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How you can choose a better Financial Projections Template
Using a Financial Projections Template for your business can help you develop more than just your business plan. Financial projections allow entrepreneurs and small business owners alike to plan for future growth. Projections also help ensure they’re on the right track with their business goals.
Generally speaking, we advise that you create financial projections that are between 3 and 5 years long (with monthly figures for the first 12 months). This will help you plan what the business will look like when it has matured, something most startups don’t think about.
By making use of historical data and future projections, you can more easily gain a healthy grasp on where your business could be headed. When looking at your potential cash flow, existing financial statements, or other business plan financials, you can more effectively improve your business planning process. By knowing where you are and where you’re headed, you can make better decisions.
Let’s talk about choosing a better Financial Projections Template
- How can a Financial Projections Template help your business?
- When do you need a financial projections template?
- What should be included in an effective Financial Projections Template?
- Specialised software vs a Financial Projections Template
As one of the 10 most important elements of writing a business plan, financial projections can be useful to businesses at any stage of their life cycle.
How can a Financial Projections Template help your business?
An effective Financial Projections Template will allow you to predict and monitor your finances. It should also help you set and track business goals, and plan for future growth. Whether you are a startup creating your first business plan or an established business looking to plan for growth, a Financial Projections Template can help you gauge progress and quickly head off trouble.
Templates are meant to serve as models that you can follow to list past performances and create future projections. However, depending on your business, you may find some areas of the worksheet more relevant to your needs than others.
A Financial Projections Template uses estimated or existing financial information to forecast the future expenses and income of your business to produce an overview of the financial health of your organization. This is to support your business plan and gain buy-in from stakeholders. Additionally, your projections will act as an early warning system. They can help you to plan for cash flow dips, identify financing needs and pinpoint the best timing for projects.
When do you need a Financial Projections Template?
Being able to track and manage your company’s finances is key. By making use of a Financial Projections Template you can save time and resources you would spend on setting up your own spreadsheet. By using a template, you can be more sure of the correctness of your projection’s formulae, thus reducing the possibility of human error.
When seeking outside financing, both startups and existing businesses will need financial projections to convince lenders and investors of the business’s growth potential.
As a startup looking to create your first business plan, having a sound financial projection of your business in place is key. This is because it will help investors and partners see the potential of your endeavour. Whether you are simply exploring the idea of a business or are actively seeking funding, presentation is crucial. It is key that you present your finances in a clear, professional manner. The use of a Financial Projections Template makes that much easier.
If you are already in business, creating financial projections each year can help you set goals and stay on track. They can also help you plan for future financing requests and help you map an exit strategy, should you be looking to sell your business in the future.
What should be included in an effective Financial Projections Template?
When it comes to selecting an effective Financial Projections Template, we would recommend that you find one that enables you to consider multiple scenarios. Not only one. This will enable you to determine how the changes in one part of your finances might affect the profitability of your company.
Many of the more comprehensive Financial Projections Templates include diagnostic tools you can use. These enable you to test the numbers in your projections and make sure they are within reasonable ranges.
An effective template will pull together several different financial documents, including:
- Startup expenses
- Payroll costs
- Sales forecast
- Operating expenses for the first years in business
- Cash flow statements for the first years in business
- Income statements for the first years in business
- Balance sheet
- Break-even analysis
- Financial ratios
- Cost of goods sold (COGS)
- Amortization and depreciation for your business.
When selecting your Financial Projections Template, you should choose a template that provides most, if not more, of the above. By knowing what an effective projection should include, the process of selecting a template and creating one will be easier. Whether creating your first, or twentieth one will, you will be more informed, leading to a more comprehensive, yet focused plan.
Creating a Financial Projections Template in Excel or Google Sheets from scratch
For example, if you wanted to create your own projection workbook using Excel you would:
- Click on the Data tab
- Pick “Forecast Sheet.”
- Enter the date your forecast will end
- Click “Create.”
- Title and save your financial projection.
However, while this may look simple enough, developing a financial projection in Excel (or Google Sheets) from scratch can be time-consuming. And often data entry or formula errors will return inaccurate results, which is why we advise against this. With so many great Financial Projections Templates out there, and specialised software making it easier for businesses to run their own financials, we suggest steering clear of starting your own sheet from scratch.
Specialised software vs a Financial Projections Template
When it comes to comparing a specialised forecasting software or a Financial Projections Template, we’ve touched on a few of the cons of using a program like Excel or Google Sheets. While our main issue with a standard template revolves around the increased potential for human error, utilising specialised software can save you more time, be more accurate, and collaborate more easily.
While we may be more partial to utilising software like Brixx for your projections, we understand that some people are simply more comfortable with a traditional spreadsheet. We’ve gone over the pros and cons in more depth in our post “Excel & Google Sheets vs Software”. Start with Brixx Foundations today!
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