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Small Business Financial Plan

Small Business Financial Plan

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Whether this is the matter of starting a new business or expanding the existing, matter of small business entrepreneur or large scale business, matter of service oriented business of the product oriented or if this is the matter of arranging financing for your business. The Financial plant is the most essential part of any type of business projections. You got to make the financial projection absolutely accurate and most probable and realistic.

 

Small business financial plan is easier to make comparing a financial plan of a large scale business but even then you got to have a good accounting knowledge. This article defines the most essential accounting knowledge required to make a financial plan of a small business. Following are the core accounting components or accounting concepts you have to be absolute clear about.

 

 

Double Entry System:

You have to have the initial accounting transaction knowledge in which you need to put one thing Debit side of accounting Journal and other thing is need to give backup of the debit entry in the credit section of the accounting journal. When Assets and expenses increase you need to put their figures in debit side and vice versa if decreased. Similarly if Liability, revenues, equity or income increases you need to put them in the credit side of accounting journal and vice versa if decreased.

 

Trail Balance:

The trail balance contains the sum of each account item in the accounting period. On the debit side there are net balances of expenses and assets. On the credit side there are sum of each accounting head of Liabilities, equity, income and revenues. The sum of all the accounting heads in debit side and sum of all the accounting heads accounts in credit is always equal in the trail balance.

 

Income Statement:

The two initial components of income are extremely essential to project comprehensively. These are Revenues and cost of goods sold (CGS). You got to do and show the workings on the revenues and CGS accounts. The revenues are the multiplication answer of expected number of customers in each category of revenues with price of each category of revenues. The CGS is the sum of costs of revenues in weighted average revenues of each category in term of labor, factory overheads and material. Deduction of CGS from revenues gives gross profit.

 

The operating expenses vary from business to business considering their types of operating expenses required according to business sector, business location and balance sheet & revenues figures and number of other things. In short these are the expenses other than direct costs of business. Generally these expenses include salaries, rent, depreciation of assets, interest, utility, and marketing, administrative & other general expenses. Deducting the sum of all the operating expense gives you operating income. Then there are taxes on income deducted to get the net income of the business period.

 

Cash Flow Statement:

The other big thing in making a small business financial plan is the cash flow statement. This accounting statement shows the cash inflows and out flows of business in three categories which are cash flow from; operating, investing and financing activities. Transaction from business operations comes in operating activities. Business assets related transactions come in financing activities. The cash activities related to business funds/financings are given in financing activities. In the end there is initial cash and ending cash balances of each accounting period in the cash flow statement is given.

 

Balance Sheet:

The balance sheet contains the assets, liabilities and equity position of business in each accounting period like monthly, quarterly or yearly. The balancing sum of assets is equal to the sum of total equity and liabilities.

 

Break Even Analysis:

This shows the minimum units or revenues required for sale to meet the fixed expenses of a certain business period.

 

Start Ups:

These are the accounting figure required to start a new business or expand an existing business. Normally these include the initial business inventory, fixed assets and first 3 months operating expenses.

 

Ratio Analyses:

You got to include the financial ratio analyses of 5 types. The most basic financial ratios of each type must be includes in the financial plan. These 5 types include; profitability ratios, activity ratios, liquidity ratios, solvency ratios and investor ratios.

 

If you have any problem in making the business financial plan for your business then contact the Research Region. Click here to give your any sort of query regarding small business financial plan.

 

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