Balance Sheet
The Balance Sheet is a snap shot of the business at any point in time. In the case of a business start-up, it is often the starting balance sheet. A balance sheet is made up of three parts.
Assets: Things a business owns
Liabilities: Debts a business owes
Equity: The owners’ investment and re-investment in the business
Everything that the business owns, its assets have to have been paid for. Therefore we get the following formula:
Assets = Liabilities + Equity
This is extremely important as it gives the reader a picture of how the business is being financed through the owners’ money (equity) or through the creditors’ money (liabilities).
Cash Flow Statements
A Cash Flow Forecast is probably your most important financial tool. It is your cash flow that shows you if, and when, you will run out of cash essential to run your business. It allows you to take action before problems occur and even to do “what if” calculations before taking on new projects. The cash flow is a 12-month projection that forecasts the receipts and disbursements for your business. In a start-up situation, it is preferable to have a start-up month to specifically show the reader the costs incurred to start the business.
Income Statements
The purpose of the Income Statement Forecast is to project the revenues and expenses of your business over a given period of time – usually one year. Other terms for this are budgeted income statement or pro forma income statement. There are three things that need to be predicted to forecast your income statement:
the sales projection, the cost of goods projection and the overhead’s projection.
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