Choosing a Financial Forecasting Template

What is a financial projection template?

A financial projection template is a structured format used to forecast your business’s future financial performance. This template typically includes various financial statements and metrics to help predict income, expenses, profits, and cash flow over a specific period.

Using a financial projection template for your business can help you develop more than just your business plan. Financial projections allow entrepreneurs and small business owners to plan for future growth and ensure they are on the right track with their business goals. By utilizing historical data and future projections, you can gain a better understanding of where your business could be headed.

Examining potential cash flow, existing financial statements, and other financial aspects of your business plan can enhance your business planning process, making it more effective and strategic.

How can a financial projections template help your business?

A financial projections template can significantly benefit your business in several ways. We have listed out five of these ways below:

Improved strategic planning

Using a template like this helps you in your strategic planning by setting realistic financial goals and milestones, allowing you to develop a clear roadmap for growth and allocate resources efficiently across your business. This structured approach ensures that the business is well-prepared to meet its objectives and adapt to changing circumstances.

Better budgeting and forecasting

With a financial projections template, you can better track and manage expenses, predict future revenue, and manage your cash flow. This all help you to stay within budget and can plan for future financial needs with greater accuracy.

Attract investment and financing

A financial projections template can also help to demonstrate the profitability and stability of your business. You can make better decisions regarding your finding requirements and overall equity – a must have to gain capital for growth.

Ensure further monitoring of performance

A projections template enables improved performance monitoring by tracking key financial metrics and KPIs. You can identify deviations from your forecasts, helping you to better understand their causes. This allows you to continuously assess and improve any business strategies, ensuring that the company remains on the right financial track.

Better risk management

A financial projections template also improves your risk management by allowing for scenario planning and sensitivity analysis, helping to understand the impact of changes in key assumptions. It prepares the business for potential financial challenges and risks, ensuring that contingency plans are in place for various scenarios.

What should be included in an effective Financial Forecasting Template?

A financial forecasting template can be overwhelming, but do not worry, we have put together a list of the common components of a template:

1. Income statement (profit & loss statement):

The profit and loss statement will include:

• Revenue (sales or income generated from your business)
• Cost of Goods Sold (COGS) (the direct costs attributable to the production of your goods or services)
• Gross profit (revenue minus COGS)
• Operating expenses (the costs required to run the business )
• Operating income (gross profit minus operating expenses)
• Net income (the final profit after all expenses, taxes, and interest)

2. Cash flow statement

The cash flow statement will include:

• Operating activities (the amount of cash used/generated in the core business operations)
• Investing activities (the amount of cash used/generated from investments)
• Financing activities (the amount of cash used/generated in financing)
• Net cash flow (the total cash inflow minus total cash outflow over a period)
  • Learn more about cash inflow vs outflow

3. Balance sheet

The balance sheet will include:

• Assets (this includes what the company owns (e.g., property))
• Liabilities (this includes what the company owes (e.g., loans))
• Equity (this includes the business owner’s share in the company (e.g., retained earnings))

4.  Key assumptions

Your key assumptions and drivers will include:

• Revenue growth rate (this is the expected rate at which your business’ revenue will increase)
• Expense growth rate (this is the expected rate at which your business’ expenses will increase)
• Profit margins (these are your projected profit margins based on industry benchmarks or historical data)
• Market conditions (these are the economic factors, competitive landscape, and market trends)

5. Break-even analysis

Break-even analysis will include a calculation of the point at which total revenues equal total costs, indicating no net loss or gain.

6. Sensitivity analysis

This sensitivity analysis will show how changes in key assumptions (like sales volume, cost of goods, etc.) impact financial outcomes.

7. Scenarios

You will need to include various scenarios:

Best case scenario (this is the optimistic projection – with positive conditions)
Worst case scenario (this is the pessimistic projection – with challenging conditions)
Most likely scenario (this is the realistic projection – based on current trends)

What are the benefits of using this template?

• For business planning: this template helps to set financial goals and develop strategies – improving your profitability over time
• For investment and financing: this template helps to attract investors or secure loans
• For budgeting: this template helps you to better allocate resources, monitor financial performance, and improve upon your decisions
• For strategic decisions: this template helps you to evaluate the financial impact of business decisions.

What tools and software are needed for financial projections?

You will typically require Microsoft Excel or Google Sheets to create financial projections, due to their flexibility and widespread availability. When it comes to software – specialised financial projections software – tools like Brixx can offer more advanced features and automations.

Creating a financial projections template in Excel

Many prefer to use a specialized software or a template for their financial projections. However, some choose to create theirs from scratch in a program like Excel or in Google Sheets. 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 templates out there, and specialized software making it easier for businesses to run their own financials, we suggest steering clear of starting your own sheet from scratch.

Specialized software vs a financial projections template

When it comes to comparing a specialized forecasting software or a forecasting spreadsheet 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, utilizing specialized software can save you more time, be more accurate, and collaborate more easily.

Make sure you sign up to Brixx for a free 7-day trial. You can seamlessly create a forecast – and upgrade to retain all of your data!