

Your business plan needs to tell an accurate, objective story of your company \u2014 where it\u2019s been, where it is right now and where it\u2019s heading. Keep the whole thing as fresh as possible but pay special attention to the numbers. We can help you review your financials, arrive at reasonable assumptions, and express your objectives and projections clearly.<\/p>\n

\u00a9 2019<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Every new company should launch with a business plan and keep it updated. Generally, such a plan will comprise six sections: executive summary, business description, industry and marketing analysis, management team description, implementation plan, and financials. Now, ideally, you would comprehensively update each section every year. But if the size, shape and objectives of your […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts\/48"}],"collection":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/comments?post=48"}],"version-history":[{"count":1,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts\/48\/revisions"}],"predecessor-version":[{"id":49,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts\/48\/revisions\/49"}],"wp:attachment":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/media?parent=48"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/categories?post=48"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/tags?post=48"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}