Create Top-Notch Financial Projections to Help Your Business Flourish
Your business’s future depends on accurate financial projections. What is included in financial projections, and how can you ensure realistic projections?
The Importance of Reasonable Financial Projections
Statistics suggest that only 35% of businesses survive their first 10 years. Many analysts attribute the company failures to poor planning. You can make your business stronger with well-thought-out financial projections.
Three documents help you to compose an excellent financial projection.
- Balance sheet
- Income statement
- Cash-flow statement
These reports help you forecast what expenses and revenue you will have over the next year. Comprehensive projections are also a powerful tool to entice investors to your business. Additionally, a projection is usually required when you apply for a loan or a line of credit.
You also need an accurate yearly projection to figure how much you will owe in taxes at year’s end or quarterly. The majority of states expect businesses to pay an income tax, file an annual report, or both. If you neglect to file your annual report, you are likely to end up subject to a penalty or even lose your right to do business in the state.
How to Make Accurate Projections
Begin by estimating your sales for the coming year. Be aggressive, but think soberly about how the economy and market conditions will affect your sales. Then create an expense projection that considers your fixed expenses along with surprise costs from emergencies and unexpected events. Add 15-20% to your best estimate to avoid missing the mark.
Take your current income statement and use it to project income for the coming year. Do the same with your balance sheet. Combine the two projections to generate a cash-flow forecast.
If you feel overwhelmed at the prospect of calculating all these numbers, consider going back to school for an MBA to fine-tune your financial skills. You can build a more substantial business with a more robust analytical prowess. An online program allows you to work at your own pace while juggling your business and family obligations.
Aids to Developing Solid Financial Projections
Your top tool for making great financial projections is your mind. Invest in whatever education you need to ensure you’re growing your business. An online accounting degree is another possibility for improving your business insight. This degree arms you with a more profound understanding of accounting and working with balance sheets. This knowledge leads to better financial projections.
Reliable accounting software is a must in the modern age. A good program ensures accuracy and easy access to your data. Many programs provide built-in tools to quickly generate a solid projection and keep you from forgetting crucial details.
An option like Jirav is optimized for people who don’t like spreadsheets and need a program in one easy-to-use tool. Centage’s Planning Maestro markets itself as an agile solution for small businesses that want to make quick decisions and handle complex financial processes.
Timely payments are crucial to being able to forecast accurate financial projections, which is why it’s critical that you have an invoicing system and process in place. You can create customized invoices by using an invoice generator. Just add your own text, images, and colors and send out invoices in your preferred format.
Programs like Workday Adaptive Planning and Planful are geared toward large firms with sizable financial planning and analysis teams that wish to collaborate more within the business. Try a few plans in a trial or demo period to see which best suits your needs. Ask around your industry to see what works for your most successful competitors.
Reasonable financial projections are vital to succeeding long-term as a business. Use good records, innovative tools and advanced education to equip yourself to make top-notch financial projections!
Looking for more financial tips for freelancers? Try these:
Five Passive Income Ideas For Virtual Assistants
9 Ways To Supplement Your Freelance Business And Produce Income While You Sleep
How To Save For Emergencies, Retirement, and More When You’re A Freelancer
Visit The Freelancer’s Life for unique and insightful advice for freelancers and independent contractors!
Emma Grace Brown lives her life by her rules; and it works! When she’s not snuggling puppies, Emma promotes female empowerment through her website. Her mission is to help those who live with self-doubt to realize they don’t have to mold themselves to conventionality.
